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As filed with the Securities and Exchange Commission on April 25, 1997
File No. 33-60967
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
CG VARIABLE LIFE INSURANCE SEPARATE ACCOUNT A
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(Exact Name of Registrant)
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
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(Name of Depositor)
900 Cottage Grove Road, Bloomfield, Connecticut 06152
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(203) 726-6000
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(Address and Telephone Number of Depositor's Principal Executive Offices)
Jerold H. Rosenblum, Esquire Copy to:
Connecticut General Life Insurance Company Michael James, Esquire
Two Liberty Place Two Liberty Place
47th Floor 47th Floor
Philadelphia, PA 19192-2475 Philadelphia, PA 19192-2475
(Name and Address of Agent for Service)
Michael Berenson, Esquire
Suite 400 East
1025 Thomas Jefferson St., N.W.
Washington, D.C. 20007-0805
Approximate date of proposed public offering: Continuous
INDEFINITE NUMBER OF UNITS OF INTEREST IN VARIABLE LIFE INSURANCE CONTRACTS
(Title and Amount of Securities Being Registered)
An indefinite amount of the securities being offered by the Registration
Statement is being registered pursuant to Rule 24f-2 under the Investment
Company Act of 1940. The initial registration fee of $500 has been paid with
this declaration.
The registrant amends this Registration Statement of such date or dates as may
be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a)may determine.
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
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on _______, pursuant to paragraph (b) of Rule 485
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60 days after filing pursuant to paragraph (a) of Rule 485
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X on May 1. 1997, pursuant to paragraph (a) of Rule 485
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CONNECTICUT GENERAL
LIFE INSURANCE COMPANY
CG VARIABLE LIFE INSURANCE
SEPARATE ACCOUNT A MAILING ADDRESS:
CIGNA
HOME OFFICE LOCATION: LEHIGH VALLEY CORPORATE CENTER
900 COTTAGE GROVE ROAD 1455 VALLEY CENTER PARKWAY
HARTFORD, CT 06152 BETHLEHEM, PA 18017
(800) 225-0646
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THE GROUP VARIABLE UNIVERSAL LIFE INSURANCE POLICY
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This prospectus describes a group variable universal life insurance contract
("Policy") offered by Connecticut General Life Insurance Company ("the
Company"). The Policy is a group master contract entered into between a Group
Policyholder (an employer or a union) and the Company. Certain Employees
(employees or union members) as agreed upon between the Group Policyholder and
the Company, may become insured under the Policy. Employees who become insured
under the Policy will receive a Certificate of Insurance ("Certificate")
describing their rights under the Policy. Employees may obtain life insurance
coverage for their spouses and dependent children as well.
This Policy is intended to provide life insurance benefits. It provides for a
death benefit, flexible premium payments, a choice of underlying funding options
for the accumulation of cash value, and a choice of additional benefit options.
Its cash value will, and the death benefit may, vary with the investment
performance of the underlying funding options selected. Certificate Cash Values
may be used to continue the Certificate in force, may be borrowed within certain
limits, and may be fully or partially surrendered. No sales loads are charged
under this Policy.
The Company offers seven variable funding vehicles ("Funds") under the Policy
through the Separate Account:
o CIGNA VP Money Market Fund
o Fidelity VIP II Investment Grade Bond Portfolio
o Fidelity VIP II Asset Manager Portfolio
o CIGNA VP S&P 500 Index Fund
o Fidelity VIP Equity-Income Portfolio
o American Century VP Capital Appreciation
o Fidelity VIP Overseas Portfolio
Each Fund is a portfolio of a diversified open-end management investment company
(commonly called a mutual fund) and each Fund has a different investment
objective.
The fixed interest option offered under the Policy is the Fixed Account. Amounts
held in the Fixed Account are guaranteed and will earn a minimum interest rate
of 4% per year. Unless specifically mentioned, this prospectus only describes
the variable investment options.
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It may not be advantageous to replace existing insurance or supplement an
existing variable universal life insurance policy with coverage under the
Policy. This entire prospectus, and those of the Funds, should be read carefully
to understand the Policy being offered.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT
PROSPECTUSES OF THE MUTUAL FUNDS AVAILABLE AS FUNDING OPTIONS FOR THE
POLICIES OFFERED BY THIS PROSPECTUS. ALL PROSPECTUSES SHOULD BE RETAINED
FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF, OR SOLICITATION OF AN OFFER TO
ACQUIRE, ANY INTEREST OR PARTICIPATION IN THE GROUP VARIABLE UNIVERSAL LIFE
INSURANCE POLICIES OFFERED BY THIS PROSPECTUS IN ANY JURISDICTION TO ANYONE TO
WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION IN SUCH JURISDICTION.
