<PAGE>
<TABLE>
<S> <C>
HARTFORD SELECT LEADERS LAST SURVIVOR
VARIABLE UNIVERSAL LIFE INSURANCE
SEPARATE ACCOUNT VL II
HARTFORD LIFE INSURANCE COMPANY
P.O. BOX 2999
HARTFORD, CONNECTICUT 06104-2999
TELEPHONE: (800) 231-5453 [LOGO]
</TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
This Prospectus describes information you should know before you purchase
Hartford Select Leaders Last Survivor variable universal life insurance policy.
Please read it carefully.
Hartford Select Leaders Last Survivor is a contract between you and Hartford
Life Insurance Company. You agree to make sufficient premium payments to us, and
we agree to pay a death benefit to your beneficiary. The policy is a last
survivor flexible premium variable life insurance policy. It is:
x Last survivor, because we pay a death benefit after the death of the last
surviving insured.
x Flexible premium, because you may add payments to your policy after the first
payment.
x Variable, because the value of your life insurance policy will fluctuate with
the performance of the investment options you select and the Fixed Account.
--------------------------------------------------------------------------------
The following Sub-Accounts are available under the policy after February 15,
2001:
<TABLE>
<CAPTION>
<S> <C>
SUB-ACCOUNT PURCHASES SHARES OF:
<CAPTION>
<S> <C>
Money Market Sub-Account Class Y shares of Money Market Portfolio of the
Morgan Stanley Dean Witter Select Dimensions
Investment Series
Diversified Income Sub-Account Class Y shares of Diversified Income Portfolio of
the Morgan Stanley Dean Witter Select Dimensions
Investment Series
Balanced Growth Sub-Account Class Y shares of Balanced Growth Portfolio of the
Morgan Stanley Dean Witter Select Dimensions
Investment Series
Utilities Sub-Account Class Y shares of Utilities Portfolio of the
Morgan Stanley Dean Witter Select Dimensions
Investment Series
Dividend Growth Sub-Account Class Y shares of Dividend Growth Portfolio of the
Morgan Stanley Dean Witter Select Dimensions
Investment Series
Value-Added Market Sub-Account Class Y shares of Value-Added Market Portfolio of
the Morgan Stanley Dean Witter Select Dimensions
Investment Series
Growth Sub-Account Class Y shares of Growth Portfolio of the Morgan
Stanley Dean Witter Select Dimensions Investment
Series
American Opportunities Sub-Account Class Y shares of American Opportunities Portfolio
of the Morgan Stanley Dean Witter Select
Dimensions Investment Series
Mid-Cap Equity Sub-Account Class Y shares of Mid-Cap Equity Portfolio of the
Morgan Stanley Dean Witter Select Dimensions
Investment Series
Global Equity Sub-Account Class Y shares of Global Equity Portfolio of the
Morgan Stanley Dean Witter Select Dimensions
Investment Series
Developing Growth Sub-Account Class Y shares of Developing Growth Portfolio of
the Morgan Stanley Dean Witter Select Dimensions
Investment Series
High Yield Sub-Account Shares of High Yield Portfolio of The Universal
Institutional Funds, Inc.
Mid Cap Value Sub-Account Shares of Mid Cap Value Portfolio of The Universal
Institutional Funds, Inc.
Emerging Markets Debt Sub-Account Shares of Emerging Markets Debt Portfolio of The
Universal Institutional Funds, Inc.
Emerging Markets Equity Sub-Account Shares of Emerging Markets Equity Portfolio of The
Universal Institutional Funds, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SUB-ACCOUNT PURCHASES SHARES OF:
<CAPTION>
<S> <C>
Fixed Income Sub-Account Shares of Fixed Income Portfolio of The Universal
Institutional Funds, Inc.
Active International Allocation Sub-Account Shares of Active International Allocation
Portfolio of The Universal Institutional Funds,
Inc.
Technology Sub-Account Shares of Technology Portfolio of The Universal
Institutional Funds, Inc.
Strategic Stock Sub-Account Class II shares of Strategic Stock Portfolio of
the Van Kampen Life Investment Trust
Enterprise Sub-Account Class II shares of Enterprise Portfolio of the Van
Kampen Life Investment Trust
American Funds Global Growth Fund Sub-Account Class 2 shares of the Global Growth Fund of
American Funds Insurance Series ("American Funds
Global Growth Fund")
American Funds Global Small Capitalization Fund Class 2 shares of the Global Small Capitalization
Fund of American Funds Insurance Series ("American
Funds Global Small Capitalization Fund")
American Funds Growth Fund Sub-Account Class 2 shares of the Growth Fund of American
Funds Insurance Series ("American Funds Growth
Fund")
American Funds Growth-Income Fund Sub-Account Class 2 shares of the Growth-Income Fund of
American Funds Insurance Series ("American Funds
Growth-Income Fund")
American Funds International Fund Sub-Account Class 2 shares of the International Fund of
American Funds Insurance Series ("American Funds
International Fund")
MFS Capital Opportunities Series Sub-Account MFS-Registered Trademark- Capital Opportunities
Series of the MFS-Registered Trademark- Variable
Insurance Trust-SM-
MFS Emerging Growth Series Sub-Account MFS-Registered Trademark- Emerging Growth Series
of the MFS-Registered Trademark- Variable
Insurance Trust-SM-
MFS Growth Series Sub-Account MFS-Registered Trademark- Growth Series of the
MFS-Registered Trademark- Variable Insurance
Trust-SM-
MFS Growth with Income Series Sub-Account MFS-Registered Trademark- Growth with Income
Series of the MFS-Registered Trademark- Variable
Insurance Trust-SM-
MFS Total Return Series Sub-Account MFS-Registered Trademark- Total Return Series of
the MFS-Registered Trademark- Variable Insurance
Trust-SM-
Franklin Small Cap Fund Sub-Account Class 2 shares of the Small Cap Fund of the
Franklin Templeton Variable Insurance Products
Trust ("Franklin Small Cap Fund")
Franklin Strategic Income Securities Fund Sub-Account Class 1 shares of the Franklin Strategic Income
(formerly Franklin Strategic Income Investment Fund Sub- Securities Fund (formerly Franklin Strategic
Account) Income Investments Fund) of the Franklin Templeton
Variable Insurance Products
Mutual Shares Securities Fund Sub-Account Class 2 shares of Mutual Shares Securities Fund of
the Franklin Templeton Variable Insurance Products
Trust
Templeton Developing Markets Securities Fund Sub-Account Class 1 shares of Templeton Developing Markets
(formerly Templeton Developing Markets Equity Fund Sub- Securities Fund (formerly Templeton Developing
Account) Markets Equity Fund) of the Franklin Templeton
Variable Insurance Trust
Templeton Growth Securities Sub-Account (formerly Class 2 shares of the Templeton Growth Securities
Templeton Global Growth Fund Sub-Account) Fund (formerly Templeton Global Growth Fund) of
the Franklin Templeton Variable Insurance Trust
</TABLE>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The policy may not be available for sale in all states.
This Prospectus can also be obtained from the Securities and Exchange
Commission's website (HTTP://WWW.SEC.GOV).
This life insurance policy IS NOT:
- a bank deposit or obligation;
- federally insured; or
- endorsed by any bank or governmental agency.
--------------------------------------------------------------------------------
PROSPECTUS DATED: JANUARY 2, 2001
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 3
--------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
----------------------------------------------------------------------
SUMMARY OF BENEFITS AND RISKS 4
----------------------------------------------------------------------
Benefits of Your Policy 4
----------------------------------------------------------------------
What Does Your Premium Pay For? 4
----------------------------------------------------------------------
Risks of Your Policy 4
----------------------------------------------------------------------
FEE TABLES 6
----------------------------------------------------------------------
ABOUT US 11
----------------------------------------------------------------------
Hartford Life Insurance Company 11
----------------------------------------------------------------------
Separate Account VL II 11
----------------------------------------------------------------------
The Portfolios 11
----------------------------------------------------------------------
CHARGES AND DEDUCTIONS 15
----------------------------------------------------------------------
YOUR POLICY 17
----------------------------------------------------------------------
PREMIUMS 19
----------------------------------------------------------------------
DEATH BENEFITS AND POLICY VALUES 20
----------------------------------------------------------------------
MAKING WITHDRAWALS FROM YOUR POLICY 21
----------------------------------------------------------------------
LOANS 21
----------------------------------------------------------------------
LAPSE AND REINSTATEMENT 22
----------------------------------------------------------------------
TAXES 23
----------------------------------------------------------------------
LEGAL PROCEEDINGS 26
----------------------------------------------------------------------
GLOSSARY OF SPECIAL TERMS 27
----------------------------------------------------------------------
WHERE YOU CAN FIND MORE INFORMATION 28
----------------------------------------------------------------------
</TABLE>
<PAGE>
4 HARTFORD LIFE INSURANCE COMPANY
--------------------------------------------------------------------------------
SUMMARY OF BENEFITS AND RISKS
BENEFITS OF YOUR POLICY
FLEXIBILITY -- The policy is designed to be flexible to meet your specific life
insurance needs. You have the flexibility to choose death benefit options,
investment options, and premiums you pay.
DEATH BENEFIT -- While the policy is in force and when the last surviving
insured dies, we pay a death benefit to your beneficiary. You select one of
three death benefit options:
- Level Option: The death benefit equals the current Face Amount.
- Return of Account Value Option: The death benefit is the current Face Amount
plus the Account Value of your policy;
- Return of Premium Option: The death benefit is the current Face Amount plus
the total of your premium payments, however, it will be no more than the
current Face Amount plus $2.5 million.
The death benefit is reduced by any money you owe us, such as outstanding loans,
loan interest, or unpaid charges. You may change your death benefit option under
certain circumstances. You may increase or decrease the Face Amount on your
policy under certain circumstances.
DEATH BENEFIT GUARANTEE -- Generally, your death benefit coverage will last as
long as there is enough value in your policy to pay for the monthly charges we
deduct. Since this is a variable life policy, values of your policy will
fluctuate based on the performance of the underlying investment options you have
chosen. Without the Death Benefit Guarantee your policy will lapse if the value
of your policy is insufficient to pay your monthly charges. However, when the
Death Benefit Guarantee feature is in effect, the policy will not lapse,
regardless of the investment performance of the underlying funds.
When you apply for the policy you choose what percentage of the total face
amount that is covered by the Death Benefit Guarantee. The Death Benefit
Guarantee period is the maximum number of policy years that the Death Benefit
Guarantee is available on the policy. The Death Benefit Guarantee period is
individualized based on the issue ages, sexes and risk classes of the insureds
and is provided in the policy. The Death Benefit Guarantee Premium is not a
charge but a funding level that is required to keep the Death Benefit Guarantee
available. In order to maintain the Death Benefit Guarantee feature, the
cumulative premiums paid into the policy, less withdrawals and indebtedness,
must exceed the Cumulative Death Benefit Guarantee Premium.
INVESTMENT OPTIONS -- You may invest in up to 9 different investment choices
within your policy, from a choice of 35 investment options and a Fixed Account.
You may transfer money among your investment choices, subject to restrictions.
PREMIUM PAYMENTS -- You have the flexibility to choose how you pay premiums. You
choose a planned premium when you purchase the policy. You may change your
planned premium, or pay additional premium any time, subject to certain
limitations.
RIGHT TO EXAMINE YOUR POLICY -- For 10 days after you receive your policy, you
may cancel it without paying a sales charge. A longer period is provided in some
states.
WITHDRAWALS -- You may take money out of your policy once a month, subject to
certain minimums. (See "Risks of Your Policy," below).
LOANS -- You may take a loan on the policy. The policy secures the loan.
SETTLEMENT OPTIONS -- You or your beneficiary may choose to receive the proceeds
of the policy over a period of time by using one of several settlement options.
OPTIONAL COVERAGE -- You may add other coverages to your policy. See "Your
Policy -- Other Benefits."
WHAT DOES YOUR PREMIUM PAY FOR?
Your premium pays for three things. It pays for life insurance coverage, it acts
as an investment in the Sub-Accounts, and it pays for sales loads and other
charges.
RISKS OF YOUR POLICY
INVESTMENT PERFORMANCE -- The value of your policy will fluctuate with the
performance of the investment options you choose. Your investment options may
decline in value, or they may not perform to your expectations. Your policy
values in the Sub-Accounts are not guaranteed.
UNSUITABLE FOR SHORT-TERM SAVINGS -- The policy is designed for long term
financial planning. You should not purchase the policy if you will need the
premium payment in a short time period.
RISK OF LAPSE -- Your policy could terminate if the value of the policy becomes
too low to support the policy's monthly charges. If this occurs, we will notify
you in writing. You will then have a 61-day grace period to pay additional
amounts to prevent the policy from terminating.
WITHDRAWAL LIMITATIONS -- You are limited to one withdrawal per month.
Withdrawals will reduce your policy's death benefit, and may be subject to a
surrender charge.
TRANSFER LIMITATIONS -- We reserve the right to limit the size of transfers and
remaining balances, and to limit the number and frequency of transfers among
your investment options and the Fixed Account.
LOANS -- Taking a loan from your policy may increase the risk that your policy
will lapse, will have a permanent effect on the policy's Account Value, and will
reduce the death proceeds.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 5
--------------------------------------------------------------------------------
ADVERSE TAX CONSEQUENCES -- You may be subject to income tax if you receive any
loans, withdrawals or other amounts from the policy, and you may be subject to a
10% penalty tax. Under certain circumstances (usually if you prefund future
benefits in seven years or less), your policy may become a modified endowment
policy under federal tax law. If these circumstances were to occur, loans and
other pre-death distributions are includable in gross income on an income first
basis, and may be subject to a 10% penalty (unless you have attained age
59 1/2). You should consult with a tax adviser before taking steps that may
affect whether your policy becomes a modified endowment policy. See "Taxes."
<PAGE>
6 HARTFORD LIFE INSURANCE COMPANY
--------------------------------------------------------------------------------
FEE TABLES
The following tables describe the MAXIMUM fees and expenses that you will pay
when buying, owning, and surrendering the policy. The first table describes the
maximum fees and expenses that you will pay at the time that you buy the policy,
surrender the policy, or transfer cash value between investment options. Your
specific fees and charges are described on the specification page of your
policy.
TRANSACTION FEES
<TABLE>
CHARGE WHEN CHARGE IS DEDUCTED AMOUNT DEDUCTED
------------------------------------------------------------------------------------------------
<S> <C> <C>
Sales Charge When you pay premium. 8% Policy Years 1-3
4% Policy Years 4+
------------------------------------------------------------------------------------------------
Premium Tax Charge When you pay premium. A percent of premium which varies
by your state and municipality of
residence. The range of premium tax
charge is generally between 0% and
4%.
This rate will change if your state
or municipality changes its premium
tax charges. It may change if you
change your state or municipality
of residence.
------------------------------------------------------------------------------------------------
Surrender Charges When you surrender your policy. Surrender charge varies by policy
When you make certain Face Amount year and equals a percentage times
decreases. the sum of two components: the
When you take certain withdrawals. sales surrender charge and the
underwriting surrender charge. The
sales surrender charge equals the
Death Benefit Guarantee Premium.
The maximum annual Death Benefit
Guarantee Premium ranges from a
minimum of $.394 per 1,000 to a
maximum of $12.463 per 1,000. The
underwriting surrender charge
equals $1 per $1000 of initial face
amount, but is at least $500 and no
more than $3000.
------------------------------------------------------------------------------------------------
The percentage by policy years is
as follows:
Policy Year Percentage
1 70%
2 70%
3 70%
4 60%
5 50%
6 40%
7 30%
8 20%
9 10%
10 and after 0%
------------------------------------------------------------------------------------------------
Face Amount Increase Each month for 12 months beginning 1/12 of $1 per month per thousand
Fee on the effective date of any of Face Amount increase.
unscheduled increase in Face Amount Monthly fees charged will not be
you request. less than 1/12 of $500 and will not
exceed 1/12 of $3,000.
------------------------------------------------------------------------------------------------
Transfer Fees When you make a transfer after the $25 per transfer.
first transfer in any month.
------------------------------------------------------------------------------------------------
Withdrawal Fee When you take a withdrawal. $10 per withdrawal.
<S> <C>
POLICIES FROM WHICH CHARGE IS
CHARGE DEDUCTED
----------------------
Sales Charge All
----------------------
Premium Tax Charge All
----------------------
Surrender Charges Policies surrendered during the first
nine policy years.
Policies where the Face Amount is
reduced below the initial Face Amount
during the first nine policy years.
----------------------
----------------------
Face Amount Increase Policies where the owner has made an
Fee unscheduled increase.
----------------------
Transfer Fees Those policies with more than one
transfer per month.
----------------------
Withdrawal Fee Those policies where the owner has
made a withdrawal.
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 7
--------------------------------------------------------------------------------
The next table describes the MAXIMUM fees and expenses that you will pay
periodically during the time that you own the policy, not including Fund fees
and expenses.
CHARGES OTHER THAN FUND OPERATING EXPENSES
<TABLE>
CHARGE WHEN CHARGE IS DEDUCTED AMOUNT DEDUCTED
------------------------------------------------------------------------------------------------
<S> <C> <C>
Cost of Insurance Monthly. The charge is the maximum cost of
Charges insurance rate times the net amount
at risk. Maximum cost of insurance
rates are individualized, depending
on the insureds' issue ages, sexes,
insurance classes, substandard
ratings, and age of the policy. The
maximum monthly cost of insurance
rate for unrated individuals ranges
from a minimum of $0.0002 per 1,000
per month to a maximum of $83.333
per 1,000 per month.
------------------------------------------------------------------------------------------------
Mortality and Expense Monthly. Per the Sub-Account accumulated
Risk Charge value:
- 1/12 of 0.75% per month for
policy years 1-10.
- 1/12 of 0.50% per month after the
10th policy year.
Per $1000 of initial Face Amount
during the first 10 policy years:
- individualized based on issue
ages and Death Benefit Guarantee
Amount.
------------------------------------------------------------------------------------------------
Administrative Charge Monthly. Year 1
$24.16
Years 2+
$7.50
------------------------------------------------------------------------------------------------
Rider Charges Monthly. Individualized based on optional
rider selected.
<S> <C>
POLICIES FROM WHICH CHARGE IS
CHARGE DEDUCTED
----------------------
Cost of Insurance All
Charges
----------------------
Mortality and Expense All
Risk Charge
----------------------
Administrative Charge All
----------------------
Rider Charges Only those policies with benefits
provided by rider.
</TABLE>
<PAGE>
8 HARTFORD LIFE INSURANCE COMPANY
--------------------------------------------------------------------------------
The next table describes the Fund fees and expenses that you will pay
periodically during the time that you own the policy. The table shows the actual
fees and expenses charged by the Funds for the year ended December 31, 1999.
More detail concerning each Fund's fees and expenses is contained in the
prospectus for each Fund.
Annual Fund Operating Expenses
As of the Fund's Year End
(As a percentage of net assets)
<TABLE>
<CAPTION>
TOTAL FUND
OPERATING
OTHER EXPENSES
MANAGEMENT FEES 12B-1 DISTRIBUTION EXPENSES (INCLUDING ANY
(INCLUDING ANY AND/OR SERVICING FEES (INCLUDING ANY WAIVERS AND ANY
WAIVERS) (INCLUDING WAIVERS) REIMBURSEMENTS) REIMBURSEMENTS)
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS
INVESTMENT SERIES:
Money Market Portfolio 0.50% 0.25% 0.04% 0.79%
--------------------------------------------------------------------------------------------------------------------------
Diversified Income Portfolio 0.40% 0.25% 0.08% 0.73%
--------------------------------------------------------------------------------------------------------------------------
Balanced Growth Portfolio 0.60% 0.25% 0.04% 0.89%
--------------------------------------------------------------------------------------------------------------------------
Utilities Portfolio 0.65% 0.25% 0.05% 0.95%
--------------------------------------------------------------------------------------------------------------------------
Dividend Growth Portfolio 0.58% 0.25% 0.02% 0.85%
--------------------------------------------------------------------------------------------------------------------------
Value-Added Market Portfolio 0.50% 0.25% 0.05% 0.80%
--------------------------------------------------------------------------------------------------------------------------
Growth Portfolio 0.80% 0.25% 0.10% 1.15%
--------------------------------------------------------------------------------------------------------------------------
American Opportunities Portfolio 0.62% 0.25% 0.04% 0.91%
--------------------------------------------------------------------------------------------------------------------------
Mid-Cap Equity Portfolio (formerly Mid-Cap
Growth) (1) 0.75% 0.25% 0.17% 1.17%
--------------------------------------------------------------------------------------------------------------------------
Global Equity Portfolio 1.00% 0.25% 0.08% 1.33%
--------------------------------------------------------------------------------------------------------------------------
Developing Growth Portfolio 0.50% 0.25% 0.08% 0.83%
--------------------------------------------------------------------------------------------------------------------------
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.:
High Yield Portfolio (2) 0.50% N/A 0.61% 1.11%
--------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value Portfolio (2) 0.75% N/A 0.62% 1.37%
--------------------------------------------------------------------------------------------------------------------------
Emerging Markets Debt Portfolio (2) 0.80% N/A 0.98% 1.78%
--------------------------------------------------------------------------------------------------------------------------
Emerging Markets Equity Portfolio (2) 1.25% N/A 1.37% 2.62%
--------------------------------------------------------------------------------------------------------------------------
Fixed Income Portfolio (2) 0.40% N/A 0.56% 0.96%
--------------------------------------------------------------------------------------------------------------------------
Active International Allocation Portfolio (2) 0.80% N/A 1.83% 2.63%
--------------------------------------------------------------------------------------------------------------------------
Technology Portfolio (2) 0.80% N/A 11.77% 12.57%
--------------------------------------------------------------------------------------------------------------------------
VAN KAMPEN LIFE INVESTMENT TRUST:
Strategic Stock Portfolio (3) (12) 0.50% 0.25% 0.41% 1.16%
--------------------------------------------------------------------------------------------------------------------------
Enterprise Portfolio (3)(12) 0.50% 0.25% 0.12% 0.87%
--------------------------------------------------------------------------------------------------------------------------
AMERICAN FUNDS INSURANCE SERIES:
American Funds Global Growth Fund 0.68% 0.25% 0.03% 0.96%
--------------------------------------------------------------------------------------------------------------------------
American Funds Global Small Capitalization
Fund 0.79% 0.25% 0.03% 1.07%
--------------------------------------------------------------------------------------------------------------------------
American Funds Growth Fund 0.38% 0.25% 0.01% 0.64%
--------------------------------------------------------------------------------------------------------------------------
American Funds Growth-Income Fund 0.34% 0.25% 0.01% 0.60%
--------------------------------------------------------------------------------------------------------------------------
American Funds International Fund 0.55% 0.25% 0.05% 0.85%
--------------------------------------------------------------------------------------------------------------------------
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE
TRUST:
MFS-Registered Trademark- Capital
Opportunities Series (7)(8) 0.75% N/A 0.16% 0.91%
--------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Emerging Growth
Series (7) 0.75% N/A 0.09% 0.84%
--------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth
Series (7)(8) 0.75% N/A 0.16% 0.91%
--------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth with Income
Series (7) 0.75% N/A 0.13% 0.88%
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 9
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL FUND
OPERATING
OTHER EXPENSES
MANAGEMENT FEES 12B-1 DISTRIBUTION EXPENSES (INCLUDING ANY
(INCLUDING ANY AND/OR SERVICING FEES (INCLUDING ANY WAIVERS AND ANY
WAIVERS) (INCLUDING WAIVERS) REIMBURSEMENTS) REIMBURSEMENTS)
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Total Return
Series (7) 0.75% N/A 0.15% 0.90%
--------------------------------------------------------------------------------------------------------------------------
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST:
Franklin Small Cap Fund -- Class 2 (4)(5) 0.55% 0.25% 0.27% 1.07%
--------------------------------------------------------------------------------------------------------------------------
Franklin Strategic Income Securities Fund (6) 0.43% N/A 0.32% 0.75%
--------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund -- Class 2
(4)(9) 0.60% 0.25% 0.19% 1.04%
--------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Equity Fund --
Class 1 (10) 1.25% N/A 0.31% 1.56%
--------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund -- Class 2
(4)(11) 0.83% 0.25% 0.05% 1.13%
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) With respect to the Mid-Cap Equity Portfolio, the expense information shown
in the table above has been restated to reflect the current fees. Prior to
December 31, 1999, the investment adviser, Morgan Stanley Dean Witter
Advisors, Inc., assumed all expenses of the Portfolio and waived the
compensation provided for the Portfolio in its management agreement with the
Fund.
(2) With respect to the High Yield, Mid-Cap Value, Emerging Markets Debt,
Emerging Markets Equity, Active International Allocation and Fixed Income
Portfolios, the investment advisers have voluntarily agreed to waive their
investment advisory fees and to reimburse certain expenses of the Portfolios
if such fees would cause their respective "Total Fund Operating Expenses" to
exceed certain limits. The expense ratios for the Active International
Allocation Portfolio and Technology Portfolio are annualized. Including
these reductions, it is estimated that "Management Fees", Other Expenses and
"Total Fund Operating Expenses" for the Portfolios would have been as
follows:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
PORTFOLIO MANAGEMENT FEES EXPENSES EXPENSES
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------
High Yield 0.19% 0.61% 0.80%
-----------------------------------------------------------------------------------------------------
Mid-Cap Value 0.43% 0.62% 1.05%
-----------------------------------------------------------------------------------------------------
Emerging Markets Debt 0.45% 0.98% 1.43%
-----------------------------------------------------------------------------------------------------
Emerging Markets Equity 0.42% 1.37% 1.79%
-----------------------------------------------------------------------------------------------------
Fixed Income 0.14% 0.56% 0.70%
-----------------------------------------------------------------------------------------------------
Active International Allocation 0.00% 1.15% 1.15%
-----------------------------------------------------------------------------------------------------
Technology Portfolio 0.00% 1.15% 1.15%
-----------------------------------------------------------------------------------------------------
</TABLE>
(3) With respect to the Strategic Stock Portfolio and the Enterprise Portfolio,
the investment adviser, Van Kampen Asset Management, Inc. has voluntarily
agreed to waive its investment advisory fees and to reimburse the Portfolios
if such fees would cause their respective "Total Fund Operating Expenses" to
exceed those set forth in the table above. Including in the aforementioned
reductions, it is estimated that "Management Fees", "Other Expenses" and
"Total Fund Operating Expenses" for the Portfolios would be:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
PORTFOLIO MANAGEMENT FEES EXPENSES EXPENSES
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------
Strategic Stock 0.24% 0.41% 0.65%
-----------------------------------------------------------------------------------------------------
Enterprise 0.47% 0.13% 0.60%
-----------------------------------------------------------------------------------------------------
</TABLE>
(4) The Fund's Class 2 distribution plan or "Rule 12b-1 Plan" is described in
the Fund's prospectus. While the maximum amount payable under the Fund's
Class 2 Rule 12b-1 Plan is 0.35% per year of the Fund's average daily net
assets, the Board of Trustees of Franklin Templeton Variable Insurance
Products Trust has set the current rate at 0.25% per year through at least
April 30, 2001.
(5) On February 8, 2000, a merger and reorganization was approved that combined
the assets of the Franklin Small Cap Fund with a similar fund of the
Templeton Variable Products Series Fund, effective May 1, 2000. On
February 8, 2000, fund shareholders approved new management fees, which
apply to the combined fund effective May 1, 2000. The table shows restated
total expenses based on the new fees and assets of the fund as of
December 31, 1999, and not the assets of the combined fund. However, if the
table reflected both the new fees and the combined assets, the fund's
expenses after May 1, 2000 would be estimated as: Management Fees 0.55%,
Distribution and Service Fees 0.25%, Other Expenses 0.27%, and Total Fund
Operating Expenses 1.07%.
<PAGE>
10 HARTFORD LIFE INSURANCE COMPANY
--------------------------------------------------------------------------------
(6) The management fees shown are based on the fund's maximum contractual
amount. Other expenses are estimated. The manager and administrator have
agreed in advance to waive or limit their respective fees and the manager to
assume as its own expense certain expenses otherwise payable by the fund so
that total annual fund operating expenses do not exceed 0.75% for the
current fiscal year. After December 31, 2001, the manager and administrator
may end this arrangement at any time. Without this reduction Total Fund
Operating Expenses were:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
MANAGEMENT FEES 12B-1 FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------
Franklin Strategic Income Securities Fund 0.43% N/A 0.52% 0.95%
-------------------------------------------------------------------------------------------------------------
</TABLE>
(7) Each Series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with
its custodian and dividend disbursing agent. Each series may enter into
other such arrangements and directed brokerage arrangements, which would
also have the effect of reducing the series' expenses. After these
reductions, the Total Fund Operating Expenses would be:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
MANAGEMENT FEES 12B-1 FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Capital Opportunities Series 0.75% N/A 0.15% 0.90%
-------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Emerging Growth Series 0.75% N/A 0.08% 0.83%
-------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth Series 0.75% N/A 0.15% 0.90%
-------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth with Income Series 0.75% N/A 0.12% 0.87%
-------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Total Return Series 0.75% N/A 0.14% 0.89%
-------------------------------------------------------------------------------------------------------------
</TABLE>
(8) MFS has contractually agreed, subject to reimbursement, to bear expenses for
these series such that each such series' "Other Expenses" (after taking into
account the expense offset arrangement described above), do not exceed 0.15%
of the average daily net assets of the series during the current fiscal
year. These contractual fee arrangements will continue until at least
May 1, 2001, unless changed with the consent of the board of trustees which
oversees the series. Without this waiver, "Total Fund Operating Expenses"
would have been:
<TABLE>
<CAPTION>
TOTAL FUND
OTHER OPERATING
MANAGEMENT FEES 12B-1 FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Capital Opportunities Series 0.75% N/A 0.27% 1.02%
-------------------------------------------------------------------------------------------------------------
MFS-Registered Trademark- Growth Series 0.75% N/A 0.71 1.46%
-------------------------------------------------------------------------------------------------------------
</TABLE>
(9) On February 8, 2000, a merger and reorganization was approved that combined
the assets of the Templeton Variable Products Series Fund, effective May 1,
2000. The table shows total expenses based on the fund's assets as of
December 31, 1999, and not the assets of the combined fund. However, if the
table reflected combined assets, the fund's expenses after May 1, 2000 would
be estimated as: Management Fees 0.60%, Distribution and Service Fees 0.25%,
Other Expenses 0.19%, and Total Fund Operating Expenses 1.04%.
(10) On February 8, 2000, shareholders approved a merger and a reorganization
that combined the Developing Markets Securities Fund with the Templeton
Developing Markets Equity Fund, effective May 1, 2000. The shareholders of
the new fund had approved new management fees, which apply to the combined
fund effective May 1, 2000. The table shows restated total expenses based on
the new fees and the assets of the fund as of December 31, 1999, and not the
assets of the combined fund. However, if the table reflected both the new
fees and the combined assets, the fund's expenses after May 1, 2000 would be
estimated as: Management Fees 1.25%, Other Expenses 0.29%, and Total Fund
Operating Expenses 1.54%.
(11) On February 8, 2000, a merger and a reorganization was approved that
combined the Templeton Growth Securities Fund with a similar fund of
Templeton Variable Products Series Fund, effective May 1, 2000. The table
shows total expenses based on the fund's assets as of December 31, 1999, and
not the assets of the combined fund. However, if the table reflected the
combined assets, the fund's expenses after May 1, 2000 would be estimated
as: Management Fees 0.80%, Distribution and Service Fees 0.25%, Other
Expenses 0.05%, and Total Fund Operating Expenses 1.10%.
(12) Under the Distribution Plan and Service Plan, the Portfolio may spend up to
a total of 0.35% per year of the Portfolio's average daily net assets with
respect to its Class II Shares. Notwithstanding the foregoing, the
Portfolio's Board of Trustees currently limits the aggregate amount payable
under the Distribution Plan and Service Plan to 0.25% per year of the
Portfolio's average daily net assets with respect to Class II Shares.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 11
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ABOUT US
HARTFORD LIFE INSURANCE COMPANY
Hartford Life Insurance Company is a stock life insurance company engaged in the
business of writing life insurance, both individual and group, in all states of
the United States, as well as the District of Columbia. We were originally
incorporated under the laws of Massachusetts on June 5, 1902, and subsequently
redomiciled to Connecticut. Our offices are located in Simsbury, Connecticut;
however, our mailing address is P.O. Box 5085, Hartford, CT 06104-5085. We are
ultimately controlled by The Hartford Financial Services Group, Inc., one of the
largest financial service providers in the United States.
HARTFORD RATINGS
<TABLE>
<CAPTION>
EFFECTIVE DATE
RATING AGENCY OF RATING RATING BASIS OF RATING
<S> <C> <C> <C>
------------------------------------------------------------------------------
A.M. Best and
Company, Inc. 4/1/00 A+ Financial performance
------------------------------------------------------------------------------
Standard & Poor's 8/1/00 AA Insurer financial strength
------------------------------------------------------------------------------
Fitch 5/1/00 AA+ Financial strength
------------------------------------------------------------------------------
</TABLE>
These ratings apply to Hartford's ability to meet its obligations under the
Contract. The ratings do not apply to the Separate Account or the underlying
Funds.
SEPARATE ACCOUNT VL II
The Sub-Accounts are subdivisions of our separate account, called Separate
Account VL II. The Separate Account exists to keep your life insurance policy
assets separate from our company assets. As such, the investment performance of
the Separate Account is independent from the investment performance of
Hartford's other assets. Hartford's other assets are utilized to pay our
insurance obligations under the policy. Your assets in the Separate Account are
held exclusively for your benefit and may not be used for any other liability of
Hartford. Separate Account VL II was established on September 30, 1994 under the
laws of Connecticut.
THE PORTFOLIOS
The underlying investment for the Contracts are shares of the portfolios or
funds of Morgan Stanley Dean Witter Select Dimensions Investment Series, The
Universal Institutional Funds, Inc., Van Kampen Life Investment Trust, American
Funds Insurance Series, MFS-Registered Trademark- Variable Insurance Trust-SM-,
and Franklin Templeton Variable Insurance Products Trust, all open-ended
management investment companies. The underlying portfolios or funds
corresponding to each Sub-Account and their investment objectives are described
below. Hartford reserves the right, subject to compliance with the law, to offer
additional portfolios with differing investment objectives. The portfolios may
not be available in all states.
We do not guarantee the investment results of any of the underlying portfolios
or funds. Since each underlying portfolio has different investment objectives,
each is subject to different risks. These risks and the portfolio's expenses are
more fully described in the accompanying Funds' prospectuses and the Statements
of Additional Information. The Funds' prospectuses should be read in conjunction
with this Prospectus before investing.
MORGAN STANLEY DEAN WITTER SELECT DIMENSIONS INVESTMENT SERIES:
MONEY MARKET PORTFOLIO -- Seeks high current income, preservation of capital and
liquidity by investing in the following money market instruments: U.S.
Government securities, obligations of U.S. regulated banks and savings
institutions having total assets of more than $1 billion, or less than $1
billion if such are fully federally insured as to principal (the interest may
not be insured), repurchase agreements and high grade corporate debt obligations
maturing in thirteen months or less.
DIVERSIFIED INCOME PORTFOLIO -- Seeks, as a primary objective, to earn a high
level of current income and, as a secondary objective, to maximize total return,
but only to the extent consistent with its primary objective, by equally
allocating its assets among three separate groupings of fixed-income securities.
Up to one-third of the securities in which the Diversified Income Portfolio may
invest will include securities rated Baa/BBB or lower. See the Special
Considerations for investments for high yield securities disclosed in the Fund's
prospectus.
BALANCED GROWTH PORTFOLIO -- Seeks to provide capital growth with reasonable
current income by investing, under normal market conditions, at least 60% of its
total assets in a diversified portfolio of common stocks of companies which have
a record of paying dividends and, in the opinion of the Investment Manager, have
the potential for increasing dividends and in securities convertible into common
stock, and at least 25% of its total assets in investment grade fixed-income
(fixed-rate and adjustable-rate) securities such as corporate notes and bonds
and obligations issued or guaranteed by the U.S. Government, its agencies and
its instrumentalities.
UTILITIES PORTFOLIO -- Seeks to provide both capital appreciation and current
income.
DIVIDEND GROWTH PORTFOLIO -- Seeks to provide reasonable current income and
long-term growth of income and capital by investing primarily in common stock of
companies with a record of paying dividends and the potential for increasing
dividends.
VALUE-ADDED MARKET PORTFOLIO -- Seeks to achieve a high level of total return on
its assets through a combination of capital appreciation and current income, by
investing, on an equally-weighted basis, in a diversified portfolio of common
stocks of the companies which are represented in the Standard & Poor's 500
Composite Stock Price Index.
GROWTH PORTFOLIO -- Seeks long-term growth of capital by investing primarily in
common stocks and securities convertible into common stocks issued by domestic
and foreign companies.
<PAGE>
12 HARTFORD LIFE INSURANCE COMPANY
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AMERICAN OPPORTUNITIES PORTFOLIO -- Seeks long-term capital growth consistent
with an effort to reduce volatility, by investing principally in common stock of
companies in industries which, at the time of the investment, are believed to be
attractively valued given their above average relative earnings growth potential
at that time.
MID-CAP EQUITY PORTFOLIO -- Seeks long-term capital growth by investing
primarily in equity securities of medium sized companies (that is, companies
whose equity market capitalization falls within the range of companies
comprising the S & P 400 Index).
GLOBAL EQUITY PORTFOLIO -- Seeks to obtain total return on its assets primarily
through long-term capital growth and, to a lesser extent, from income, through
investments in all types of common stocks and equivalents (such as convertible
securities and warrants), preferred stocks and bonds and other debt obligations
of domestic and foreign companies, governments and international organizations.
DEVELOPING GROWTH PORTFOLIO -- Seeks long-term capital growth by investing
primarily in common stocks of smaller and medium-sized companies that, in the
opinion of the Investment Manager, have the potential for growing more rapidly
than the economy and which may benefit from new products or services,
technological developments or changes in management.
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.:
HIGH YIELD PORTFOLIO -- Seeks above-average total return over a market cycle of
three to five years by investing primarily in high yield securities (commonly
referred to as "junk bonds"). The Portfolio also may invest in investment grade
fixed income securities, including U.S. Government securities, corporate bonds
and mortgage securities. The Portfolio may invest to a limited extent in foreign
fixed income securities, including emerging market securities. The Investment
Adviser may use futures, swaps and other types of derivatives in managing the
Portfolio.
MID-CAP VALUE PORTFOLIO -- Seeks above-average total return over a market cycle
of three to five years by investing in common stocks of companies with
capitalizations in the range of companies included in the S&P MidCap 400 Index
(currently $500 million to $6 billion). The Portfolio purchases stocks that
typically do not pay dividends. The Investment Adviser analyzes securities to
identify stocks that are undervalued, and measures the relative attractiveness
of the PortfolIo's current holdings against potential purchases.
EMERGING MARKETS DEBT PORTFOLIO -- Seeks high total return by investing
primarily in fixed income securities of government and government-related
issuers and, to a lesser extent, of corporate issuers located in emerging market
countries. The Investment Adviser seeks high total return by investing in a
portfolio of emerging market debt that offers low correlation to many other
asset classes. Using macroeconomic and fundamental analysis, the Investment
Adviser seeks to identify developing countries that are undervalued and have
attractive or improving fundamentals. After the country allocation is
determined, the sector and security selection is made within each county.
EMERGING MARKETS EQUITY PORTFOLIO -- Seeks long-term capital appreciation by
investing primarily in equity securities of issuers in emerging market
countries. The Investment Adviser seeks to maximize returns by investing in
growth-oriented equity securities in emerging markets. The Investment Adviser's
investment approach combines top-down country allocation with bottom-up stock
selection. Investment selection criteria include attractive growth
characteristics, reasonable valuations and managements with a strong shareholder
value orientation.
FIXED INCOME PORTFOLIO -- Seeks above-average total return over a market cycle
of three to five years by investing primarily in a diversified mix of dollar
denominated investment grade fixed income securities, particularly U.S.
Government, corporate and mortgage securities. The Portfolio ordinarily will
maintain an average weighted maturity in excess of five years. The Portfolio may
invest opportunistically in non-dollar denominated securities and below
investment grade securities; and it may use futures, swaps and other types of
derivatives in managing the Portfolio.
ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO -- Seeks long-term capital
appreciation by investing primarily in accordance with country and sector
weightings determined by the investment adviser in equity securities of non-U.S.
issuers which, in the aggregate, replicate broad-market indices. The Investment
Adviser seeks to maintain a diversified portfolio of international equity
ecurities based on a top-down approach that emphasizes country and sector
selection and weighting rather than individual stock selection. The Investment
Adviser capitalizes on the significance of country and sector selection in
international equity portfolio returns by over and underweighting countries
based on three factors: (i) valuation; (ii) fundamental change; and (iii)
short-term market momentum/technicals.
TECHNOLOGY PORTFOLIO -- Seeks long-term capital appreciation by investing
primarily in equity securities of companies that the Investment Adviser expects
will benefit from their involvement in technology and technology-related
industries. The Investment Adviser seeks to identify significant long-term
technology trends and invest primarily in companies the Investment Adviser
believes are positioned to benefit materially from these trends.
VAN KAMPEN LIFE INVESTMENT TRUST:
STRATEGIC STOCK PORTFOLIO -- Seeks an above average total return through a
combination of potential capital appreciation and dividend income, consistent
with the preservation of invested capital. Under normal market conditions, the
Portfolio's investment adviser seeks to achieve the investment objectives by
investing in a portfolio of high dividend yielding equity securities of
companies included in the Dow Jones Industrial Average or in the Morgan Stanley
Capital International USA Index.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 13
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ENTERPRISE PORTFOLIO -- Seeks capital appreciation through investments in
securities believed by the Portfolio's investment adviser to have above average
potential for capital appreciation.
AMERICAN FUNDS INSURANCE SERIES:
AMERICAN FUNDS GLOBAL GROWTH FUND -- Seeks long-term growth of capital by
investing primarily in common stocks of issuers domiciled around the world.
AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION FUND -- Seeks long-term growth of
capital by investing primarily in equity securities of smaller companies located
around the world that typically have market capitalizations of $50 million to
$1.5 billion.
AMERICAN FUNDS GROWTH FUND -- Seeks long-term growth of capital by investing
primarily in common stocks which demonstrate the potential for appreciation.
AMERICAN FUNDS GROWTH-INCOME FUND -- Seeks growth of capital and income by
investing primarily in common stocks or other securities which demonstrate the
potential for appreciation and/or dividends.
AMERICAN FUNDS INTERNATIONAL FUND -- Seeks long-term growth of capital by
investing primarily in common stocks of issuers domiciled outside of the United
States.
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST:
MFS-REGISTERED TRADEMARK- CAPITAL OPPORTUNITIES SERIES -- Seeks capital
appreciation.
MFS-REGISTERED TRADEMARK- EMERGING GROWTH SERIES -- Seeks to provide long-term
growth of capital.
MFS-REGISTERED TRADEMARK- GROWTH SERIES -- Seeks to provide long-term growth of
capital and future income rather than current income.
MFS-REGISTERED TRADEMARK- GROWTH WITH INCOME SERIES -- Seeks to provide
reasonable current income and long-term growth of capital and income.
MFS-REGISTERED TRADEMARK- TOTAL RETURN SERIES -- Seeks primarily to provide
above-average income (compared to a portfolio invested in equity securities)
consistent with the prudent employment of capital, and secondarily to provide a
reasonable opportunity for growth of capital and income.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST:
FRANKLIN SMALL CAP FUND -- Seeks long-term capital growth.
FRANKLIN STRATEGIC INCOME SECURITIES FUND -- Seeks to earn a high level of
current income. Its secondary goal is long-term capital appreciation.
MUTUAL SHARES SECURITIES FUND -- Seeks capital appreciation. Its secondary goal
is income.
TEMPLETON DEVELOPING MARKETS SECURITIES FUND -- Seeks long-term capital
appreciation.
TEMPLETON GROWTH SECURITIES FUND -- Seeks long-term capital growth.
INVESTMENT ADVISERS -- Morgan Stanley Dean Witter Advisors Inc. ("MSDW
Advisors"), a Delaware Corporation, whose address is Two World Trade Center, New
York, New York 10048, is the Investment Manager for the Money Market Portfolio,
the North American Government Securities Portfolio, the Diversified Income
Portfolio, the Balanced Growth Portfolio, the Utilities Portfolio, the Dividend
Growth Portfolio, the Value-Added Market Portfolio, the Growth Portfolio, the
American Value Portfolio, the Mid-Cap Equity Portfolio, the Global Equity
Portfolio, the Developing Growth Portfolio, and the Emerging Markets Portfolio
of the Morgan Stanley Dean Witter Select Dimensions Investment Series (the
"Morgan Stanley Dean Witter Portfolios"). MSDW Advisors was incorporated in
July, 1992 and is a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co.
("MSDW"). Morgan Stanley Dean Witter Portfolios offer both Class X and Class Y
shares. Only Class Y shares are available in this Contract.
MSDW Advisors provides administrative services, manages the Morgan Stanley Dean
Witter Portfolios' business affairs and manages the investment of the Morgan
Stanley Dean Witter Portfolios' assets, including the placing of orders for the
purchase and sales of portfolio securities. MSDW Advisors has retained Morgan
Stanley Dean Witter Services Company Inc., its wholly-owned subsidiary, to
perform the aforementioned administrative services for the Morgan Stanley Dean
Witter Portfolios. For its services, the Morgan Stanley Dean Witter Portfolios
pay MSDW Advisors a monthly fee. See the accompanying Fund prospectus for a more
complete description of MSDW Advisors and the respective fees of the Morgan
Stanley Dean Witter Portfolios. With regard to the Mid-Cap Equity Portfolio, TCW
Investment Management Company ("TCW"), under a Sub-Advisory Agreement with MSDW
Advisors, provides these Portfolios with investment advice and portfolio
management, in each case subject to the overall supervision of the MSDW
Advisors. TCW's address is 865 South Figueroa Street, Suite 1800, Los Angeles,
California 90017.
With regard to the Growth Portfolio, Morgan Stanley Dean Witter Investment
Management Inc. ("MSDW Investment Management"),* under a Sub-Advisory Agreement
with MSDW Advisors, provides the Growth Portfolio with investment advice and
portfolio management, subject to the overall supervision of MSDW Advisors. MSDW
Investment Management, like MSDW Advisors, is a wholly-owned subsidiary of MSDW.
MSDW Investment Management's address is 1221 Avenue of the Americas, New York,
New York 10020.
In addition to acting as the Sub-Adviser for the Growth Portfolio, MSDW
Investment Management, pursuant to an Investment Advisory Agreement with The
Universal Institutional Funds, Inc., is the investment adviser for the Emerging
Markets Debt Portfolio,
* ON DECEMBER 1, 1998, MORGAN STANLEY ASSET MANAGEMENT INC. CHANGED ITS NAME TO
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC. BUT CONTINUES TO DO
BUSINESS IN CERTAIN INSTANCES USING THE NAME MORGAN STANLEY ASSET MANAGEMENT.
<PAGE>
14 HARTFORD LIFE INSURANCE COMPANY
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Emerging Markets Equity Portfolio, Active International Allocation Portfolio and
Technology Portfolio. As the investment adviser, MSDW Investment Management
provides investment advice and portfolio management services for Emerging
Markets Debt Portfolio, Emerging Markets Equity Portfolio, Active International
Allocation Portfolio and Technology Portfolio subject to the supervision of The
Universal Institutional Funds, Inc.'s Board of Directors.
The investment adviser for the High Yield Portfolio, Fixed Income Portfolio, and
the Mid Cap Value Portfolio is Miller Anderson & Sherrerd, LLP ("MAS"). MAS is a
Pennsylvania limited liability partnership founded in 1969 with its principal
offices at One Tower Bridge, West Conshohocken, Pennsylvania 19428. MAS provides
investment advisory services to employee benefit plans, endowment portfolios,
foundations and other institutional investors and has served as an investment
adviser to several open-end investment companies. MAS is an indirect wholly-
owned subsidiary of MSDW.
The Investment Adviser with respect to the Strategic Stock Portfolio and the
Enterprise Portfolio is Van Kampen Asset Management Inc., a wholly owned
subsidiary of Van Kampen Investments Inc. Van Kampen Investments Inc. is an
indirect wholly owned subsidiary of MSDW. Van Kampen Investments Inc. is a
diversified asset management company with more than two million retail investor
accounts, extensive capabilities for managing institutional portfolios, and more
than $90 billion under management or supervision as of December 31, 1999. Van
Kampen Investments Inc.'s more than 50 open-end and 39 closed-end funds and more
than 2,700 unit investment trusts are professionally distributed by leading
authorized dealers nationwide. The Van Kampen Life Investment Trust offers Class
I and Class II shares. Only Class II shares are available in this Contract.
The American Fund Global Growth Fund, American Funds Global Small Capitalization
Fund, American Funds Growth Fund, American Funds Growth-Income Fund and American
Funds International Fund are all part of American Funds Insurance Series.
American Funds Insurance Seriesis a fully managed, diversified, open-end
investment company organized as a Massachusetts business trust in 1983. American
Funds Insurance Seriesoffers two classes of fund shares: Class 1 shares and
Class 2 shares. This Contract invests only in Class 2 shares of American Funds
Insurance Series. The investment adviser for each of the funds of American Funds
Insurance Seriesis Capital Research and Management Company located at 333 South
Hope Street, Los Angeles, California 90071. Capital Research and Management
Company is a wholly owned subsidiary of The Capital Group Companies, Inc.
The MFS-Registered Trademark- Capital Opportunities Series, MFS-Registered
Trademark- Emerging Growth Series, MFS-Registered Trademark- Growth Series,
MFS-Registered Trademark- Growth with Income Series, MFS-Registered Trademark-
Total Return Seriesare series of the MFS-Registered Trademark- Variable
Insurance Trust-SM-. The MFS Variable Insurance Trust-SM- is a professionally
managed open-end management investment company. The MFS Variable Insurance
Trust-SM- is registered as a Massachusetts business trust. MFS Investment
Management-Registered Trademark- serves as the investment adviser to each of the
Seriesof the MFS-Registered Trademark- Variable Insurance Trust-SM-. MFS
Investment Management-Registered Trademark- is located at 500 Boylston Street,
Boston, Massachusetts 02116.
Franklin Small Cap Fund, Franklin Strategic Income Securities Fund, Mutual
Shares Securities Fund, Templeton Developing Markets Securities Fund, and
Templeton Growth Securities Fund are all part of the Franklin Templeton Variable
Insurance Products Trust. The Franklin Templeton Variable Insurance Products
Trust is an open-end managed investment company which was organized as a
Massachusetts business trust on April 26, 1988. Franklin Templeton Variable
Insurance Products Trust currently offers Class 1 and Class 2 shares. Class 2
shares of each Fund are available in this Contract, except that Class 1 shares
of Franklin Strategic Income Securities Fund and Templeton Developing Markets
Securities Fund are available. The investment manager of the Franklin Small Cap
Fund and the Franklin Strategic Income Securities Fund is Franklin Advisers,
Inc. located at 777 Mariners Island Blvd. P.O. Box 7777, San Mateo, California
94403-777. The investment manager of Mutual Shares Securities Fund is Franklin
Mutual Advisers, LLC, located at 51 John F. Kennedy Parkway, Short Hills, New
Jersey, 07078. The investment manager of Templeton Growth Securities Fund is
Templeton Global Advisers Limited, located at Lyford Cay, Nassau, N.P. Bahamas.
The investment manager of Templeton Developing Markets Securities Fund is
Templeton Asset Management Ltd., located at 7 Temasek Blvd. #38-03, Suntec Tower
One, Singapore, 038987.
MIXED AND SHARED FUNDING -- Shares of the Funds may be sold to our other
separate accounts and our insurance company affiliates or other unaffiliated
insurance companies to serve as the underlying investment for both variable
annuity contracts and variable life insurance policies, a practice known as
"mixed and shared funding." As a result, there is a possibility that a material
conflict may arise between the interests of policy owners, and of owners of
other contracts whose contract values are allocated to one or more of these
other separate accounts investing in any one of the Funds. In the event of any
such material conflicts, we will consider what action may be appropriate,
including removing the Fund from the Separate Account or replacing the Fund with
another underlying fund. There are certain risks associated with mixed and
shared funding, as disclosed in the prospectuses for the Funds.
VOTING RIGHTS -- For Sub-Accounts in which you have invested, we will notify you
of shareholder's meetings of the Funds purchased by those Sub-Accounts. We will
send you proxy materials and instructions for you to vote the shares held for
your benefit by those Sub-Accounts. We will arrange for the handling and
tallying of proxies received from you or other policy owners. If you give no
instructions, we will vote those shares in the same proportion as shares for
which we received instructions.
ADMINISTRATIVE SERVICES -- Hartford has entered into agreements with the
investment advisers or distributors of many of the Funds. Under the terms of
these agreements, Hartford provides administrative services and the Funds pay a
fee to Hartford that is usually based on an annual percentage of the average
daily
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 15
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net assets of the Funds. These agreements may be different for each Fund or each
Fund family.
THE FIXED ACCOUNT
You may allocate amounts to the Fixed Account. The Fixed Account is not a part
of the Separate Account, but is a part of our general assets. As such, the Fixed
Account (and this description of the Fixed Account) is not subject to the same
securities laws as the Separate Account.
The Fixed Account credits at least 3.5% per year. We are not obligated to, but
may, credit more than 3.5% per year. If we do, such rates are determined at our
sole discretion. You assume the risk that, at any time, the Fixed Account may
credit no more than 3.5%.
CHARGES AND DEDUCTIONS
--------------------------------------------------------------------------------
DEDUCTIONS FROM PREMIUM
Before your premium is allocated to the Sub-Accounts and/or the Fixed Account,
we deduct a percentage from your premium for a sales load and a premium tax
charge. The amount allocated after the deductions is called your Net Premium.
FRONT-END SALES LOAD -- We deduct a sales load from each premium you pay. The
maximum sales load under the policy is 8% of premium in Policy Years 1 through 3
and 4% of premium in Policy Years 4 and beyond.
PREMIUM TAX CHARGE -- We deduct a premium tax charge from each premium you pay.
The premium tax charge covers taxes assessed against us by a state and/or other
governmental entity. The range of such charge generally is between 0% and 4%.
DEDUCTIONS FROM ACCOUNT VALUE
MONTHLY DEDUCTION AMOUNTS -- Each month we will deduct an amount from your
Account Value to pay for the benefits provided by your policy. This amount is
called the Monthly Deduction Amount and equals the sum of:
- the charge for the cost of insurance;
- the monthly administrative charge;
- the mortality and expense risk charge;
- any Face Amount increase fee;
- any charges for additional benefits provided by rider;
Each Monthly Deduction Amount will be deducted pro rata from the Fixed Account
and each of the Sub-Accounts. The Monthly Deduction Amount will vary from month
to month.
COST OF INSURANCE CHARGE -- The charge for the cost of insurance equals:
- the cost of insurance rate per $1,000, multiplied by
- the amount at risk, divided by
- $1,000.
On any Monthly Activity Date, the amount at risk equals the Death Benefit less
the Account Value on that date, prior to assessing the Monthly Deduction Amount.
Cost of insurance rates will be determined on each policy anniversary based on
our future expectations of such factors as mortality, expenses, interest,
persistency and taxes. The cost of insurance rates will not exceed those based
on the 1980 Commissioners' Standard Ordinary Mortality Table (ALB), Male or
Female, Nonsmoker or Smoker Table, age last birthday (unisex rates may be
required in some states). A table of guaranteed cost of insurance rates per
$1,000 will be included in your policy, however, we reserve the right to use
rates less than those shown in the table. Substandard risks will be charged
higher cost of insurance rates that will not exceed rates based on a multiple of
1980 Commissioners' Standard Ordinary Mortality Table (ALB), Male or Female,
Nonsmoker or Smoker Table, age last birthday (unisex rates may be required in
some states) plus any flat extra amount assessed. The multiple will be based on
the insured's substandard rating.
Any changes in the cost of insurance rates will be made uniformly for all
insureds of the same issue ages, sexes, risk classes and whose coverage has been
in-force for the same length of time. No change in insurance class or cost will
occur on account of deterioration of the insureds' health.
Because your Account Value and death benefit may vary from month to month, the
cost of insurance may also vary on each Monthly Activity Date. The cost of
insurance depends on your policy's amount at risk. Items which may affect the
amount at risk include the amount and timing of premium payments, investment
performance, fees and charges assessed, rider charges, policy loans and changes
to the Face Amount.
MONTHLY ADMINISTRATIVE CHARGE -- We deduct a monthly administrative charge from
your Account Value to compensate us for issue and administrative costs of the
policy. During the first Policy Year the charge is $24.16 per month, each year
after the first Policy Year the charge is $7.50 per month.
MORTALITY AND EXPENSE RISK CHARGE -- We deduct a mortality and expense risk
charge each month from your Account Value. There are two components to the
mortality and expense risk charge. Part of the charge is assessed according to
your Account Value attributable to the Sub-Accounts, and the other part is
assessed based on the initial Face Amount of your policy. The mortality and
expense risk charge each month is equal to the sum of (a) and (b) where
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16 HARTFORD LIFE INSURANCE COMPANY
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(a) equals:
- the monthly accumulated value mortality and expense risk rate; multiplied by
- the sum of your accumulated values in the Sub-Accounts on the Monthly Activity
Date, prior to assessing the Monthly Deduction Amount.
and
(b) equals:
- the monthly mortality and expense risk rate per $1,000; multiplied by
- the initial Face Amount; divided by
- $1,000.
During the first 10 years, the maximum accumulated value mortality and expense
risk rate is 1/12 of 0.75% per month. Thereafter, the maximum is 1/12 of 0.50%
per month.
During the first 10 years, the Face Amount mortality and expense risk rate per
$1,000 of initial Face Amount is individualized based on issue ages and death
benefit guarantee, and is provided in the policy. Thereafter, there is no
charge.
The mortality and expense risk charge compensates us for mortality and expense
risks assumed under the policies. The mortality risk assumed is that the cost of
insurance charges are insufficient to meet actual claims. The expense risk
assumed is that the expense incurred in issuing, distributing and administering
the policies exceed the administrative charges and sales loads collected.
Hartford may keep any difference between the cost it incurs and the charges it
collects.
FACE AMOUNT INCREASE FEE -- We deduct a dollar amount from your Account Value
for an unscheduled increase of the Face Amount on your policy. We deduct the fee
each month for twelve months after the increase. The fee is 1/12 of $1.00 per
month per $1,000 of unscheduled increase in the Face Amount. The fee will not be
less than 1/12 of $500 per month, but will not exceed 1/12 of $3,000 per month.
This fee compensates us for underwriting and processing costs for such
increases.
RIDER CHARGE -- If your policy includes riders, a charge applicable to the
riders is made from the Account Value each month. The charge applicable to these
riders is to compensate Hartford for the anticipated cost of providing these
benefits and is specified on the applicable rider. For a description of the
riders available, see "Your Policy -- Supplemental Benefits."
SURRENDER CHARGE -- During the first 9 policy years, surrender charges will be
deducted from your Account Value if:
- you surrender your policy;
- you decrease the Face Amount to an amount lower than it has ever been; or
- you take a withdrawal that causes the Face Amount to fall below the lowest
previous Face Amount.
The amount of surrender charge is individualized based on your issue ages,
sexes, insurance classes, duration, Face Amount and Death Benefit Guarantee
Amount. The charge compensates us for expenses incurred in issuing the policy
and the recovery of acquisition costs. Hartford may keep any difference between
the cost it incurs and the charges it collects. For partial surrender charges
applicable to a decrease in the Face Amount or withdrawal, see "Unscheduled
Increases and Decreases in the Face Amount." The amount of surrender charge
varies by policy year and equals a percentage times the sum of two components:
the sales surrender charge and the underwriting surrender charge. The sales
surrender charge equals the Death Benefit Guarantee Premium. The underwriting
surrender charge equals $1 per $1000 of initial face amount, but is at least
$500 and no more than $3000.
The percentage by policy years is as follows:
<TABLE>
<CAPTION>
POLICY YEAR PERCENTAGE
<S> <C>
-------------------------------
1 70%
-------------------------------
2 70%
-------------------------------
3 70%
-------------------------------
4 60%
-------------------------------
5 50%
-------------------------------
6 40%
-------------------------------
7 30%
-------------------------------
8 20%
-------------------------------
9 10%
-------------------------------
10 and after 0%
-------------------------------
</TABLE>
CHARGES FOR THE FUNDS
The investment performance of each Fund reflects the management fee that the
Fund pays to its investment manager as well as other operating expenses that the
Fund incurs. Investment management fees are generally daily fees computed as a
percentage of a Fund's average daily net assets as an annual rate. Please read
the prospectus for each Fund for complete details.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 17
--------------------------------------------------------------------------------
YOUR POLICY
CONTRACT RIGHTS
POLICY OWNER, OR "YOU" -- As long as your policy is in force, you may exercise
all rights under the policy while either of the insureds is alive and no
beneficiary has been irrevocably named.
BENEFICIARY -- You name the beneficiary in your application for the policy. You
may change the beneficiary (unless irrevocably named) while either of the
insureds is alive by notifying us in writing. If no beneficiary is living when
the last surviving insured dies, the death benefit will be paid to you, if
living; otherwise, it will be paid to your estate.
ASSIGNMENT -- You may assign your policy. Until you notify us in writing, no
assignment will be effective against us. We are not responsible for the validity
of any assignment.
STATEMENTS -- We will send you a statement at least once each year, showing:
- the current Account Value, Cash Surrender Value and Face Amount;
- the premiums paid, monthly deduction amounts and any loans since your last
statement;
- the amount of any Indebtedness;
- any notifications required by the provisions of your policy; and
- any other information required by the Insurance Department of the state where
your policy was delivered.
CONTRACT LIMITATIONS
ALLOCATIONS TO SUB-ACCOUNTS AND THE FIXED ACCOUNT -- You may allocate amounts to
a maximum of nine (9) Sub-
Accounts, or eight (8) Sub-Accounts and the Fixed Account.
TRANSFERS OF ACCOUNT VALUE -- You may transfer amounts among the Fixed Account
and the Sub-Accounts subject to a charge described below. You may request
transfers in writing or by calling us at 1-800-231-5453. Transfers by telephone
may also be made by your agent of record or by your attorney-in-fact pursuant to
a power of attorney. Telephone transfers may not be permitted in some states. We
will not be responsible for losses that result from acting upon telephone
requests reasonably believed to be genuine. We will employ reasonable procedures
to confirm that instructions communicated by telephone are genuine. The
procedures we follow for transactions initiated by telephone include requiring
callers to provide certain identifying information. All transfer instructions
communicated to us by telephone are tape recorded.
You may make one transfer per calendar month free of charge, excluding any
transfers made pursuant to your enrollment in the Dollar Cost Averaging Program.
Each subsequent transfer in excess of one per calendar month will be subject to
a transfer charge of up to $25. We reserve the right to limit at a future date
the size of transfers and remaining balances and to limit the number and
frequency of transfers.
TRANSFERS FROM THE FIXED ACCOUNT -- Except for transfers made under the Dollar
Cost Averaging Program, any transfers from the Fixed Account must occur during
the 30-day period following each policy anniversary, and, if your accumulated
value in the Fixed Account exceeds $1,000, the amount transferred from the Fixed
Account in any policy year may not exceed 25% of the accumulated value in the
Fixed Account on the transfer date.
DEFERRAL OF PAYMENTS -- We may defer payment of any Cash Surrender Values,
withdrawals and loan amounts which are not attributable to the Sub-Accounts for
up to six months from the date of the request. If we defer payment for more than
30 days, we will pay you interest.
CHANGES TO CONTRACT OR SEPARATE ACCOUNT
MODIFICATION OF POLICY -- The only way the policy may be modified is by a
written agreement signed by our President, or one of our Vice Presidents,
Secretaries, or Assistant Secretaries.
SUBSTITUTION OF FUNDS -- We reserve the right to substitute the shares of any
other registered investment company for the shares of any Fund already purchased
or to be purchased in the future by the Separate Account provided that the
substitution has been approved by the Securities and Exchange Commission.
CHANGE IN OPERATION OF THE SEPARATE ACCOUNT -- The operation of the Separate
Account may be modified to the extent permitted by law, including deregistration
under the securities laws.
SEPARATE ACCOUNT TAXES -- Currently, no charge is made to the Separate Account
for federal, state and local taxes that may be allocable to the Separate
Account. A change in the applicable federal, state or local tax laws which
impose tax on Hartford and/ or the Separate Account may result in a charge
against the policy in the future. Charges for other taxes, if any, allocable to
the Separate Account may also be made.
OTHER BENEFITS
DOLLAR COST AVERAGING PROGRAM -- You may elect to allocate your Net Premiums
among the Sub-Accounts and the Fixed Account pursuant to the Dollar Cost
Averaging (DCA) program. If you choose the DCA program, your Net Premiums will
be deposited into the Hartford Money Market Sub-Account or the Fixed Account.
Amounts will be transferred monthly to the other investment choices in
accordance with your premium allocation instructions. The dollar amount will be
allocated to the investment choices that you specify, in the proportions that
you specify. If, on any transfer date, your Account Value allocated to the
Dollar Cost Averaging program is less than the amount you have elected to
transfer, your DCA program will terminate.
<PAGE>
18 HARTFORD LIFE INSURANCE COMPANY
--------------------------------------------------------------------------------
You may cancel your DCA election by notice in writing or by calling us at
1-800-231-5453. We reserve the right to change or discontinue the DCA program.
The main objective of a DCA program is to minimize the impact of short-term
price fluctuations. The DCA program allows you to take advantage of market
fluctuations. Since the same dollar amount is transferred to your selected
investment choices at set intervals, the DCA program allows you to purchase more
accumulation units when prices are low and fewer accumulation units when prices
are high. Therefore, a lower average cost per accumulation unit may be achieved
over the long term. However, it is important to understand that the DCA program
does not assure a profit or protect against loss in a declining market.
SUPPLEMENTAL BENEFITS -- The following supplemental benefits are among the
options that may be included in a policy by rider, subject to the restrictions
and limitations set forth therein.
- LAST SURVIVOR EXCHANGE OPTION RIDER. We will exchange your policy for two
individual policies on the life of each insured, subject to the conditions
stated in the rider.
- ESTATE PROTECTION RIDER. We will pay a term insurance benefit upon receipt of
due proof of the last surviving insured's death while your policy and rider
are in force, subject to the conditions stated in the rider.
- YEARLY RENEWABLE TERM LIFE INSURANCE RIDER While the rider is in force, we
will pay the term life insurance amount upon receipt of due proof of death of
the designated insured, subject to the conditions stated in the rider.
SETTLEMENT OPTIONS -- Proceeds under your policy may be paid in a lump sum or
may be applied to one of our four settlement options. The minimum amount that
may be placed under a settlement option is $5,000 (unless we consent to a lesser
amount), subject to our then-current rules. Once payments under the Second
Option, the Third Option or the Fourth Option begin, no surrender may be made
for a lump sum settlement in lieu of the life insurance payments. The following
payment options are available to you or your beneficiary. If a payment option is
not selected, proceeds will be paid in a lump sum. Your beneficiary may choose a
settlement.
FIRST OPTION -- Interest Income
Payments of interest at the rate we declare (but not less than 3 1/2% per year)
on the amount applied under this option.
SECOND OPTION -- Income of Fixed Amount
Equal payments of the amount chosen until the amount applied under this option
(with interest of not less than 3 1/2% per year) is exhausted. The final payment
will be for the balance remaining.
THIRD OPTION -- Payments for a Fixed Period
An amount payable monthly for the number of years selected, which may be from
one to 30 years.
FOURTH OPTION -- Life Income
- LIFE ANNUITY -- An annuity payable monthly during the lifetime of the
annuitant and terminating with the last monthly payment due preceding the
death of the annuitant.
- LIFE ANNUITY WITH 120 MONTHLY PAYMENTS CERTAIN -- An annuity providing monthly
income to the annuitant for a fixed period of 120 months and for as long
thereafter as the annuitant shall live.
The policy provides for guaranteed dollar amounts of monthly payments for each
$1,000 applied under the four payment options. Under the Fourth Option, the
amount of each payment will depend upon the age of the Annuitant at the time the
first payment is due. If any periodic payment due any payee is less than $200,
we may make payments less often.
The table for the Fourth Option is based on the 1983a Individual Annuity
Mortality Table, set back one year and with a net investment rate of 3.5% per
annum. The tables for the First, Second and Third Options are based on a net
investment rate of 3.5% per annum. We may, however, from time to time, at our
discretion if mortality appears more favorable and interest rates justify, apply
other tables which will result in higher monthly payments for each $1,000
applied under one or more of the four payment options.
Other arrangements for income payments may be agreed upon.
BENEFITS AT MATURITY -- The scheduled maturity date is the last date on which
you may elect to make premium payments. The policy will terminate on the
scheduled maturity date and any Cash Surrender Value will be paid to you.
CLASS OF PURCHASERS
REDUCED CHARGES FOR ELIGIBLE GROUPS -- Certain charges and deductions described
above may be reduced for policies issued in connection with a specific plan, in
accordance with our rules in effect as of the date the application for a policy
is approved. To qualify for such a reduction, a plan must satisfy certain
criteria, i.e., as to size of the plan, expected number of participants and
anticipated premium payment from the plan. Generally, the sales contacts and
effort, administrative costs and mortality cost per policy vary, based on such
factors as the size of the plan, the purposes for which policies are purchased
and certain characteristics of the plan's members. The amount of reduction and
the criteria for qualification will be reflected in the reduced sales effort and
administrative costs resulting from, and the different mortality experience
expected as a result of, sales to qualifying plans. We may modify, from time to
time on a uniform basis, both the amounts of reductions and the criteria for
qualification. Reductions in these charges will not be unfairly discriminatory
against any person, including the affected policy owners invested in Separate
Account VL II.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 19
--------------------------------------------------------------------------------
PREMIUMS
APPLICATION FOR A POLICY -- To purchase a policy you must submit an application
to us. Within limits, you may choose the initial Face Amount. Policies generally
will be issued only on the lives of insureds between the ages of 20 and 85 who
supply evidence of insurability satisfactory to us. Acceptance is subject to our
underwriting rules and we reserve the right to reject an application for any
reason. No change in the terms or conditions of a policy will be made without
your consent. The minimum initial premium is the amount required to keep the
policy in force for one month, but not less than $50.
Your policy will be effective on the policy date only after we receive all
outstanding delivery requirements and the initial premium payment. The policy
date is the date used to determine all future cyclical transactions on the
policy, such as Monthly Activity Date and policy years.
PREMIUM PAYMENT FLEXIBILITY -- You have considerable flexibility as to when and
in what amounts you pay premiums under your policy.
Prior to policy issue, you choose a planned premium, within a range determined
by us. We will send you premium notices for planned premiums. Such notices may
be sent on an annual, semi-annual or quarterly basis. You may also have premiums
automatically deducted monthly from your checking account. The planned premiums
and payment mode you select are shown on your policy's specifications page. You
may change the planned premiums, subject to our minimum amount rules then in
effect.
After the first premium has been paid, your subsequent premium payments are
flexible. The actual amount and frequency of payment will affect the Account
Value and could affect the amount and duration of insurance provided by the
policy. Your policy may lapse if the value of your policy becomes insufficient
to cover the Monthly Deduction Amounts. In such case you may be required to pay
additional premiums in order to prevent the policy from terminating. For details
see, "Lapse and Reinstatement."
You may pay additional premiums at any time prior to the scheduled maturity
date, subject to the following limitations:
- The minimum premium that we will accept is $50 or the amount required to keep
the policy in force.
- We reserve the right to refund any excess premiums that would cause the policy
to fail to meet the definition of life insurance under the Internal Revenue
Code.
- We reserve the right to require evidence of insurability for any premium
payment that results in an increase in the death benefit greater than the
amount of the premium.
- Any premium payment in excess of $1,000,000 is subject to our approval.
ALLOCATION OF PREMIUM PAYMENTS -- The initial Net Premium (and any additional
Net Premiums received by us before the end of the right to examine period) will
be allocated to the Hartford Money Market Sub-Account on the later of the policy
date or the date we receive your premium payment.
We will then allocate the Account Value in the Hartford Money Market Sub-Account
to the Fixed Account and the Sub-Accounts according to the premium allocation
specified in your policy application upon the expiration of the right to examine
policy period, or the date we receive the final requirement to put the policy in
force, whichever is later.
You may change your premium allocation upon request in writing. Subsequent Net
Premiums will be allocated to the Fixed Account and the Sub-Accounts according
to your most recent written instructions as long as the number of investment
choices does not exceed nine (9), and the percentage you allocate to each
Sub-Account and/or the Fixed Account is in whole percentages. If we receive a
premium payment with a premium allocation instruction that does not comply with
the above rules, we will allocate the Net Premium pro rata based on the values
of your existing investment choices.
You will receive several different types of notifications as to what your
current premium allocation is. Each transaction confirmation received after we
receive a premium payment will show how a Net Premium has been allocated.
Additionally, each quarterly statement summarizes the current premium allocation
in effect for your policy.
ACCUMULATION UNITS -- Net Premiums allocated to the Sub-Accounts are used to
credit accumulation units to such Sub-Accounts.
The number of accumulation units in each Sub-Account to be credited to a policy
(including the initial allocation to the Hartford Money Market Sub-Account) and
the amount to be credited to the Fixed Account will be determined, first, by
multiplying the Net Premium by the appropriate allocation percentage in order to
determine the portion of Net Premiums or transferred Account Value to be
invested in the Fixed Account or the Sub-Account. Each portion of the Net
Premium or transferred Account Value to be invested in a Sub-Account is then
divided by the accumulation unit value in a particular Sub-Account next computed
following its receipt. The resulting figure is the number of accumulation units
to be credited to each Sub-Account.
ACCUMULATION UNIT VALUES -- The accumulation unit value for each Sub-Account
will vary to reflect the investment experience of the applicable Fund and will
be determined on each Valuation Day by multiplying the accumulation unit value
of the particular Sub-Account on the preceding Valuation Day by the net
investment factor for that Sub-Account for the Valuation Period then ended. The
net investment factor for each of the Sub-Accounts is equal to the net asset
value per share of the corresponding Fund at the end of the Valuation Period
(plus the per share amount of any dividend or capital gain distributions paid by
that Fund in the Valuation Period then ended) divided by
<PAGE>
20 HARTFORD LIFE INSURANCE COMPANY
--------------------------------------------------------------------------------
the net asset value per share of the corresponding Fund at the beginning of the
Valuation Period.
All valuations in connection with a policy, (i.e, with respect to determining
Account Value, in connection with policy loans, or in calculation of death
benefits, or with respect to determining the number of accumulation units to be
credited to a policy with each premium payment other than the initial premium
payment) will be made on the date the request or payment is received by us at
the National Service Center, provided such date is a Valuation Day; otherwise
such determination will be made on the next succeeding date which is a Valuation
Day.
ACCOUNT VALUES -- Each policy will have an Account Value. There is no minimum
guaranteed Account Value.
The Account Value of a policy changes on a daily basis and will be computed on
each Valuation Day. The Account Value will vary to reflect the investment
experience of the Sub-Accounts, the interest credited to the Fixed Account and
the Loan Account, and the Monthly Deduction Amounts, Net Premiums paid, and any
withdrawals taken.
A policy's Account Value is related to the net asset value of the Funds
associated with the Sub-Accounts, if any, to which Net Premiums on the policy
have been allocated. The Account Value in the Sub-Accounts on any Valuation Day
is calculated by, first, multiplying the number of accumulation units in each
Sub-Account as of the Valuation Day by the then current value of the
accumulation units in that Sub-Account and then totaling the result for all of
the Sub-Accounts. A policy's Account Value equals the policy's value in all of
the Sub-Accounts, the Fixed Account, and the Loan Account. A policy's Cash Value
is equal to the Account Value less any applicable surrender charges. A policy's
Cash Surrender Value, which is the net amount available upon surrender of the
policy, is the Cash Value less any Indebtedness. See "Accumulation Unit Values,"
above.
We will pay death proceeds, Cash Surrender Values, partial withdrawals, and loan
amounts allocable to the Sub-Accounts within seven days after we receive all the
information needed to process the payment, unless the New York Stock Exchange is
closed for other than a regular holiday or weekend, trading is restricted by the
Commission or the Commission declares that an emergency exists.
DEATH BENEFITS AND POLICY VALUES
--------------------------------------------------------------------------------
DEATH BENEFIT -- Your policy provides for the payment of the death proceeds to
the named beneficiary upon receipt of due proof of the death of the last
surviving insured. Your policy will be effective on the policy Date only after
we receive all outstanding delivery requirements and the initial premium
payment. You must notify us in writing as soon as possible after the death of
either insured. The death proceeds payable to the beneficiary equal the death
benefit less any Indebtedness and less any due and unpaid Monthly Deduction
Amount occurring during a grace period. The death benefit depends on the death
benefit option you select, the minimum death benefit provision, and whether or
not the Death Benefit Guarantee is in effect.
DEATH BENEFIT OPTIONS -- There are three death benefit options: the Level Death
Benefit Option ("Option A"), the Return of Account Value Death Benefit Option
("Option B") and the Return of Premium Death Benefit Option ("Option C").
Subject to the minimum death benefit described below, the death benefit under
each option is as follows:
- Under Option A, the current Face Amount.
- Under Option B, the current Face Amount plus the Account Value on the date we
receive due proof of the last surviving insured's death.
- Under Option C, the current Face Amount plus the lesser of: (a) the sum of the
premiums paid; or (b) $2.5 million.
DEATH BENEFIT OPTION CHANGES -- You may change your death benefit option. You
must notify us of the change in writing. You may change Option C or Option B to
Option A. If you do, the Face Amount will become that amount available as a
death benefit immediately prior to the option change. You may change Option A to
Option B. If you do, the Face Amount will become that amount available as a
death benefit immediately prior to the option change, reduced by the
then-current Account Value. Any resulting decrease in the Face Amount may be
subject to a partial surrender charge.
MINIMUM DEATH BENEFIT -- Your policy has a minimum death benefit. We will
automatically increase the death benefit so that it will never be less than the
Account Value multiplied by the minimum death benefit percentage for the then
current year. This percentage varies according to the policy year and each
insured's issue age, sex (where unisex rates are not used) and insurance class.
EXAMPLES OF MINIMUM DEATH BENEFIT:
<TABLE>
<CAPTION>
A B
<S> <C> <C>
-----------------------------------------------------
Face Amount $100,000 $100,000
-----------------------------------------------------
Account Value 46,500 34,000
-----------------------------------------------------
Specified Percentage 250% 250%
-----------------------------------------------------
Death Benefit Option Level Level
-----------------------------------------------------
</TABLE>
In Example A, the death benefit equals $116,250, i.e., the greater of $100,000
(the Face Amount) or $116,250 (the Account Value at the date of death of
$46,500, multiplied by the specified percentage of 250%). This amount, less any
outstanding Indebtedness, constitutes the death proceeds payable to the
beneficiary.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 21
--------------------------------------------------------------------------------
In Example B, the death benefit is $100,000, i.e., the greater of $100,000 (the
Face Amount) or $85,000 (the Account Value of $34,000, multiplied by the
specified percentage of 250%).
UNSCHEDULED INCREASES AND DECREASES IN FACE AMOUNT -- At any time after the
first policy year, you may request in writing to change the Face Amount. The
minimum amount by which the Face Amount can be increased or decreased is based
on our rules then in effect.
We reserve the right to limit the number of increases or decreases made under a
policy to no more than one in any 12 month period.
All requests to increase the Face Amount must be applied for on a new
application and accompanied by your policy. All requests will be subject to
evidence of insurability satisfactory to us. Any increase approved by us will be
effective on the Monthly Activity Date shown on the new policy specifications
page, provided that the Monthly Deduction Amount for the first month after the
effective date of the increase is made. Each unscheduled increase in Face Amount
is subject to an increase fee of 1/12 of $1 per $1,000 of each increase per
month for the first twelve months from the effective date of each increase. This
amount will not be less than 1/12 of $500 but not greater than 1/12 of $3,000.
A decrease in the Face Amount will be effective on the Monthly Activity Date
following the date we receive your request in writing. The remaining Face Amount
must not be less than that specified in our minimum rules then in effect. If
during the surrender charge period, you decrease your Face Amount to an amount
lower than it has ever been, a partial surrender charge will be assessed.
The surrender charge assessed will be:
- the surrender charge applicable to the then current policy year, if any;
multiplied by
- the percentage described below.
The percentage will be determined by:
- subtracting the new Face Amount from the lowest previous Face Amount; and
- dividing that difference by the lowest previous Face Amount.
The surrender charge assessed will be deducted from your Account Value on the
Monthly Activity Date on which the decrease becomes effective. We will also
reduce the surrender charges applicable to future policy years and provide you a
revised schedule of surrender charges.
CHARGES AND POLICY VALUES -- Your policy values decrease due to the deduction of
policy charges. Policy values may increase or decrease depending on investment
performance; investment expenses and fees reduce the investment performance of
the Sub-Accounts. Fluctuations in your account value may have an effect on your
death benefit. If your policy lapses, the policy terminates and no death benefit
will be paid.
MAKING WITHDRAWALS FROM YOUR POLICY
--------------------------------------------------------------------------------
SURRENDER -- Provided your policy has a Cash Surrender Value, you may surrender
your policy to us. In such case you may be subject to a surrender charge, see
"Surrender Charge." We will pay you the Cash Surrender Value. Our liability
under the policy will cease as of the date of your request for surrender,or the
date you request to have your policy surrendered, if later.