PROSPECTUS DATED: MAY 1, 1997
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Definitions............................................................................................. 5
Highlights...............................................................................................7
Initial Choices.....................................................................................7
Death Benefit Amount................................................................................8
Amount of Premium Payment...........................................................................8
Selection of Funding Vehicle(s).....................................................................8
Charges and Fees....................................................................................8
The Company.............................................................................................10
The Separate Account and The Fund Accounts..............................................................10
The Funds...............................................................................................11
Fund Annual Expenses...............................................................................13
Investment Risk....................................................................................15
Substitution or Elimination of Funds...............................................................15
Fund Participation Agreements......................................................................15
Eligibility.............................................................................................15
Coverage Amounts........................................................................................16
Amounts of Coverage Vehicles.......................................................................16
Guaranteed Issue Amounts...........................................................................16
Changes In Coverage Amounts........................................................................17
Automatic Increase Feature.........................................................................17
Effective Dates.........................................................................................17
Right To Examine .......................................................................................18
Death Benefit...........................................................................................18
Amount of Death Benefit............................................................................18
Payment of Death Benefit...........................................................................18
Premium Payments........................................................................................20
Premium Payments...................................................................................20
Premium Increases..................................................................................20
Allocation of Net Premium Payments.................................................................21
Certificate Values......................................................................................21
Cash Value.........................................................................................21
Variable Accumulation Unit Value...................................................................22
Transfers..........................................................................................23
Net Cash Value.....................................................................................23
Charges and Fees........................................................................................23
Premium Load.......................................................................................23
Monthly Deduction..................................................................................24
Transaction Fee for Excess Transfers and Surrenders................................................31
Mortality and Expense Risk Charge..................................................................31
Certificate Loans.......................................................................................32
Surrender, Lapse, and Reinstatement.....................................................................32
Full Surrender.....................................................................................32
Partial Surrender..................................................................................33
Lapse of a Certificate.............................................................................33
Reinstatement of a Lapsed Certificate..............................................................33
</TABLE>
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<TABLE>
<S> <C>
Termination, Continuation, and Conversion...............................................................33
Policy Termination.................................................................................33
Termination of Individual Coverage.................................................................33
Continuation.......................................................................................34
Conversion.........................................................................................34
Additional Coverage Riders..............................................................................35
Accidental Death, Dismemberment, and Injury........................................................35
Waiver of Cost of Life Insurance...................................................................35
Paid-Up Insurance..................................................................................36
Accelerated Payment Benefit........................................................................36
Seat Belt Benefit..................................................................................37
Other Policy Provisions.................................................................................37
Deferral of Payment................................................................................37
Fixed Benefit Policy Exchange......................................................................37
Certificate Owner..................................................................................38
Beneficiary........................................................................................38
Assignment.........................................................................................38
Incontestability...................................................................................38
Misstatement of Age................................................................................38
Suicide............................................................................................39
State Variations........................................................................................39
Group Policyholder Elections............................................................................39
Telephone Transactions..................................................................................39
Non-Participating Policies..............................................................................39
Dollar Cost Averaging...................................................................................40
Tax Matters.............................................................................................41
Taxation of Policy Benefits in General.............................................................41
Diversification Requirements.......................................................................42
Taxation of the Company............................................................................42
Section 848 Charges................................................................................43
Other Considerations...............................................................................43
Other Matters...........................................................................................43
Voting Rights......................................................................................43
Directors and Officers of the Company..............................................................44
Distribution of Policies...........................................................................45
Other Contracts Issued by the Company..............................................................46
Right to Take Actions Regarding the Separate Account...............................................46
State Regulation...................................................................................46
Reports to Certificate Owners......................................................................46
Advertisements.....................................................................................47
Legal Proceedings..................................................................................47
Experts............................................................................................47
Registration Statement.............................................................................47
Financial Statements...............................................................................48
Illustrations......................................................................................73
Portfolio Prospectuses..................................................................................75
</TABLE>
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DEFINITIONS
CASH VALUE: The sum of the Fixed Account Value, the Fund Account Values and the
Loan Account Value.
CERTIFICATE: The document given to an Owner as evidence of that person's rights
and obligations under the Policy.
CERTIFICATE EFFECTIVE DATE: The date on which the Certificate becomes effective,
as shown in the Coverage Verification Pages.
CODE: The Internal Revenue Code of 1986, as amended.
CORRIDOR DEATH BENEFIT: The Death Benefit calculated as a percentage of the Cash
Value, rather than by reference to the Coverage, Amount to satisfy the Internal
Revenue Service definition of life insurance.
COST OF INSURANCE: The portion of the Monthly Deduction attributable to the life
insurance coverage, not including riders, supplemental benefits or monthly
administrative fees.
COVERAGE AMOUNT: The amount of life insurance benefit selected by the Owner upon
application and changed from time to time by the Owner as described in this
prospectus.
CURRENT OUTSTANDING LOAN BALANCE: The Loan Balance plus all interest accrued but
not yet paid.
CUSTOMER SERVICE CENTER: The office or representative of the Company to which
correspondence should be sent, and any customer service requests made. The
address is stated in the Coverage Verification Pages of the Certificate.
DEATH BENEFIT: The amount payable to the beneficiary upon the death of the
Insured. The Death Benefit is reduced by any accelerated payment benefit made
under the Certificate and any amounts due the Company under the Certificate.
FIXED ACCOUNT: The account under which principal is guaranteed and interest is
credited at a rate of not less than 4% per year. Fixed Account assets are
general assets of the Company held in the Company's General Account.
FIXED ACCOUNT VALUE: The portion of the Cash Value under a Certificate, other
than the Loan Account Value, held in the Company's General Account.
FUND ACCOUNT: An Account under a Certificate, the value of which varies based on
the net investment performance of a specific Fund, as described herein. Fund
Account assets are held in the Separate Account and are not guaranteed.
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FUND ACCOUNT VALUE: The Cash Value portion under a Certificate which is
determined by multiplying the number of Variable Accumulation Units in the Fund
Account by the current Variable Accumulation Unit Value.
FUND(S): One or more of CIGNA VP Money Market Fund, Fidelity VIP II Investment
Grade Bond Portfolio, Fidelity VIP II Asset Manager Portfolio, CIGNA VP S&P 500
Index Fund, Fidelity VIP Equity-Income Portfolio, American Century VP Capital
Appreciation and Fidelity VIP Overseas Portfolio.
GENERAL ACCOUNT: The Company's general asset account, in which, along with other
assets of the Company, the assets supporting the non-variable portion of the
Policy are held.
GRACE PERIOD: The period after the Certificate's Net Cash Value becomes
insufficient to cover a due but unpaid Monthly Deduction during which the Owner
may keep the Certificate in force by paying the required premium.
INSURED: The person whose life is insured in the Certificate.
LOAN ACCOUNT VALUE: A portion of the Cash Value equal to the sum of all unpaid
Certificate loans, plus all unpaid interest added to the Loan Balance as
provided for in the Policy, less repayments on loans, plus interest which
accrues daily on the Loan Account.
LOAN BALANCE: The sum of all loans under the Certificate, less any loan
repayments, plus all unpaid interest added to the Loan Balance as provided for
in the Policy.
MONTHLY DEDUCTION: The monthly deduction made from the Net Cash Value; this
deduction includes the cost of insurance, monthly administrative fees and
charges for supplemental riders or benefits, if applicable.
NET CASH VALUE: The Cash Value less the Current Outstanding Loan Balance.
NET PREMIUM PAYMENT: The portion of a premium payment, after deduction of the
premium load for taxes, allocated to the Fixed Account and the Fund Accounts.
OWNER: The Owner of a Certificate under a Policy on the Certificate Effective
Date will be the person designated as Owner in the Coverage Verification Pages.
If no person is designated as Owner, the Insured will be the Owner.
POLICY: The group life insurance contract described in the prospectus, under
which flexible premium payments are permitted and the death benefit and contract
values may vary with the investment performance of the funding option(s)
selected.
POLICY ANNIVERSARY DATE: The Policy Anniversary Date stated in the Coverage
Verification Pages of the Certificate.
POLICY YEAR: Each 12-month period, beginning on the Policy Anniversary Date,
during which the Policy is in effect.
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RELATED FUND: The Fund whose investment performance is the basis for determining
the investment performance of a specific Fund Account.
SEPARATE ACCOUNT: CG Variable Life Insurance Separate Account A. Separate
Account assets are kept separate from the general assets of the Company and are
not, except to the extent that they exceed Separate Account liabilities,
chargeable with the general liabilities of the Company.
VALUATION DAY: Every day on which Variable Accumulation Units are valued; any
day on which the New York Stock Exchange is open, except any day on which
trading on the Exchange is restricted, or on which an emergency exists, as
determined by the Securities and Exchange Commission, so that valuation or
disposal of securities is not practicable.
Valuation Period: The period consisting of one or more days, from one Valuation
Time to the next succeeding Valuation Time.
Valuation Time: The time of the close of the New York Stock Exchange (currently
4:00 p.m. New York time) on a Valuation Day. All actions which are to be
performed on a Valuation Day will be performed as of the Valuation Time.
VARIABLE ACCUMULATION UNIT: A unit of measure used to calculate the value of a
Fund Account.