WITHDRAWALS -- One withdrawal is allowed per calendar month. Withdrawals may be
subject to a surrender charge, see "Surrender Charge." You may request a
withdrawal in writing. The minimum withdrawal allowed is $500. The maximum
partial withdrawal is the Cash Surrender Value, minus $1000. If the death
benefit option then in effect is Option A or Option C, the Face Amount will be
reduced by the amount of any partial withdrawal. Unless specified, the
withdrawal will be deducted on a pro rata basis from the Fixed Account and the
Sub-Accounts. You may be assessed a charge of up to $10 for each partial
withdrawal.
RIGHT TO EXAMINE A POLICY -- You have a limited right to return your policy for
cancellation. You may deliver or mail the policy to us or to the agent from whom
it was purchased any time during your free look period. Your free look period
begins on the day you get your policy and ends ten days after you get it (or
longer in some states). In such event, the policy will be rescinded and we will
pay an amount equal to the greater of the premiums paid for the policy less any
Indebtedness or the sum of: i) the Account Value less any Indebtedness, on the
date the returned policy is received by us or the agent from whom it was
purchased; and, ii) any deductions under the policy or charges associated with
the Separate Account. If your policy is replacing another policy, your free look
period and the amount paid to you upon the return of your policy vary by state.
LOANS
--------------------------------------------------------------------------------
AVAILABILITY OF LOANS -- At any time while the policy is in force, you may
borrow against the policy by assigning it as sole security to us. Any new loan
taken together with any existing Indebtedness may not exceed the Cash Surrender
Value on the date we grant a loan. The minimum loan amount that we will allow is
$500.
<PAGE>
22 HARTFORD LIFE INSURANCE COMPANY
--------------------------------------------------------------------------------
Unless you specify otherwise, all loan amounts will be transferred on a pro rata
basis from the Fixed Account and each of the Sub-Accounts to the Loan Account.
If total Indebtedness equals or exceeds the Cash Value on any Monthly Activity
Date, the policy will then go into default. See "Lapse and Reinstatement."
PREFERRED INDEBTEDNESS -- If, at any time after the tenth (10th) policy
anniversary, your Account Value exceeds the total of all premiums paid since
issue, a portion of your Indebtedness may qualify as preferred. Preferred
Indebtedness is charged a lower interest rate than non-preferred Indebtedness,
if any. The maximum amount of preferred Indebtedness is the amount by which the
Account Value exceeds the total premiums paid and is determined on each Monthly
Activity Date.
LOAN REPAYMENTS -- You can repay all or any part of a loan at any time while
your policy is in force and either of the insureds' is alive. The amount of your
policy loan repayment will be deducted from the Loan Account. It will be
allocated among the Fixed Account and Sub-Accounts in the same percentage as
premiums are allocated.
EFFECT OF LOANS ON ACCOUNT VALUE -- A loan, whether or not repaid, will have a
permanent effect on your Account Value. This effect occurs because the
investment results of each Sub-Account will apply only to the amount remaining
in such Sub-Accounts. In addition, the rate of interest credited to the Fixed
Account will usually be different than the rate credited to the Loan Account.
The longer a loan is outstanding, the greater the effect on your Account Value
is likely to be. Such effect could be favorable or unfavorable. If the Fixed
Account and the Sub-Accounts earn more than the annual interest rate for funds
held in the Loan Account, your Account Value will not increase as rapidly as it
would have had no loan been made. If the Fixed Account and the Sub-Accounts earn
less than the Loan Account, then your Account Value will be greater than it
would have been had no loan been made. Additionally, if not repaid, the
aggregate amount of the outstanding Indebtedness will reduce the death proceeds
and the Cash Surrender Value otherwise payable.
CREDITED INTEREST -- Any amounts in the Loan Account will be credited with
interest at an annual rate of 3.5%.
INTEREST CHARGED ON INDEBTEDNESS -- Interest will accrue daily on the
Indebtedness at the policy loan rate. Because the interest charged on
Indebtedness may exceed the rate credited to the Loan Account, the Indebtedness
may grow faster than the Loan Account. If this happens, any difference between
the value of the Loan Account and the Indebtedness will be transferred on each
Monthly Activity Date from the Fixed Account and Sub-Accounts to the Loan
Account on a pro rata basis.
POLICY LOAN RATES -- The table below shows the interest rates we will charge on
your Indebtedness.
<TABLE>
<CAPTION>
INTEREST RATE
PORTION OF CHARGED
DURING POLICY YEARS INDEBTEDNESS EQUALS 3.5% PLUS:
<S> <C> <C>
----------------------------------------------------------
1-10 All 2%
----------------------------------------------------------
11 and later Preferred 0%
Non-Preferred 1%
----------------------------------------------------------
</TABLE>
LAPSE AND REINSTATEMENT
--------------------------------------------------------------------------------
During the first policy year, the policy will go into default on any Monthly
Activity Date on which the Account Value less Indebtedness is not sufficient to
cover the Monthly Deduction Amount.
During the second policy year, the policy will go into default on any Monthly
Activity Date on which the Account Value less Indebtedness less 1/2 of the
surrender charge for the second policy year is not sufficient to cover the
Monthly Deduction Amount.
During the third policy year and thereafter, the policy will go into default on
any Monthly Activity Date if the Cash Surrender Value is not sufficient to cover
the Monthly Deduction Amount.
If the policy goes into default, we will send you a lapse notice warning you
that the policy is in danger of terminating. That lapse notice will tell you the
minimum premium required to keep the policy from terminating. This minimum
premium equals the amount to pay three Monthly Deduction Amounts as of the day
the policy grace period began. That notice will be mailed both to you on the
first day the policy goes into default, at your last know address, and to any
assignee of record.
GRACE PERIOD -- We will keep your policy inforce for the 61 day period following
the date your policy goes into default. We call that period the policy Grace
Period. However, if we have not received the required premiums (specified in
your lapse notice) by the end of the policy Grace Period, the policy will
terminate unless the Death Benefit Guarantee is in effect. If the last surviving
insured dies during the Grace Period, we will pay the death benefit.
DEATH BENEFIT GUARANTEE -- The policy will remain in force at the end of the
policy Grace Period as long as the Death Benefit Guarantee is available, as
described below.
The Death Benefit Guarantee is available so long as:
- the policy is in the Death Benefit Guarantee Period; and
- on each Monthly Activity Date during that period, the cumulative premiums paid
into the policy, less Indebtedness and less withdrawals from the policy, equal
or exceed an amount known as the Cumulative Death Benefit Guarantee Premium.
The Death Benefit Guarantee Period is determined at issue, based on each
insured's age, sex and risk classification. Some states may limit the maximum
length of the Death Benefit Guarantee Period. In Massachusetts, the maximum
length of the Death Benefit Guarantee Period is five (5) years. The Cumulative
Death Benefit Guarantee Premium is the premium required to maintain the Death
Benefit Guarantee.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 23
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If the Death Benefit Guarantee is available and you fail to pay the required
premium as defined in your lapse notice by the end of the policy grace period,
the Death Benefit Guarantee will then go into effect. The policy will remain in
force, however:
- all riders will terminate;
- the Death Benefit Option becomes Level;
- The Face Amount will be reduced to the Death Benefit Guarantee Amount; and
- Any future scheduled increases in the Face Amount will be canceled.
The Death Benefit Guarantee Amount is the amount selected by you at the time you
apply for the policy. It is the death benefit while the Death Benefit Guarantee
is in effect.
As long as the policy remains in default and the Death Benefit Guarantee is
available, the Death Benefit Guarantee will remain in effect on each subsequent
Monthly Activity Dates. You may be required to make premium payments to keep the
Death Benefit Guarantee available, as described above.
If during the Death Benefit Guarantee Period, the Face Amount is decreased below
the current Death Benefit Guarantee Amount, the Death Benefit Guarantee Amount
will become the new Face Amount. A new monthly Death Benefit Guarantee Premium
will be calculated. We will send you a notice of the new Monthly Death Benefit
Guarantee Premium, which will be used in calculating the Cumulative Death
Benefit Guarantee Premium in subsequent months.
DEATH BENEFIT GUARANTEE GRACE PERIOD -- If, on each Monthly Activity Date during
the Death Benefit Guarantee Period, the cumulative premiums paid into the
policy, less Indebtedness and less withdrawals from the policy, do not equal or
exceed the Cumulative Death Benefit Guarantee Premium on that date, a Death
Benefit Guarantee Grace Period of 61 days will begin. We will mail to you and
any assignee a notice. That notice will warn you that you are in danger of
losing the Death Benefit Guarantee and will tell you the amount of premium you
need to pay to continue the Death Benefit Guarantee.
The Death Benefit Guarantee will be removed from the policy if the required
premium is not paid by the end of the Death Benefit Guarantee Grace Period. You
will receive a written notification of the change and the Death Benefit
Guarantee will never again be available or in effect on the policy. If the Death
Benefit Guarantee was in effect, the policy will terminate at the end of the
Death Benefit Guarantee Grace Period.
REINSTATEMENT -- Unless the policy has been surrendered for its Cash Surrender
Value, the policy may be reinstated prior to the maturity date, provided:
- the insureds alive at the end of the grace period are also alive on the date
of reinstatement;
- You make your request in writing within five years from the date the policy
lapsed;
- You submit to us satisfactory evidence of insurability;
- any policy Indebtedness is repaid or carried over to the reinstated policy;
and
- You pay sufficient premium to (1) cover all Monthly Deduction Amounts that are
due and unpaid during the Grace Period and (2) keep your policy in force for
three months after the date of reinstatement.
The Account Value on the reinstatement date will reflect:
- the Cash Value at the time of termination; plus
- Net Premiums derived from premiums paid at the time of reinstatement; minus
- the Monthly Deduction Amounts that were due and unpaid during the policy Grace
Period; plus
- the Surrender Charge at the time of reinstatement.
The surrender charge will be based on the duration from the original policy date
as though the policy had never lapsed.
TAXES
--------------------------------------------------------------------------------
GENERAL
Since federal tax law is complex, the tax consequences of purchasing this Policy
will vary depending on your situation. You may need tax or legal advice to help
you determine whether purchasing this Policy is right for you.
Our general discussion of the tax treatment of this policy is based on our
understanding of federal income tax laws as they are currently interpreted. A
detailed description of all federal income tax consequences regarding the
purchase of this policy cannot be made in the prospectus. We also do not discuss
state, municipal or other tax laws that may apply to this policy. For detailed
information, you should consult with a qualified tax adviser familiar with your
situation.
TAXATION OF HARTFORD AND THE
SEPARATE ACCOUNT
The Separate Account is taxed as a part of Hartford which is taxed as a life
insurance company under Subchapter L of the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, the Separate Account will not be taxed as a
"regulated investment company" under Subchapter M of the Code. Investment income
and realized capital gains on the assets of the Separate Account (the underlying
Funds) are reinvested and are taken into account in determining the value of the
Accumulation Units. (See "Accumulation Unit Values"). As a result, such
investment income and realized capital gains are automatically applied to
increase reserves under the policy.
<PAGE>
24 HARTFORD LIFE INSURANCE COMPANY
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Hartford does not expect to incur any federal income tax on the earnings or
realized capital gains attributable to the Separate Account. Based upon this
expectation, no charge is currently being made to the Separate Account for
federal income taxes. If Hartford incurs income taxes attributable to the
Separate Account or determines that such taxes will be incurred, it may assess a
charge for such taxes against the Separate Account.
INCOME TAXATION OF POLICY BENEFITS -- GENERALLY
For federal income tax purposes, the Policies should be treated as life
insurance contracts under Section 7702 of the Code. The death benefit under a
life insurance contract is generally excluded from the gross income of the
Beneficiary. Also, a life insurance policy owner is generally not taxed on
increments in the policy value until the policy is partially or completely
surrendered. Section 7702 limits the amount of premiums that may be invested in
a policy that is treated as life insurance. Hartford intends to monitor premium
levels to assure compliance with the Section 7702 requirements.
Although Hartford believes that the Last Survivor Policies are in compliance
with Section 7702 of the Code, the manner in which Section 7702 should be
applied to certain features of a joint survivorship life insurance contract is
not directly addressed by Section 7702. In the absence of final regulations or
other guidance issued under Section 7702, there is necessarily some uncertainty
whether a last survivor life insurance policy will meet the Section 7702
definition of a life insurance contract.
Hartford also believes that any loan received under a policy will be treated as
Indebtedness of the policy owner, and that no part of any loan under a policy
will constitute income to the policy owner. A surrender or assignment of the
policy may have tax consequences depending upon the circumstances. Policy owners
should consult a qualified tax adviser concerning the effect of such changes.
During the first fifteen policy years, an "income first" rule generally applies
to distributions of cash required to be made under Code Section 7702 because of
a reduction in benefits under the policy.
The Last Survivor Exchange Option Rider permits, under limited circumstances, a
policy to be split into two individual policies on the life of each of the
Insureds. A policy split may have adverse tax consequences. It is not clear
whether a policy split will be treated as a nontaxable exchange or transfer
under the Code. Unless a policy split is so treated, among other things, the
split or transfer will result in the recognition of taxable income on the gain
in the policy. In addition, it is not clear whether, in all circumstances, the
individual policies that result from a policy split would be treated as life
insurance policies under Section 7702 of the Code or would be classified as
modified endowment contracts. The policy owner should consult a qualified tax
adviser regarding the possible adverse tax consequences of a policy split.
The Maturity Date Extension Rider allows a policy owner to extend the Maturity
Date to the date of the death of the last surviving insured. If the Maturity
Date of the policy is extended by rider, Hartford believes the policy will
continue to be treated as a life insurance contract for Federal income tax
purposes after the scheduled Maturity Date. However, due to the lack of specific
guidance on this issue, the result is not certain. If the policy is not treated
as a life insurance contract for federal income tax purposes after the scheduled
Maturity Date, among other things, the Death Proceeds may be taxable to the
recipient. The policy owner should consult a qualified tax adviser regarding the
possible adverse tax consequences resulting from an extension of the scheduled
Maturity Date.
DIVERSIFICATION REQUIREMENTS
The Code requires that investments supporting your policy be adequately
diversified. Code Section 817 provides that a variable life insurance contract
will not be treated as a life insurance contract for any period during which the
investments made by the separate account or underlying fund are not adequately
diversified. If a contract is not treated as a life insurance contract, the
policy owner will be subject to income tax on annual increases in cash value.
The Treasury Department's diversification regulations require, among other
things, that:
- no more than 55% of the value of the total assets of the segregated asset
account underlying a variable contract is represented by any one investment,
- no more than 70% is represented by any two investments,
- no more than 80% is represented by any three investments and
- no more than 90% is represented by any four investments.
In determining whether the diversification standards are met, all securities of
the same issuer, all interests in the same real property project, and all
interests in the same commodity are each treated as a single investment. In the
case of government securities, each government agency or instrumentality is
treated as a separate issuer.
A separate account must be in compliance with the diversification standards on
the last day of each calendar quarter or within 30 days after the quarter ends.
If an insurance company inadvertently fails to meet the diversification
requirements, the company may still comply within a reasonable period and avoid
the taxation of contract income on an ongoing basis. However, either the company
or the policy owner must agree to pay the tax due for the period during which
the diversification requirements were not met.
We monitor the diversification of investments in the separate accounts and test
for diversification as required by the Code. We intend to administer all
policies subject to the diversification requirements in a manner that will
maintain adequate diversification.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 25
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OWNERSHIP OF THE ASSETS IN THE
SEPARATE ACCOUNT
In order for a variable life insurance contract to qualify for tax deferral,
assets in the separate accounts supporting the contract must be considered to be
owned by the insurance company and not by the policy owner. It is unclear under
what circumstances an investor is considered to have enough control over the
assets in the separate account to be considered the owner of the assets for tax
purposes.
The IRS has issued several rulings discussing investor control. These rulings
say that certain incidents of ownership by the policy owner, such as the ability
to select and control investments in a separate account, will cause the policy
owner to be treated as the owner of the assets for tax purposes.
In its explanation of the diversification regulations, the Treasury Department
recognized that the temporary regulations "do not provide guidance concerning
the circumstances in which investor control of the investments of a segregated
asset account may cause the investor, rather than the insurance company, to be
treated as the owner of the assets in the account." The explanation further
indicates that "the temporary regulations provide that in appropriate cases a
segregated asset account may include multiple sub-accounts, but do not specify
the extent to which policyholders may direct their investments to particular
sub-accounts without being treated as the owners of the underlying assets.
Guidance on this and other issues will be provided in regulations or revenue
rulings under Section 817(d), relating to the definition of variable contract."
The final regulations issued under Section 817 did not provide guidance
regarding investor control, and as of the date of this prospectus, guidance has
yet to be issued. We do not know if additional guidance will be issued. If
guidance is issued, we do not know if it will have a retroactive effect.
Due to the lack of specific guidance on investor control, there is some
uncertainty about when a policy owner is considered the owner of the assets for
tax purposes. We reserve the right to modify the policy, as necessary, to
prevent you from being considered the owner of assets in the separate account.
TAX DEFERRAL DURING ACCUMULATION PERIOD
Under existing provisions of the Code, except as described below, any increase
in an owner's contract value is generally not taxable to the owner unless
amounts are received (or are deemed to be received) under the policy prior to
the Insured's death. If there is a total withdrawal from the policy, then the
surrender value will be includible in the owner's income to the extent that the
amount received exceeds the "investment in the contract." (If there is any debt
at the time of a total withdrawal, then such debt will be treated as an amount
distributed to the owner.) The "investment in the contract" is the aggregate
amount of premium payments and other consideration paid for the policy, less the
aggregate amount received under the policy previously to the extent such amounts
received were excludable from gross income. Whether partial withdrawals (or such
other amounts deemed to be distributed) from the policy constitute income to the
owner depends, in part, upon whether the policy is considered a modified
endowment contract for federal income tax purposes.
MODIFIED ENDOWMENT CONTRACTS
Code Section 7702A applies an additional test, the "seven-pay" test, to life
insurance contracts. The seven-pay test provides that premiums cannot be paid at
a rate more rapidly than that allowed by the payment of seven annual premiums
using specified computational rules described in Section 7702A(c). A modified
endowment contract ("MEC") is a life insurance policy that either:
(i) satisfies the Section 7702 definition of life insurance, but fails the
seven-pay test of Section 7702A or (ii) is exchanged for a MEC. A policy fails
the seven-pay test if the accumulated amount paid into the policy at any time
during the first seven policy years exceeds the sum of the net level premiums
that would have been paid up to that point if the policy provided for paid-up
future benefits after the payment of seven level annual premiums. Computational
rules for the seven-pay test are described in Section 7702A(c).
If the policy satisfies the seven-pay test at issuance, distributions and loans
made thereafter will not be subject to the MEC rules, unless the policy is
changed materially. The seven-pay test will be applied anew at any time the
policy undergoes a material change, which includes an increase in the Face
Amount. In addition, if there is a reduction in benefits under the policy within
the first seven years, the seven-pay test is applied as if the policy had
initially been issued at the reduced benefit level. Any reduction in benefits
attributable to the nonpayment of premiums will not be taken into account for
purposes of the seven-pay test if the benefits are reinstated within 90 days
after the reduction.
A policy that is classified as a MEC is eligible for certain aspects of the
beneficial tax treatment accorded to life insurance. That is, the death benefit
is excluded from income and increments in value are not subject to current
taxation. However, if the policy is classified as a MEC, then withdrawals from
the contract will be considered first as withdrawals of income and then as a
recovery of premium payments. Thus, withdrawals will be includible in income to
the extent the contract value exceeds the investment in the contract. The amount
of any loan (including unpaid interest thereon) under the contract will be
treated as a withdrawal from the contract for tax purposes. In addition, if the
owner assigns or pledges any portion of the value of a contract (or agrees to
assign or pledge any portion), then such portion will be treated as a withdrawal
from the contract for tax purposes. Taxable withdrawals are subject to an
additional 10% tax, with certain exceptions. The owner's investment in the
contract is increased by the amount includible in income with respect to such
assignment, pledge, or loan, though it is not affected by any other aspect of
the assignment, pledge, or loan (including its release or repayment).
Generally, only distributions and loans made in the first year in which a policy
becomes a MEC, and in subsequent years, are
<PAGE>
26 HARTFORD LIFE INSURANCE COMPANY
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taxable. However, distributions and loans made in the two years prior to a
policy's failing the seven-pay test are deemed to be in anticipation of failure
and are subject to tax.
Before assigning, pledging, or requesting a loan under a policy that is a MEC,
an owner should consult a qualified tax adviser.
All MEC policies that are issued within any calendar year to the same policy
owner by one company or its affiliates are treated as one MEC policy for the
purpose of determining the taxable portion of any loan or distribution.
Hartford has instituted procedures to monitor whether a policy may become
classified as a MEC after issue.
ESTATE AND GENERATION-SKIPPING TAXES
When the last surviving Insured dies, the Death Proceeds will generally be
includible in the policy owner's estate for purposes of federal estate tax if
the last surviving Insured owned the policy. If the policy owner was not the
last surviving Insured, the fair market value of the policy would be included in
the policy owner's estate upon the policy owner's death. The policy would not be
includible in the last surviving Insured's estate if he or she neither retained
incidents of ownership at death nor had given up ownership within three years
before death.
The federal estate tax is integrated with the federal gift tax under a unified
rate schedule and unified credit which shelters up to $675,000 (for 2000) from
the estate and gift tax. The Taxpayer Relief Act of 1997 gradually raises the
credit over the next six years to $1,000,000. In addition, an unlimited marital
deduction may be available for federal estate and gift tax purposes. The
unlimited marital deduction permits the deferral of taxes until the death of the
surviving spouse.
If the policy owner (whether or not he or she is an Insured) transfers ownership
of the policy to someone two or more generations younger, the transfer may be
subject to the generation skipping transfer tax, the taxable amount being the
value of the policy. The generation-skipping transfer tax provisions generally
apply to transfers which would be subject to the gift and estate tax rules.
Individuals are generally allowed an aggregate generation skipping transfer
exemption of $1 million as adjusted for inflation. Because these rules are
complex, the policy owner should consult with a qualified tax adviser for
specific information if ownership is passing to younger generations.
LIFE INSURANCE PURCHASED FOR USE IN SPLIT DOLLAR ARRANGEMENTS
On January 26, 1996, the IRS released a technical advice memorandum ("TAM") on
the taxability of life insurance policies used in certain split dollar
arrangements. A TAM, issued by the National Office of the IRS, provides advice
as to the internal revenue laws, regulations, and related statutes with respect
to a specific set of facts and a specific taxpayer. In the TAM, among other
things, the IRS concluded that an employee was subject to current taxation on
the excess of the cash surrender value of the policy over the premiums to be
returned to the employer. Purchasers of life insurance policies to be used in
split dollar arrangements are strongly advised to consult with a qualified tax
adviser to determine the tax treatment resulting from such an arrangement.
FEDERAL INCOME TAX WITHHOLDING
If any amounts are deemed to be current taxable income to the policy owner, such
amounts will be subject to federal income tax withholding and reporting,
pursuant to the Code.
NON-INDIVIDUAL OWNERSHIP OF POLICIES
In certain circumstances, the Code limits the application of specific tax
advantages to individual owners of life insurance contracts. Prospective policy
owners which are not individuals should consult a qualified tax adviser to
determine the potential impact on the purchaser.
OTHER
Federal estate tax, state and local estate, inheritance and other tax
consequences of ownership, or receipt of policy proceeds depend on the
circumstances of each policy owner or beneficiary. A qualified tax adviser
should be consulted to determine the impact of these taxes.
LIFE INSURANCE PURCHASES BY NON-RESIDENT ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal income
tax consequences to life insurance purchasers that are U.S. citizens or
residents. Purchasers that are not U.S. citizens or residents will generally be
subject to U.S. federal income tax and withholding on taxable distributions from
life insurance policies at a 30% rate, unless a lower treaty rate applies. In
addition, purchasers may be subject to state and/or municipal taxes and taxes
that may be imposed by the purchaser's country of citizenship or residence.
Prospective purchasers are advised to consult with a qualified tax adviser
regarding U.S., state, and foreign taxation with respect to a life insurance
policy purchase.
LEGAL PROCEEDINGS
--------------------------------------------------------------------------------
There are no pending material legal proceedings to which the Separate Account is
a party.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY 27
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GLOSSARY OF SPECIAL TERMS
ACCOUNT VALUE: the total of all amounts in the Fixed Account, Loan Account and
Sub-Accounts.
CASH SURRENDER VALUE: the Cash Value less all Indebtedness.
CASH VALUE: the Account Value less any applicable Surrender Charges.
CUMULATIVE DEATH BENEFIT GUARANTEE PREMIUM: the premium required to maintain the
Death Benefit Guarantee. Initially, the Cumulative Death Benefit Guarantee
Premium is the Death Benefit Guarantee Premium. On each Monthly Activity Date
thereafter, the Cumulative Death Benefit Guarantee Premium is: (a) the
Cumulative Death Benefit Guarantee Premium on the previous Monthly Activity
Date; plus (b) the current Death Benefit Guarantee Premium.
DEATH BENEFIT GUARANTEE AMOUNT: a benefit amount selected by you at the time you
apply for the policy. This is the death benefit that will apply to your policy
while the Death Benefit Guarantee is in effect.
DEATH BENEFIT GUARANTEE PREMIUM: the amount of monthly premium required to keep
the Death Benefit Guarantee available, as shown in the policy's specification
page, and used to calculate the Cumulative Death Benefit Guarantee Premium.
FACE AMOUNT: an amount we use to determine the Death Benefit. On the policy
date, the Face Amount equals the initial Face Amount shown in your policy.
Thereafter, it may change under the terms of the policy.
FIXED ACCOUNT: part of our general account to which all or a portion of the
Account Value may be allocated.
FUNDS: the registered open-end management companies in which assets of the
Separate Account may be invested.
INDEBTEDNESS: all loans taken on the policy, plus any interest due or accrued
minus any loan repayments.
LOAN ACCOUNT: an account established for any amounts transferred from the Fixed
Account and Sub-Accounts as a result of loans. The amounts in the Loan Account
are credited with interest and are not subject to the investment experience of
any Sub-Accounts.
MONTHLY ACTIVITY DATE: the policy date and the same date in each succeeding
month as the policy date. However, whenever the Monthly Activity Date falls on a
date other than a Valuation Day, the Monthly Activity Date will be deemed to be
the next Valuation Day.
NET PREMIUM: the amount of premium credited to Account Value. It is premium paid
minus the sales load and premium tax charge.
SEPARATE ACCOUNT: an account which has been established by us to separate the
assets funding the variable benefits for the class of contracts to which the
policy belongs from our other assets.
SUB-ACCOUNT: a subdivision of the Separate Account.
SURRENDER CHARGE: a charge that may be assessed if you surrender your policy or
the Face Amount is decreased.
VALUATION DAY: the date on which a Sub-Account is valued. This occurs every day
the New York Stock Exchange is open for trading.
WE, US, OUR: Hartford Life Insurance Company, sometimes referred to as
"Hartford."
YOU, YOUR: the owner of the policy.
<PAGE>
28 HARTFORD LIFE INSURANCE COMPANY
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WHERE YOU CAN FIND MORE INFORMATION
You can call us at 1-800-231-5453 to ask us questions. The Statement of
Additional Information contains more information about this life insurance
policy and, like this prospectus, is filed with the Securities and Exchange
Commission. You should read the Statement of Additional Information because you
are bound by the terms contained in it.
We file other information with the Securities and Exchange Commission. You may
read and copy any document we file at the SEC's public reference room in
Washington, DC 20549-6009. Please call the SEC at 1-800-SEC-0330 for further
information. Our SEC filings are also available to the public at the SEC's
website at http://www.sec.gov.
<PAGE>
HARTFORD LIFE INSURANCE COMPANY
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STATEMENT OF ADDITIONAL INFORMATION
SEPARATE ACCOUNT VL II
This Statement of Additional Information is not a prospectus. To obtain a
prospectus write to us at P.O. Box 2999, Hartford, CT 06104-2999, or call us at
1-800-231-5453.
DATE OF PROSPECTUS: JANUARY 2, 2001
DATE OF STATEMENT OF ADDITIONAL INFORMATION: JANUARY 2, 2001
<PAGE>
2 HARTFORD LIFE INSURANCE COMPANY
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
GENERAL INFORMATION AND HISTORY 3
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SERVICES 5
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EXPERTS 5
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DISTRIBUTION OF THE POLICIES 5
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ADDITIONAL INFORMATION ABOUT CHARGES 5
----------------------------------------------------------------------
ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES AND CASH
SURRENDER VALUES 7
----------------------------------------------------------------------
FINANCIAL STATEMENTS SA-1
----------------------------------------------------------------------
</TABLE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION 3
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GENERAL INFORMATION AND HISTORY
HARTFORD LIFE INSURANCE COMPANY ("HARTFORD") -- Hartford Life Insurance Company
is a stock life insurance company engaged in the business of writing life
insurance, both individual and group, in all states of the United States and the
District of Columbia. We were originally incorporated under the laws of
Massachusetts on June 5, 1902, and subsequently redomiciled to Connecticut. Our
offices are located in Simsbury, Connecticut; however, our mailing address is
P.O. Box 2999, Hartford, CT 06104-2999.
Hartford Life Insurance Company is controlled by Hartford Life and Accident
Insurance Company, which is controlled by Hartford Life Inc., which is
controlled by Hartford Accident & Indemnity Company, which is controlled by
Hartford Fire Insurance Company, which is controlled by Nutmeg Insurance
Company, which is controlled by The Hartford Financial Services Group, Inc. Each
of these companies is engaged in the business of insurance and financial
services.
The following table shows a brief description of the business experience of
officers and directors of Hartford Life Insurance Company:
<TABLE>
<CAPTION>
POSITION WITH OTHER BUSINESS PROFESSION,
HARTFORD; VOCATION OR EMPLOYMENT FOR PAST
NAME YEAR OF ELECTION FIVE YEARS; OTHER DIRECTORSHIPS
<S> <C> <C>
-----------------------------------------------------------------------------------------------------------------
David A. Carlson Vice President, 1999 Assistant Vice President and Director of Taxes
(1998-1999), Hartford; CIGNA Corporation (1975-1998)
Peter W. Cummins Senior Vice President, 1997 Vice President (1989-1997); Director of Broker Dealer
Sales-ILAD (1989-1992), Hartford; Senior Vice President
(1997-Present) Vice President (1989-1997); Director of
Broker Dealer Sales-ILAD (1989-1991), Hartford Life and
Accident Insurance Company.
Timothy M. Fitch Vice President, 1995 Assistant Vice President (1992-1995), Hartford; Vice
President (1995-Present); Actuary (1994-Present);
Assistant Vice President (1992-1995), Hartford Life and
Accident Insurance Company.
Mary Jane B. Fortin Vice President & Chief Vice President & Chief Accounting Officer, (1998-Present),
Accounting Officer, 1998 Hartford Life & Annuity Insurance Company; Vice President
& Chief Accounting Officer, (1998-Present), Royal Life
Insurance Company of America; Vice President & Chief
Accounting Officer (1998-Present) Alpine Life Insurance
Company; Chief Accounting Officer (1997-Present), Hartford
Life, Inc.; Director, Finance (1995-1997), Value Health,
Inc.; Senior Manager (1993-1995), Coopers and Lybrand;
Audit Manager (1993-1996) Arthur Andersen & Co.
David T. Foy Senior Vice President, Chief Senior Vice President (1998-Present), Vice President
Financial Officer & Treasurer, (1998), Assistant Vice President (1995-1998), Hartford;
1998 Senior Vice President (1998-Present), Hartford Life and
Director, 1999 * Accident Insurance Company; Director, Strategic Planning
Corporate Finance (1995-1996), IA Product Development
(1994-1995), Hartford; Various Actuarial Roles
(1989-1993), Milliman & Robertson
Lois W. Grady Senior Vice President, 1998 Vice President (1993-1998); Assistant Vice President
(1987-1993), Hartford; Senior Vice President, 1998); Vice
President (1993-1997); Assistant Vice President
(1987-1993), Hartford Life and Accident Insurance Company.
Stephen T. Joyce Senior Vice President, 1999 Vice President (1997-1999), Assistant Vice President
(1994-1997), Hartford; Assistant Vice President
(1994-1997), Hartford Life and Accident Insurance Company;
Vice President (1997-1999), Assistant Vice President
(1994-1997), Hartford Life and Annuity Insurance Company.
Michael D. Keeler Vice President, 1998 Vice President (1998-Present); Hartford Life and Accident
Insurance Company; Vice President (1995-1997), Providian
Insurance; Supervisor/Manager (1985-1995), U.S. West
Communications.
</TABLE>
<PAGE>
4 HARTFORD LIFE INSURANCE COMPANY
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<TABLE>
<CAPTION>
POSITION WITH OTHER BUSINESS PROFESSION,
HARTFORD; VOCATION OR EMPLOYMENT FOR PAST
NAME YEAR OF ELECTION FIVE YEARS; OTHER DIRECTORSHIPS
<S> <C> <C>
-----------------------------------------------------------------------------------------------------------------
Robert A. Kerzner Senior Vice President, 1998 Director of Individual Life, Senior Vice President,
(1998-Present); Vice President, (1995-1998); Regional Vice
President (1991-1994), Hartford; Vice President
(1994-1997), Hartford Life and Accident Insurance Company.
Thomas M. Marra President, 2000 Executive Vice President (1995-2000), Senior Vice
Director, 1994* President (1994-1995); Vice President (1989-1994); Actuary
(1987-1995), Hartford; Director (1994-Present); Executive
Vice President (1995-Present); Senior Vice President
(1994-1995); Vice President (1989-1994), Actuary
(1987-1997), Hartford Life and Accident Insurance Company;
President (2000-Present), Executive Vice President
(1996-2000), Director (1994-Present), Senior Vice
President (1993-1996), Hartford Life and Annuity Insurance
Company; Chief Operating Officer (2000-Present), Executive
Vice President, Individual Life and Annuities (1997-2000),
Hartford Life, Inc.
Craig R. Raymond Senior Vice President, 1997 Chief Actuary, 1994 Vice President (1993-1997); Assistant
Vice President (1992-1993); Actuary (1990-1994), Hartford;
Senior Vice President (1997-Present); Chief Actuary
(1995-Present); Vice President (1993-1997); Actuary
(1990-1995), Hartford Life and Accident Insurance Company;
Vice President and Chief Actuary (1997-Present), Hartford
Life, Inc.
Christine Hayer Senior Vice President, General Associate General Counsel (1998-2000), Assistant Corporate
Repasy Counsel, Corporate Secretary, Secretary (2000), Vice President (1999-2000), Assistant
Director 2001 Vice President (1997-1999), Hartford Life and Annuity
Insurance Company
Lowndes A. Smith Chief Executive Officer, 1997 President (1989-2000), Chief Operating Officer
Director, 1981* (1989-1997), Hartford; Chief Executive Officer
(1997-Present), President (1989-2000), Chief Operating
Officer (1989-1997), Director (1985-Present); Hartford
Life and Annuity Insurance Company; Director
(1981-Present); President (1989-Present); Chief Executive
Officer (1997-Present); Chief Operating Officer
(1989-1997), Hartford Life and Accident Insurance Company;
Chief Executive Officer and President and Director
(1997-Present), Hartford Life, Inc.
John C. Walters Executive Vice President, Program Leader, Wheat First Securities, Inc./First Union
Director 2000 Capital Markets Corp. (1984-1999)
David M. Znamierowski Senior Vice President & Chief Vice President (1997), Hartford; Director (1998-Present);
Investment Officer, 1997 Senior Vice President (1997-Present); Hartford Life and
Director, 1998* Accident Insurance Company; Vice President, Investment
Strategy (1997-Present), Hartford Life, Inc.; Vice
President, Investment Strategy & Policy (1991-1996), Aetna
Life and Casualty.
</TABLE>
---------
* Denotes date of election to Board of Directors of Hartford.
Unless otherwise indicated, the principal business address of each of the above
individuals is P.O. Box 2999, Hartford, CT 06104-2999.
SEPARATE ACCOUNT VL II was established as a separate account under Connecticut
law on September 30, 1994. The Separate Account is classified as a unit
investment trust registered with the Securities and Exchange Commission under
the Investment Company Act of 1940.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION 5
--------------------------------------------------------------------------------
SERVICES
SAFEKEEPING OF ASSETS -- Title to the assets of the Separate Account is held by
Hartford. The assets are kept physically segregated and are held separate and
apart from Hartford's general corporate assets. Records are maintained of all
purchases and redemptions of Fund shares held in each of the Sub-Accounts.
EXPERTS
--------------------------------------------------------------------------------
INDEPENDENT PUBLIC ACCOUNTANTS -- The audited financial statements and financial
statement schedules included in this registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports. The principal business
address of Arthur Andersen LLP is One Financial Plaza, Hartford, Connecticut
06103.
ACTUARIAL EXPERT -- The hypothetical Policy illustrations included in this
Statement of Additional Information and the registration statement with respect
to the Separate Account have been approved by Thomas P. Kalmbach, FSA, MAAA,
Actuary, for Hartford, and are included in reliance upon his opinion as to their
reasonableness.
DISTRIBUTION OF THE POLICIES
--------------------------------------------------------------------------------
Hartford Equity Sales Company, Inc. ("HESCO") serves as principal underwriter
for the policies and will offer the policies on a continuous basis. HESCO is
controlled by Hartford and is located at the same address as Hartford. HESCO is
registered with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 as a broker-dealer and is a member of the National
Association of Securities Dealers, Inc. ("NASD").
The policies will be sold by salespersons who represent Hartford as insurance
agents and who are registered representatives of HESCO or certain other
registered broker-dealers who have entered into distribution agreements with
HESCO.
During the first Policy Year, the maximum sales commission payable to Hartford
agents, independent registered insurance brokers, and other registered
broker-dealers, is 45% of the premium paid up to a Target Premium, and 5% of any
excess. In Policy Years 2 through 10, such sales commission will not exceed 5.5%
of premiums paid. Thereafter, agent commissions will not exceed 2% of premiums
paid. Sales commissions may be less for premiums attributable to Supplemental
Face Amount. Additionally, expense allowances may be paid. A sales
representative may be required to return all or a portion of the commissions
paid if the Policy terminates prior to the Policy's second Policy Anniversary.
Broker-dealers or financial institutions are compensated according to a schedule
set forth by HESCO and any applicable rules or regulations for variable
insurance compensation. Compensation is generally based on premium payments.
This compensation is usually paid from the sales charges described in the
Prospectus.
In addition, a broker-dealer or financial institution may also receive
additional compensation for, among other things, training, marketing or other
services provided. HESCO, its affiliates or Hartford may also make compensation
arrangements with certain broker-dealers or other financial institutions based
on total sales by the broker-dealer or financial institution of insurance
products. These payments, which may be different for broker-dealers or financial
institutions, will be made by HESCO, its affiliates or Hartford out of their
assets and will not effect the amounts paid by the policy owner to purchase,
hold or surrender variable insurance products.
The following table shows officers and directors of HESCO:
<TABLE>
<CAPTION>
NAME POSITIONS AND OFFICES
<S> <C>
-----------------------------------------------------------------
David A. Carlson Vice President
-----------------------------------------------------------------
Peter W. Cummins Senior Vice President
-----------------------------------------------------------------
David T. Foy Treasurer
-----------------------------------------------------------------
J. Richard Garrett Vice President
-----------------------------------------------------------------
Christine Hayer Repasy Senior Vice President, General
Counsel and Corporate Secretary,
Director
-----------------------------------------------------------------
George R. Jay Controller
-----------------------------------------------------------------
Robert A. Kerzner Executive Vice President, Director
-----------------------------------------------------------------
Joseph F. Mahoney Executive Vice President
-----------------------------------------------------------------
Thomas M. Marra President, Director
-----------------------------------------------------------------
Lowndes A. Smith Chief Executive Officer
-----------------------------------------------------------------
John C. Walters Executive Vice President
-----------------------------------------------------------------
</TABLE>
ADDITIONAL INFORMATION ABOUT CHARGES
--------------------------------------------------------------------------------
SALES LOAD -- The maximum and current sales load under the policy is 8% in years
1 through 3 and 4% in year 4 and beyond of premium in order to cover expenses
related to the sale and distribution of the Policy.
REDUCED CHARGES FOR ELIGIBLE GROUPS -- Certain charges and deductions described
above may be reduced for policies issued in connection with a specific plan, in
accordance with our rules in effect as of the date the application for a policy
is approved. To qualify for such a reduction, a plan must satisfy certain
criteria, i.e,
<PAGE>
6 HARTFORD LIFE INSURANCE COMPANY
--------------------------------------------------------------------------------
as to size of the plan, expected number of participants and anticipated premium
payment from the plan. Generally, the sales contacts and effort, administrative
costs and mortality cost per policy vary, based on such factors as the size of
the plan, the purposes for which policies are purchased and certain
characteristics of the plan's members. The amount of reduction and the criteria
for qualification will be reflected in the reduced sales effort and
administrative costs resulting from, and the different mortality experience
expected as a result of, sales to qualifying plans. We may modify, from time to
time on a uniform basis, both the amounts of reductions and the criteria for
qualification. Reductions in these charges will not be unfairly discriminatory
against any person, including the affected policy owners invested in Separate
Account VL II.
UNDERWRITING PROCEDURES -- To purchase a policy you must submit an application
to us. Within limits, you may choose the initial Face Amount. Policies generally
will be issued only on the lives of insureds between the ages of 28 and 85 who
supply evidence of insurability satisfactory to us. Acceptance is subject to our
underwriting rules and we reserve the right to reject an application for any
reason. No change in the terms or conditions of a policy will be made without
your consent.
Cost of insurance rates will be determined on each policy anniversary based on
our future expectations of such factors as mortality, expenses, interest,
persistency and taxes. For preferred and standard risks, the cost of insurance
rate will not exceed those based on the 1980 Commissioners' Standard Ordinary
Mortality Table (ALB), Male or Female, Nonsmoker or Smoker Table, age last
birthday (unisex rates may be required in some states). A table of guaranteed
cost of insurance rates per $1,000 will be included in your policy, however, we
reserve the right to use rates less than those shown in the table. Special risk
classes are used when mortality experience in excess of the standard risk
classes is expected. These substandard risks will be charged a higher cost of
insurance rate that will not exceed rates based on a multiple of 1980
Commissioners' Standard Ordinary Mortality Table (ALB), Male or Female,
Nonsmoker or Smoker Table, age last birthday (unisex rates may be required in
some states) plus any flat extra amount assessed. The multiple will be based on
the insured's substandard rating.
INCREASES IN FACE AMOUNT -- At any time after the first policy year, you may
request in writing to change the Face Amount. The minimum amount by which the
Face Amount can be increased is based on our rules then in effect.
We reserve the right to limit the number of increases or decreases made under a
policy to no more than one in any 12 month period.
All requests to increase the Face Amount must be applied for on a new
application and accompanied by your policy. All requests will be subject to
evidence of insurability satisfactory to us. Any increase approved by us will be
effective on the Monthly Activity Date shown on the new policy specifications
page, provided that the Monthly Deduction Amount for the first month after the
effective date of the increase is made. Each unscheduled increase in Face Amount
is subject to an increase fee of 1/12 of $1 per $1,000 of each increase per
month for the first 12 months from the effective date of each increase. This
amount will not be less than 1/12 of $500 but not greater than 1/12 of $3,000.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION 7
--------------------------------------------------------------------------------
ILLUSTRATION OF DEATH BENEFITS, ACCOUNT VALUES
AND CASH SURRENDER VALUES
The following tables illustrate the way in which a Policy operates. They show
how the Death Benefit, Account Values and Cash Surrender Values could vary over
an extended period of time assuming hypothetical gross rates of return equal to
constant after tax annual rates of 0%, 6% and 12%. The illustrations assume the
following: (a) a male, preferred non-nicotine, age 55, and a female, preferred
non-nicotine, age 55, with $1,000,000 of Face Amount, a Death Benefit Guarantee
Amount of $500,000, and a premium of $10,000.00 paid in all years; (b) a male,
preferred non-nicotine, age 55, and a female, preferred non-nicotine, age 55,
with $1,000,000 of Face Amount, a Death Benefit Guarantee Amount of $1,000,000,
and a premium of $20,000.00 paid in all years.
The Death Benefit, Account Value and Cash Surrender Value for a Policy would be
different from those shown if the rates of return averaged 0%, 6% and 12% over a
period of years, but also fluctuated above or below those averages for
individual Policy Years. They would also differ if any Policy loan was made
during the period of time illustrated.
The tables reflect the deductions of current Policy charges and guaranteed
Policy charges for a single gross interest rate. The Death Benefits, Account
Values and Cash Surrender Values would change if current Cost of Insurance
charges change.
The amounts shown for the Death Benefits, Account Values and Cash Surrender
Values as of the end of each Policy Year take into account an average daily
charge equal to an annual charge of 1.09% of the average daily net assets of the
Funds for investment advisory and administrative services fees. The gross annual
investment return rates of 0%, 6% and 12% on the Fund's assets are equal to net
annual investment return rates (net of the 1.09% average daily charge) of
-1.09%, 4.91% and 10.91%, respectively.
In addition, the Death Benefits, Account Values and Cash Surrender Values as of
the end of each Policy Year take into account the front-end sales load, premium
tax charge (assumed to be 1.75% in these illustrations), Cost of Insurance
charge, monthly administrative fee, and mortality and expense risk charge.
The hypothetical returns shown in the tables are without any tax charges that
may be allocable to the Separate Account in the future. In order to produce
after-tax returns of 0%, 6%, and 12%, the Separate Account would have to earn a
sufficient amount in excess of 0%, 6%, 12%, respectively, to cover any tax
charges.
The "Premium Paid Plus Interest" column of each table shows the amount which
would accumulate if the initial premium was invested to earn interest, after
taxes, of 5% per year, compounded annually.
Hartford will furnish, upon request, a comparable illustration reflecting the
proposed Insured's age and risk classification, Face Amount or initial premium
requested, and reflecting guaranteed Cost of Insurance rates. Hartford will also
furnish an additional similar illustration reflecting current Cost of Insurance
rates which may be less than, but never greater than, the guaranteed Cost of
Insurance rates.
<PAGE>
8 HARTFORD LIFE INSURANCE COMPANY
--------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 FACE AMOUNT
$1,000,000 DEATH BENEFIT GUARANTEE AMOUNT
ISSUE AGE 55 MALE PREFERRED NON-NICOTINE
ISSUE AGE 55 FEMALE PREFERRED NON-NICOTINE
$20,000 PLANNED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (10.91% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS -----------------------------------------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------
1 21,000 15,942 1,851 1,000,000 15,942 1,851 1,000,000
2 43,050 33,682 19,591 1,000,000 33,578 19,487 1,000,000
3 66,203 53,193 42,401 1,000,000 52,848 42,057 1,000,000
4 90,513 75,522 69,264 1,000,000 74,773 68,515 1,000,000
5 116,038 100,055 98,332 1,000,000 98,714 96,990 1,000,000
6 142,840 127,001 127,001 1,000,000 124,842 124,842 1,000,000
7 170,982 156,583 156,583 1,000,000 153,342 153,342 1,000,000
8 200,531 189,046 189,046 1,000,000 184,402 184,402 1,000,000
9 231,558 224,662 224,662 1,000,000 218,229 218,229 1,000,000
10 264,136 263,720 263,720 1,000,000 255,050 255,050 1,000,000
11 298,343 311,588 311,588 1,000,000 299,453 299,453 1,000,000
12 334,260 364,383 364,383 1,000,000 348,001 348,001 1,000,000
13 371,973 422,616 422,616 1,000,000 401,138 401,138 1,000,000
14 411,571 486,844 486,844 1,000,000 459,387 459,387 1,000,000
15 453,150 557,698 557,698 1,000,000 523,351 523,351 1,000,000
16 496,807 635,870 635,870 1,000,000 593,735 593,735 1,000,000
17 542,648 722,135 722,135 1,000,000 671,387 671,387 1,000,000
18 590,780 817,361 817,361 1,000,000 757,354 757,354 1,000,000
19 641,319 922,528 922,528 1,005,556 852,981 852,981 1,000,000
20 694,385 1,038,644 1,038,644 1,111,349 959,968 959,968 1,027,166
25 1,002,269 1,825,607 1,825,607 1,916,888 1,683,482 1,683,482 1,767,656
30 1,395,216 3,105,398 3,105,398 3,260,667 2,828,189 2,828,189 2,969,599
----------------------------------------------------------------------------------------------------------------
</TABLE>
*These values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk rates.
**These values reflect investment results using guaranteed cost of insurance
rates, administrative fees, and Mortality and Expense Risk rates.
These values reflect Current and Guaranteed Front-End Sales Loads of 8% in years
1 through 3 and 4% thereafter. The surrender charge effective in any year can be
determined by subtracting the cash surrender value from the account value.
The Death Benefit may, and the Account Values and Cash Surrender Values will
differ if premiums are paid in different amounts or frequencies.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
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. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION 9
--------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 FACE AMOUNT
$1,000,000 DEATH BENEFIT GUARANTEE AMOUNT
ISSUE AGE 55 MALE PREFERRED NON-NICOTINE
ISSUE AGE 55 FEMALE PREFERRED NON-NICOTINE
$20,000 PLANNED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (4.91% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ----------------------------------------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------
1 21,000 14,985 894 1,000,000 14,985 894 1,000,000
2 43,050 30,773 16,682 1,000,000 30,672 16,581 1,000,000
3 66,203 47,196 36,404 1,000,000 46,866 36,074 1,000,000
4 90,513 65,099 58,841 1,000,000 64,394 58,137 1,000,000
5 116,038 83,695 81,971 1,000,000 82,452 80,729 1,000,000
6 142,840 102,997 102,997 1,000,000 101,026 101,026 1,000,000
7 170,982 123,011 123,011 1,000,000 120,093 120,093 1,000,000
8 200,531 143,745 143,745 1,000,000 139,615 139,615 1,000,000
9 231,558 165,203 165,203 1,000,000 159,540 159,540 1,000,000
10 264,136 187,378 187,378 1,000,000 179,806 179,806 1,000,000
11 298,343 215,018 215,018 1,000,000 204,332 204,332 1,000,000
12 334,260 243,830 243,830 1,000,000 229,317 229,317 1,000,000
13 371,973 273,859 273,859 1,000,000 254,717 254,717 1,000,000
14 411,571 305,145 305,145 1,000,000 280,485 280,485 1,000,000
15 453,150 337,738 337,738 1,000,000 306,551 306,551 1,000,000
16 496,807 371,684 371,684 1,000,000 332,812 332,812 1,000,000
17 542,648 407,025 407,025 1,000,000 359,130 359,130 1,000,000
18 590,780 443,813 443,813 1,000,000 385,318 385,318 1,000,000
19 641,319 482,095 482,095 1,000,000 411,169 411,169 1,000,000
20 694,385 521,924 521,924 1,000,000 436,480 436,480 1,000,000
25 1,002,269 746,524 746,524 1,000,000 549,303 549,303 1,000,000
30 1,395,216 1,024,607 1,024,607 1,075,838 617,208 617,208 1,000,000
---------------------------------------------------------------------------------------------------------------
</TABLE>
*These values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk rates.
**These values reflect investment results using guaranteed cost of insurance
rates, administrative fees, and Mortality and Expense Risk rates.
These values reflect Current and Guaranteed Front-End Sales Loads of 8% in years
1 through 3 and 4% thereafter. The surrender charge effective in any year can be
determined by subtracting the cash surrender value from the account value.
The Death Benefit may, and the Account Values and Cash Surrender Values will
differ if premiums are paid in different amounts or frequencies.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
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. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 6%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
10 HARTFORD LIFE INSURANCE COMPANY
--------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 FACE AMOUNT
$1,000,000 DEATH BENEFIT GUARANTEE AMOUNT
ISSUE AGE 55 MALE PREFERRED NON-NICOTINE
ISSUE AGE 55 FEMALE PREFERRED NON-NICOTINE
$20,000 PLANNED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-1.09% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ---------------------------------------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------
1 21,000 14,030 0 1,000,000 14,030 0 1,000,000
2 43,050 27,982 13,891 1,000,000 27,884 13,793 1,000,000
3 66,203 41,662 30,870 1,000,000 41,348 30,556 1,000,000
4 90,513 55,848 49,591 1,000,000 55,187 48,929 1,000,000
5 116,038 69,729 68,006 1,000,000 68,581 66,857 1,000,000
6 142,840 83,294 83,294 1,000,000 81,500 81,500 1,000,000
7 170,982 96,527 96,527 1,000,000 93,905 93,905 1,000,000
8 200,531 109,408 109,408 1,000,000 105,740 105,740 1,000,000
9 231,558 121,916 121,916 1,000,000 116,936 116,936 1,000,000
10 264,136 134,016 134,016 1,000,000 127,413 127,413 1,000,000
11 298,343 150,185 150,185 1,000,000 140,799 140,799 1,000,000
12 334,260 166,052 166,052 1,000,000 153,272 153,272 1,000,000
13 371,973 181,614 181,614 1,000,000 164,745 164,745 1,000,000
14 411,571 196,857 196,857 1,000,000 175,118 175,118 1,000,000
15 453,150 211,773 211,773 1,000,000 184,254 184,254 1,000,000
16 496,807 226,350 226,350 1,000,000 191,964 191,964 1,000,000
17 542,648 240,562 240,562 1,000,000 197,996 197,996 1,000,000
18 590,780 254,388 254,388 1,000,000 202,009 202,009 1,000,000
19 641,319 267,793 267,793 1,000,000 203,593 203,593 1,000,000
20 694,385 280,737 280,737 1,000,000 202,291 202,291 1,000,000
25 1,002,269 336,067 336,067 1,000,000 132,419 132,419 1,000,000
30 1,395,216 359,694 359,694 1,000,000 0 0 0
--------------------------------------------------------------------------------------------------------------
</TABLE>
*These values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk rates.
**These values reflect investment results using guaranteed cost of insurance
rates, administrative fees, and Mortality and Expense Risk rates.
These values reflect Current and Guaranteed Front-End Sales Loads of 8% in years
1 through 3 and 4% thereafter. The surrender charge effective in any year can be
determined by subtracting the cash surrender value from the account value.
The Death Benefit may, and the Account Values and Cash Surrender Values will
differ if premiums are paid in different amounts or frequencies.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
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. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION 11
--------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 FACE AMOUNT
$500,000 DEATH BENEFIT GUARANTEE AMOUNT
ISSUE AGE 55 MALE PREFERRED NON-NICOTINE
ISSUE AGE 55 FEMALE PREFERRED NON-NICOTINE
$10,000 PLANNED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (10.91% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ----------------------------------------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------
1 10,500 7,791 358 1,000,000 7,791 358 1,000,000
2 21,525 16,558 9,125 1,000,000 16,452 9,019 1,000,000
3 33,101 26,189 18,756 1,000,000 25,836 18,403 1,000,000
4 45,256 37,199 30,828 1,000,000 36,426 30,055 1,000,000
5 58,019 49,270 43,960 1,000,000 47,873 42,564 1,000,000
6 71,420 62,489 58,242 1,000,000 60,221 55,973 1,000,000
7 85,491 76,948 73,763 1,000,000 73,509 70,324 1,000,000
8 100,266 92,746 90,623 1,000,000 87,764 85,640 1,000,000
9 115,779 109,989 108,927 1,000,000 103,000 101,938 1,000,000
10 132,068 128,779 128,779 1,000,000 119,225 119,225 1,000,000
11 149,171 152,239 152,239 1,000,000 138,582 138,582 1,000,000
12 167,130 178,081 178,081 1,000,000 159,221 159,221 1,000,000
13 185,986 206,547 206,547 1,000,000 181,193 181,193 1,000,000
14 205,786 237,890 237,890 1,000,000 204,552 204,552 1,000,000
15 226,575 272,404 272,404 1,000,000 229,337 229,337 1,000,000
16 248,404 310,403 310,403 1,000,000 255,557 255,557 1,000,000
17 271,324 352,233 352,233 1,000,000 283,190 283,190 1,000,000
18 295,390 398,280 398,280 1,000,000 312,173 312,173 1,000,000
19 320,660 448,972 448,972 1,000,000 342,429 342,429 1,000,000
20 347,193 504,786 504,786 1,000,000 373,912 373,912 1,000,000
25 501,135 882,426 882,426 1,000,000 553,336 553,336 1,000,000
30 697,608 1,502,545 1,502,545 1,577,673 811,836 811,836 1,000,000
---------------------------------------------------------------------------------------------------------------
</TABLE>
*These values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk rates.
**These values reflect investment results using guaranteed cost of insurance
rates, administrative fees, and Mortality and Expense Risk rates.
These values reflect Current and Guaranteed Front-End Sales Loads of 8% in years
1 through 3 and 4% thereafter. The surrender charge effective in any year can be
determined by subtracting the cash surrender value from the account value.
The Death Benefit may, and the Account Values and Cash Surrender Values will
differ if premiums are paid in different amounts or frequencies.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
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. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 12%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
12 HARTFORD LIFE INSURANCE COMPANY
--------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 FACE AMOUNT
$500,000 DEATH BENEFIT GUARANTEE AMOUNT
ISSUE AGE 55 MALE PREFERRED NON-NICOTINE
ISSUE AGE 55 FEMALE PREFERRED NON-NICOTINE
$10,000 PLANNED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (4.91% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ---------------------------------------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------
1 10,500 7,318 0 1,000,000 7,318 0 1,000,000
2 21,525 15,122 7,689 1,000,000 15,019 7,586 1,000,000
3 33,101 23,229 15,797 1,000,000 22,892 15,459 1,000,000
4 45,256 32,057 25,686 1,000,000 31,331 24,960 1,000,000
5 58,019 41,199 35,889 1,000,000 39,911 34,602 1,000,000
6 71,420 50,651 46,403 1,000,000 48,594 44,346 1,000,000
7 85,491 60,401 57,215 1,000,000 57,331 54,146 1,000,000
8 100,266 70,433 68,309 1,000,000 66,053 63,929 1,000,000
9 115,779 80,728 79,666 1,000,000 74,669 73,607 1,000,000
10 132,068 91,251 91,251 1,000,000 83,073 83,073 1,000,000
11 149,171 104,813 104,813 1,000,000 93,117 93,117 1,000,000
12 167,130 118,920 118,920 1,000,000 102,819 102,819 1,000,000
13 185,986 133,586 133,586 1,000,000 112,044 112,044 1,000,000
14 205,786 148,813 148,813 1,000,000 120,642 120,642 1,000,000
15 226,575 164,616 164,616 1,000,000 128,412 128,412 1,000,000
16 248,404 180,997 180,997 1,000,000 135,085 135,085 1,000,000
17 271,324 197,951 197,951 1,000,000 140,301 140,301 1,000,000
18 295,390 215,473 215,473 1,000,000 143,588 143,588 1,000,000
19 320,660 233,549 233,549 1,000,000 144,365 144,365 1,000,000
20 347,193 252,152 252,152 1,000,000 141,961 141,961 1,000,000
25 501,135 351,235 351,235 1,000,000 50,521 50,521 1,000,000
30 697,608 446,645 446,645 1,000,000 0 0 0
--------------------------------------------------------------------------------------------------------------
</TABLE>
*These values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk rates.
**These values reflect investment results using guaranteed cost of insurance
rates, administrative fees, and Mortality and Expense Risk rates.
These values reflect Current and Guaranteed Front-End Sales Loads of 8% in years
1 through 3 and 4% thereafter. The surrender charge effective in any year can be
determined by subtracting the cash surrender value from the account value.
The Death Benefit may, and the Account Values and Cash Surrender Values will
differ if premiums are paid in different amounts or frequencies.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
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. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 6%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION 13
--------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
DEATH BENEFIT OPTION: LEVEL
$1,000,000 FACE AMOUNT
$500,000 DEATH BENEFIT GUARANTEE AMOUNT
ISSUE AGE 55 MALE PREFERRED NON-NICOTINE
ISSUE AGE 55 FEMALE PREFERRED NON-NICOTINE
$10,000 PLANNED PREMIUM
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-1.09% NET)
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
PREMIUMS ---------------------------------------------------------------------
END OF ACCUMULATED CASH CASH
POLICY AT 5% INTEREST ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------
1 10,500 6,846 0 1,000,000 6,846 0 1,000,000
2 21,525 13,745 6,312 1,000,000 13,645 6,212 1,000,000
3 33,101 20,499 13,067 1,000,000 20,178 12,745 1,000,000
4 45,256 27,493 21,122 1,000,000 26,814 20,443 1,000,000
5 58,019 34,310 29,000 1,000,000 33,124 27,815 1,000,000
6 71,420 40,936 36,689 1,000,000 39,073 34,825 1,000,000
7 85,491 47,350 44,164 1,000,000 44,612 41,427 1,000,000
8 100,266 53,527 51,404 1,000,000 49,675 47,551 1,000,000
9 115,779 59,440 58,379 1,000,000 54,179 53,117 1,000,000
10 132,068 65,046 65,046 1,000,000 58,028 58,028 1,000,000
11 149,171 73,016 73,016 1,000,000 62,957 62,957 1,000,000
12 167,130 80,808 80,808 1,000,000 67,000 67,000 1,000,000
13 185,986 88,413 88,413 1,000,000 70,041 70,041 1,000,000
14 205,786 95,813 95,813 1,000,000 71,946 71,946 1,000,000
15 226,575 102,994 102,994 1,000,000 72,533 72,533 1,000,000
16 248,404 109,937 109,937 1,000,000 71,558 71,558 1,000,000
17 271,324 116,608 116,608 1,000,000 68,690 68,690 1,000,000
18 295,390 122,973 122,973 1,000,000 63,490 63,490 1,000,000
19 320,660 128,987 128,987 1,000,000 55,419 55,419 1,000,000
20 347,193 134,590 134,590 1,000,000 43,866 43,866 1,000,000
25 501,135 152,983 152,983 1,000,000 0 0 0
30 697,608 132,307 132,307 1,000,000 0 0 0
--------------------------------------------------------------------------------------------------------------
</TABLE>
*These values reflect investment results using current cost of insurance rates,
administrative fees, and Mortality and Expense Risk rates.
**These values reflect investment results using guaranteed cost of insurance
rates, administrative fees, and Mortality and Expense Risk rates.
These values reflect Current and Guaranteed Front-End Sales Loads of 8% in years
1 through 3 and 4% thereafter. The surrender charge effective in any year can be
determined by subtracting the cash surrender value from the account value.
The Death Benefit may, and the Account Values and Cash Surrender Values will
differ if premiums are paid in different amounts or frequencies.
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
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. THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGE 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE DEATH BENEFIT,
ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD ALSO BE DIFFERENT FROM
THOSE SHOWN, DEPENDING ON THE INVESTMENT ALLOCATIONS MADE TO THE SEPARATE
ACCOUNTS AND THE RATES OF RETURN OF THE SEPARATE ACCOUNT IF THE ACTUAL RATES OF
INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, BUT VARIED ABOVE OR
BELOW THAT AVERAGE FOR THE SEPARATE ACCOUNT. NO REPRESENTATION CAN BE MADE THAT
THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INDEX FOR HARTFORD AND FIDELITY SUB-ACCOUNTS
Statements of Assets and Liabilities For the Period Ended
September 30, 2000 (unaudited)............................. SA-2
Statements of Operations For the Period Ended September 30,
2000 (unaudited)........................................... SA-4
Statements of Changes in Net Assets For the Period Ended
September 30, 2000 (unaudited)............................. SA-6
INDEX FOR PUTNAM SUB-ACCOUNTS
Statements of Assets and Liabilities For the Period Ended
September 30, 2000 (unaudited)............................. SA-10
Statements of Operations For the Period Ended September 30,
2000 (unaudited)........................................... SA-14
Statements of Changes in Net Assets For the Period Ended
September 30, 2000 (unaudited)............................. SA-17
</TABLE>
SA-1
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
September 30, 2000 Bond Stock Money Advisers Capital Mortgage Index
Fund Fund Market Fund Fund Appreciation Securities Fund
Sub-Account Sub-Account Sub-Account Sub-Account Fund Fund Sub-Account
Sub-Account Sub-Account
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
-------------------------------------------------------------------------------------------------------------------------
HARTFORD BOND HLS FUND, INC. --
CLASS IA
Shares 5,811,397
Cost $6,174,474
........................................................................................................................
Market Value: $6,179,514 $ -- $ -- $ -- $ -- $ -- $ --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD STOCK HLS
FUND, INC. -- CLASS IA
Shares 3,766,637
Cost $20,856,576
........................................................................................................................
Market Value: -- 23,412,687 -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD MONEY MARKET HLS
FUND, INC. -- CLASS IA
Shares 5,728,264
Cost $5,728,264
........................................................................................................................
Market Value: -- -- 5,728,264 -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD ADVISERS HLS
FUND, INC. -- CLASS IA
Shares 4,412,680
Cost $11,533,871
........................................................................................................................
Market Value: -- -- -- 11,972,249 -- -- --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD CAPITAL APPRECIATION HLS
FUND, INC. -- CLASS IA
Shares 4,291,297
Cost $19,598,277
........................................................................................................................
Market Value: -- -- -- -- 27,097,852 -- --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD MORTGAGE SECURITIES HLS
FUND, INC. -- CLASS IA
Shares 217,890
Cost $232,757
........................................................................................................................
Market Value: -- -- -- -- -- 239,242 --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD INDEX HLS
FUND, INC. -- CLASS IA
Shares 5,411,247
Cost $16,657,404
........................................................................................................................
Market Value: -- -- -- -- -- -- 22,061,739
-------------------------------------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL
OPPORTUNITIES HLS FUND, INC. --
CLASS IA
Shares 3,581,501
Cost $4,961,085
........................................................................................................................
Market Value: -- -- -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company -- -- 54,145 -- -- -- --
........................................................................................................................
Receivable from fund shares sold 2,569 -- -- 5,012 8,451 336 3,598
........................................................................................................................
Total Assets 6,182,083 23,412,687 5,782,409 11,977,261 27,106,303 239,578 22,065,337
........................................................................................................................
LIABILITIES:
Due to Hartford Life Insurance
Company 2,593 752 -- 4,993 8,135 337 8,195
........................................................................................................................
Payable for fund shares purchased -- 636 53,285 -- -- -- --
........................................................................................................................
TOTAL LIABILITIES 2,593 1,388 53,285 4,993 8,135 337 8,195
-------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $6,179,490 $23,411,299 $5,729,124 $11,972,268 $27,098,168 $ 239,241 $22,057,142
-------------------------------------------------------------------------------------------------------------------------
Units Owned by Participants 3,950,341 6,399,345 4,008,825 4,441,032 6,670,762 153,829 6,262,389
........................................................................................................................
Unit Values $ 1.564293 $ 3.658390 $ 1.429128 $ 2.695830 $ 4.062230 $1.555236 $ 3.522161
-------------------------------------------------------------------------------------------------------------------------
<S> <C>
September 30, 2000 International
Opportunities
Fund
Sub-Account
--------------------------------------------------------------
ASSETS
Investments:
---------------------------------------------------------------------------
HARTFORD BOND HLS FUND, INC. --
CLASS IA
Shares 5,811,397
Cost $6,174,474
................................
Market Value: $ --
----------------------------------------------------------------------------------------
HARTFORD STOCK HLS
FUND, INC. -- CLASS IA
Shares 3,766,637
Cost $20,856,576
................................
Market Value: --
-----------------------------------------------------------------------------------------------------
HARTFORD MONEY MARKET HLS
FUND, INC. -- CLASS IA
Shares 5,728,264
Cost $5,728,264
................................
Market Value: --
------------------------------------------------------------------------------------------------------------------
HARTFORD ADVISERS HLS
FUND, INC. -- CLASS IA
Shares 4,412,680
Cost $11,533,871
................................
Market Value: --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD CAPITAL APPRECIATION HLS
FUND, INC. -- CLASS IA
Shares 4,291,297
Cost $19,598,277
................................
Market Value: --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD MORTGAGE SECURITIES HLS
FUND, INC. -- CLASS IA
Shares 217,890
Cost $232,757
................................
Market Value: --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD INDEX HLS
FUND, INC. -- CLASS IA
Shares 5,411,247
Cost $16,657,404
................................
Market Value: --
-------------------------------------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL
OPPORTUNITIES HLS FUND, INC. --
CLASS IA
Shares 3,581,501
Cost $4,961,085
................................
Market Value: 5,218,931
-------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company --
................................
Receivable from fund shares sold 1,154
................................
Total Assets 5,220,085
................................
LIABILITIES:
Due to Hartford Life Insurance
Company 1,305
................................
Payable for fund shares purchased --
................................
TOTAL LIABILITIES 1,305
-------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $5,218,780
-------------------------------------------------------------------------------------------------------------------------
Units Owned by Participants 2,499,204
................................
Unit Values $ 2.088177
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-2
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
September 30, 2000 Dividend Growth and International Small MidCap Fidelity VIP Fidelity
and Income Advisers Company Fund Fund Equity-Income VIP
Growth Fund Fund Fund Sub-Account Sub-Account Portfolio Overseas
Sub-Account Sub-Account Sub-Account Sub-Account Portfolio
Sub-Account
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
-----------------------------------------------------------------------------------------------------------------------------
HARTFORD DIVIDEND AND GROWTH HLS
FUND, INC. -- CLASS IA
Shares 4,909,747
Cost $9,338,020
............................................................................................................................
Market Value: $10,081,709 $ -- $ -- $ -- $ -- $ -- $ --
-----------------------------------------------------------------------------------------------------------------------------
HARTFORD GROWTH AND INCOME HLS
FUND -- CLASS IA
Shares 264,786
Cost $358,903
............................................................................................................................
Market Value: -- 380,934 -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL ADVISERS
HLS FUND, INC. -- CLASS IA
Shares 2,577
Cost $3,282
............................................................................................................................
Market Value: -- -- 3,168 -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------
HARTFORD SMALL COMPANY HLS
FUND, INC. -- CLASS IA
Shares 625,134
Cost $1,142,737
............................................................................................................................
Market Value: -- -- -- 1,192,116 -- -- --
-----------------------------------------------------------------------------------------------------------------------------
HARTFORD MIDCAP HLS
FUND, INC. -- CLASS IA
Shares 583,768
Cost $1,332,090
............................................................................................................................
Market Value: -- -- -- -- 1,532,517 -- --
-----------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME
PORTFOLIO
Shares 394,853
Cost $9,059,855
............................................................................................................................
Market Value: -- -- -- -- -- 9,689,702 --
-----------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS PORTFOLIO
Shares 204,435
Cost $4,379,775
............................................................................................................................
Market Value: -- -- -- -- -- -- 4,448,508
-----------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP II ASSET MANAGER
PORTFOLIO
Shares 124,628
Cost $2,100,314
............................................................................................................................
Market Value: -- -- -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company 3,872 -- -- -- -- -- 7,125
............................................................................................................................
Receivable from fund shares sold -- 84 -- 883 528 -- --
............................................................................................................................
Total Assets 10,085,581 381,018 3,168 1,192,999 1,533,045 9,689,702 4,455,633
............................................................................................................................
LIABILITIES:
Due to Hartford Life Insurance
Company -- 81 -- 888 515 1,644 --
............................................................................................................................
Payable for fund shares purchased 4,088 -- -- -- -- 1,760 45
............................................................................................................................
TOTAL LIABILITIES 4,088 81 -- 888 515 3,404 45
-----------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $10,081,493 $ 380,937 $ 3,168 $1,192,111 $1,532,530 $9,686,298 $4,455,588
-----------------------------------------------------------------------------------------------------------------------------
Units Owned by Participants 3,911,711 267,713 2,678 680,097 686,809 4,459,891 2,320,108
............................................................................................................................
Unit Values $ 2.577259 $1.422924 $1.183079 $ 1.752856 $ 2.231378 $ 2.171869 $ 1.920422
-----------------------------------------------------------------------------------------------------------------------------
<S> <C>
September 30, 2000 Fidelity VIP
II
Asset
Manager
Portfolio
Sub-Account
-----------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments:
-----------------------------------------------------------------------------------------------------------------------------
HARTFORD DIVIDEND AND GROWTH HLS
FUND, INC. -- CLASS IA
Shares 4,909,747
Cost $9,338,020
................................
Market Value: $ --
-----------------------------------------------------------------------------------------------------------------------------
HARTFORD GROWTH AND INCOME HLS
FUND -- CLASS IA
Shares 264,786
Cost $358,903
................................
Market Value: --
-----------------------------------------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL ADVISERS
HLS FUND, INC. -- CLASS IA
Shares 2,577
Cost $3,282
................................
Market Value: --
-----------------------------------------------------------------------------------------------------------------------------
HARTFORD SMALL COMPANY HLS
FUND, INC. -- CLASS IA
Shares 625,134
Cost $1,142,737
................................
Market Value: --
-----------------------------------------------------------------------------------------------------------------------------
HARTFORD MIDCAP HLS
FUND, INC. -- CLASS IA
Shares 583,768
Cost $1,332,090
................................
Market Value: --
-----------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME
PORTFOLIO
Shares 394,853
Cost $9,059,855
................................
Market Value: --
-----------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS PORTFOLIO
Shares 204,435
Cost $4,379,775
................................
Market Value: --
-----------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP II ASSET MANAGER
PORTFOLIO
Shares 124,628
Cost $2,100,314
................................
Market Value: 2,073,809
-----------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company --
................................
Receivable from fund shares sold --
................................
Total Assets 2,073,809
................................
LIABILITIES:
Due to Hartford Life Insurance
Company 7,066
................................
Payable for fund shares purchased --
................................
TOTAL LIABILITIES 7,066
-----------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $2,066,743
-----------------------------------------------------------------------------------------------------------------------------
Units Owned by Participants 1,063,166
................................
Unit Values $ 1.943951
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-3
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended Bond Stock Money Advisers Capital Mortgage Index
September 30, 2000 Fund Fund Market Fund Fund Appreciation Securities Fund
Sub-Account Sub-Account Sub-Account Sub-Account Fund Fund Sub-Account
Sub-Account Sub-Account
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 34,347 $ 6,073 $223,777 $ 25,821 $ 10,337 $ 1,561 $ 2,251
......................................................................................................................
Net investment income (loss) 34,347 6,073 223,777 25,821 10,337 1,561 2,251
......................................................................................................................
Capital gains income -- 2,507,944 (139) 1,027,707 3,415,266 -- 211,235
......................................................................................................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
......................................................................................................................
Net realized gain (loss) on
security transactions 29,364 2,748 -- (3,366) 3,212 (4,304) (6,956)
......................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 459,858 (3,069,509) -- (995,416) 943,911 17,575 (600,372)
......................................................................................................................
Net gain (loss) on investments 489,222 (3,066,761) -- (998,782) 947,123 13,271 (607,328)
-----------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $523,569 $ (552,744) $223,638 $ 54,746 $4,372,726 $14,832 $(393,842)
-----------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Period Ended International
September 30, 2000 Opportunities
Fund
Sub-Account
--------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 37,460
................................
Net investment income (loss) 37,460
................................
Capital gains income 600,005
................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
................................
Net realized gain (loss) on
security transactions 2,892
................................
Net unrealized appreciation
(depreciation) of investments
during the period (1,331,996)
................................
Net gain (loss) on investments (1,329,104)
---------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $ (691,639)
----------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-4
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended Dividend Growth and International Small MidCap Fidelity VIP Fidelity
September 30, 2000 and Income Advisers Company Fund Fund Equity-Income VIP
Growth Fund Fund Sub-Account Sub-Account Portfolio Overseas
Fund Sub-Account Sub-Account Sub-Account Portfolio
Sub-Account Sub-Account
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 7,705 $ 18 $ 41 $ -- $ -- $ 181,507 $ 66,972
.............................................................................................................................
Net investment income (loss) 7,705 18 41 -- -- 181,507 66,972
.............................................................................................................................
Capital gains income 846,252 3,766 222 126,600 35,459 683,816 421,740
.............................................................................................................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
.............................................................................................................................
Net realized gain (loss) on
security transactions 2,713 96 1 783 1,076 (196,811) (3,030)
.............................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period (364,258) 2,178 (425) (164,246) 147,231 (442,687) (1,086,099)
.............................................................................................................................
Net gain (loss) on investments (361,545) 2,274 (424) (163,463) 148,307 (639,498) (1,089,129)
------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $ 492,412 $6,058 $(161) $ (36,863) $183,766 $ 225,825 $ (600,417)
------------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Period Ended Fidelity VIP
September 30, 2000 II
Asset Manager
Portfolio
Sub-Account
-----------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 62,391
................................
Net investment income (loss) 62,391
................................
Capital gains income 146,990
................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
................................
Net realized gain (loss) on
security transactions 1,788
................................
Net unrealized appreciation
(depreciation) of investments
during the period (211,209)
................................
Net gain (loss) on investments (209,421)
--------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $ (40)
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-5
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended Bond Stock Money Advisers Capital Mortgage Index
September 30, 2000 Fund Fund Market Fund Fund Appreciation Securities Fund
Sub-Account Sub-Account Sub-Account Sub-Account Fund Fund Sub-Account
Sub-Account Sub-Account
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 34,347 $ 6,073 $ 223,777 $ 25,821 $ 10,337 $ 1,561 $ 2,251
.........................................................................................................................
Capital gains income -- 2,507,944 (139) 1,027,707 3,415,266 -- 211,235
.........................................................................................................................
Net realized gain (loss) on
security transactions 29,364 2,748 -- (3,366) 3,212 (4,304) (6,956)
.........................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 459,858 (3,069,509) -- (995,416) 943,911 17,575 (600,372)
.........................................................................................................................
Net increase (decrease) in net
assets resulting from
operations 523,569 (552,744) 223,638 54,746 4,372,726 14,832 (393,842)
.........................................................................................................................
UNIT TRANSACTIONS:
Purchases 422,078 1,818,944 5,791,952 1,304,866 1,874,668 67,386 1,340,086
.........................................................................................................................
Net transfers (1,500,730) 1,479,878 (4,815,157) 597,986 522,652 (157,141) (349,224)
.........................................................................................................................
Surrenders for benefit payments
and fees (245,074) (428,697) (174,408) (233,403) (484,505) (10,162) (382,084)
.........................................................................................................................
Net Loan withdrawals 2,282 (9,888) (225) 11,040 (14,295) -- (7,549)
.........................................................................................................................
Cost of insurance (162,369) (612,698) (305,118) (479,092) (774,168) (9,222) (479,038)
.........................................................................................................................
Net (decrease) increase in net
assets resulting from unit
transactions (1,483,813) 2,247,539 497,044 1,201,397 1,124,352 (109,139) 122,191
.........................................................................................................................
Total (decrease) increase in net
assets (960,244) 1,694,795 720,682 1,256,143 5,497,078 (94,307) (271,651)
.........................................................................................................................
NET ASSETS:
Beginning of period 7,139,734 21,716,504 5,008,442 10,716,125 21,601,090 333,548 22,328,793
--------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $6,179,490 $23,411,299 $5,729,124 $11,972,268 $27,098,168 $ 239,241 $22,057,142
--------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Period Ended International
September 30, 2000 Opportunities
Fund
Sub-Account
--------------------------------------------------------------
OPERATIONS:
Net investment income $ 37,460
................................
Capital gains income 600,005
................................
Net realized gain (loss) on
security transactions 2,892
................................
Net unrealized appreciation
(depreciation) of investments
during the period (1,331,996)
................................
Net increase (decrease) in net
assets resulting from
operations (691,639)
................................
UNIT TRANSACTIONS:
Purchases 459,659
................................
Net transfers 160,928
................................
Surrenders for benefit payments
and fees (202,739)
................................
Net Loan withdrawals (8,458)
................................
Cost of insurance (144,000)
................................
Net (decrease) increase in net
assets resulting from unit
transactions 265,390
................................
Total (decrease) increase in net
assets (426,249)
................................
NET ASSETS:
Beginning of period 5,645,029
---------------------------------------------------------------------------
END OF PERIOD $5,218,780
----------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-6
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended Dividend Growth and International Small MidCap Fidelity VIP Fidelity
September 30, 2000 and Income Advisers Company Fund Fund Equity-Income VIP
Growth Fund Fund Fund Sub-Account Sub-Account Portfolio Overseas
Sub-Account Sub-Account Sub-Account Sub-Account Portfolio
Sub-Account
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 7,705 $ 18 $ 41 $ -- $ -- $ 181,507 $ 66,972
............................................................................................................................
Capital gains income 846,252 3,766 222 126,600 35,459 683,816 421,740
............................................................................................................................
Net realized gain (loss) on
security transactions 2,713 96 1 783 1,076 (196,811) (3,030)
............................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period (364,258) 2,178 (425) (164,246) 147,231 (442,687) (1,086,099)
............................................................................................................................
Net increase (decrease) in net
assets resulting from
operations 492,412 6,058 (161) (36,863) 183,766 225,825 (600,417)
............................................................................................................................
UNIT TRANSACTIONS:
Purchases 928,057 24,206 -- 107,661 56,262 802,314 255,579
............................................................................................................................
Net transfers 96,826 213,260 1,927 500,142 1,131,250 (1,671,022) 202,866
............................................................................................................................
Surrenders for benefit payments
and fees (246,982) (21,555) (440) (104,866) (79,549) (239,180) (155,420)
............................................................................................................................
Net Loan withdrawals (14,987) -- -- -- -- (11,050) (14)
............................................................................................................................
Cost of insurance (304,436) (9,579) (42) (45,498) (30,525) (257,830) (91,236)
............................................................................................................................
Net increase (decrease) in net
assets resulting from unit
transactions 458,478 206,332 1,445 457,439 1,077,438 (1,376,768) 211,775
............................................................................................................................
Total increase (decrease) in net
assets 950,890 212,390 1,284 420,576 1,261,204 (1,150,943) (388,642)
............................................................................................................................
NET ASSETS:
Beginning of period 9,130,603 168,547 1,884 771,535 271,326 10,837,241 4,844,230
-----------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $10,081,493 $ 380,937 $3,168 $1,192,111 $1,532,530 $ 9,686,298 $ 4,455,588
-----------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Period Ended Fidelity VIP
September 30, 2000 II
Asset
Manager
Portfolio
Sub-Account
-----------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 62,391
................................
Capital gains income 146,990
................................
Net realized gain (loss) on
security transactions 1,788
................................
Net unrealized appreciation
(depreciation) of investments
during the period (211,209)
................................
Net increase (decrease) in net
assets resulting from
operations (40)
................................
UNIT TRANSACTIONS:
Purchases 217,564
................................
Net transfers 2,923
................................
Surrenders for benefit payments
and fees (28,064)
................................
Net Loan withdrawals --
................................
Cost of insurance (70,566)
................................
Net increase (decrease) in net
assets resulting from unit
transactions 121,857
................................
Total increase (decrease) in net
assets 121,817
................................
NET ASSETS:
Beginning of period 1,944,926
------------------------------------------------------------------------------------------------------------------
END OF PERIOD $2,066,743
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-7
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
September 30, 2000 Asia Diversified The George Global Global Growth Health
Pacific Income Putnam Asset Growth and Income Sciences
Growth Sub-Account Fund Allocation Sub-Account Sub-Account Sub-Account
Sub-Account of Boston Sub-Account
Sub-Account
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
--------------------------------------------------------------------------------------------------------------------------
PUTNAM VT ASIA PACIFIC GROWTH
FUND
Shares 14,864
Cost $191,425
.........................................................................................................................
Market Value: $166,924 $ -- $ -- $ -- $ -- $ -- $ --
--------------------------------------------------------------------------------------------------------------------------
PUTNAM VT DIVERSIFIED INCOME FUND
Shares 55,548
Cost $571,376
.........................................................................................................................
Market Value: -- $ 512,151 -- -- -- -- --
--------------------------------------------------------------------------------------------------------------------------
PUTNAM VT THE GEORGE PUTNAM FUND
OF BOSTON
Shares 7,606
Cost $76,531
.........................................................................................................................
Market Value: -- -- $79,330 -- -- -- --
--------------------------------------------------------------------------------------------------------------------------
PUTNAM VT GLOBAL ASSET ALLOCATION
FUND
Shares 238,111
Cost $4,318,259
.........................................................................................................................
Market Value: -- -- -- $4,093,120 -- -- --
--------------------------------------------------------------------------------------------------------------------------
PUTNAM VT GLOBAL GROWTH FUND
Shares 468,990
Cost $9,105,904
.........................................................................................................................
Market Value: -- -- -- -- $10,228,673 -- --
--------------------------------------------------------------------------------------------------------------------------
PUTNAM VT GROWTH AND INCOME FUND
Shares 631,284
Cost $16,349,980
.........................................................................................................................
Market Value: -- -- -- -- -- $15,655,832 --
--------------------------------------------------------------------------------------------------------------------------
PUTNAM VT HEALTH SCIENCES FUND
Shares 23,982
Cost $294,982
.........................................................................................................................
Market Value: -- -- -- -- -- -- $353,254
--------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company -- 1,331 3 230 3,176 86,005 401
.........................................................................................................................
Receivable from fund shares sold -- -- -- -- -- -- --
.........................................................................................................................
Total Assets 166,924 513,482 79,333 4,093,350 10,231,849 15,741,837 353,655
.........................................................................................................................
LIABILITIES
Due to Hartford Life Insurance
Company 1 -- -- -- -- --
.........................................................................................................................
Payable for fund shares purchased -- 1,329 -- -- 2,576 87,657 405
.........................................................................................................................
TOTAL LIABILITIES 1 1,329 -- 0 2,576 87,657 405
--------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $166,923 $ 512,153 $79,333 $4,093,350 $10,229,273 $15,654,180 $353,250
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-8
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
September 30, 2000 High Yield Income International International International Investors Money
Sub-Account Sub-Account Growth Growth and New Sub-Account Market
Sub-Account Income Opportunities Sub-Account
Sub-Account Sub-Account
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Investments:
------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT HIGH YIELD FUND
Shares 427,248
Cost $4,963,588
.............................................................................................................................
Market Value: $4,093,037 $ -- $ -- $ -- $ -- $ -- $ --
------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INCOME FUND
Shares 176,459
Cost $2,236,332
.............................................................................................................................
Market Value: -- $2,159,855 -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL GROWTH
FUND
Shares 41,689
Cost $723,206
.............................................................................................................................
Market Value: -- -- $752,901 -- -- -- --
------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL GROWTH
AND INCOME FUND
Shares 7,261
Cost $102,403
.............................................................................................................................
Market Value: -- -- -- $92,582 -- -- --
------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL NEW
OPPORTUNITIES FUND
Shares 16,407
Cost $374,292
.............................................................................................................................
Market Value: -- -- -- -- $276,450 -- --
------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INVESTORS FUND
Shares 48,350
Cost $572,089
.............................................................................................................................
Market Value: -- -- -- -- -- $702,519 --
------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT MONEY MARKET FUND
Shares 195,393
Cost $195,393
.............................................................................................................................
Market Value: -- -- -- -- -- -- $ 195,393
------------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company 2,768 -- -- -- 488 4,585 42
.............................................................................................................................
Receivable from fund shares sold -- -- -- -- -- -- --
.............................................................................................................................
Total Assets 4,095,805 2,159,855 752,901 92,582 276,938 707,104 195,435
.............................................................................................................................
LIABILITIES
Due to Hartford Life Insurance
Company -- 72 4 1 -- -- --
.............................................................................................................................
Payable for fund shares purchased 2,758 -- -- -- 438 4,590 --
.............................................................................................................................
TOTAL LIABILITIES 2,758 72 4 1 438 4,590 0
------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $4,093,047 $2,159,783 $752,897 $92,581 $276,500 $702,514 $ 195,435
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-9
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS & LIABILITIES (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
September 30, 2000 New New OTC & Utilities Vista Voyager
Opportunities Value Emerging Growth Sub-Account Sub-Account
Sub-Account Sub-Account Growth and Income
Sub-Account Sub-Account
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
PUTNAM VT NEW OPPORTUNITIES FUND
Shares 415,594
Cost $9,741,192
.................................................................................................................
Market Value: $17,442,478 $ -- $ -- $ -- $ -- $ --
------------------------------------------------------------------------------------------------------------------
PUTNAM VT NEW VALUE FUND
Shares 28,348
Cost $332,758
.................................................................................................................
Market Value: -- $349,525 -- -- -- --
------------------------------------------------------------------------------------------------------------------
PUTNAM VT OTC & EMERGING GROWTH
FUND
Shares 40,703
Cost $862,212
.................................................................................................................
Market Value: -- -- $755,048 -- -- --
------------------------------------------------------------------------------------------------------------------
PUTNAM VT UTILITIES GROWTH &
INCOME FUND
Shares 69,525
Cost $1,113,117
.................................................................................................................
Market Value: -- -- -- $1,229,896 -- --
------------------------------------------------------------------------------------------------------------------
PUTNAM VT VISTA FUND
Shares 28,861
Cost $686,239
.................................................................................................................
Market Value: -- -- -- -- $ 715,473 --
------------------------------------------------------------------------------------------------------------------
PUTNAM VT VOYAGER FUND
Shares 442,227
Cost $18,363,234
.................................................................................................................
Market Value: -- -- -- -- -- $25,299,833
------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company 3,789 3,779 -- 62 2 53,509
.................................................................................................................
Receivable from fund shares sold -- -- -- -- -- --
.................................................................................................................
Total Assets 17,446,267 353,304 755,048 1,229,958 715,475 25,353,342
.................................................................................................................
LIABILITIES
Due to Hartford Life Insurance
Company -- -- 7 -- -- --
.................................................................................................................
Payable for fund shares purchased 4,530 3,780 -- -- -- 51,571
.................................................................................................................
TOTAL LIABILITIES 4,530 3,780 7 -- -- 51,571
------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $17,441,737 $349,524 $755,041 $1,229,958 $ 715,475 $25,301,771
------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-10
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) (CONTINUED)
<TABLE>
-----------------------------------------------------------------------------------
September 30, 2000 Units Unit Contract
Owned by Price Liability
Participants
<S> <C> <C> <C>
-----------------------------------------------------------------------------------
Variable life contracts
Asia Pacific Growth Fund 11,176 $14.935338 $ 166,923
..................................................................................
Diversified Income Fund 39,056 13.113302 512,153
..................................................................................
George Putnam Fund 7,186 11.040569 79,333
..................................................................................
Global Asset Allocation Fund 179,415 22.815002 4,093,350
..................................................................................
Global Growth Fund 310,165 32.980056 10,229,273
..................................................................................
Growth and Income Fund 582,230 26.886600 15,654,180
..................................................................................
Health Sciences Fund 23,315 15.151502 353,250
..................................................................................
High Yield Fund 254,003 16.114172 4,093,047
..................................................................................
Income Fund 143,049 15.098227 2,159,783
..................................................................................
International Growth Fund 52,056 14.463235 752,897
..................................................................................
International Growth and Income Fund 7,818 11.842557 92,581
..................................................................................
International New Opportunities Fund 18,499 14.947040 276,500
..................................................................................
Investors Fund 50,360 13.949961 702,514
..................................................................................
Money Market Fund 137,813 1.418117 195,435
..................................................................................
New Opportunities Fund 436,370 39.970028 17,441,737
..................................................................................
New Value Fund 29,385 11.894540 349,524
..................................................................................
OTC & Emerging Growth Fund 37,669 20.043914 755,041
..................................................................................
Utilities Growth and Income Fund 49,867 24.664702 1,229,958
..................................................................................
Vista Fund 36,398 19.656868 715,475
..................................................................................
Voyager Fund 566,147 44.691134 25,301,771
..................................................................................
GRAND TOTAL: $85,154,725
-----------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-11
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended Asia Diversified The George Global Global Growth Health
September 30, 2000 Pacific Income Putnam Asset Growth and Income Sciences
Growth Sub-Account Fund Allocation Sub-Account Sub-Account Sub-Account
Sub-Account of Boston Sub-Account
Sub-Account
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 12,316 $ 35,542 -- $ 70,991 $ 75,911 $ 239,607 --
......................................................................................................................
Capital gains income -- -- 370,753 1,891,825 1,128,130 --
......................................................................................................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
......................................................................................................................
Net realized gain (loss) on
security transactions (33,484) (83) 13 (2,920) 1,082 8,516 189
......................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period (79,251) (32,173) 3,572 (521,051) (3,829,450) (787,276) 54,307
......................................................................................................................
Net gain (loss) on investments (112,735) (32,256) 3,585 (523,971) (3,828,368) (778,760) 54,496
-----------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $(100,419) $ 3,286 $3,585 $(82,227) $(1,860,632) $ 588,977 $ 54,496
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-12
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended High Yield Income International International International Investors Money Market
September 30, 2000 Sub-Account Sub-Account Growth Growth and New Sub-Account Sub-Account
Sub-Account Income Opportunities
Sub-Account Sub-Account
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $460,172 $154,348 $ 11,179 $ 3,053 $ 145 $ -- $ 9,603
..........................................................................................................................
Capital gains income -- 48,486 6,693 13,573 -- --
..........................................................................................................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
..........................................................................................................................
Net realized gain (loss) on
security transactions (16) (4,056) (368) 4 (36) 3,405 --
..........................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period (555,990) (41,499) (117,160) (11,955) (110,927) (30,376) --
..........................................................................................................................
Net gain (loss) on investments (556,006) (45,555) (117,528) (11,951) (110,963) (26,971) --
---------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $(95,834) $108,793 $(57,863) $(2,205) $(97,245) $(26,971) $9,603
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-13
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended New New OTC & Utilities Vista Voyager
September 30, 2000 Opportunities Value Emerging Growth Sub-Account Sub-Account
Sub-Account Sub-Account Growth and
Sub-Account Income
Sub-Account
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ -- $ 4,289 $ -- $ 40,997 $ -- $ 7,767
......................................................................................................
Capital gains income 1,304,356 15,191 6,665 72,373 1,850 3,295,557
......................................................................................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
......................................................................................................
Net realized gain (loss) on
security transactions 12,108 134 (16,212) (645) 663 (62,622)
......................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period (694,441) 17,392 (197,101) 49,888 23,635 (3,822,605)
......................................................................................................
Net gain (loss) on investments (682,333) 17,526 (213,313) 49,243 24,298 (3,885,227)
-------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $ 622,023 $37,006 $(206,648) $162,613 $26,148 $ (581,903)
-------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-14
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended Asia Diversified The George Global Asset Global Growth Health
September 30, 2000 Pacific Income Putnam Fund Allocation Growth and Income Sciences
Growth Sub-Account of Boston Sub-Account Sub-Account Sub-Account Sub-Account
Sub-Account Sub-Account
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 12,316 $ 35,542 $ -- $ 70,991 $ 75,911 $ 239,607 $ --
............................................................................................................................
Capital gains income -- -- -- 370,753 1,891,825 1,128,130 --
............................................................................................................................
Net realized gain (loss) on
security transactions (33,484) (83) 13 (2,920) 1,082 8,516 189
............................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period (79,251) (32,173) 3,572 (521,051) (3,829,450) (787,276) 54,307
............................................................................................................................
Net increase (decrease) in net
assets resulting from
operations (100,419) 3,286 3,585 (82,227) (1,860,632) 588,977 54,496
............................................................................................................................
UNIT TRANSACTIONS:
Purchases 17,571 116,833 16,368 230,443 934,029 1,752,733 24,162
............................................................................................................................
Net transfers 69,540 543 45,155 (75,950) (267,298) 1,538,652 209,568
............................................................................................................................
Surrenders for benefit payments
and fees (5,097) (9,606) (28,120) (32,233) (436,192) (242,831) (9,325)
............................................................................................................................
Net loan activity -- -- -- (6) (373) (12,445) (115)
............................................................................................................................
Cost of insurance (10,437) (20,544) (1,267) (86,856) (293,601) (486,484) (4,111)
............................................................................................................................
Net increase (decrease) in net
assets resulting from unit
transactions 71,577 87,226 32,136 35,398 (63,435) 2,549,625 220,179
............................................................................................................................
Total increase (decrease) in net
assets (28,842) 90,512 35,721 (46,829) (1,924,067) 3,138,602 274,675
............................................................................................................................
NET ASSETS:
Beginning of period 195,765 421,641 43,612 4,140,179 12,153,340 12,515,578 78,575
-----------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $166,923 $ 512,153 $79,333 $4,093,350 $10,229,273 $15,654,180 $353,250
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-15
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended High Yield Income International International International Investors Money
September 30, 2000 Sub-Account Sub-Account Growth Growth and New Sub-Account Market
Sub-Account Income Opportunities Sub-Account
Sub-Account Sub-Account
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 460,172 $ 154,348 $ 11,179 $ 3,053 $ 145 $ -- $ 9,603
................................................................................................................................
Capital gains income -- -- 48,486 6,693 13,573 -- --
................................................................................................................................
Net realized gain (loss) on
security transactions (16) (4,056) (368) 4 (36) 3,405 --
................................................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (555,990) (41,499) (117,160) (11,955) (110,927) (30,376) --
................................................................................................................................
Net increase (decrease) in net
assets resulting from
operations (95,834) 108,793 (57,863) (2,205) (97,245) (26,971) 9,603
................................................................................................................................
UNIT TRANSACTIONS:
Purchases (423,002) 272,666 28,440 12,024 40,701 48,933 115,616
................................................................................................................................
Net transfers 147,110 (286,388) 373,832 62,876 265,661 21,004 (251,024)
................................................................................................................................
Surrenders for benefit payments
and fees (83,220) (179,077) (18,320) (1,704) (25,529) (10,906) (3,836)
................................................................................................................................
Net loan activity (9) (1,942) (1,528) -- -- (109)
................................................................................................................................
Cost of insurance (109,925) (79,874) (19,716) (4,398) (13,210) (21,865) (7,254)
................................................................................................................................
Net increase (decrease) in net
assets resulting from unit
transactions (469,046) (274,615) 362,708 68,798 267,623 37,057 (146,498)
................................................................................................................................
Total increase (decrease) in net
assets (564,880) (165,822) 304,845 66,593 170,378 10,086 (136,895)
................................................................................................................................
NET ASSETS:
Beginning of period 3,811,927 2,325,605 448,052 25,988 106,122 692,428 332,330
---------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $3,247,047 $2,159,783 $752,897 $92,581 $276,500 $ 702,514 $ 195,435
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-16
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
For the Period Ended New New OTC & Utilities Vista Voyager
September 30, 2000 Opportunities Value Emerging Growth Sub-Account Sub-Account
Sub-Account Sub-Account Growth and Income
Sub-Account Sub-Account
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ -- $ 14,289 $ -- $ 40,997 $ -- $ 7,767
...............................................................................................................................
Capital gains income 1,304,356 15,191 6,665 72,373 1,850 3,295,557
...............................................................................................................................
Net realized gain (loss) on security
transactions 12,108 134 (16,212) (645) 663 (62,622)
...............................................................................................................................
Net unrealized appreciation (depreciation) of
investments during the period (694,441) 17,392 (197,101) 49,888 23,635 (3,822,605)
...............................................................................................................................
Net increase (decrease) in net assets
resulting from operations 622,023 37,006 (206,648) 162,613 26,148 (581,903)
...............................................................................................................................
UNIT TRANSACTIONS:
Purchases 1,025,448 20,425 70,794 132,618 34,219 1,714,176
...............................................................................................................................
Net transfers 488,951 34,545 668,421 (180,639) 703,154 12,038
...............................................................................................................................
Surrenders for benefit payments and fees (496,370) (4,589) (14,638) (37,143) (71,247) (577,875)
...............................................................................................................................
Net loan activity 9,562 -- (5) (15,954)
...............................................................................................................................
Cost of insurance (460,628) (10,595) (18,804) (44,067) (7,167) (661,336)
...............................................................................................................................
Net increase (decrease) in net assets
resulting from unit transactions 566,963 39,786 705,773 (129,236) 658,959 471,049
...............................................................................................................................
Total increase (decrease) in net assets 1,188,986 76,792 499,125 33,377 685,107 (110,854)
...............................................................................................................................
NET ASSETS:
Beginning of period 16,252,751 272,732 255,916 1,196,581 30,368 25,412,625
--------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $17,441,737 $349,524 $755,041 $1,229,958 $715,475 $25,301,771
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-17
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life Insurance Company
Separate Account VL II and to the Owners of Units of Interest therein:
We have audited the accompanying statements of assets and liabilities of
Hartford Life Insurance Company Separate Account VL II (Bond Fund, Stock Fund,
Money Market Fund, Advisers Fund, Capital Appreciation Fund, Mortgage Securities
Fund, Index Fund, International Opportunities Fund, Dividend and Growth Fund,
Growth and Income Fund, International Advisers Fund, Small Company Fund, MidCap
Fund, Fidelity VIP Equity-Income Portfolio, Fidelity VIP Overseas Portfolio and
Fidelity VIP II Asset Manager Portfolio) (collectively, the Account) as of
December 31, 1999, and the related statements of operations and the statements
of changes in net assets for the periods presented. These financial statements
are the responsibility of the Account's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Account as of December 31,
1999, and the results of their operations and the changes in their net assets
for the periods presented in conformity with generally accepted accounting
principles.
Hartford, Connecticut
February 17, 2000 ARTHUR ANDERSEN LLP
SA-1
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
Statements of Assets & Liabilities
--------------------------------------------------------------------------------
<TABLE>
December 31, 1999 Bond Fund Stock Fund Money Advisers Capital Mortgage Index Fund
Sub-Account Sub-Account Market Fund Appreciation Securities Sub-Account
Fund Sub-Account Fund Fund
Sub-Account Sub-Account Sub-Account
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
--------------------------------------------------------------------------------------------------------------------------
HARTFORD BOND HLS FUND, INC. -
CLASS IA
Shares 7,183,854
Cost $7,594,577
.........................................................................................................................
Market Value $7,139,760 $ -- $ -- $ -- $ -- $ -- $ --
--------------------------------------------------------------------------------------------------------------------------
HARTFORD STOCK HLS FUND, INC. -
CLASS IA
Shares 3,038,583
Cost $16,092,310
.........................................................................................................................
Market Value -- 21,717,930 -- -- -- -- --
--------------------------------------------------------------------------------------------------------------------------
HARTFORD MONEY MARKET HLS
FUND, INC. - CLASS IA
Shares 5,008,118
Cost $5,008,118
.........................................................................................................................
Market Value -- -- 5,008,118 -- -- -- --
--------------------------------------------------------------------------------------------------------------------------
HARTFORD ADVISERS HLS FUND, INC.
-CLASS IA
Shares 3,614,492
Cost $9,282,357
.........................................................................................................................
Market Value -- -- -- 10,716,151 -- -- --
--------------------------------------------------------------------------------------------------------------------------
HARTFORD CAPITAL APPRECIATION HLS
FUND, INC. - CLASS IA
Shares 3,543,798
Cost $15,045,160
.........................................................................................................................
Market Value -- -- -- -- 21,600,824 -- --
--------------------------------------------------------------------------------------------------------------------------
HARTFORD MORTGAGE SECURITIES HLS
FUND, INC. - CLASS IA
Shares 320,876
Cost $344,638
.........................................................................................................................
Market Value -- -- -- -- -- 333,548 --
--------------------------------------------------------------------------------------------------------------------------
HARTFORD INDEX HLS FUND, INC. -
CLASS IA
Shares 5,331,733
Cost $16,328,752
.........................................................................................................................
Market Value -- -- -- -- -- -- 22,333,459
--------------------------------------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL
OPPORTUNITIES HLS FUND, INC. -
CLASS IA
Shares 3,009,268
Cost $4,055,348
.........................................................................................................................
Market Value -- -- -- -- -- -- --
--------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company 6,406 8,652 -- 3,873 5,956 -- 6,419
.........................................................................................................................
Receivable from fund shares sold -- -- 531 -- -- -- --
.........................................................................................................................
Total Assets 7,146,166 21,726,582 5,008,649 10,720,024 21,606,780 333,548 22,339,878
.........................................................................................................................
LIABILITIES:
Due to Hartford Life Insurance
Company -- -- 207 -- -- -- --
.........................................................................................................................
Payable for fund shares purchased 6,432 10,078 -- 3,899 5,690 -- 11,085
.........................................................................................................................
TOTAL LIABILITIES 6,432 10,078 207 3,899 5,690 -- 11,085
--------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $7,139,734 $21,716,504 $5,008,442 $10,716,125 $21,601,090 $ 333,548 $22,328,793
--------------------------------------------------------------------------------------------------------------------------
Units Owned by Participants 4,905,759 5,777,931 3,661,897 3,992,555 6,371,127 228,153 6,229,908
Unit Values $ 1.455378 $ 3.758526 $1.367718 $ 2.684027 $ 3.390466 $ 1.461942 $ 3.584129
--------------------------------------------------------------------------------------------------------------------------
<S> <C>
December 31, 1999 International
Opportunities
Fund
Sub-Account
------------------------------------------------------------
ASSETS:
Investments:
------------------------------------------------------------------------
HARTFORD BOND HLS FUND, INC. -
CLASS IA
Shares 7,183,854
Cost $7,594,577
................................
Market Value $ --
------------------------------------------------------------------------------------
HARTFORD STOCK HLS FUND, INC. -
CLASS IA
Shares 3,038,583
Cost $16,092,310
................................
Market Value --
------------------------------------------------------------------------------------------------
HARTFORD MONEY MARKET HLS
FUND, INC. - CLASS IA
Shares 5,008,118
Cost $5,008,118
................................
Market Value --
------------------------------------------------------------------------------------------------------------
HARTFORD ADVISERS HLS FUND, INC.
-CLASS IA
Shares 3,614,492
Cost $9,282,357
................................
Market Value --
------------------------------------------------------------------------------------------------------------------------
HARTFORD CAPITAL APPRECIATION HLS
FUND, INC. - CLASS IA
Shares 3,543,798
Cost $15,045,160
................................
Market Value --
--------------------------------------------------------------------------------------------------------------------------
HARTFORD MORTGAGE SECURITIES HLS
FUND, INC. - CLASS IA
Shares 320,876
Cost $344,638
................................
Market Value --
--------------------------------------------------------------------------------------------------------------------------
HARTFORD INDEX HLS FUND, INC. -
CLASS IA
Shares 5,331,733
Cost $16,328,752
................................
Market Value --
--------------------------------------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL
OPPORTUNITIES HLS FUND, INC. -
CLASS IA
Shares 3,009,268
Cost $4,055,348
................................
Market Value 5,645,191
--------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company 1,276
................................
Receivable from fund shares sold --
................................
Total Assets 5,646,467
................................
LIABILITIES:
Due to Hartford Life Insurance
Company --
................................
Payable for fund shares purchased 1,438
................................
TOTAL LIABILITIES 1,438
--------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $5,645,029
--------------------------------------------------------------------------------------------------------------------------
Units Owned by Participants 2,375,497
Unit Values $ 2.376357
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-2
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
Statements of Assets & Liabilities (continued)
--------------------------------------------------------------------------------
<TABLE>
December 31, 1999 Dividend Growth and International Small MidCap Fund Fidelity Fidelity
and Growth Income Fund Advisers Company Sub-Account VIP Equity- VIP
Fund Sub-Account Fund Fund Income Overseas
Sub-Account Sub-Account Sub-Account Portfolio Portfolio
Sub-Account Sub-Account
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments:
--------------------------------------------------------------------------------------------------------------------------
HARTFORD DIVIDEND AND GROWTH HLS
FUND, INC. - CLASS IA
Shares 4,249,199
Cost $8,022,852
.........................................................................................................................
Market Value $9,130,798 $ -- $ -- $ -- $ -- $ -- $ --
--------------------------------------------------------------------------------------------------------------------------
HARTFORD GROWTH AND INCOME HLS
FUND - CLASS IA
Shares 117,729
Cost $148,694
.........................................................................................................................
Market Value -- 168,547 -- -- -- -- --
--------------------------------------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL ADVISERS
HLS FUND, INC. - CLASS IA
Shares 1,349
Cost $1,573
.........................................................................................................................
Market Value -- -- 1,884 -- -- -- --
--------------------------------------------------------------------------------------------------------------------------
HARTFORD SMALL COMPANY HLS
FUND, INC. - CLASS IA
Shares 352,657
Cost $557,910
.........................................................................................................................
Market Value -- -- -- 771,535 -- -- --
--------------------------------------------------------------------------------------------------------------------------
HARTFORD MIDCAP HLS FUND, INC. -
CLASS IA
Shares 132,124
Cost $218,119
.........................................................................................................................
Market Value -- -- -- -- 271,316 -- --
--------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME
PORTFOLIO
Shares 421,647
Cost $9,768,013
.........................................................................................................................
Market Value -- -- -- -- -- 10,840,547 --
--------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS PORTFOLIO
Shares 176,253
Cost $3,681,545
.........................................................................................................................
Market Value -- -- -- -- -- -- 4,836,377
--------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP II ASSET MANAGER
PORTFOLIO
Shares 104,549
Cost $1,767,222
.........................................................................................................................
Market Value -- -- -- -- -- -- --
--------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company 7,196 -- -- 1,103 1,113 4,845 8,819
.........................................................................................................................
Receivable from fund shares sold -- -- -- -- -- -- --
.........................................................................................................................
Total Assets 9,137,994 168,547 1,884 772,638 272,429 10,845,392 4,845,196
.........................................................................................................................
LIABILITIES:
Due to Hartford Life Insurance
Company -- -- -- -- -- -- --
.........................................................................................................................
Payable for fund shares purchased 7,391 -- -- 1,103 1,103 8,151 966
.........................................................................................................................
TOTAL LIABILITIES 7,391 -- -- 1,103 1,103 8,151 966
.........................................................................................................................
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $9,130,603 $ 168,547 $ 1,884 $ 771,535 $ 271,326 $10,837,241 $4,844,230
--------------------------------------------------------------------------------------------------------------------------
Units Owned by Participants 3,726,135 120,204 1,518 432,247 161,935 5,202,176 2,221,144
Unit Values $ 2.450422 $1.402176 $1.240838 $1.784939 $1.675516 $ 2.083213 $ 2.180961
--------------------------------------------------------------------------------------------------------------------------
<S> <C>
December 31, 1999 Fidelity
VIP II
Asset
Manager
Portfolio
Sub-Account
----------------------------------------------------------
ASSETS:
Investments:
----------------------------------------------------------------------
HARTFORD DIVIDEND AND GROWTH HLS
FUND, INC. - CLASS IA
Shares 4,249,199
Cost $8,022,852
................................
Market Value $ --
----------------------------------------------------------------------------------
HARTFORD GROWTH AND INCOME HLS
FUND - CLASS IA
Shares 117,729
Cost $148,694
................................
Market Value --
----------------------------------------------------------------------------------------------
HARTFORD INTERNATIONAL ADVISERS
HLS FUND, INC. - CLASS IA
Shares 1,349
Cost $1,573
................................
Market Value --
----------------------------------------------------------------------------------------------------------
HARTFORD SMALL COMPANY HLS
FUND, INC. - CLASS IA
Shares 352,657
Cost $557,910
................................
Market Value --
----------------------------------------------------------------------------------------------------------------------
HARTFORD MIDCAP HLS FUND, INC. -
CLASS IA
Shares 132,124
Cost $218,119
................................
Market Value --
--------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME
PORTFOLIO
Shares 421,647
Cost $9,768,013
................................
Market Value --
--------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS PORTFOLIO
Shares 176,253
Cost $3,681,545
................................
Market Value --
--------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP II ASSET MANAGER
PORTFOLIO
Shares 104,549
Cost $1,767,222
................................
Market Value 1,951,926
--------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company --
................................
Receivable from fund shares sold --
................................
Total Assets 1,951,926
................................
LIABILITIES:
Due to Hartford Life Insurance
Company 7,000
................................
Payable for fund shares purchased --
................................
TOTAL LIABILITIES 7,000
................................
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $1,944,926
--------------------------------------------------------------------------------------------------------------------------
Units Owned by Participants 999,637
Unit Values $ 1.945633
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-3
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
Statements of Operations
--------------------------------------------------------------------------------
<TABLE>
For the Year Ended Bond Fund Stock Fund Money Advisers Capital Mortgage Index Fund
December 31, 1999 Sub-Account Sub-Account Market Fund Appreciation Securities Sub-Account
Fund Sub-Account Fund Fund
Sub-Account Sub-Account Sub-Account
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 389,916 $ 148,629 $270,522 $ 223,535 $ 64,817 $ 18,656 $ 204,111
........................................................................................................................
Capital gains income 27,919 1,376,125 138 710,073 982,513 -- 242,973
........................................................................................................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
........................................................................................................................
Net realized (loss) gain on
security transactions (217) (1,037) -- (2,197) 46,004 (164) (8,989)
........................................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (528,300) 1,855,342 -- 32,325 4,620,392 (14,413) 2,990,567
........................................................................................................................
Net (loss) gain on investments (528,517) 1,854,305 -- 30,128 4,666,396 (14,577) 2,981,578
-------------------------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS $(110,682) $3,379,059 $270,660 $ 963,736 $5,713,726 $ 4,079 $3,428,662
-------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Year Ended International
December 31, 1999 Opportunities
Fund
Sub-Account
------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 54,978
................................
Capital gains income --
................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
................................
Net realized (loss) gain on
security transactions 237,802
................................
Net unrealized (depreciation)
appreciation of investments
during the period 1,473,851
................................
Net (loss) gain on investments 1,711,653
------------------------------------------------------------------------
NET (DECREASE) INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS $1,766,631
------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-4
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
Statements of Operations (continued)
--------------------------------------------------------------------------------
<TABLE>
For the Year Ended Dividend Growth and International Small MidCap Fund Fidelity Fidelity
December 31, 1999 and Growth Income Fund Advisers Company Sub-Account VIP VIP
Fund Sub-Account Fund Fund Equity- Overseas
Sub-Account Sub-Account Sub-Account Income Portfolio
Portfolio Sub-Account
Sub-Account
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $147,722 $ 462 $ 55 $ -- $ -- $ 135,354 $ 55,675
........................................................................................................................
Capital gains income 342,313 1,064 -- 924 12,242 299,204 89,799
........................................................................................................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
........................................................................................................................
Net realized gain (loss) on
security transactions 32,258 51 90 (1,319) 2,552 (5,697) 163,510
........................................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (30,149) 19,702 303 199,277 53,093 134,510 1,066,662
........................................................................................................................
Net gain on investments 2,109 19,753 393 197,958 55,645 128,813 1,230,172
-------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $492,144 $21,279 $ 448 $198,882 $ 67,887 $ 563,371 $1,375,646
-------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Year Ended Fidelity
December 31, 1999 VIP II
Asset
Manager
Portfolio
Sub-Account
----------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 49,346
................................
Capital gains income 62,505
................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
................................
Net realized gain (loss) on
security transactions 110
................................
Net unrealized (depreciation)
appreciation of investments
during the period 70,100
................................
Net gain on investments 70,210
----------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $182,061
----------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-5
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
For the Year Ended Bond Fund Stock Fund Money Advisers Capital Mortgage Index Fund
December 31, 1999 Sub-Account Sub-Account Market Fund Fund Appreciation Securities Sub-Account
Sub-Account Sub-Account Fund Fund
Sub-Account Sub-Account
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 389,916 $ 148,629 $ 270,522 $ 223,535 $ 64,817 $ 18,656 $ 204,111
............................................................................................................................
Capital gains income 27,919 1,376,125 138 710,073 982,513 -- 242,973
............................................................................................................................
Net realized (loss) gain on
security transactions (217) (1,037) -- (2,197) 46,004 (164) (8,989)
............................................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (528,300) 1,855,342 -- 32,325 4,620,392 (14,413) 2,990,567
............................................................................................................................
Net (decrease) increase in net
assets resulting from
operations (110,682) 3,379,059 270,660 963,736 5,713,726 4,079 3,428,662
............................................................................................................................
UNIT TRANSACTIONS:
Purchases 906,756 2,808,097 5,256,362 1,915,900 2,681,591 176,753 5,504,772
............................................................................................................................
Net transfers 3,046,307 985,523 (5,594,076) 635,438 (289,293) (29,483) 842,727
............................................................................................................................
Surrenders for benefit payments
and fees (72,647) (408,643) (332,938) (349,009) (473,077) (12,808) (300,584)
............................................................................................................................
Net loan activity (580) 113,577 (1,129) 9,903 21,822 -- 37,126
............................................................................................................................
Cost of insurance (178,194) (730,808) (410,504) (544,241) (771,602) (37,402) (596,819)
............................................................................................................................
Net increase (decrease) in net
assets resulting from unit
transactions 3,701,642 2,767,746 (1,082,285) 1,667,991 1,169,441 97,060 5,487,222
............................................................................................................................
Net increase (decrease) in net
assets 3,590,960 6,146,805 (811,625) 2,631,727 6,883,167 101,139 8,915,884
............................................................................................................................
NET ASSETS:
Beginning of period 3,548,774 15,569,699 5,820,067 8,084,398 14,717,923 232,409 13,412,909
-----------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $7,139,734 $21,716,504 $5,008,442 $10,716,125 $21,601,090 $ 333,548 $22,328,793
-----------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Year Ended International
December 31, 1999 Opportunities
Fund
Sub-Account
------------------------------------------------------------
OPERATIONS:
Net investment income $ 54,978
................................
Capital gains income --
................................
Net realized (loss) gain on
security transactions 237,802
................................
Net unrealized (depreciation)
appreciation of investments
during the period 1,473,851
................................
Net (decrease) increase in net
assets resulting from
operations 1,766,631
................................
UNIT TRANSACTIONS:
Purchases 677,267
................................
Net transfers (1,859,466)
................................
Surrenders for benefit payments
and fees (121,807)
................................
Net loan activity 26,015
................................
Cost of insurance (219,619)
................................
Net increase (decrease) in net
assets resulting from unit
transactions (1,497,610)
................................
Net increase (decrease) in net
assets 269,021
................................
NET ASSETS:
Beginning of period 5,376,008
------------------------------------------------------------------------
END OF PERIOD $5,645,029
------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-6
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
Statements of Changes in Net Assets (continued)
--------------------------------------------------------------------------------
<TABLE>
For the Year Ended Dividend Growth and International Small MidCap Fidelity Fidelity
December 31, 1999 and Growth Income Fund Advisers Company Fund Fund VIP Equity- VIP
Fund Sub-Account Fund Sub-Account Sub-Account Income Overseas
Sub-Account Sub-Account Portfolio Portfolio
Sub-Account Sub-Account
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
...........................................................................................................................
Net investment income $ 147,722 $ 462 $ 55 -- -- $ 135,354 $ 55,675
...........................................................................................................................
Capital gains income 342,313 1,064 -- 924 12,242 299,204 89,799
...........................................................................................................................
Net realized gain (loss) on
security transactions 32,258 51 90 (1,319) 2,552 (5,697) 163,510
...........................................................................................................................
Net unrealized (deoreciation)
appreciation of investments
during the period (30,149) 19,702 303 199,277 53,093 134,510 1,066,662
...........................................................................................................................
Net increase in net assets
resulting from operations 492,144 21,279 448 198,882 67,887 563,371 1,375,646
...........................................................................................................................
UNIT TRANSACTIONS:
Purchases 1,433,200 8,474 -- 130,785 26,831 1,305,399 434,002
...........................................................................................................................
Net transfers (565,534) 143,243 2,134 407,361 190,145 669,108 (532,883)
...........................................................................................................................
Surrenders for benefit payments
and fees (285,404) (3,898) (1,686) (2,001) (7,597) (217,417) (99,612)
...........................................................................................................................
Net loan activity 26,838 -- -- -- -- (1,401) 19,098
...........................................................................................................................
Cost of insurance (453,821) (2,157) (19) (20,448) (7,044) (400,372) (113,429)
...........................................................................................................................
Net increase (decrease) in net
assets resulting from unit
transactions 155,279 145,662 429 515,697 202,335 1,355,317 (292,824)
...........................................................................................................................
Net increase in net assets 647,423 166,941 877 714,579 270,222 1,918,688 1,082,822
...........................................................................................................................
NET ASSETS:
Beginning of period 8,483,180 1,606 1,007 56,956 1,104 8,918,553 3,761,408
----------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $9,130,603 $ 168,547 $ 1,884 $ 771,535 $ 271,326 $10,837,241 $4,844,230
----------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Year Ended Fidelity
December 31, 1999 VIP II
Asset
Manager
Portfolio
Sub-Account
------------------------------------------------------------------------------------------------
OPERATIONS:
................................
Net investment income $ 49,346
................................
Capital gains income 62,505
................................
Net realized gain (loss) on
security transactions 110
................................
Net unrealized (deoreciation)
appreciation of investments
during the period 70,100
................................
Net increase in net assets
resulting from operations 182,061
................................
UNIT TRANSACTIONS:
Purchases 397,109
................................
Net transfers 51,243
................................
Surrenders for benefit payments
and fees (78,051)
................................
Net loan activity --
................................
Cost of insurance (80,468)
................................
Net increase (decrease) in net
assets resulting from unit
transactions 289,833
................................
Net increase in net assets 471,894
................................
NET ASSETS:
Beginning of period 1,473,032
------------------------------------------------------------------------------------------------------------
END OF PERIOD $1,944,926
------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-7
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
Statements of Changes in Net Assets (continued)
--------------------------------------------------------------------------------
<TABLE>
For the Year Ended Bond Fund Stock Fund Money Advisers Capital Mortgage Index Fund
December 31, 1998 Sub-Account Sub-Account Market Fund Fund Appreciation Securities Sub-Account
Sub-Account Sub-Account Fund Fund
Sub-Account Sub-Account
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
............................................................................................................................
Net investment income $ 166,560 $ 116,844 $ 524,273 $ 158,735 $ 77,525 $ 14,559 $ 107,603
............................................................................................................................
Capital gains income -- 289,691 -- 148,349 573,895 -- 176,994
............................................................................................................................
Net realized gain (loss) on
security transactions 20,736 (19,525) -- 3,423 (40,897) (1) 41,466
............................................................................................................................
Net unrealized appreciation of
investments during the period 48,115 2,840,198 -- 925,117 1,053,772 632 2,102,732
............................................................................................................................
Net increase in net assets
resulting from operations 235,411 3,227,208 524,273 1,235,624 1,664,295 15,190 2,428,795
............................................................................................................................
UNIT TRANSACTIONS:
............................................................................................................................
Purchases 408,130 2,041,519 27,722,133 1,892,134 2,473,509 56,332 1,752,558
............................................................................................................................
Net transfers 1,509,453 4,810,627 (33,879,254) 1,620,594 3,402,616 (58,529) 3,270,849
............................................................................................................................
Surrenders for benefit payments
and fees (69,652) (576,595) (1,840,672) (400,056) (595,743) (8,870) (264,762)
............................................................................................................................
Net loan activity (519) (125,205) (66,865) 20,293 35,831 -- (56,810)
............................................................................................................................
Cost of insurance (87,306) (456,787) (501,588) (299,823) (540,583) (20,595) (313,799)
............................................................................................................................
Net increase (decrease) in net
assets resulting from unit
transactions 1,760,106 5,693,559 (8,566,246) 2,833,142 4,775,630 (31,662) 4,388,036
............................................................................................................................
Net increase (decrease) in net
assets 1,995,517 8,920,767 (8,041,973) 4,068,766 6,439,925 (16,472) 6,816,831
............................................................................................................................
NET ASSETS:
Beginning of period 1,553,257 6,648,932 13,862,040 4,015,632 8,277,998 248,881 6,596,078
-----------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $3,548,774 $15,569,699 $ 5,820,067 $8,084,398 $14,717,923 $ 232,409 $13,412,909
-----------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Year Ended International
December 31, 1998 Opportunities
Fund
Sub-Account
------------------------------------------------------------
OPERATIONS:
................................
Net investment income $ 69,373
................................
Capital gains income 235,374
................................
Net realized gain (loss) on
security transactions (12,897)
................................
Net unrealized appreciation of
investments during the period 226,926
................................
Net increase in net assets
resulting from operations 518,776
................................
UNIT TRANSACTIONS:
................................
Purchases 707,600
................................
Net transfers 1,517,699
................................
Surrenders for benefit payments
and fees (221,694)
................................
Net loan activity (97,052)
................................
Cost of insurance (144,802)
................................
Net increase (decrease) in net
assets resulting from unit
transactions 1,761,751
................................
Net increase (decrease) in net
assets 2,280,527
................................
NET ASSETS:
Beginning of period 3,095,481
------------------------------------------------------------------------
END OF PERIOD $5,376,008
------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-8
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
Statements of Changes in Net Assets (continued)
--------------------------------------------------------------------------------
<TABLE>
For the Year Ended Dividend Growth and International Small MidCap Fidelity Fidelity
December 31, 1998 and Growth Income Fund Advisers Company Fund Fund VIP Equity- VIP
Fund Sub-Account* Fund Sub-Account* Sub-Account* Income Overseas
Sub-Account Sub-Account* Portfolio Portfolio
Sub-Account Sub-Account
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
...........................................................................................................................
Net investment income $ 132,007 $ 6 $ -- $ -- $ -- $ 64,760 $ 22,698
...........................................................................................................................
Capital gains income 182,157 -- -- -- -- 230,469 66,900
...........................................................................................................................
Net realized gain (loss) on
security transactions (22,437) -- -- 41 -- 16 (12,367)
...........................................................................................................................
Net unrealized appreciation of
investments during the period 652,784 150 7 14,348 104 303,166 80,752
...........................................................................................................................
Net increase in net assets
resulting from operations 944,511 156 7 14,389 104 598,411 157,983
...........................................................................................................................
UNIT TRANSACTIONS:
Purchases 1,129,533 1,000 1,000 1,344 1,000 1,148,707 296,446
...........................................................................................................................
Net transfers 2,842,341 450 -- 41,605 -- 3,213,980 2,455,676
...........................................................................................................................
Surrenders for benefit payments
and fees (358,785) -- -- (271) -- (198,212) (66,416)
...........................................................................................................................
Net loan activity (33,674) -- -- -- -- (929) (1,217)
...........................................................................................................................
Cost of insurance (302,161) -- -- (111) -- (201,357) (50,423)
...........................................................................................................................
Net increase in net assets
resulting from unit
transactions 3,277,164 1,450 1,000 42,567 1,000 3,962,189 2,634,066
...........................................................................................................................
Net increase in net assets 4,221,675 1,606 1,007 56,956 1,104 4,560,600 2,792,049
...........................................................................................................................
NET ASSETS:
Beginning of period 4,261,505 -- -- -- -- 4,357,953 969,359
----------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $8,483,180 $ 1,606 $ 1,007 $ 56,956 $ 1,104 $8,918,553 $3,761,408
----------------------------------------------------------------------------------------------------------------------------
<S> <C>
For the Year Ended Fidelity
December 31, 1998 VIP II
Asset
Manager
Portfolio
Sub-Account
------------------------------------------------------------------------------------------------
OPERATIONS:
................................
Net investment income $ 29,183
................................
Capital gains income 87,549
................................
Net realized gain (loss) on
security transactions (943)
................................
Net unrealized appreciation of
investments during the period 48,191
................................
Net increase in net assets
resulting from operations 163,980
................................
UNIT TRANSACTIONS:
Purchases 276,627
................................
Net transfers 218,464
................................
Surrenders for benefit payments
and fees (46,101)
................................
Net loan activity --
................................
Cost of insurance (44,434)
................................
Net increase in net assets
resulting from unit
transactions 404,556
................................
Net increase in net assets 568,536
................................
NET ASSETS:
Beginning of period 904,496
------------------------------------------------------------------------------------------------------------
END OF PERIOD $1,473,032
------------------------------------------------------------------------------------------------------------------------
</TABLE>
* From inception, August 3, 1998 to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-9
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
Notes to Financial Statements
December 31, 1999
1. ORGANIZATION:
Separate Account Variable Life Two (the Account) is a separate investment
account within Hartford Life Insurance Company (the Company) and is registered
with the Securities and Exchange Commission (SEC) as a unit investment trust
under the Investment Company Act of 1940, as amended. Both the Company and the
Account are subject to supervision and regulation by the Department of Insurance
of the State of Connecticut and the SEC. The Account invests deposits by
variable life contractholders of the Company in various mutuals funds (the
Funds) as directed by the contractholders.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the Account,
which are in accordance with generally accepted accounting principles in the
investment company industry:
A) SECURITY TRANSACTIONS -- Security transactions are recorded on the trade date
(date the order to buy or sell is executed). Realized gains and losses on the
sales of securities are computed on the basis of identified cost of the fund
shares sold. Dividend and capital gains income is accrued as of the ex-dividend
date. Capital gains income represents those dividends from the Funds which are
characterized as capital gains under tax regulations.
B) SECURITY VALUATION -- The investments in shares of the Funds are valued at
the closing net asset value per share as determined by the appropriate Fund as
of December 31, 1999.
C) UNIT TRANSACTIONS -- Unit transactions are executed based on the unit values
calculated at the close of the business day.
D) FEDERAL INCOME TAXES -- The operations of the Account form a part of, and are
taxed with, the total operations of the Company, which is taxed as an insurance
company under the Internal Revenue Code. Under current law, no federal income
taxes are payable with respect to the operations of the Account.
E) USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported amounts
of income and expenses during the period. Operating results in the future could
vary from the amounts derived from management's estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
A) DEDUCTIONS AND CHARGES FROM THE ACCOUNT VALUE -- On the policy date and on
each subsequent monthly activity date, the Company will deduct from the Account
an amount to cover mortality and expense risk charges, cost of insurance,
administrative charges and any other benefits provided by the rider. These
charges, which may vary from month to month in accordance with the terms of the
contracts, are deducted through termination of units of interest from the
applicable contractholders' accounts.
SA-10
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hartford Life Insurance Company
Separate Account VL II and to the Owners of Units of Interest therein:
We have audited the accompanying statements of assets and liabilities of
Hartford Life Insurance Company Separate Account VL II (Asia Pacific Growth,
Diversified Income, The George Putnam Fund of Boston, Global Asset Allocation,
Global Growth, Growth and Income, Health Sciences, High Yield, Income,
International Growth, International Growth and Income, International New
Opportunities, Investors, Money Market, New Opportunities, New Value, OTC &
Emerging Growth, Utilities Growth and Income, Vista, and Voyager sub-accounts),
(collectively, the Account) as of December 31, 1999, and the related statements
of operations and the statements of changes in net assets for the periods
presented. These financial statements are the responsibility of the Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Account as of December 31,
1999, and the results of its operations and the changes in its net assets for
the periods presented in conformity with generally accepted accounting
principles.
Hartford, Connecticut
February 11, 2000 ARTHUR ANDERSEN LLP
SA-11
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
Statements of Assets & Liabilities
--------------------------------------------------------------------------------
<TABLE>
December 31, 1999 Asia Diversified The George Global Global Growth Health
Pacific Income Putnam Asset Growth and Income Sciences
Growth Sub-Account Fund Allocation Sub-Account Sub-Account Sub-Account
Sub-Account of Boston Sub-Account
Sub-Account
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
--------------------------------------------------------------------------------------------------------------------------
PUTNAM VT ASIA PACIFIC GROWTH
FUND
Shares 11,322
Cost $141,016
.........................................................................................................................
Market Value: $195,766 $ -- $ -- $ -- $ -- $ -- $ --
--------------------------------------------------------------------------------------------------------------------------
PUTNAM VT DIVERSIFIED INCOME FUND
Shares 42,461
Cost $448,692
.........................................................................................................................
Market Value: -- 421,639 -- -- -- -- --
--------------------------------------------------------------------------------------------------------------------------
PUTNAM VT THE GEORGE PUTNAM FUND
OF BOSTON
Shares 4,370
Cost $44,384
.........................................................................................................................
Market Value: -- -- 43,612 -- -- -- --
--------------------------------------------------------------------------------------------------------------------------
PUTNAM VT GLOBAL ASSET ALLOCATION
FUND
Shares 211,113
Cost $3,844,016
.........................................................................................................................
Market Value: -- -- -- 4,139,928 -- -- --
--------------------------------------------------------------------------------------------------------------------------
PUTNAM VT GLOBAL GROWTH FUND
Shares 398,583
Cost $7,200,576
.........................................................................................................................
Market Value: -- -- -- -- 12,152,795 -- --
--------------------------------------------------------------------------------------------------------------------------
PUTNAM VT GROWTH AND INCOME FUND
Shares 467,054
Cost $12,423,917
.........................................................................................................................
Market Value: -- -- -- -- -- 12,517,045 --
--------------------------------------------------------------------------------------------------------------------------
PUTNAM VT HEALTH SCIENCES FUND
Shares 7,483
Cost $74,611
.........................................................................................................................
Market Value: -- -- -- -- -- -- 78,576
--------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company -- 2,127 -- 3,467 2,198 4,035 --
.........................................................................................................................
Receivable from fund shares sold -- -- -- -- -- -- --
.........................................................................................................................
TOTAL ASSETS 195,766 423,766 43,612 4,143,395 12,154,993 12,521,080 78,576
.........................................................................................................................
LIABILITIES
Due to Hartford Life Insurance
Company 1 -- -- -- -- -- 1
.........................................................................................................................
Payable for fund shares purchased -- 2,125 -- 3,216 1,653 5,502 --
.........................................................................................................................
TOTAL LIABILITIES 1 2,125 -- 3,216 1,653 5,502 1
--------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $195,765 $421,641 $43,612 $4,140,179 $12,153,340 $12,515,578 $78,575
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-12
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
Statements of Assets and Liabilities (continued)
--------------------------------------------------------------------------------
<TABLE>
December 31, 1999 High Yield Income International International International Investors Money
Sub-Account Sub-Account Growth Growth and New Sub-Account Market
Sub-Account Income Opportunities Sub-Account
Sub-Account Sub-Account
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT HIGH YIELD FUND
Shares 343,726
Cost $4,126,478
.............................................................................................................................
Market Value: $3,811,917 $ -- $ -- $ -- $ -- $ -- $ --
------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INCOME FUND
Shares 185,757
Cost $2,360,652
.............................................................................................................................
Market Value: -- 2,325,674 -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL GROWTH
FUND
Shares 20,695
Cost $301,201
.............................................................................................................................
Market Value: -- -- 448,055 -- -- -- --
------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL GROWTH
AND INCOME FUND
Shares 1,704
Cost $23,855
.............................................................................................................................
Market Value: -- -- -- 25,990 -- -- --
------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INTERNATIONAL NEW
OPPORTUNITIES FUND
Shares 4,549
Cost $92,959
.............................................................................................................................
Market Value: -- -- -- -- 106,044 -- --
------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT INVESTORS FUND
Shares 45,675
Cost $531,627
.............................................................................................................................
Market Value: -- -- -- -- -- 692,433 --
------------------------------------------------------------------------------------------------------------------------------
PUTNAM VT MONEY MARKET FUND
Shares 332,312
Cost $332,312
.............................................................................................................................
Market Value: -- -- -- -- -- -- 332,312
------------------------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company 2,549 3,147 -- -- 78 1,445 18
.............................................................................................................................
Receivable from fund shares sold -- -- -- -- -- -- --
.............................................................................................................................
TOTAL ASSETS 3,814,466 2,328,821 448,055 25,990 106,122 693,878 332,330
.............................................................................................................................
LIABILITIES
Due to Hartford Life Insurance
Company -- -- 3 2 -- -- --
.............................................................................................................................
Payable for fund shares purchased 2,539 3,216 -- -- -- 1,450 --
.............................................................................................................................
TOTAL LIABILITIES 2,539 3,216 3 2 -- 1,450 --
------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $3,811,927 $2,325,605 $448,052 $25,988 $106,122 $692,428 $332,330
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-13
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
Statements of Assets & Liabilities (continued)
--------------------------------------------------------------------------------
<TABLE>
December 31, 1999 New New OTC & Utilities Growth Vista Voyager
Opportunities Value Emerging and Income Sub-Account Sub-Account
Sub-Account Sub-Account Growth Sub-Account
Sub-Account
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
-----------------------------------------------------------------------------------------------------------------
PUTNAM VT NEW OPPORTUNITIES FUND
Shares 373,288
Cost $7,857,227
................................................................................................................
Market Value: $16,252,954 $ -- $ -- $ -- $ -- $ --
-----------------------------------------------------------------------------------------------------------------
PUTNAM VT NEW VALUE FUND
Shares 22,996
Cost $273,358
................................................................................................................
Market Value: -- 272,732 -- -- -- --
-----------------------------------------------------------------------------------------------------------------
PUTNAM VT OTC & EMERGING GROWTH
FUND
Shares 11,229
Cost $165,980
................................................................................................................
Market Value: -- -- 255,917 -- -- --
-----------------------------------------------------------------------------------------------------------------
PUTNAM VT UTILITIES GROWTH &
INCOME FUND
Shares 70,508
Cost $1,129,635
................................................................................................................
Market Value: -- -- -- 1,196,527 -- --
-----------------------------------------------------------------------------------------------------------------
PUTNAM VT VISTA FUND
Shares 1,468
Cost $24,769
................................................................................................................
Market Value: -- -- -- -- 30,368 --
-----------------------------------------------------------------------------------------------------------------
PUTNAM VT VOYAGER FUND
Shares 383,553
Cost $14,651,156
................................................................................................................
Market Value: -- -- -- -- -- 25,410,360
-----------------------------------------------------------------------------------------------------------------
Due from Hartford Life Insurance
Company 8,724 -- -- 54 -- 15,663
................................................................................................................
Receivable from fund shares sold -- -- -- -- -- --
................................................................................................................
TOTAL ASSETS 16,261,678 272,732 255,917 1,196,581 30,368 25,426,023
................................................................................................................
LIABILITIES
Due to Hartford Life Insurance
Company -- -- 1 -- -- --
................................................................................................................
Payable for fund shares purchased 8,927 -- -- -- -- 13,398
................................................................................................................
TOTAL LIABILITIES 8,927 -- 1 -- -- 13,398
-----------------------------------------------------------------------------------------------------------------
NET ASSETS (VARIABLE LIFE
CONTRACT LIABILITIES) $16,252,751 $272,732 $255,916 $1,196,581 $30,368 $25,412,625
-----------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-14
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
Statements of Assets and Liabilities (continued)
<TABLE>
----------------------------------------------------------------------------------
December 31, 1999 Units Unit Contract
Owned by Price Liability
Participants
<S> <C> <C> <C>
----------------------------------------------------------------------------------
Variable Life Contracts:
Asia Pacific Growth Fund 8,820 $22.195177 $ 195,765
.................................................................................
Diversified Income Fund 32,428 13.002362 421,641
.................................................................................
George Putnam Fund of Boston 4,128 10.564227 43,612
.................................................................................
Global Asset Allocation Fund 178,026 23.255993 4,140,179
.................................................................................
Global Growth Fund 312,423 38.900326 12,153,340
.................................................................................
Growth and Income Fund 482,803 25.922728 12,515,578
.................................................................................
Health Sciences Fund 7,275 10.800460 78,575
.................................................................................
High Yield Fund 231,043 16.498765 3,811,927
.................................................................................
Income Fund 161,483 14.401541 2,325,605
.................................................................................
International Growth Fund 28,594 15.669625 448,052
.................................................................................
International Growth and Income Fund 2,135 12.169641 25,988
.................................................................................
International New Opportunities Fund 5,361 19.795791 106,122
.................................................................................
Investors Fund 47,574 14.554810 692,428
.................................................................................
Money Market Fund 244,629 1.358506 332,330
.................................................................................
New Opportunities Fund 421,990 38.514515 16,252,751
.................................................................................
New Value Fund 25,634 10.639520 272,732
.................................................................................
OTC & Emerging Growth Fund 10,487 24.402281 255,916
.................................................................................
Utilities Growth and Income Fund 55,671 21.493623 1,196,581
.................................................................................
Vista Fund 1,871 16.227448 30,368
.................................................................................
Voyager Fund 556,989 45.624982 25,412,625
.................................................................................
GRAND TOTAL: $80,712,115
----------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-15
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
Statements of Operations
--------------------------------------------------------------------------------
<TABLE>
For the Year Ended Asia Diversified The George Global Global Growth Health
December 31, 1999 Pacific Income Putnam Asset Growth and Income Sciences
Growth Sub-Account Fund Allocation Sub-Account Sub-Account Sub-Account
Sub-Account of Boston Sub-Account
Sub-Account
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
....................................................................................................................
Dividends $ -- $ 22,458 $ 1,001 $ 71,013 $ 29,989 $ 168,362 $ 125
....................................................................................................................
Capital gains income -- -- 41 199,267 624,480 840,162 --
....................................................................................................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
....................................................................................................................
Net realized gain (loss) on
security transactions 449 48 2 2,237 10,150 (33,683) (382)
....................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 54,681 (15,631) (1,442) 161,213 4,049,316 (833,418) (3,071)
....................................................................................................................
Net gain (loss) on investments 55,130 (15,583) (1,440) 163,450 4,059,466 (867,101) (3,453)
---------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $55,130 $ 6,875 $ (398) $433,730 $4,713,935 $ 141,423 $(3,328)
---------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-16
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
Statements of Operations (continued)
--------------------------------------------------------------------------------
<TABLE>
For the Year Ended High Yield Income International International International Investors Money
December 31, 1999 Sub-Account Sub-Account* Growth Growth and New Sub-Account Market
Sub-Account Income Opportunities Sub-Account
Sub-Account Sub-Account
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $241,157 $141,863 $ -- $ -- $ 1 $ -- $16,902
........................................................................................................................
Capital gains income -- 42,324 -- -- -- -- --
........................................................................................................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
........................................................................................................................
Net realized gain (loss) on
security transactions 1,475 (12,893) 254 2,632 57 (78) --
........................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period (96,976) (221,917) 146,577 (715) 12,844 140,714 --
........................................................................................................................
Net gain (loss) on investments (95,501) (234,810) 146,831 1,917 12,901 140,636
........................................................................................................................
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $145,656 $(50,623) $146,831 $1,917 $12,902 $140,636 $16,902
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Formerly Putnam U.S. Government and High Quality Bond Sub-Account, change
effective on April 9, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-17
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
Statements of Operations (continued)
--------------------------------------------------------------------------------
<TABLE>
For the Year Ended New New OTC & Utilities Vista Voyager
December 31, 1999 Opportunities Value Emerging Growth Sub-Account Sub-Account
Sub-Account Sub-Account Growth and Income
Sub-Account Sub-Account
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ -- $ -- $ -- $29,351 $ -- $ 16,812
...........................................................................................................
Capital gains income 127,960 48 669 30,824 2,322 1,348,226
...........................................................................................................
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
...........................................................................................................
Net realized gain (loss) on
security transactions 8,119 (50) 3,794 (1,167) 242 (36,877)
...........................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 6,351,649 (997) 85,875 (67,896) 4,571 7,727,928
...........................................................................................................
Net gain (loss) on investments 6,359,768 (1,047) 89,669 (69,063) 4,813 7,691,051
...........................................................................................................
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $6,487,728 $ (999) $90,338 $(8,888) $7,135 $9,056,089
------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-18
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
For the Year Ended Asia Diversified The George Global Global Growth Health
December 31, 1999 Pacific Income Putnam Asset Growth and Income Sciences
Growth Sub-Account Fund Allocation Sub-Account Sub-Account Sub-Account
Sub-Account of Boston Sub-Account
Sub-Account
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ -- $ 22,458 $ 1,001 $ 71,013 $ 29,989 $ 168,362 $ 125
......................................................................................................................
Capital gains income -- -- 41 199,267 624,480 840,162
......................................................................................................................
Net realized gain (loss) on
security transactions 449 48 2 2,237 10,150 (33,683) (382)
......................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 54,681 (15,631) (1,442) 161,213 4,049,316 (833,418) (3,071)
......................................................................................................................
Net increase (decrease) in net
assets resulting from
operations 55,130 6,875 (398) 433,730 4,713,935 141,423 (3,328)
......................................................................................................................
UNIT TRANSACTIONS:
Purchases 24,427 179,265 11,255 314,949 1,301,509 2,424,542 9,089
......................................................................................................................
Net transfers 118,773 (49,985) 21,592 (39,079) (121,599) (363,554) 10,606
......................................................................................................................
Surrenders for benefit payments
and fees (2,565) (16,582) (2,658) (56,245) (286,077) (378,131) (2,828)
......................................................................................................................
Net loan activity -- -- -- (14) (1,865) (24,549) (8,505)
......................................................................................................................
Cost of insurance (1,069) (22,843) (423) (105,067) (322,725) (620,162) (1,870)
......................................................................................................................
Net increase (decrease) in net
assets resulting from unit
transactions 139,566 89,855 29,766 114,544 569,243 1,038,146 6,492
......................................................................................................................
Total increase (decrease) in net
assets 194,696 96,730 29,368 548,274 5,283,178 1,179,569 3,164
-----------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,069 324,911 14,244 3,591,905 6,870,162 11,336,009 75,411
-----------------------------------------------------------------------------------------------------------------------
END OF PERIOD $ 195,765 $ 421,641 $43,612 $4,140,179 $12,153,340 $12,515,578 $ 78,575
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-19
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
Statements of Changes in Net Assets (continued)
--------------------------------------------------------------------------------
<TABLE>
For the Year Ended High Yield Income International International International Investors Money
December 31, 1999 Sub-Account Sub-Account* Growth Growth and New Sub-Account Market
Sub-Account Income Opportunities Sub-Account
Sub-Account Sub-Account
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 241,157 $ 141,863 $ -- $ -- $ 1 $ -- $ 16,902
............................................................................................................................
Capital gains income -- 42,324 -- -- -- -- --
............................................................................................................................
Net realized gain (loss) on
security transactions 1,475 (12,893) 254 2,632 57 (78)
............................................................................................................................
Net unrealized (depreciation)
appreciation of investments
during the period (96,976) (221,917) 146,577 (715) 12,844 140,714
............................................................................................................................
Net increase (decrease) in net
assets resulting from
operations 145,656 (50,623) 146,831 1,917 12,902 140,636 16,902
............................................................................................................................
UNIT TRANSACTIONS:
............................................................................................................................
Purchases 723,890 463,993 17,892 9,252 4,815 28,819 235,220
............................................................................................................................
Net transfers 1,056,399 (441,576) 293,024 (8,372) 81,822 428,229 (283,112)
............................................................................................................................
Surrenders for benefit payments
and fees (80,333) (43,311) (5,128) (1,616) 3,487 (6,953) (7,691)
............................................................................................................................
Net loan activity (93) 66,816 (1,909) -- -- (8,548) --
............................................................................................................................
Cost of insurance (124,382) (179,232) (8,009) (928) (480) (12,574) (17,144)
............................................................................................................................
Net increase (decrease) in net
assets resulting from unit
transactions 1,575,481 (133,310) 295,870 (1,664) 89,644 428,973 (72,727)
............................................................................................................................
Total increase (decrease) in net
assets 1,721,137 (183,933) 442,701 253 102,546 569,609 (55,825)
............................................................................................................................
NET ASSETS:
Beginning of period 2,090,790 2,509,538 5,351 25,735 3,576 122,819 388,155
-----------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $3,811,927 $2,325,605 $448,052 $25,988 $106,122 $692,428 $332,330
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Formerly Putnam U.S. Government and High Quality Bond Sub-Account, change
effective on April 9, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-20
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
Statements of Changes in Net Assets (continued)
--------------------------------------------------------------------------------
<TABLE>
For the Year Ended New New OTC & Utilities Growth Vista Voyager
December 31, 1999 Opportunities Value Emerging and Income Sub-Account Sub-Account
Sub-Account Sub-Account Growth Sub-Account
Sub-Account
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ -- $ -- $ -- $ 29,351 $ -- $ 16,812
...................................................................................................................
Capital gains income 127,960 48 669 30,824 2,322 1,348,226
...................................................................................................................
Net realized gain (loss) on
security transactions 8,119 (50) 3,794 (1,167) 242 (36,877)
...................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 6,351,649 (997) 85,875 (67,896) 4,571 7,727,928
...................................................................................................................
Net increase (decrease) in net
assets resulting from
operations 6,487,728 (999) 90,338 (8,888) 7,135 9,056,089
...................................................................................................................
UNIT TRANSACTIONS:
Purchases 1,631,913 25,445 1,058 233,952 6,440 2,360,763
...................................................................................................................
Net transfers 83,908 250,987 153,855 26,751 13,830 672,345
...................................................................................................................
Surrenders for benefit payments
and fees (332,858) (2,892) (3,558) (27,357) (2,301) (442,195)
...................................................................................................................
Net loan activity (57,806) -- -- (14) -- (45,856)
...................................................................................................................
Cost of insurance (446,062) (2,735) (1,247) (58,839) (96) (639,283)
...................................................................................................................
Net increase (decrease) in net
assets resulting from unit
transactions 879,095 270,805 150,108 174,493 17,873 1,905,774
...................................................................................................................
Total increase (decrease) in net
assets 7,366,823 269,806 240,446 165,605 25,008 10,961,863
...................................................................................................................
NET ASSETS:
Beginning of period 8,885,928 2,926 15,470 1,030,976 5,360 14,450,762
...................................................................................................................
END OF PERIOD $16,252,751 $272,732 $255,916 $1,196,581 $ 30,368 $25,412,625
--------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-21
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
Statements of Changes in Net Assets (continued)
--------------------------------------------------------------------------------
<TABLE>
For the Year Ended Asia Diversified The George Global Global Growth Health
December 31, 1998 Pacific Income Putnam Fund Asset Growth and Income Sciences
Growth Sub-Account of Boston Allocation Sub-Account Sub-Account Sub-Account*
Sub-Account* Sub-Account* Sub-Account
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ -- $ 8,975 $ 122 $ 51,115 $ 127,435 $ 129,504 $ 69
.........................................................................................................................
Capital gains income -- 3,812 -- 219,555 637,175 845,402
.........................................................................................................................
Net realized gain (loss) on
security transactions -- 181 11 68 (12,611) 15,246 11
.........................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 69 (17,009) 670 37,408 623,542 249,632 7,036
.........................................................................................................................
Net increase (decrease) in net
assets resulting from
operations 69 (4,041) 803 308,146 1,375,541 1,239,784 7,116
.........................................................................................................................
UNIT TRANSACTIONS:
Purchases 1,000 128,587 1,000 369,681 1,390,116 2,372,295 1,000
.........................................................................................................................
Net transfers -- 47,983 12,809 1,442,896 472,175 2,636,000 67,576
.........................................................................................................................
Surrenders for benefit payments
and fees -- (17,974) (356) (73,960) (229,540) (394,619) (213)
.........................................................................................................................
Net loan activity -- -- -- 23,838 13,683 (74,317) --
.........................................................................................................................
Cost of insurance -- (18,831) (12) (73,651) (210,154) (418,260) (68)
.........................................................................................................................
Net increase (decrease) in net
assets resulting from unit
transactions 1,000 139,765 13,441 1,688,804 1,436,280 4,121,099 68,295
.........................................................................................................................
Total increase (decrease) in net
assets 1,069 135,724 14,244 1,996,950 2,811,821 5,360,883 75,411
.........................................................................................................................
NET ASSETS:
Beginning of period -- 189,187 -- 1,594,955 4,058,341 5,975,126 --
--------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $1,069 $ 324,911 $14,244 $3,591,905 $6,870,162 $11,336,009 $75,411
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
*From inception August 3, 1998, to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-22
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
Statements of Changes in Net Assets (continued)
--------------------------------------------------------------------------------
<TABLE>
For the Year Ended High Yield Income International International International Investors Money
December 31, 1998 Sub-Account Sub-Account** Growth Growth and New Sub-Account* Market
Sub-Account* Income Opportunities Sub-Account
Sub-Account* Sub-Account*
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 114,613 $ 159,132 $ 15 $ 320 $ -- $ 158 $ 17,549
.............................................................................................................................
Capital gains income 17,985 4,142 -- 770 -- -- --
.............................................................................................................................
Net realized gain (loss) on
security transactions (6,169) 3,345 4 5 7 18 --
.............................................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period (280,696) 47,564 278 2,850 240 20,091
.............................................................................................................................
Net increase (decrease) in net
assets resulting from
operations (154,267) 214,183 297 3,945 247 20,267 17,549
.............................................................................................................................
UNIT TRANSACTIONS:
Purchases 451,806 480,043 1,000 1,172 1,000 1,207 376,321
.............................................................................................................................
Net transfers 938,222 (975,004) 4,157 20,802 2,431 101,790 (222,386)
.............................................................................................................................
Surrenders for benefit payments
and fees (78,942) (62,811) (102) (132) (101) (298) (14,326)
.............................................................................................................................
Net loan activity (19) (15,305) -- -- -- -- --
.............................................................................................................................
Cost of insurance (68,646) (137,056) (1) (52) (1) (147) (4,514)
.............................................................................................................................
Net increase (decrease) in net
assets resulting from unit
transactions 1,242,421 (710,133) 5,054 21,790 3,329 102,552 135,095
.............................................................................................................................
Total increase (decrease) in net
assets 1,088,154 (495,950) 5,351 25,735 3,576 122,819 152,644
.............................................................................................................................
NET ASSETS:
Beginning of period 1,002,636 3,005,488 -- -- -- -- 235,511
------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD $2,090,790 $2,509,538 $ 5,351 $25,735 $3,576 $122,819 $388,155
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*From inception August 3, 1998, to December 31, 1998.
**Formerly Putnam U.S. Government and High Quality Bond Sub-Account, change
effective on April 9, 1999.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-23
<PAGE>
SEPARATE ACCOUNT VL II -- HARTFORD LIFE INSURANCE COMPANY
Statements of Changes in Net Assets (continued)
--------------------------------------------------------------------------------
<TABLE>
For the Year Ended New New OTC & Utilities Vista Voyager
December 31, 1998 Opportunities Value Emerging Growth Sub-Account* Sub-Account
Sub-Account Sub-Account Growth and Income
Sub-Account* Sub-Account
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ -- $ 32 $ 6 $ 19,667 $ -- $ 23,145
..............................................................................................................
Capital gains income 79,622 6 -- 33,897 -- 564,740
..............................................................................................................
Net realized gain (loss) on
security transactions 5 18 8 (421) 25 4,061
..............................................................................................................
Net unrealized appreciation
(depreciation) of investments
during the period 1,351,153 371 4,062 66,049 1,028 1,898,310
..............................................................................................................
Net increase (decrease) in net
assets resulting from
operations 1,430,780 427 4,076 119,192 1,053 2,490,256
..............................................................................................................
UNIT TRANSACTIONS:
Purchases 1,645,046 1,000 1,086 175,713 1,000 2,546,550
..............................................................................................................
Net transfers 1,581,473 1,668 10,401 361,235 3,533 2,515,789
..............................................................................................................
Surrenders for benefit payments
and fees (286,756) (168) (66) (24,641) (224) (452,353)
..............................................................................................................
Net loan activity (61,049) -- -- 23,875 -- 47,899
..............................................................................................................
Cost of insurance (251,400) (1) (27) (33,941) (2) (400,770)
..............................................................................................................
Net increase (decrease) in net
assets resulting from unit
transactions 2,627,314 2,499 11,394 502,241 4,307 4,257,115
..............................................................................................................
Total increase (decrease) in net
assets 4,058,094 2,926 15,470 621,433 5,360 6,747,371
..............................................................................................................
NET ASSETS:
Beginning of period 4,827,834 -- -- 409,543 -- 7,703,391
---------------------------------------------------------------------------------------------------------------
END OF PERIOD $8,885,928 $2,926 $15,470 $1,030,976 $5,360 $14,450,762
---------------------------------------------------------------------------------------------------------------
</TABLE>
*From inception August 3, 1998, to December 31, 1998.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SA-24
<PAGE>
SEPARATE ACCOUNT VL I -- HARTFORD LIFE INSURANCE COMPANY
Notes to Financial Statements
December 31, 1999
1. ORGANIZATION:
Separate Account VL II (the Account) is a separate investment account within
Hartford Life Insurance Company (the Company) and is registered with the
Securities and Exchange Commission (SEC) as a unit investment trust under the
Investment Company Act of 1940, as amended. Both the Company and the Account are
subject to supervision and regulation by the Department of Insurance of the
State of Connecticut and the SEC. The Account invests deposits by variable life
policyowners of the Company in the various mutual funds (the Funds) as directed
by the policyowners.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies of the Account,
which are in accordance with generally accepted accounting principles in the
investment company industry:
A) SECURITY TRANSACTIONS -- Security transactions are recorded on the trade date
(date the order to buy or sell is executed). Realized gains and losses on the
sales of securities are computed on the basis of identified cost of the fund
shares sold. Dividend and capital gains income is accrued as of the ex-dividend
date. Capital gains income represents dividends from the Funds which are
characterized as capital gains under tax regulations.
B) SECURITY VALUATION -- The investments in shares of the Funds are valued at
the closing net asset value per share as determined by the appropriate Fund as
of December 31, 1999.
C) UNIT TRANSACTIONS -- Unit transactions are executed based on the unit values
calculated at the close of the business day. All unit transactions are executed
at fair value.
D) FEDERAL INCOME TAXES -- The operations of the Account form a part of, and are
taxed with, the total operations of the Company, which is taxed as an insurance
company under the Internal Revenue Code. Under current law, no federal income
taxes are payable with respect to the operations of the Account.
E) USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and the reported amounts
of income and expenses during the period. Operating results in the future could
vary from the amounts derived from management's estimates.
3. ADMINISTRATION OF THE ACCOUNT AND RELATED CHARGES:
A) COST OF INSURANCE -- In accordance with terms of the policies, the Company
assesses deductions for costs of insurance charges to cover the Company's
anticipated mortality costs. Because a policy's account value and death benefit
may vary from month to month, the cost of insurance charges may also vary.
B) MORTALITY AND EXPENSE RISK CHARGE -- The Company, as issuer of variable life
policies, provides the mortality and expense undertakings and, with respect to
the Account, receives a maximum annual fee of 0.80% of the Account's average
daily net assets. These charges are reflected in surrenders for benefit payments
and fees on the accompanying statements of changes in net assets.
C) ADMINISTRATIVE -- The Company assesses a monthly administrative charge to
compensate the Company for administrative costs in connection with the policies.
This charge covers the average expected cost for these services and varies based
on the face amount of the underlying policy, among other factors. These charges
are reflected in surrenders for benefit payments and fees on the accompanying
statements of changes in net assets.
D) DEDUCTION OF ANNUAL MAINTENANCE FEE -- Annual maintenance fees are deducted
through termination of units of interest from applicable policyowners' accounts,
in accordance with the terms of the policies. In addition, certain other charges
may apply based on the characteristics of the underlying policy. These charges
are reflected in surrenders for benefit payments and fees on the accompanying
statements of changes in net assets.
SA-25
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THIRD QUARTER NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
-----------------------------------------------
2000 1999 2000 1999
-----------------------------------------------
(in millions) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES
Premiums and other considerations $588 $513 $1,653 $1,517
Net investment income 338 333 979 1,019
Net realized capital gains (losses) (7) -- (44) 1
-----------------------------------------------
TOTAL REVENUES 919 846 2,588 2,537
-----------------------------------------------
BENEFITS, CLAIMS AND EXPENSES
Benefits, claims and claim adjustment expenses 372 379 1,086 1,195
Amortization of deferred policy acquisition costs 163 141 462 396
Dividends to policyholders 7 70 53 97
Other expenses 188 105 456 432
-----------------------------------------------
TOTAL BENEFITS, CLAIMS AND EXPENSES 730 695 2,057 2,120
-----------------------------------------------
Income before income tax expense 189 151 531 417
Income tax expense 60 51 144 144
-----------------------------------------------
NET INCOME $129 $100 $ 387 $ 273
-----------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-1
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------------------------------
(Unaudited)
(in millions, except for share data)
<S> <C> <C>
ASSETS
Investments
Fixed maturities, available for sale, at fair value
(amortized cost of $13,851 and $13,923) $ 13,599 $ 13,499
Equity securities, at fair value 51 56
Policy loans, at outstanding balance 3,561 4,187
Other investments 727 342
------------------------------------
TOTAL INVESTMENTS 17,938 18,084
------------------------------------
Cash 95 55
Premiums receivable and agents' balances 23 29
Reinsurance recoverables 1,267 1,274
Deferred policy acquisition costs 4,242 4,013
Deferred income tax 462 459
Other assets 555 654
Separate account assets 118,333 110,397
------------------------------------
TOTAL ASSETS $142,915 $134,965
------------------------------------
LIABILITIES
Future policy benefits $ 4,643 $ 4,332
Other policyholder funds 14,796 16,004
Other liabilities 2,223 1,613
Separate account liabilities 118,333 110,397
------------------------------------
TOTAL LIABILITIES 139,995 132,346
------------------------------------
STOCKHOLDER'S EQUITY
Common stock -- 1,000 shares authorized,
issued and outstanding, par value $5,690 6 6
Capital surplus 1,045 1,045
Accumulated other comprehensive loss
Net unrealized capital losses on securities, net of tax (156) (255)
------------------------------------
TOTAL ACCUMULATED OTHER COMPREHENSIVE LOSS (156) (255)
------------------------------------
Retained earnings 2,025 1,823
------------------------------------
TOTAL STOCKHOLDER'S EQUITY 2,920 2,619
------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $142,915 $134,965
------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-2
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Accumulated Other
Comprehensive
Income (Loss)
-----------------
Net Unrealized
Capital Gains
(Losses) on Total
Common Capital Securities, Retained Stockholder's
Stock Surplus Net of Tax Earnings Equity
---------------------------------------------------------------
(in millions) (Unaudited)
<S> <C> <C> <C> <C> <C>
NINE MONTHS ENDED SEPTEMBER 30, 2000
Balance, December 31, 1999 $6 $1,045 $(255) $1,823 $2,619
Comprehensive income (loss)
Net income 387 387
Other comprehensive income (loss), net of
tax
Net unrealized capital gains (losses) on
securities (1) 99 99
Total other comprehensive income (loss) 99
Total comprehensive income (loss) 486
Dividends paid to parent (185) (185)
---------------------------------------------------------------
BALANCE, SEPTEMBER 30, 2000 $6 $1,045 $(156) $2,025 $2,920
---------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 1999
Balance, December 31, 1998 $6 $1,045 $ 184 $1,462 $2,697
Comprehensive income (loss)
Net income 273 273
Other comprehensive income (loss), net of
tax
Net unrealized capital gains (losses) on
securities (1) (353) (353)
Total other comprehensive income (loss) (353)
Total comprehensive income (loss) (80)
---------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1999 $6 $1,045 $(169) $1,735 $2,617
---------------------------------------------------------------
</TABLE>
(1) Net unrealized capital gains (losses) on securities are reflected net of tax
provision (benefit) of $53 and $(190) for the nine months ended
September 30, 2000 and 1999, respectively. There were reclassification
adjustments for after-tax gains (losses) realized in net income of $(29) and
$1 for the nine months ended September 30, 2000 and 1999, respectively.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------------
2000 1999
--------------------------------
(Unaudited) (in millions)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 387 $ 273
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization (20) (8)
Net realized capital losses (gains) 44 (1)
Decrease (increase) in premiums receivable and agents'
balances 6 (15)
Increase (decrease) in other liabilities 169 (97)
Change in receivables, payables and accruals 40 142
Increase (decrease) in accrued tax 262 (200)
(Increase) decrease in deferred income tax (56) 164
Increase in deferred policy acquisition costs (229) (258)
Increase in future policy benefits 311 438
Decrease (increase) in reinsurance recoverables 27 (162)
Other, net 79 (100)
--------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,020 176
--------------------------------
INVESTING ACTIVITIES
Purchases of investments (4,134) (5,132)
Sales of investments 3,458 6,434
Maturities and principal paydowns of fixed maturity
investments 1,117 1,338
Purchase of affiliates and other 2 --
--------------------------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 443 2,640
--------------------------------
FINANCING ACTIVITIES
Dividends paid to parent (185) --
Net disbursements for investment and universal life-type
contracts charged against policyholder accounts (1,238) (2,798)
--------------------------------
Net cash used for financing activities (1,423) (2,798)
--------------------------------
Net increase in cash 40 18
Cash -- beginning of period 55 17
--------------------------------
Cash -- end of period $ 95 $ 35
--------------------------------
Supplemental Disclosure of Cash Flow Information
Net cash paid during the period for
Income taxes $ 34 $ 111
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN MILLIONS, UNLESS OTHERWISE STATED)
(Unaudited)
--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Hartford Life
Insurance Company and subsidiaries ("Hartford Life Insurance Company" or the
"Company"), a wholly-owned subsidiary of Hartford Life and Accident Insurance
Company (its parent), a wholly-owned subsidiary of Hartford Life, Inc., have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and note disclosures which are normally
included in financial statements prepared on the basis of accounting principles
generally accepted in the United States have been condensed or omitted pursuant
to those rules and regulations, although the Company believes that the
disclosures made are adequate to make the information presented not misleading.
In the opinion of management, these statements include all adjustments which
were normal recurring adjustments necessary to present fairly the financial
position, results of operations and cash flows for the periods presented. For a
description of significant accounting policies, see Note 2 of Notes to
Consolidated Financial Statements in Hartford Life Insurance Company's 1999 Form
10-K Annual Report.
Certain reclassifications have been made to prior year financial information to
conform to the current year classification of transactions and accounts.
(b) NEW ACCOUNTING STANDARDS
In October 2000, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities - a Replacement of SFAS No. 125". SFAS No. 140 carries forward most
of SFAS No. 125's provisions without amendment. However, it revises criteria for
accounting for certain transfers of financial assets and the reporting and
disclosure requirements for collateral arrangements. SFAS No. 140's disclosure
requirements must be applied for fiscal years ending after December 15, 2000.
The other provisions of SFAS No. 140 apply prospectively to transactions and
commitments occurring after March 31, 2001. Implementation of the accounting
provisions of SFAS No. 140 is not expected to have a material impact on the
Company's financial condition or results of operations.
In July 2000, the Emerging Issues Task Force (EITF) reached consensus on Issue
No. 99-20, "Recognition of Interest Income and Impairment on Certain
Investments". This pronouncement requires investors in certain asset-backed
securities to record changes in their estimated yield on a prospective basis and
to evaluate these securities for an other-than-temporary decline in value. This
consensus is effective for financial statements with fiscal quarters beginning
after December 15, 2000. While the Company is currently in the process of
quantifying the impact of EITF No. 99-20, the consensus provisions are not
expected to have a material impact on the Company's financial condition or
results of operations.
In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities", which amended SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133
established accounting and reporting requirements for derivative instruments,
including certain derivative instruments embedded in other contracts. SFAS No.
133 requires, among other things, that all derivatives be carried on the balance
sheet at fair value. SFAS No. 133 also specifies hedge accounting criteria under
which a derivative can qualify for special accounting. SFAS No. 138 amended SFAS
No. 133 so that for interest rate hedges, a company may designate as the hedged
risk, the risk of changes only in a benchmark interest rate. Also, credit risk
is newly defined as the company-specific spread over the benchmark interest rate
and may be hedged separately from, or in combination with, the benchmark
interest rate. Initial application of SFAS No. 133, as amended, for Hartford
Life Insurance Company will begin January 1, 2001. Implementation of SFAS No.
133, as amended, is not expected to have a material impact on the Company's
financial condition or results of operations. However, the FASB's Derivative
Implementation Group continues to deliberate on multiple issues, the resolution
of which could have a significant impact on the Company's expectations.
Effective January 1, 2000, Hartford Life Insurance Company adopted Statement of
Position (SOP) No. 98-7, "Accounting for Insurance and Reinsurance Contracts
That Do Not Transfer Insurance Risk". This SOP provides guidance on the method
of accounting for insurance and reinsurance contracts that do not transfer
insurance risk, defined in the SOP as the deposit method. Adoption of this SOP
did not have a material impact on the Company's financial condition or results
of operations.
2. COMMITMENTS AND CONTINGENT LIABILITIES
(a) LITIGATION
Hartford Life Insurance Company is involved in pending and threatened litigation
in the normal course of its business in which claims for alleged economic and
punitive damages have been asserted. Although there can be no assurances, at the
present time the Company does not anticipate that the ultimate liability arising
from such pending or threatened litigation, after consideration of provisions
made for estimated losses and costs of defense, will have a material adverse
effect on the financial condition or operating results of the Company.
(b) TAX MATTERS
Hartford Life, Inc.'s federal income tax returns are routinely audited by the
Internal Revenue Service. Hartford Life, Inc.'s 1996-1997 federal income tax
returns are currently under audit by the Internal Revenue Service.
F-5
<PAGE>
Management believes that sufficient provision has been made in the financial
statements for issues that may result from tax examinations and other tax
related matters for all open years.
During the second quarter of 2000, Hartford Life, Inc. reached a settlement with
the Internal Revenue Service with respect to certain tax matters for the
1993-1995 years. This settlement resulted in a $24 tax benefit being recorded in
Hartford Life Insurance Company's second quarter results of operations.
3. SEGMENT INFORMATION
Hartford Life Insurance Company is organized into three reportable operating
segments which include Investment Products, Individual Life and Corporate Owned
Life Insurance (COLI). Investment Products offers individual fixed and variable
annuities, retirement plan services and other investment products. Individual
Life sells a variety of life insurance products, including variable life,
universal life, interest sensitive whole life and term life insurance. COLI
primarily offers variable products used by employers to fund non-qualified
benefits or other post-employment benefit obligations as well as leveraged COLI.
The Company includes in "Other" corporate items not directly allocable to any of
its reportable operating segments, as well as certain group benefit products
including group life and disability insurance that is directly written by the
Company and is substantially ceded to its parent.
The accounting policies of the reportable operating segments are the same as
those described in the summary of significant accounting policies in Note 2 of
Notes to Consolidated Financial Statements in Hartford Life Insurance Company's
1999 Form 10-K Annual Report. Hartford Life Insurance Company evaluates
performance of its segments based on revenues, net income and the segment's
return on allocated capital. The Company charges direct operating expenses to
the appropriate segment and allocates the majority of indirect expenses to the
segments based on an intercompany expense arrangement. Intersegment revenues are
not significant and primarily occur between corporate and the operating
segments. These amounts include interest income on allocated surplus and the
allocation of net realized capital gains and losses through net investment
income utilizing the duration of the segment's investment portfolios.
The following tables present summarized financial information concerning the
Company's segments.
<TABLE>
<CAPTION>
Investment Individual
SEPTEMBER 30, 2000 Products Life COLI Other Total
<S> <C> <C> <C> <C> <C>
------------------------------------------------
THIRD QUARTER ENDED
Total revenues $ 522 $141 $238 $ 18 $ 919
Net income 86 19 9 15 129
------------------------------------------------
NINE MONTHS ENDED
Total revenues $1,548 $405 $572 $ 63 $2,588
Net income 262 53 25 47 387
</TABLE>
<TABLE>
<CAPTION>
Investment Individual
SEPTEMBER 30, 1999 Products Life COLI Other Total
<S> <C> <C> <C> <C> <C>
------------------------------------------------
THIRD QUARTER ENDED
Total revenues $ 468 $148 $220 $ 10 $ 846
Net income 69 19 7 5 100
------------------------------------------------
NINE MONTHS ENDED
Total revenues $1,403 $421 $659 $ 54 $2,537
Net income (loss) 228 51 20 (26) 273
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Dollar amounts in millions, unless otherwise stated)
Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) addresses the financial condition of Hartford Life Insurance
Company and subsidiaries ("Hartford Life Insurance Company" or the "Company") as
of September 30, 2000, compared with December 31, 1999, and its results of
operations for the third quarter and nine months ended September 30, 2000
compared with the equivalent periods in 1999. This discussion should be read in
conjunction with the MD&A included in the Company's 1999 Form 10-K Annual
Report.
Certain statements contained in this discussion, other than statements of
historical fact, are forward-looking statements. These statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and include estimates and assumptions related to economic,
competitive and legislative developments. These forward-looking statements are
subject to change and uncertainty which are, in many instances, beyond the
Company's control and have been made based upon management's expectations and
beliefs concerning future developments and their potential effect on the
F-6
<PAGE>
Company. There can be no assurance that future developments will be in
accordance with management's expectations or that the effect of future
developments on Hartford Life Insurance Company will be those anticipated by
management. Actual results could differ materially from those expected by the
Company, depending on the outcome of certain factors, including the possibility
of general economic, business and legislative conditions that are less favorable
than anticipated, changes in interest rates or the stock markets, stronger than
anticipated competitive activity and those described in the forward-looking
statements.
INDEX
<TABLE>
<S> <C> <C> <C>
Consolidated Results of Operations 9 Corporate Owned Life Insurance (COLI) 11
Investment Products 10 Regulatory Matters and Contingencies 11
Individual Life 10 Accounting Standards 12
</TABLE>
CONSOLIDATED RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
THIRD QUARTER NINE MONTHS
ENDED ENDED
OPERATING SUMMARY SEPTEMBER 30, SEPTEMBER 30,
<S> <C> <C> <C> <C>
--------------------------------------------------
2000 1999 2000 1999
--------------------------------------------------
Revenues $919 $846 $2,588 $2,537
Expenses 790 746 2,201 2,264
--------------------------------------------------
NET INCOME $129 $100 $ 387 $ 273
--------------------------------------------------
</TABLE>
Hartford Life Insurance Company has the following reportable segments:
Investment Products, Individual Life and Corporate Owned Life Insurance (COLI).
The Company reports in "Other" corporate items not directly allocable to any of
its segments, as well as certain group benefits business, including group life
and disability insurance that is directly written by the Company and is
substantially ceded to its parent, Hartford Life and Accident Insurance Company
(HLA).
Revenues increased $73, or 9%, and $51, or 2%, for the third quarter and nine
months ended September 30, 2000, respectively, as compared to the equivalent
1999 periods. The increases in revenues were primarily attributable to growth in
the Investment Products segment which was, for the most part, due to higher fee
income related to the individual annuity operation which is directly
attributable to increased assets under management. Additionally, for the third
quarter the COLI segment's revenues increased primarily due to fees generated
from strong sales. Partially offsetting the growth in the nine month period was
a decline in the COLI segment's revenues primarily due to the declining block of
leveraged COLI business.
Expenses increased $44, or 6%, for the third quarter, while expenses for the
nine month period decreased $63, or 3%, as compared to the equivalent prior year
periods due to the factors described above.
Net income increased $29, or 29%, and $114, or 42%, for the third quarter and
nine months ended September 30, 2000, respectively, as compared to the
equivalent 1999 periods primarily driven by increases in net income across each
of the Company's reportable segments for the nine months. The Company also
reported a benefit related to the settlement of certain federal tax matters of
$24 for the second quarter of 2000 (see Note 2(b) of Notes to Consolidated
Financial Statements). This benefit, along with an $8 benefit related to state
income taxes in the first quarter of 2000, resulted in $32 of tax benefits for
the nine months ended September 30, 2000. Partially offsetting the increase for
the nine month period, the Company realized $29 of net realized capital losses,
primarily as a result of portfolio re-balancing. Excluding the tax items and the
net realized capital losses, net income increased $111, or 41%, for the nine
months ended September 30, 2000.
SEGMENT RESULTS
Below is a summary of net income (loss) by segment.
<TABLE>
<CAPTION>
THIRD QUARTER NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
<S> <C> <C> <C> <C>
--------------------------------------------------
2000 1999 2000 1999
--------------------------------------------------
Investment Products $ 86 $ 69 $262 $228
Individual Life 19 19 53 51
Corporate Owned Life Insurance
(COLI) 9 7 25 20
Other 15 5 47 (26)
--------------------------------------------------
NET INCOME $129 $100 $387 $273
--------------------------------------------------
</TABLE>
The sections that follow analyze each segment's results.
F-7
<PAGE>
INVESTMENT PRODUCTS
<TABLE>
<CAPTION>
THIRD QUARTER NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
<S> <C> <C> <C> <C>
--------------------------------------------------
2000 1999 2000 1999
--------------------------------------------------
Revenues $522 $468 $1,548 $1,403
Expenses 436 399 1,286 1,175
--------------------------------------------------
NET INCOME $ 86 $ 69 $ 262 $ 228
--------------------------------------------------
</TABLE>
Revenues in the Investment Products segment increased $54, or 12%, and $145, or
10%, for the third quarter and nine months ended September 30, 2000,
respectively, as compared to the equivalent 1999 periods, primarily due to
higher fee income in the individual annuity operation. Fee income generated by
individual annuities increased $58, or 22%, and $149, or 19%, for the respective
third quarter and nine month periods, as related account values grew
$14.7 billion, or 19%, from September 30, 1999. This substantial growth was
mostly due to strong individual annuity sales (including $8.5 billion for the
first nine months of 2000) and equity market appreciation.
Due to the continued growth in this segment, particularly the individual annuity
operation, expenses increased $37, or 9%, or $111, or 9%, for the third quarter
and nine months ended September 30, 2000, respectively, as compared to the
equivalent 1999 periods. These increases were primarily driven by amortization
of deferred policy acquisition costs, which grew $24, or 23%, and $61, or 20%,
for the respective third quarter and nine month periods and other expenses which
increased $9, or 10%, and $43, or 17%, over the respective prior year levels.
The segment's operating expenses as a percentage of average assets under
management declined slightly for the third quarter and nine months ended versus
the respective prior year periods.
Net income increased $17, or 25%, and $34, or 15%, for the third quarter and
nine months ended September 30, 2000, respectively, as compared to the
equivalent 1999 periods, primarily due to the growth in revenues associated with
the increase in assets under management across the entire segment. Additionally,
the Investment Products segment continued to maintain its profit margins related
to its primary businesses thus contributing to the segment's earnings growth.
INDIVIDUAL LIFE
<TABLE>
<CAPTION>
THIRD QUARTER NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
<S> <C> <C> <C> <C>
--------------------------------------------------
2000 1999 2000 1999
--------------------------------------------------
Revenues $141 $148 $405 $421
Expenses 122 129 352 370
--------------------------------------------------
NET INCOME $ 19 $ 19 $ 53 $ 51
--------------------------------------------------
</TABLE>
The slight decrease in revenues and expenses in the Individual Life segment is
primarily due to HLA's December 1, 1999 recapture of an in force block of
individual life insurance previously ceded to the Company. (For a discussion of
the recapture, see Note 9 of Notes to Consolidated Financial Statements in
Hartford Life Insurance Company's 1999 Form 10-K Annual Report.)
Excluding the recapture described above, revenues in the Individual Life segment
increased $16, or 13%, and $53, or 15%, for the third quarter and nine months
ended September 30, 2000, respectively, as compared to the equivalent 1999
periods. This increase in revenues is attributable to higher fee income
associated with the growing block of variable life insurance. Fee income
increased $13, or 15%, and $53, or 22%, for the respective third quarter and
nine month periods, as variable life account values increased $918, or 44%, and
variable life insurance in force increased $9.7 billion, or 46%, from
September 30, 1999.
Excluding the recapture described above, expenses increased $14, or 13%, and
$47, or 15%, for the third quarter and nine months ended September 30, 2000,
respectively, as compared to the equivalent 1999 periods. The increases in
expenses were primarily due to a $4, or 9%, and $12, or 8%, increase in
benefits, claims and claim adjustment expenses for the respective third quarter
and nine month periods and other expenses which increased $7, or 40%, and $16,
or 29%, over the respective prior year levels. These increases were associated
with the growth in this segment as indicated above. Additionally, for the nine
month period, amortization of deferred policy acquisition costs increased $15,
or 19%, primarily associated with the growth in this segment's variable
business. Excluding the recapture described above, net income increased $2, or
12%, and $6, or 13%, for the respective periods, primarily due to the higher fee
income as year-to-date mortality was essentially in line with prior year.
F-8
<PAGE>
CORPORATE OWNED LIFE INSURANCE (COLI)
<TABLE>
<CAPTION>
THIRD QUARTER NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
<S> <C> <C> <C> <C>
--------------------------------------------------
2000 1999 2000 1999
--------------------------------------------------
Revenues $238 $220 $572 $659
Expenses 229 213 547 639
--------------------------------------------------
NET INCOME $ 9 $ 7 $ 25 $ 20
--------------------------------------------------
</TABLE>
COLI revenues increased $18, or 8%, for the third quarter ended September 30,
2000, from the respective prior year period, while for the nine month period,
revenues decreased $87, or 13%. The revenue increase in the third quarter was
primarily due to an increase in fee income of $22, or 19%, associated with
strong sales of $2.5 billion in the third quarter 2000.
For the nine month period, revenues decreased primarily due to a decline in net
investment income of $59, or 18%. This decline was primarily due to the
leveraged COLI block of business, as related account values decreased $786, or
14%, as a result of the downsizing caused by the Health Insurance Portability
and Accountability Act of 1996.
Expenses increased $16, or 8%, for the third quarter, while expenses for the
nine month period decreased $92, or 14%, respectively, as compared to the
equivalent prior year periods due to the factors described above.
Net income increased $2, or 29%, and $5, or 25%, for the third quarter and nine
months ended September 30, 2000, respectively, as compared to the equivalent
prior year periods. The increase was primarily attributable to the variable COLI
business where account values increased $3.5 billion, or 29%, as well as
increased earnings associated with a block of leveraged COLI business recaptured
in 1998. (For a discussion of the MBL Recapture, see the Capital Resources and
Liquidity section in Hartford Life Insurance Company's 1999 Form 10-K Annual
Report.)
REGULATORY MATTERS AND CONTINGENCIES
NAIC PROPOSALS
The NAIC adopted the Codification of Statutory Accounting Principles (SAP) in
March 1998. The effective date for the statutory accounting guidance is
January 1, 2001. Hartford Life Insurance Company and its subsidiaries'
domiciliary state has adopted the SAP and the Company will make the necessary
changes required for implementation. The Company has not yet determined the
impact that the SAP will have on the statutory financial statements of Hartford
Life Insurance Company and its subsidiaries.
DEPENDENCE ON CERTAIN THIRD PARTY RELATIONSHIPS
Hartford Life Insurance Company distributes its annuity and life insurance
products through a variety of distribution channels, including broker-dealers,
banks, wholesalers, its own internal sales force and other third party marketing
organizations. The Company periodically negotiates provisions and renewals of
these relationships and there can be no assurance that such terms will remain
acceptable to the Company or such service providers. An interruption in the
Company's continuing relationship with certain of these third parties could
materially affect the Company's ability to market its products.
ACCOUNTING STANDARDS
For a discussion of accounting standards, see Note 1 of Notes to Consolidated
Financial Statements.
F-9
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------------------
To Hartford Life Insurance Company:
We have audited the accompanying Consolidated Balance Sheets of Hartford Life
Insurance Company and subsidiaries as of December 31, 1999 and 1998, and the
related Consolidated Statements of Income, Changes in Stockholder's Equity and
Cash Flows for each of the three years in the period ended December 31, 1999.
These Consolidated Financial Statements and the schedules referred to below are
the responsibility of Hartford Life Insurance Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the Consolidated Financial Statements referred to above present
fairly, in all material respects, the financial position of Hartford Life
Insurance Company and subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the Index to
Consolidated Financial Statements and Schedules are presented for the purpose of
complying with the Securities and Exchange Commission's rules and are not part
of the basic financial statements. These schedules have been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
Hartford, Connecticut
January 31, 2000 ARTHUR ANDERSEN LLP
F-1
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(in millions)
REVENUES
Premiums and other considerations $2,045 $2,218 $1,637
Net investment income 1,359 1,759 1,368
Net realized capital gains (losses) (4) (2) 4
----------------------------------------------------------------------------------------------
TOTAL REVENUES 3,400 3,975 3,009
----------------------------------------------------------------------------------------------
BENEFITS, CLAIMS AND EXPENSES
Benefits, claims and claim adjustment expenses 1,574 1,911 1,379
Amortization of deferred policy acquisition costs 539 431 335
Dividends to policyholders 104 329 240
Other expenses 631 766 586
----------------------------------------------------------------------------------------------
TOTAL BENEFITS, CLAIMS AND EXPENSES 2,848 3,437 2,540
----------------------------------------------------------------------------------------------
Income before income tax expense 552 538 469
Income tax expense 191 188 167
----------------------------------------------------------------------------------------------
NET INCOME $ 361 $ 350 $ 302
----------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-2
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
<S> <C> <C>
------------------------------------------------------------------------------------------
1999 1998
------------------------------------------------------------------------------------------
(in millions, except
for share data)
ASSETS
Investments
Fixed maturities, available for sale, at fair value
(amortized cost of $13,923 and $14,505) $ 13,499 $ 14,818
Equity securities, at fair value 56 31
Policy loans, at outstanding balance 4,187 6,684
Other investments 342 264
------------------------------------------------------------------------------------------
TOTAL INVESTMENTS 18,084 21,797
------------------------------------------------------------------------------------------
Cash 55 17
Premiums receivable and agents' balances 29 17
Reinsurance recoverables 1,274 1,257
Deferred policy acquisition costs 4,013 3,754
Deferred income tax 459 464
Other assets 654 695
Separate account assets 110,397 90,262
------------------------------------------------------------------------------------------
TOTAL ASSETS $134,965 $118,263
------------------------------------------------------------------------------------------
LIABILITIES
Future policy benefits $ 4,332 $ 3,595
Other policyholder funds 16,004 19,615
Other liabilities 1,613 2,094
Separate account liabilities 110,397 90,262
------------------------------------------------------------------------------------------
TOTAL LIABILITIES 132,346 115,566
------------------------------------------------------------------------------------------
STOCKHOLDER'S EQUITY
Common stock -- 1,000 shares authorized, issued and
outstanding, par value $5,690 6 6
Capital surplus 1,045 1,045
Accumulated other comprehensive income (loss)
Net unrealized capital gains (losses) on securities, net
of tax (255) 184
------------------------------------------------------------------------------------------
TOTAL ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (255) 184
------------------------------------------------------------------------------------------
Retained earnings 1,823 1,462
------------------------------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY 2,619 2,697
------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $134,965 $118,263
------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Accumulated Other
Comprehensive
Income (Loss)
-----------------
<S> <C> <C> <C> <C> <C>
Net Unrealized
Capital Gains
(Losses) on Total
Common Capital Securities, Retained Stockholder's
Stock Surplus Net of Tax Earnings Equity
-------------------------------------------------------------------------------------------------------------
(in millions)
1999
Balance, December 31, 1998 $6 $1,045 $ 184 $1,462 $2,697
Comprehensive income
Net income -- -- -- 361 361
Other comprehensive income (loss), net of
tax (1):
Changes in net unrealized capital gains
(losses) on securities (2) -- -- (439) -- (439)
Total other comprehensive income (loss) (439)
Total comprehensive income (loss) (78)
-------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999 $6 $1,045 $(255) $1,823 $2,619
-------------------------------------------------------------------------------------------------------------
1998
Balance, December 31, 1997 $6 $1,045 $ 179 $1,113 $2,343
Comprehensive income
Net income -- -- -- 350 350
Other comprehensive income, net of tax
(1):
Changes in net unrealized capital gains
on securities (2) -- -- 5 -- 5
Total other comprehensive income 5
Total comprehensive income 355
Dividends (1) (1)
-------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 $6 $1,045 $ 184 $1,462 $2,697
-------------------------------------------------------------------------------------------------------------
1997
Balance, December 31, 1996 $6 $1,045 $ 30 $ 811 $1,892
Comprehensive income
Net income -- -- -- 302 302
Other comprehensive income, net of tax
(1):
Changes in net unrealized capital gains
on securities (2) -- -- 149 -- 149
Total other comprehensive income 149
Total comprehensive income 451
-------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 $6 $1,045 $ 179 $1,113 $2,343
-------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Net unrealized capital gain (loss) on securities is reflected net of tax of
$(236), $3 and $80, for the years ended December 31, 1999, 1998 and 1997,
respectively.
(2) Net of reclassification adjustment for after-tax gains (losses) realized in
net income of $(2), $(1) and $2 for the years ended December 31, 1999, 1998
and 1997, respectively.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(in millions)
OPERATING ACTIVITIES
Net income $ 361 $ 350 $ 302
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization (18) (23) 8
Net realized capital losses (gains) 4 2 (4)
Loss due to commutation of reinsurance 16 -- --
(Increase) decrease in premiums receivable and agents'
balances (18) 1 119
(Decrease) increase in other liabilities (263) (79) 223
Change in receivables, payables, and accruals 125 83 107
(Decrease) increase in accrued taxes (163) 60 126
Decrease (increase) in deferred income tax 241 (118) 40
Increase in deferred policy acquisition costs (358) (439) (555)
Increase in future policy benefits 797 536 585
Increase in reinsurance recoverables (318) (101) (31)
Other, net (81) 99 52
--------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 325 371 972
--------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchases of investments (5,753) (6,061) (6,869)
Sales of investments 6,383 4,901 4,256
Maturity of investments 1,818 1,761 2,329
Purchases of affiliates and other (25) -- --
--------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES 2,423 601 (284)
--------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net disbursements for investment and universal life-type
contracts charged against policyholder accounts (2,710) (1,009) (677)
--------------------------------------------------------------------------------------------
Net cash used for financing activities (2,710) (1,009) (677)
--------------------------------------------------------------------------------------------
Net increase (decrease) in cash 38 (37) 11
Cash -- beginning of year 17 54 43
--------------------------------------------------------------------------------------------
Cash -- end of year $ 55 $ 17 $ 54
--------------------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information:
Net Cash Paid During the Year for:
Income taxes $ 111 $ 263 $ 9
Noncash Investing Activities:
In 1999, the Company's parent, Hartford Life and Accident Insurance Company, recaptured an
in force block of individual life insurance previously ceded to the Company. This
commutation resulted in a reduction in the Company's assets of $666, consisting of $556
of invested assets, $99 of deferred policy acquisition costs and $11 of other assets.
Liabilities decreased $650, consisting of $543 of other policyholder funds, $60 of future
policy benefits and $47 of other liabilities. As a result, the Company recognized an
after-tax loss relating to this transaction of $16.
In 1998, due to the recapture of an in force block of business previously ceded to MBL
Life Assurance Co. of New Jersey, reinsurance recoverables of $4,753 were exchanged for
the fair value of assets comprised of $4,310 in policy loans and $443 in other net
assets.
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN MILLIONS EXCEPT PER SHARE DATA UNLESS OTHERWISE STATED)
-----------------------------------------------------------------------------
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
These Consolidated Financial Statements include Hartford Life Insurance Company
and its wholly-owned subsidiaries ("Hartford Life Insurance Company" or the
"Company"), Hartford Life and Annuity Insurance Company (HLAI) and Hartford
International Life Reassurance Corporation (HLRe), formerly American Skandia
Life Reinsurance Corporation. The Company is a wholly-owned subsidiary of
Hartford Life and Accident Insurance Company (HLA), a wholly-owned subsidiary of
Hartford Life, Inc. (Hartford Life). Hartford Life is a direct subsidiary of
Hartford Accident and Indemnity Company (HA&I), an indirect subsidiary of The
Hartford Financial Services Group, Inc. (The Hartford). In November 1998,
Hartford Life Insurance Company transferred in the form of a dividend, Hartford
Financial Services, LLC and its subsidiaries to HLA.
Pursuant to an initial public offering (the "IPO") on May 22, 1997, Hartford
Life sold 26 million shares of Class A Common Stock at $28.25 per share and
received proceeds, net of offering expenses, of $687. Of the proceeds, $527 was
used to retire debt related to Hartford Life's outstanding promissory notes and
line of credit with the remaining $160 contributed by Hartford Life to its
insurance subsidiaries to support growth in its core businesses. Hartford Life
became a publicly traded company upon the sale of 26 million shares representing
approximately 18.6% of the equity ownership in Hartford Life.
Along with its parent, HLA, the Company is a leading financial services and
insurance company which provides (a) investment products such as individual
variable annuities and fixed market value adjusted annuities, mutual funds and
retirement plan services for savings and retirement needs; (b) life insurance
for income protection and estate planning; (c) employee benefits products such
as group life and disability insurance that is directly written by the Company
and is substantially ceded to its parent, HLA, and (d) corporate owned life
insurance.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
These Consolidated Financial Statements are prepared on the basis of accounting
principles generally accepted in the United States, which differ materially from
the statutory accounting practices prescribed by various insurance regulatory
authorities. All material intercompany transactions and balances between
Hartford Life Insurance Company and its subsidiaries have been eliminated.
The preparation of financial statements, in conformity with accounting
principles generally accepted in the United States, 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.
The most significant estimates include those used in determining deferred policy
acquisition costs and the liability for future policy benefits and other
policyholder funds. Although some variability is inherent in these estimates,
management believes the amounts provided are adequate.
Certain reclassifications have been made to prior year financial information to
conform to the current year presentation.
(B) ADOPTION OF NEW ACCOUNTING STANDARDS
Effective January 1, 1999, Hartford Life Insurance Company adopted Statement of
Position (SOP) No. 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use". This SOP provides guidance on
accounting for the costs of internal use software and in determining whether the
software is for internal use. The SOP defines internal use software as software
that is acquired, internally developed, or modified solely to meet internal
needs and identifies stages of software development and accounting for the
related costs incurred during the stages. Adoption of this SOP did not have a
material impact on the Company's financial condition or results of operations.
Effective January 1, 1999, Hartford Life Insurance Company adopted SOP
No. 97-3, "Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments". This SOP addresses accounting by insurance and other enterprises
for assessments related to insurance activities, including recognition,
measurement and disclosure of guaranty fund or other assessments. Adoption of
this SOP did not have a material impact on the Company's financial condition or
results of operations.
The Company's cash flows were not impacted by these changes in accounting
principles.
(C) FUTURE ADOPTION OF NEW ACCOUNTING STANDARDS
In June 1999, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133". This statement amends SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", to defer its effective date for
one year, to fiscal years beginning after June 15, 2000. Initial
F-6
<PAGE>
application for Hartford Life Insurance Company will begin January 1, 2001. SFAS
No. 133 establishes accounting and reporting guidance for derivative
instruments, including certain derivative instruments embedded in other
contracts. The standard requires, among other things, that all derivatives be
carried on the balance sheet at fair value. The standard also specifies hedge
accounting criteria under which a derivative can qualify for special accounting.
In order to receive special accounting, the derivative instrument must qualify
as either a hedge of the fair value or the variability of the cash flow of a
qualified asset or liability. Special accounting for qualifying hedges provides
for matching the timing of gain or loss recognition on the hedging instrument
with the recognition of the corresponding changes in value of the hedged item.
The Company has reviewed its derivative holdings and is in the process of
quantifying the impact of SFAS No. 133. The Company is also assessing what
actions, if any, need to be taken to minimize potential volatility, while at the
same time maintaining the economic protection needed to support the goals of its
business.
In October 1998, the American Institute of Certified Public Accountants (AICPA)
issued SOP No. 98-7, "Accounting for Insurance and Reinsurance Contracts That Do
Not Transfer Insurance Risk". This SOP provides guidance on the method of
accounting for insurance and reinsurance contracts that do not transfer
insurance risk, defined in the SOP as the deposit method. This SOP is effective
for financial statements for fiscal years beginning after June 15, 1999 and is
not expected to have a material impact on the Company's financial condition or
results of operations.
(D) REVENUE RECOGNITION
Revenues for investment products and universal life-type policies consist of
policy charges for policy administration, cost of insurance and surrender
charges assessed to policy account balances and are recognized in the period in
which services are provided. Premiums for traditional life insurance and
disability policies are recognized as revenues ratably over the policy period.
(E) DIVIDENDS TO POLICYHOLDERS
Certain life insurance policies contain dividend payment provisions that enable
the policyholder to participate in the earnings on that participating block of
business of the life insurance subsidiaries of the Company. The participating
insurance in force accounted for 34%, 35% and 33% in 1999, 1998 and 1997,
respectively, of total insurance in force.
(F) INVESTMENTS
Hartford Life Insurance Company's investments in both fixed maturities, which
include bonds, redeemable preferred stock and commercial paper, and equity
securities, which include common and non-redeemable preferred stocks, are
classified as "available for sale" in accordance with SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". Accordingly, these
securities are carried at fair value with the after-tax difference from cost
reflected in stockholder's equity as a component of accumulated other
comprehensive income. Policy loans are carried at outstanding balance which
approximates fair value. Other invested assets consist primarily of partnership
investments, which are accounted for by the equity method, and mortgage loans,
whereby the carrying value approximates fair value. Realized capital gains and
losses on security transactions associated with the Company's immediate
participation guaranteed contracts are excluded from revenues and deferred over
the expected maturity of the securities, since under the terms of the contracts
the realized gains and losses will be credited to policyholders in future years
as they are entitled to receive them. Net realized capital gains and losses,
excluding those related to immediate participation guaranteed contracts, are
reported as a component of revenue and are determined on a specific
identification basis.
The Company's accounting policy for impairment requires recognition of an other
than temporary impairment charge on a security if it is determined that the
Company is unable to recover all amounts due under the contractual obligations
of the security. In addition, for securities expected to be sold, an other than
temporary impairment charge is recognized if the Company does not expect the
fair value of a security to recover to cost or amortized cost prior to the
expected date of sale. Once an impairment charge has been recorded, the Company
then continues to review the other than temporarily impaired securities for
additional impairment, if necessary.
(G) DERIVATIVE INSTRUMENTS
HEDGE ACCOUNTING -- Hartford Life Insurance Company uses a variety of derivative
instruments, including swaps, caps, floors, forwards and exchange traded
financial futures and options as part of an overall risk management strategy.
These instruments are used as a means of hedging exposure to price, foreign
currency and/or interest rate risk on planned investment purchases or existing
assets and liabilities. Hartford Life Insurance Company does not hold or issue
derivative instruments for trading purposes. Hartford Life Insurance Company's
accounting for derivative instruments used to manage risk is in accordance with
the concepts established in SFAS No. 80, "Accounting for Futures Contracts",
SFAS No. 52, "Foreign Currency Translation", AICPA SOP No. 86-2, "Accounting for
Options" and various Emerging Issues Task Force pronouncements. Written options
are used, in all cases in conjunction with other assets and derivatives, as part
of the Company's asset and liability management strategy. Derivative instruments
are carried at values consistent with the asset or liability being hedged.
Derivative instruments used to hedge fixed maturities or equity securities are
carried at fair value with the after-tax difference from cost reflected in
stockholder's equity. Derivative instruments used to hedge other invested assets
or liabilities are carried at cost. For a discussion of SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", issued in June
1998, see (c) Future Adoption of New Accounting Standards.
Derivative instruments must be designated at inception as a hedge and measured
for effectiveness both at inception
F-7
<PAGE>
and on an ongoing basis. Hartford Life Insurance Company's correlation threshold
for hedge designation is 80% to 120%. If correlation, which is assessed monthly
or quarterly and measured based on a rolling three month average, falls outside
the 80% to 120% range, hedge accounting will be terminated. Derivative
instruments used to create a synthetic asset must meet synthetic accounting
criteria, including designation at inception and consistency of terms between
the synthetic and the instrument being replicated. Consistent with industry
practice, synthetic instruments are accounted for like the financial instrument
they are intended to replicate. Derivative instruments which fail to meet risk
management criteria, subsequent to acquisition, are marked to market with the
impact reflected in the Consolidated Statements of Income.
FUTURES -- Gains or losses on financial futures contracts entered into in
anticipation of the investment of future receipt of product cash flows are
deferred and, at the time of the ultimate investment purchase, reflected as an
adjustment to the cost basis of the purchased asset. Gains or losses on futures
used in invested asset risk management are deferred and adjusted into the cost
basis of the hedged asset when the contract futures are closed, except for
futures used in duration hedging, which are deferred and basis adjusted on a
quarterly basis. The basis adjustments are amortized into net investment income
over the remaining asset life.
FORWARD COMMITMENTS -- Open forward commitment contracts are marked to market
through stockholder's equity. Such contracts are accounted for at settlement by
recording the purchase of the specified securities at the previously committed
price. Gains or losses resulting from the termination of forward commitment
contracts are recognized immediately in the Consolidated Statements of Income as
a component of net investment income.
OPTIONS -- The cost of options entered into as part of a risk management
strategy are basis adjusted to the underlying asset or liability and amortized
over the remaining life of the option. Gains or losses on expiration or
termination are adjusted into the basis of the underlying asset or liability and
amortized over the remaining asset life.
INTEREST RATE SWAPS -- Interest rate swaps involve the periodic exchange of
payments without the exchange of underlying principal or notional amounts. Net
receipts or payments are accrued and recognized over the life of the swap
agreement as an adjustment to investment income. Should the swap be terminated,
the gain or loss is adjusted into the basis of the asset or liability and
amortized over the remaining life. Should the hedged asset be sold or liability
terminated without terminating the swap position, any swap gains or losses are
immediately recognized in earnings. Interest rate swaps purchased in
anticipation of an asset purchase (anticipatory transaction) are recognized
consistent with the underlying asset components such that the settlement
component is recognized in the Consolidated Statements of Income while the
change in market value is recognized as an unrealized capital gain or loss.
INTEREST RATE CAPS AND FLOORS -- Premiums paid on purchased cap or floor
agreements and the premium received on issued cap or floor agreements (used for
risk management) are adjusted into the basis of the applicable asset and
amortized over the asset life. Gains or losses on termination of such positions
are adjusted into the basis of the asset or liability and amortized over the
remaining asset life. Net payments are recognized as an adjustment to income or
basis adjusted and amortized depending on the specific hedge strategy.
FORWARD EXCHANGE AND CURRENCY SWAPS CONTRACTS -- Forward exchange contracts and
foreign currency swaps are accounted for in accordance with SFAS No. 52. Changes
in the spot rate of instruments designated as hedges of the net investment in a
foreign subsidiary are reflected in the cumulative translation adjustment
component of stockholder's equity.
Cash flows from futures, options and swaps, accounted for as hedges, are
included with the cash flows of the item being hedged.
(H) SEPARATE ACCOUNTS
Hartford Life Insurance Company maintains separate account assets and
liabilities which are reported at fair value. Separate account assets are
segregated from other investments. Separate accounts reflect two categories of
risk assumption: non-guaranteed separate accounts, wherein the policyholder
assumes substantially all the investment risk and rewards, and guaranteed
separate accounts, wherein the Company contractually guarantees either a minimum
return or account value to the policyholder.
(I) DEFERRED POLICY ACQUISITION COSTS
Policy acquisition costs, which include commissions and certain other expenses
associated with acquiring business, are deferred and amortized over the
estimated lives of the contracts, usually 20 years. Generally, acquisition costs
are deferred and amortized using the retrospective deposit method. Under the
retrospective deposit method, acquisition costs are amortized in proportion to
the present value of expected gross profits from surrender charges, investment
charges, mortality and expense margins. Actual gross profits can vary from
management's estimates, resulting in increases or decreases in the rate of
amortization. Management periodically updates these estimates, when appropriate,
and evaluates the recoverability of the deferred acquisition cost asset. When
appropriate, management revises its assumptions on the estimated gross profits
of these contracts and the cumulative amortization for the books of business are
re-estimated and adjusted by a cumulative charge or credit to income.
F-8
<PAGE>
Acquisition costs and their related deferral are included in the Company's other
expenses as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
------------------------------
Commissions $ 887 $1,069 $ 976
Deferred acquisition costs (898) (891) (862)
Other 642 588 472
------------------------------
TOTAL OTHER EXPENSES $ 631 $ 766 $ 586
------------------------------
</TABLE>
(J) FUTURE POLICY BENEFITS
Liabilities for future policy benefits are computed by the net level premium
method using interest rate assumptions varying from 3% to 11% and withdrawal and
mortality assumptions appropriate at the time the policies were issued.
(K) OTHER POLICYHOLDER FUNDS
Other policyholder funds include reserves for investment contracts without life
contingencies, corporate owned life insurance and universal life insurance
contracts. These reserves are based on account values, which represent the
balance that accrues to the benefit of policyholders.
3. INVESTMENTS AND DERIVATIVE INSTRUMENTS
(A) COMPONENTS OF NET INVESTMENT INCOME
<TABLE>
<CAPTION>
For the years ended
December 31,
--------------------------------
1999 1998 1997
<S> <C> <C> <C>
--------------------------------
Interest income from fixed maturities $ 934 $ 952 $ 932
Interest income from policy loans 391 789 425
Income from other investments 48 32 26
--------------------------------
Gross investment income 1,373 1,773 1,383
Less: Investment expenses 14 14 15
--------------------------------
NET INVESTMENT INCOME $1,359 $1,759 $1,368
--------------------------------
</TABLE>
(B) COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
<TABLE>
<CAPTION>
For the years ended
December 31,
--------------------------
1999 1998 1997
<S> <C> <C> <C>
--------------------------
Fixed maturities $(7) $(28) $(7)
Equity securities 2 21 12
Real estate and other 1 5 (1)
--------------------------
NET REALIZED CAPITAL GAINS (LOSSES) $(4) $(2) $ 4
--------------------------
</TABLE>
(C) NET UNREALIZED CAPITAL GAINS (LOSSES) ON EQUITY SECURITIES
<TABLE>
<CAPTION>
For the years ended
December 31,
--------------------------
1999 1998 1997
<S> <C> <C> <C>
--------------------------
Gross unrealized capital gains $ 9 $ 2 $14
Gross unrealized capital losses (2) (1) --
--------------------------
Net unrealized capital gains 7 1 14
Deferred income tax expense 2 -- 5
--------------------------
Net unrealized capital gains, net of tax 5 1 9
Balance -- beginning of year 1 9 8
--------------------------
NET CHANGE IN UNREALIZED CAPITAL GAINS (LOSSES) ON EQUITY
SECURITIES $ 4 $(8) $ 1
--------------------------
</TABLE>
F-9
<PAGE>
(D) NET UNREALIZED CAPITAL GAINS (LOSSES) ON FIXED MATURITIES
<TABLE>
<CAPTION>
For the years ended
December 31,
----------------------------
1999 1998 1997
<S> <C> <C> <C>
----------------------------
Gross unrealized capital gains $ 48 $ 421 $371
Gross unrealized capital losses (472) (108) (80)
Unrealized capital (gains) losses credited to policyholders 24 (32) (30)
----------------------------
Net unrealized capital gains (losses) (400) 281 261
Deferred income tax expense (benefit) (140) 98 91
----------------------------
Net unrealized capital gains (losses), net of tax (260) 183 170
Balance -- beginning of year 183 170 22
----------------------------
NET CHANGE IN UNREALIZED CAPITAL GAINS (LOSSES) ON FIXED
MATURITIES $(443) $ 13 $148
----------------------------
</TABLE>
(E) FIXED MATURITY INVESTMENTS
<TABLE>
<CAPTION>
As of December 31, 1999
---------------------------------------------
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
---------------------------------------------
U.S. Government and Government agencies and authorities
(guaranteed and sponsored) $ 180 $ 5 $ (3) $ 182
U.S. Government and Government agencies and authorities
(guaranteed and sponsored) -- asset backed 1,094 5 (35) 1,064
States, municipalities and political subdivisions 155 2 (1) 156
Foreign governments 289 6 (14) 281
Public utilities 865 7 (39) 833
All other corporate, including international 5,646 18 (244) 5,420
All other corporate -- asset backed 4,103 5 (123) 3,985
Short-term investments 1,156 -- -- 1,156
Certificates of deposit 434 -- (12) 422
Redeemable preferred stock 1 -- (1) --
---------------------------------------------
TOTAL FIXED MATURITIES $13,923 $48 $(472) $13,499
---------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
As of December 31, 1998
---------------------------------------------
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
---------------------------------------------
U.S. Government and Government agencies and authorities
(guaranteed and sponsored) $ 121 $ 2 $ -- $ 123
U.S. Government and Government agencies and authorities
(guaranteed and sponsored) -- asset backed 1,001 23 (8) 1,016
States, municipalities and political subdivisions 165 8 -- 173
Foreign governments 393 26 (7) 412
Public utilities 844 33 (3) 874
All other corporate, including international 5,469 260 (42) 5,687
All other corporate -- asset backed 4,155 58 (42) 4,171
Short-term investments 1,847 -- -- 1,847
Certificates of deposit 510 11 (6) 515
---------------------------------------------
TOTAL FIXED MATURITIES $14,505 $421 $(108) $14,818
---------------------------------------------
</TABLE>
The amortized cost and estimated fair value of fixed maturity investments as of
December 31, 1999 by estimated maturity year are shown below. Expected
maturities differ from contractual maturities due to call or prepayment
provisions. Asset backed securities, including mortgage backed securities and
collateralized mortgage obligations, are distributed to maturity year based on
the Company's estimates of the rate of future prepayments of principal over the
remaining lives of the securities. These estimates are developed using
prepayment speeds provided in broker consensus
F-10
<PAGE>
data. Such estimates are derived from prepayment speeds experienced at the
interest rate levels projected for the applicable underlying collateral and can
be expected to vary from actual experience.
<TABLE>
<CAPTION>
Amortized
Cost Fair Value
<S> <C> <C>
----------------------------
MATURITY
One year or less $ 2,454 $ 2,440
Over one year through five years 4,874 4,787
Over five years through ten years 3,072 2,940
Over ten years 3,523 3,332
----------------------------
TOTAL $13,923 $13,499
----------------------------
</TABLE>
(F) SALES OF FIXED MATURITY AND EQUITY SECURITY INVESTMENTS
Sales of fixed maturities, excluding short-term fixed maturities, for the years
ended December 31, 1999, 1998 and 1997 resulted in proceeds of $3.4 billion,
$3.2 billion and $4.2 billion, gross realized capital gains of $153, $103 and
$169, gross realized capital losses (including writedowns) of $160, $131 and
$176, respectively. Sales of equity security investments for the years ended
December 31, 1999, 1998 and 1997 resulted in proceeds of $7, $35 and $132 and
gross realized capital gains of $2, $21 and $12, respectively, and no gross
realized capital losses for all periods.
(G) CONCENTRATION OF CREDIT RISK
The Company is not exposed to any significant concentration of credit risk in
fixed maturities of a single issuer greater than 10% of stockholder's equity.
(H) DERIVATIVE INSTRUMENTS
Hartford Life Insurance Company utilizes a variety of derivative instruments,
including swaps, caps, floors, forwards and exchange traded futures and options,
in accordance with Company policy and in order to achieve one of three Company
approved objectives: to hedge risk arising from interest rate, price or currency
exchange rate volatility; to manage liquidity; or, to control transactions
costs. The Company utilizes derivative instruments to manage market risk through
four principal risk management strategies: hedging anticipated transactions,
hedging liability instruments, hedging invested assets and hedging portfolios of
assets and/or liabilities. The Company does not trade in these instruments for
the express purpose of earning trading profits.
The Company maintains a derivatives counterparty exposure policy which
establishes market based credit limits, favors long-term financial stability and
creditworthiness, and typically requires credit enhancement/credit risk reducing
agreements. Credit risk is measured as the amount owed to the Company based on
current market conditions and potential payment obligations between the Company
and its counterparties. Credit exposures are quantified weekly and netted, and
collateral is pledged to or held by the Company to the extent the current value
of derivatives exceed exposure policy thresholds.
The Company's derivative program is monitored by an internal compliance unit and
is reviewed by senior management. Notional amounts, which represent the basis
upon which pay or receive amounts are calculated and are not reflective of
credit risk, pertaining to derivative financial instruments (excluding the
Company's guaranteed separate account derivative investments), totaled $5.5
billion and $6.2 billion ($3.9 billion and $3.9 billion related to the Company's
investments, $1.6 billion and $2.3 billion on the Company's liabilities) as of
December 31, 1999 and 1998, respectively.
The tables below provide a summary of derivative instruments held by Hartford
Life Insurance Company as of December 31, 1999 and 1998, segregated by major
investment and liability category:
F-11
<PAGE>
<TABLE>
<CAPTION>
1999 -- Amount Hedged (Notional Amounts)
----------------------------------------------------------------------------------
Total Issued Purchased Interest Rate Foreign Total
Carrying Caps & Caps, Floors Swaps & Currency Notional
ASSETS HEDGED Value Floors & Options Futures (1) Forwards Swaps (2) Amount
<S> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------
Asset backed securities (excluding
anticipatory) $ 5,049 $ -- $ -- $ -- $ 911 $-- $ 911
Anticipatory (3) -- -- -- 5 112 -- 117
Other bonds and notes 7,294 494 611 -- 1,676 80 2,861
Short-term investments 1,156 -- -- -- -- -- --
----------------------------------------------------------------------------------
TOTAL FIXED MATURITIES 13,499 494 611 5 2,699 80 3,889
Equity securities, policy loans and
other investments 4,585 -- -- -- -- -- --
----------------------------------------------------------------------------------
TOTAL INVESTMENTS $18,084 494 611 5 2,699 80 3,889
----------------------------------------------------------------------------------
OTHER POLICYHOLDER FUNDS $16,004 -- 1,150 -- 430 -- 1,580
----------------------------------------------------------------------------------
TOTAL DERIVATIVE INSTRUMENTS --
NOTIONAL VALUE $ 494 $1,761 $ 5 $3,129 $80 $5,469
----------------------------------------------------------------------------------
TOTAL DERIVATIVE INSTRUMENTS --
FAIR VALUE $ (22) $ 8 $ -- $ (30) $ 2 $ (42)
----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1998 -- Amount Hedged (Notional Amounts)
-------------------------------------------------------------------------------
Total Issued Purchased Interest Rate Foreign Total
Carrying Caps & Caps & Swaps & Currency Notional
ASSETS HEDGED Value Floors Floors Futures (1) Forwards Swaps (2) Amount
<S> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------
Asset backed securities (excluding
anticipatory) $ 5,187 $ 44 $ 243 $ 3 $ 885 $-- $1,175
Anticipatory (3) -- -- -- -- 235 -- 235
Other bonds and notes 7,683 461 597 18 1,300 90 2,466
Short-term investments 1,948 -- -- -- -- -- --
-------------------------------------------------------------------------------
TOTAL FIXED MATURITIES 14,818 505 840 21 2,420 90 3,876
Equity securities, policy loans and
other investments 6,979 -- -- -- -- -- --
-------------------------------------------------------------------------------
TOTAL INVESTMENTS $21,797 505 840 21 2,420 90 3,876
-------------------------------------------------------------------------------
OTHER POLICYHOLDER FUNDS $19,615 -- 1,150 -- 1,195 -- 2,345
-------------------------------------------------------------------------------
TOTAL DERIVATIVE INSTRUMENTS --
NOTIONAL VALUE $ 505 $1,990 $21 $3,615 $90 $6,221
-------------------------------------------------------------------------------
TOTAL DERIVATIVE INSTRUMENTS --
FAIR VALUE $ (6) $ 19 $-- $ 27 $(7) $ 33
-------------------------------------------------------------------------------
</TABLE>
(1) As of December 31, 1999 and 1998, approximately 100% and 5%,
respectively, of the notional futures contracts expire within one year.
(2) As of December 31, 1999 and 1998, approximately 28% and 11%,
respectively, of foreign currency swaps expire within one year.
(3) Deferred gains and losses on anticipatory transactions are included in
the carrying value of fixed maturities in the Consolidated Balance Sheets. At
the time of the ultimate purchase, they are reflected as a basis adjustment to
the purchased asset. As of December 31, 1999, the Company had $1.4 of net
deferred losses on interest rate swaps and futures. The Company expects to basis
adjust the entire loss in 2000. During 1999, $0.2 of new future activity was
basis adjusted. As of December 31, 1998, the Company had no deferred gains for
interest rate swaps.
F-12
<PAGE>
The following is a reconciliation of notional amounts by derivative type and
strategy as of December 31, 1999 and 1998:
<TABLE>
<CAPTION>
BY DERIVATIVE TYPE
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------
<CAPTION>
December 31, 1998 Maturities/ December 31, 1999
Notional Amount Additions Terminations (1) Notional Amount
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Caps $1,912 $ -- $ 148 $1,764
Floors 583 -- 178 405
Swaps/Forwards 3,705 991 1,487 3,209
Futures 21 292 308 5
Options -- 86 -- 86
-------------------------------------------------------------------------------------------------------------------------------
TOTAL $6,221 $1,369 $2,121 $5,469
-------------------------------------------------------------------------------------------------------------------------------
BY STRATEGY
-------------------------------------------------------------------------------------------------------------------------------
Liability $2,345 $ 17 $ 782 $1,580
Anticipatory 235 204 322 117
Asset 2,398 831 427 2,802
Portfolio 1,243 317 590 970
-------------------------------------------------------------------------------------------------------------------------------
TOTAL $6,221 $1,369 $2,121 $5,469
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) During 1999, the Company had no significant gains or losses on
terminations of hedge positions using derivative financial instruments.
4. FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 "Disclosure about Fair Value of Financial Instruments" requires
disclosure of fair value information of financial instruments. For certain
financial instruments where quoted market prices are not available, other
independent valuation techniques and assumptions are used. Because considerable
judgment is used, these estimates are not necessarily indicative of amounts that
could be realized in a current market exchange. SFAS No. 107 excludes certain
financial instruments from disclosure, including insurance contracts. Hartford
Life Insurance Company uses the following methods and assumptions in estimating
the fair value of each class of financial instrument.
Fair value for fixed maturities and marketable equity securities approximates
those quotations published by applicable stock exchanges or received from other
reliable sources.
For policy loans, carrying amounts approximate fair value.
Other invested assets consist primarily of partnership investments, which are
accounted for by the equity method, and mortgage loans, whereby the carrying
value approximates fair value.
Other policyholder funds fair value information is determined by estimating
future cash flows, discounted at the current market rate.
The fair value of derivative financial instruments, including swaps, caps,
floors, futures, options and forward commitments, is determined using a pricing
model which is similar to external valuation models.
The carrying amount and fair values of Hartford Life Insurance Company's
financial instruments as of December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
------------------------------------
ASSETS
Fixed maturities $13,499 $13,499 $14,818 $14,818
Equity securities 56 56 31 31
Policy loans 4,187 4,187 6,684 6,684
Other investments 342 348 264 309
LIABILITIES
Other policyholder funds (1) 11,734 11,168 11,709 11,726
------------------------------------
</TABLE>
(1) Excludes corporate owned life insurance and universal life insurance
contracts.
F-13
<PAGE>
5. SEPARATE ACCOUNTS
Hartford Life Insurance Company maintained separate account assets and
liabilities totaling $110.4 billion and $90.3 billion as of December 31, 1999
and 1998, respectively, which are reported at fair value. Separate account
assets, which are segregated from other investments, reflect two categories of
risk assumption: non-guaranteed separate accounts totaling $101.7 billion and
$80.6 billion as of December 31, 1999 and 1998, respectively, wherein the
policyholder assumes substantially all the investment risk, and guaranteed
separate accounts totaling $8.7 and $9.7 billion as of December 31, 1999 and
1998, respectively, wherein Hartford Life Insurance Company contractually
guarantees either a minimum return or account value to the policyholder.
Included in non-guaranteed separate account assets were policy loans totaling
$860 and $1.8 billion as of December 31, 1999 and 1998, respectively. Net
investment income (including net realized capital gains and losses) and interest
credited to policyholders on separate account assets are not reflected in the
Consolidated Statements of Income.
Separate account management fees and other revenues were $1.1 billion, $908 and
$699 in 1999, 1998 and 1997, respectively. The guaranteed separate accounts
include fixed market value adjusted (MVA) individual annuities and modified
guaranteed life insurance. The average credited interest rate on these contracts
was 6.5% and 6.6% as of December 31, 1999 and 1998, respectively. The assets
that support these liabilities were comprised of $8.7 billion and $9.5 billion
in fixed maturities as of December 31, 1999 and 1998, respectively, and $0.2
billion of other invested assets as of December 31, 1998. The portfolios are
segregated from other investments and are managed to minimize liquidity and
interest rate risk. In order to minimize the risk of disintermediation
associated with early withdrawals, fixed MVA annuity and modified guaranteed
life insurance contracts carry a graded surrender charge as well as a market
value adjustment. Additional investment risk is hedged using a variety of
derivatives which totaled $(96) and $40 in carrying value and $2.0 billion and
$3.5 billion in notional amounts as of December 31, 1999 and 1998, respectively.
6. STATUTORY RESULTS
<TABLE>
<CAPTION>
For the years ended December 31,
------------------------------------
1999 1998 1997
<S> <C> <C> <C>
------------------------------------
Statutory net income $ 151 $ 211 $ 214
------------------------------------
Statutory capital and surplus $1,905 $1,676 $1,441
------------------------------------
</TABLE>
A significant percentage of the consolidated statutory surplus is permanently
reinvested or is subject to various state regulatory restrictions which limit
the payment of dividends without prior approval. The total amount of statutory
dividends which may be paid by the insurance subsidiaries of the Company in
2000, without prior regulatory approval, is estimated to be $190.
Hartford Life Insurance Company and its domestic insurance subsidiaries prepare
their statutory financial statements in accordance with accounting practices
prescribed by the applicable state of domicile. Prescribed statutory accounting
practices include publications of the National Association of Insurance
Commissioners (NAIC), as well as state laws, regulations and general
administrative rules.
The NAIC adopted the Codification of Statutory Accounting Principles (SAP) in
March 1998. The proposed effective date for the statutory accounting guidance is
January 1, 2001. It is expected that Hartford Life Insurance Company's
domiciliary state will adopt the SAP and the Company will make the necessary
changes required for implementation. The Company has not yet determined the
impact that the SAP will have on the statutory financial statements of Hartford
Life Insurance Company and its insurance subsidiaries.
7. STOCK COMPENSATION PLANS
Hartford Life Insurance Company's employees are included in the 1997 Hartford
Life, Inc. Incentive Stock Plan (the "Plan"), which was adopted during the
second quarter of 1997. Under the Plan, options granted may be either non-
qualified options or incentive stock options qualifying under Section 422A of
the Internal Revenue Code, stock appreciation rights, performance shares or
restricted stock, or any combination of the foregoing. The aggregate number of
shares of Class A Common Stock which may be awarded in any one year shall be
subject to an annual limit. The maximum number of shares of Class A Common Stock
which may be granted under the Plan in each year shall be 1.5% of the total
issued and outstanding shares of Hartford Life Class A and Class B Common Stock
and treasury stock as reported in the Annual Report on Hartford Life's Form 10-K
of the Company for the preceding year plus unused portions of such limit from
prior years.
In addition, no more than 5 million shares of Class A Common Stock shall be
cumulatively available for awards of incentive stock options under the Plan, and
no more than 20% of the total number of shares on a cumulative basis shall be
available for restricted stock and performance shares awards. Performance shares
awards of common stock granted under the Plan become payable upon the attainment
of specific performance goals achieved over a three year period.
F-14
<PAGE>
All options granted have an exercise price equal to the market price of the
Company's stock on the date of grant and an option's maximum term is ten years.
Certain non-performance based options become exercisable upon the attainment of
specified market price appreciation of Hartford Life's common shares or at seven
years after the date of grant, while the remaining non-performance based options
become exercisable over a three year period commencing with the date of grant.
During the second quarter of 1997, Hartford Life established the Hartford Life,
Inc. Employee Stock Purchase Plan (ESPP). Under this plan, eligible employees of
Hartford Life and the Company may purchase Class A Common Stock of Hartford Life
at a 15% discount from the lower of the market price at the beginning or end of
the quarterly offering period. Hartford Life may sell up to 2,700,000 shares of
stock to eligible employees. Hartford Life sold 120,694, 121,943 and 54,316
shares under the ESPP in 1999, 1998 and 1997, respectively. The weighted average
fair value of the discount under the ESPP was $7.48 per share in 1999, $13.74
per share in 1998 and $9.63 per share in 1997.
8. POSTRETIREMENT BENEFIT AND SAVINGS PLANS
(A) PENSION PLANS
Hartford Life Insurance Company's employees are included in The Hartford's
noncontributory defined benefit pension plans. These plans provide pension
benefits that are based on years of service and the employee's compensation
during the last ten years of employment. The Company's funding policy is to
contribute annually an amount between the minimum funding requirements set forth
in the Employee Retirement Income Security Act of 1974, as amended, and the
maximum amount that can be deducted for U.S. federal income tax purposes.
Generally, pension costs are funded through the purchase of the Company's group
pension contracts. The cost to the Company was approximately $6 in both 1999 and
1998, and $5 in 1997.
The Company also provides, through The Hartford, certain health care and life
insurance benefits for eligible retired employees. A substantial portion of the
Company's employees may become eligible for these benefits upon retirement. The
Company's contribution for health care benefits will depend on the retiree's
date of retirement and years of service. In addition, the plan has a defined
dollar cap which limits average Company contributions. The Company has prefunded
a portion of the health care and life insurance obligations through trust funds
where such prefunding can be accomplished on a tax effective basis.
Postretirement health care and life insurance benefits expense, allocated by The
Hartford, was immaterial to the results of operations for 1999, 1998 and 1997.
The assumed rate in the per capita cost of health care (the health care trend
rate) was 7.1% for 1999, decreasing ratably to 5.0% in the year 2003. Increasing
or decreasing the health care trend rates by one percent per year would have an
immaterial impact on the accumulated postretirement benefit obligation and the
annual expense. To the extent that the actual experience differs from the
inherent assumptions, the effect will be amortized over the average future
service of covered employees.
(B) INVESTMENT AND SAVINGS PLAN
Substantially all employees of the Company are eligible to participate in The
Hartford's Investment and Savings Plan. Under this plan, designated
contributions, which may be invested in Class A Common Stock of Hartford Life or
certain other investments, are matched, up to 3% of compensation, by the
Company. The cost to Hartford Life Insurance Company for the above-mentioned
plan was approximately $4 in both 1999 and 1998, and $2 in 1997.
9. REINSURANCE
Hartford Life Insurance Company cedes insurance to other insurers in order to
limit its maximum losses. Such transfer does not relieve Hartford Life Insurance
Company of its primary liability. Failure of reinsurers to honor their
obligations could result in losses to Hartford Life Insurance Company. Hartford
Life Insurance Company reduces this risk by evaluating the financial condition
of reinsurers, and monitoring for possible concentrations of credit risk.
Hartford Life Insurance Company has no significant reinsurance related
concentrations of credit risk.
The Company records a receivable for the portion of reinsured benefits paid and
insurance liabilities. Reinsurance recoveries on ceded reinsurance contracts
were $397, $300 and $418 for the years ended December 31, 1999, 1998 and 1997,
respectively. Hartford Life Insurance Company also assumes insurance from other
insurers.
The effect of reinsurance on premiums and other considerations is summarized as
follows:
<TABLE>
<CAPTION>
For the years ended December 31,
------------------------------------
1999 1998 1997
<S> <C> <C> <C>
------------------------------------
Direct premiums and other considerations $2,660 $2,722 $2,164
Reinsurance assumed 95 150 159
Reinsurance ceded (710) (654) (686)
------------------------------------
PREMIUMS AND OTHER CONSIDERATIONS $2,045 $2,218 $1,637
------------------------------------
</TABLE>
F-15
<PAGE>
Hartford Life Insurance Company maintains certain reinsurance agreements with
HLA, whereby the Company cedes both group life and group accident and health
risk. Under these treaties, the Company ceded group life premium of $119, $132
and $80 in 1999, 1998 and 1997, respectively, and accident and health premium of
$430, $379, and $335, respectively, to HLA.
Pursuant to a reinsurance agreement dating back to 1992, the Company assumed
100% of certain blocks of individual life insurance from HLA. Under this
reinsurance agreement Hartford Life Insurance Company assumed $9, $13 and $18 of
premium from HLA in 1999, 1998 and 1997, respectively. On December 1, 1999, HLA
recaptured this in force block of individual life insurance previously ceded to
the Company. This commutation resulted in a reduction in the Company's assets of
$666, consisting of $556 of invested assets, $99 of deferred policy acquisition
costs and $11 of other assets. Liabilities decreased $650, consisting of $543 of
other policyholder funds, $60 of future policy benefits and $47 of other
liabilities. As a result, the Company recognized an after-tax loss relating to
this transaction of $16.
In 1998, the Hartford Life recaptured an in force block of Corporate Owned Life
Insurance (COLI) business previously ceded to MBL Assurance Co. of New Jersey
(MBL Life). The transaction was consummated through an assignment of a
reinsurance arrangement between Hartford Life and MBL Life to a Hartford Life
subsidiary. Hartford Life originally assumed the life insurance block in 1992
from Mutual Benefit Life, which was placed in court-supervised rehabilitation in
1991, and reinsured a portion of those policies back to MBL Life. This recapture
was effective January 1, 1998 and resulted in a decrease in ceded premiums and
other considerations of $163 in 1998. Additionally, this transaction resulted in
a decrease in reinsurance recoverables of $4.8 billion, which was exchanged for
the fair value of assets comprised of $4.3 billion in policy loans and $443 in
other net assets.
10. INCOME TAX
Hartford Life and The Hartford have entered into a tax sharing agreement under
which each member in the consolidated U.S. federal income tax return will make
payments between them such that, with respect to any period, the amount of taxes
to be paid by the Company, subject to certain adjustments, generally will be
determined as though the Company were filing separate federal, state and local
income tax returns.
As long as The Hartford continues to own at least 80% of the combined voting
power and 80% of the value of the outstanding capital stock of Hartford Life,
the Company will be included for federal income tax purposes in the affiliated
group of which The Hartford is the common parent. It is the intention of The
Hartford and its non-life subsidiaries to file a single consolidated federal
income tax return. The life insurance companies will file a separate
consolidated federal income tax return for 1997 and 1998 and intend to file a
separate consolidated federal income tax return for 1999. The Company's
effective tax rate was 35%, 35% and 36% in 1999, 1998 and 1997, respectively.
Income tax expense (benefit) is as follows:
<TABLE>
<CAPTION>
For the years ended
December 31,
------------------------------
1999 1998 1997
<S> <C> <C> <C>
------------------------------
Current $(50) $307 $162
Deferred 241 (119) 5
------------------------------
INCOME TAX EXPENSE $191 $188 $167
------------------------------
</TABLE>
A reconciliation of the tax provision at the U.S. federal statutory rate to the
provision (benefit) for income taxes is as follows:
<TABLE>
<CAPTION>
For the years ended
December 31,
------------------------------
1999 1998 1997
<S> <C> <C> <C>
------------------------------
Tax provision at the U.S. federal statutory rate $193 $188 $164
Other (2) -- 3
------------------------------
TOTAL $191 $188 $167
------------------------------
</TABLE>
Deferred tax assets (liabilities) include the following as of December 31:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C> <C>
---------------------
Tax basis deferred policy acquisition costs $ 720 $ 751
Financial statement deferred policy acquisition costs and
reserves 11 103
Employee benefits (3) 4
Net unrealized capital losses (gains) on securities 138 (98)
Investments and other (407) (296)
---------------------
TOTAL $ 459 $ 464
---------------------
</TABLE>
F-16
<PAGE>
Hartford Life Insurance Company had a current tax receivable of $56 as of
December 31, 1999 and a current tax payable of $65 as of December 31, 1998.
Prior to the Tax Reform Act of 1984, the Life Insurance Company Income Tax Act
of 1959 permitted the deferral from taxation of a portion of statutory income
under certain circumstances. In these situations, the deferred income was
accumulated in a "Policyholders' Surplus Account" and, based on current tax law,
will be taxable in the future only under conditions which management considers
to be remote; therefore, no federal income taxes have been provided on the
balance in this account, which for tax return purposes was $104 as of December
31, 1999.
11. RELATED PARTY TRANSACTIONS
Transactions of the Company with its affiliates relate principally to tax
settlements, reinsurance, insurance coverage, rental and service fees, payment
of dividends and capital contributions. In addition, certain affiliated
insurance companies purchased group annuity contracts from the Company to fund
pension costs and claim annuities to settle casualty claims. Substantially all
general insurance expenses related to the Company, including rent and employee
benefit plan expenses, are initially paid by The Hartford. Direct expenses are
allocated to the Company using specific identification, and indirect expenses
are allocated using other applicable methods. Indirect expenses include those
for corporate areas which, depending on type, are allocated based on either a
percentage of direct expenses or on utilization. Indirect expenses allocated to
the Company by The Hartford were $47 in both 1999 and 1998 and $39 in 1997.
12. COMMITMENTS AND CONTINGENT LIABILITIES
(A) LITIGATION
Hartford Life Insurance Company is involved in pending and threatened litigation
in the normal course of its business in which claims for alleged economic and
punitive damages have been asserted. Some of these cases have been filed as
purported class actions and some cases have been filed in certain jurisdictions
that permit punitive damage awards disproportionate to the actual damages
incurred. Although there can be no assurances, at the present time the Company
does not anticipate that the ultimate liability arising from such pending or
threatened litigation, after consideration of provisions made for estimated
losses and costs of defense, will have a material adverse effect on the
financial condition or operating results of the Company.
(B) GUARANTY FUNDS
Under insurance guaranty fund laws in each state, the District of Columbia and
Puerto Rico, insurers licensed to do business can be assessed by state insurance
guaranty associations for certain obligations of insolvent insurance companies
to policyholders and claimants. Recent regulatory actions against certain large
life insurers encountering financial difficulty have prompted various state
insurance guaranty associations to begin assessing life insurance companies for
the deemed losses. Most of these laws do provide, however, that an assessment
may be excused or deferred if it would threaten an insurer's solvency and
further provide annual limits on such assessments. Part of the assessments paid
by the Company and its subsidiaries pursuant to these laws may be used as
credits for a portion of the associated premium taxes. The Company paid guaranty
fund assessments of approximately $2, $9 and $15 in 1999, 1998 and 1997,
respectively, of which $1 in 1999 and $4 in both 1998 and 1997 were estimated to
be creditable against premium taxes.
(C) LEASES
The rent paid to Hartford Fire for space occupied by the Company was $9 in 1999
and $7 in both 1998 and 1997. Future minimum rental commitments are as follows:
<TABLE>
<S> <C>
2000 $ 14
2001 14
2002 13
2003 12
2004 12
Thereafter 62
--------
TOTAL $ 127
--------
</TABLE>
The principal executive offices of Hartford Life Insurance Company, together
with its parent, are located in Simsbury, Connecticut. Rental expense is
recognized on a level basis over the term of the primary sublease for the
facility located in Simsbury, Connecticut, which expires on December 31, 2009,
and amounted to approximately $9 in each of the years ended December 31, 1999,
1998 and 1997.
(D) TAX MATTERS
Hartford Life's federal income tax returns are routinely audited by the Internal
Revenue Service. Hartford Life's 1996-1997 federal income tax returns are
currently under audit by the Internal Revenue Service. Management believes that
sufficient provision has been made in the financial statements for issues that
may result from tax examinations and other tax related matters for all open tax
years.
F-17
<PAGE>
13. SEGMENT INFORMATION
Hartford Life Insurance Company is organized into three reportable operating
segments which include Investment Products, Individual Life and Corporate Owned
Life Insurance (COLI). Investment Products offers individual fixed and variable
annuities, mutual funds, retirement plan services other investment products.
Individual Life sells a variety of life insurance products, including variable
life, universal life, interest sensitive whole life and term life insurance.
COLI primarily offers variable products used by employers to fund non-qualified
benefits or other post-employment benefit obligations as well as leveraged COLI.
The Company includes in "Other" corporate items not directly allocable to any of
its reportable operating segments, as well as certain employee benefit products
including group life and disability insurance that is directly written by the
Company and is substantially ceded to its parent, HLA.
The accounting policies of the reportable operating segments are the same as
those described in the summary of significant accounting policies in Note 2.
Hartford Life Insurance Company evaluates performance of its segments based on
revenues, net income and the segment's return on allocated capital. The Company
charges direct operating expenses to the appropriate segment and allocates the
majority of indirect expenses to the segments based on an intercompany expense
arrangement. Intersegment revenues are not significant and primarily occur
between corporate and the operating segments. These amounts include interest
income on allocated surplus and the amortization of net realized capital gains
and losses through net investment income utilizing the duration of the segment's
investment portfolios. The Company's revenues are primarily derived from
customers within the United States. The Company's long-lived assets primarily
consist of deferred policy acquisition costs and deferred tax assets from within
the United States. The following tables outlines summarized financial
information concerning the Company's segments.
<TABLE>
<CAPTION>
Investment Individual
1999 Products Life COLI Other Total
<S> <C> <C> <C> <C> <C>
--------------------------------------------------
Total revenues $ 1,884 $ 574 $ 830 $ 112 $ 3,400
Net investment income 699 169 431 60 1,359
Amortization of deferred policy acquisition costs 411 128 -- -- 539
Income tax expense (benefit) 159 37 15 (20) 191
Net income (loss) 300 68 28 (35) 361
Assets 106,352 5,962 20,198 2,453 134,965
</TABLE>
<TABLE>
<CAPTION>
Investment Individual
1998 Products Life COLI Other Total
<S> <C> <C> <C> <C> <C>
--------------------------------------------------
Total revenues $ 1,779 $ 543 $ 1,567 $ 86 $ 3,975
Net investment income 736 181 793 49 1,759
Amortization of deferred policy acquisition costs 326 105 -- -- 431
Income tax expense (benefit) 145 35 12 (4) 188
Net income (loss) 270 64 24 (8) 350
Assets 87,207 5,228 22,631 3,197 118,263
</TABLE>
<TABLE>
<CAPTION>
Investment Individual
1997 Products Life COLI Other Total
<S> <C> <C> <C> <C> <C>
-------------------------------------------------
Total revenues $ 1,510 $ 487 $ 980 $ 32 $ 3,009
Net investment income 739 164 429 36 1,368
Amortization of deferred policy acquisition costs 250 83 -- 2 335
Income tax expense 111 30 15 11 167
Net income 206 55 27 14 302
Assets 72,288 4,914 17,800 2,743 97,745
</TABLE>
14. QUARTERLY RESULTS FOR 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
<S> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, June 30, September 30, December 31,
------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998 1999 1998
------------------------------------------------------------------------------
Revenues $838 $915 $853 $721 $846 $826 $863 $1,513
Benefits, claims and expenses 703 787 722 591 695 688 728 1,371
Net income 88 83 85 85 100 89 88 93
</TABLE>
F-18
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE I -- SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN AFFILIATES
AS OF DECEMBER 31, 1999
(IN MILLIONS)
<TABLE>
<CAPTION>
Amount at
Fair which shown
Type of Investment Cost Value on Balance Sheet
<S> <C> <C> <C>
------------------------------------
FIXED MATURITIES
Bonds and Notes
U.S. Government and Government agencies and authorities
(guaranteed and sponsored) $ 180 $ 182 $ 182
U.S. Government and Government agencies and authorities
(guaranteed and sponsored) -- asset backed 1,094 1,064 1,064
States, municipalities and political subdivisions 155 156 156
Foreign governments 289 281 281
Public utilities 865 833 833
All other corporate, including international 5,646 5,420 5,420
All other corporate -- asset backed 4,103 3,985 3,985
Short-term investments 1,156 1,156 1,156
Certificates of deposit 434 422 422
Redeemable preferred stock 1 -- --
------------------------------------
TOTAL FIXED MATURITIES 13,923 13,499 13,499
------------------------------------
EQUITY SECURITIES
Common Stocks
Industrial and miscellaneous 49 56 56
------------------------------------
TOTAL EQUITY SECURITIES 49 56 56
------------------------------------
TOTAL FIXED MATURITIES AND EQUITY SECURITIES 13,972 13,555 13,555
------------------------------------
Policy Loans 4,187 4,187 4,187
------------------------------------
OTHER INVESTMENTS
Mortgage loans on real estate 198 198 198
Other invested assets 127 150 144
------------------------------------
TOTAL OTHER INVESTMENTS 325 348 342
------------------------------------
TOTAL INVESTMENTS $18,484 $18,090 $18,084
------------------------------------
</TABLE>
S-1
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
Net Benefits,
Deferred Realized Claims and
Policy Future Other Premiums Net Capital Claim
Acquisition Policy Policyholder and Other Investment Gains Adjustment
Segment Costs Benefits Funds Considerations Income (Losses) Expenses
<S> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------
1999
Investment Products $3,099 $2,744 $ 8,859 $1,185 $ 699 $-- $ 660
Individual Life 914 270 1,880 405 169 -- 254
Corporate Owned Life Insurance -- 321 5,244 399 431 -- 621
Other -- 997 21 56 60 (4) 39
-------------------------------------------------------------------------------------------
CONSOLIDATED OPERATIONS $4,013 $4,332 $16,004 $2,045 $1,359 $(4) $1,574
-------------------------------------------------------------------------------------------
1998
-------------------------------------------------------------------------------------------
Investment Products $2,823 $2,407 $ 9,194 $1,043 $ 736 $-- $ 670
Individual Life 931 466 2,307 363 181 (1) 262
Corporate Owned Life Insurance -- 225 8,097 774 793 -- 924
Other -- 497 17 38 49 (1) 55
-------------------------------------------------------------------------------------------
CONSOLIDATED OPERATIONS $3,754 $3,595 $19,615 $2,218 $1,759 $(2) $1,911
-------------------------------------------------------------------------------------------
1997
-------------------------------------------------------------------------------------------
Investment Products $2,478 $2,070 $ 9,620 $ 771 $ 739 $-- $ 677
Individual Life 837 392 2,182 323 164 -- 242
Corporate Owned Life Insurance -- 56 9,259 551 429 -- 439
Other -- 541 (27) (8) 36 4 21
-------------------------------------------------------------------------------------------
CONSOLIDATED OPERATIONS $3,315 $3,059 $21,034 $1,637 $1,368 $ 4 $1,379
-------------------------------------------------------------------------------------------
<CAPTION>
Amortization
of Deferred
Policy
Acquisition Dividends to Other
Segment Costs Policyholders Expenses
<S> <C> <C> <C>
---------------------------------------
1999
Investment Products $411 $ -- $354
Individual Life 128 -- 87
Corporate Owned Life Insurance -- 104 62
Other -- -- 128
---------------------------------------
CONSOLIDATED OPERATIONS $539 $104 $631
---------------------------------------
1998
---------------------------------------
Investment Products $326 $ -- $368
Individual Life 105 -- 77
Corporate Owned Life Insurance -- 329 278
Other -- -- 43
---------------------------------------
CONSOLIDATED OPERATIONS $431 $329 $766
---------------------------------------
1997
---------------------------------------
Investment Products $250 $ -- $266
Individual Life 83 -- 77
Corporate Owned Life Insurance -- 240 259
Other 2 -- (16)
---------------------------------------
CONSOLIDATED OPERATIONS $335 $240 $586
---------------------------------------
</TABLE>
S-2
<PAGE>
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE IV -- REINSURANCE
(IN MILLIONS)
<TABLE>
<CAPTION>
Percentage
Gross Ceded to Assumed From Net of Amount
Amount Other Companies Other Companies Amount Assumed to Net
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------------
FOR THE YEAR ENDED
DECEMBER 31, 1999
Life insurance in force $307,970 $131,162 $11,785 $188,593 6.2%
PREMIUMS AND OTHER CONSIDERATIONS
Life insurance and annuities $ 2,212 $ 275 $ 84 $ 2,021 4.2%
Accident and health insurance 448 435 11 24 45.8%
------------------------------------------------------------------------
TOTAL PREMIUMS AND OTHER CONSIDERATIONS $ 2,660 $ 710 $ 95 $ 2,045 4.6%
------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1998
------------------------------------------------------------------------
Life insurance in force $326,400 $200,782 $18,289 143,907 12.7%
------------------------------------------------------------------------
PREMIUMS AND OTHER CONSIDERATIONS
Life insurance and annuities $ 2,329 $ 271 142 $ 2,200 6.5%
Accident and health insurance 393 383 8 18 44.4%
------------------------------------------------------------------------
TOTAL PREMIUMS AND OTHER CONSIDERATIONS $ 2,722 $ 654 150 $ 2,218 6.8%
------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1997
------------------------------------------------------------------------
Life insurance in force $245,487 $178,771 $33,156 $ 99,872 33.2%
------------------------------------------------------------------------
PREMIUMS AND OTHER CONSIDERATIONS
Life insurance and annuities $ 1,818 $ 340 $ 157 $ 1,635 9.6%
Accident and health insurance 346 346 2 2 100.0%
------------------------------------------------------------------------
TOTAL PREMIUMS AND OTHER CONSIDERATIONS $ 2,164 $ 686 $ 159 $ 1,637 9.7%
------------------------------------------------------------------------
</TABLE>
S-3