HIGHLIGHTS
The Policy is a group variable universal life insurance policy. The Policy will
be sold to Group Policyholders (employers and unions) to make available life
insurance coverage for their Employees (employees of the employer or members of
the union). Employees who purchase coverage on their own lives will receive a
Certificate of Insurance under the Policy. Depending upon the plan being
offered, employees may also be able to purchase a Certificate of Insurance under
the Policy on the lives of their spouses, or term insurance on the lives of
their spouses. Term life insurance coverage on the lives of the dependent
children of the Employee may be added as an additional benefit to the
Certificate of Insurance on the Employee or the Certificate of Insurance on the
spouse (but not both).
Each Certificate may accumulate Cash Value on a fixed or a variable basis or on
a combination of fixed and variable bases. (See Eligibility Section)
The Policy's provisions may vary from state to state as required by state law
and the insurance provisions may vary from policy to policy depending upon the
insurance features selected by the group policyholder.
INITIAL CHOICES TO BE MADE
When purchasing a Certificate under a Policy, the Owner makes three important
choices:
1) Selecting the initial Coverage Amount;
2) Selecting the amount of premium payments to make; and
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3) Selecting how Net Premium Payments will be allocated among the available
funding options.
(See Coverage Amount and Premium Payment Sections)
Death Benefit Amount
At the time of purchase, the Certificate Owner (also called the "Owner" in this
prospectus) chooses the initial Coverage Amount. The Coverage Amount may be
changed from time to time by the Owner. The Death Benefit will be the Coverage
Amount plus the Net Cash Value less any amounts due the Company under the
Certificate. The Death Benefit will be reduced by the amount of any Accelerated
Payment Benefit made under the Policy. The amount payable will be determined as
of the date of the Insured's death based on investment performance and any
changes made by the Owner. (See Death Benefit Period)
Amount of Premium Payment
At the time of purchase, the Owner also chooses the amount of premium to be
paid. The Owner may subsequently vary premium payments to some extent and still
keep the Certificate in force. Premium reminder notices will be sent for
premiums required to continue the Certificate in force. If the Certificate
lapses it may be reinstated. (See Reinstatement of a Lapsed Certificate)
Selection of Funding Vehicle(s)
The Owner chooses how to allocate Net Premium Payments. Net Premium Payments may
be allocated, in any combination, to one or more Fund Accounts, each of which
varies in value based on the performance of a particular Fund, and to the Fixed
Account. Allocations to any Fund Account or to the Fixed Account must be in 5%
increments. (See Allocation of Net Premium Payments Section)
Fund Account Values are not guaranteed and will vary with the investment
performance of the Related Fund.
CHARGES AND FEES
There is no sales load.
There is a premium load on all premium payments which will not exceed 5.00%.
Currently, the premium load is 3.00%, which reflects charges to cover the
expenses of state premium taxes and the additional federal income tax burden
under Section 848 of the Code relating to the tax treatment of deferred
acquisition costs.
State premium taxes vary from state to state and may be as low as 0.00% and as
high as 3.00%.
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The premium load comprising the combined charges for federal income taxes and
state premium taxes will not exceed 5%. The Company reserves the right to waive
the state premium tax portion of the premium load when it would apply to the
value of a policy or certificate of life insurance underwritten by the Company
or an affiliate which is accepted in exchange for a certificate of insurance
under this group variable universal life insurance policy in a transaction under
Section 1035 of the Code.
Monthly deductions are made from the Cash Value for the cost of insurance and
any additional benefits. Monthly deductions are also made from the Cash Value
for administrative expenses. The administrative charge is comprised of two fixed
dollar monthly fees. The first fixed dollar monthly fee, which will not exceed
$5.00 per month, will be charged to each Certificate under the Policy. The
second fixed dollar monthly fee, which will not exceed $3.00 per month, will be
charged, in addition to the first fee, to Certificates which have accumulated
Cash Value in any Fund Account. The second fixed dollar monthly fee will be
waived for Certificates under which the Net Cash Value is greater than $10,000.
In addition to the guaranteed maximum amounts for each of the two fixed dollar
monthly fees comprising the monthly administrative fee, the sum of the two fixed
dollar monthly fees actually charged at any time is guaranteed not to exceed
$6.00.
Daily charges to the Fund Accounts are made for the mortality and expense risks.
The mortality and expense risk charge may vary up to an annual rate of 0.90%. It
is currently at the annual rate of 0.45%.
Investment results for each Fund Account are affected by each Fund's daily
charge for management fees; these charges vary by Fund and are shown in the Fund
Annual Expenses subsection of The Funds section of this prospectus.
A transaction fee of $25 is imposed for full surrenders, partial surrenders and
for transfers in excess of 12 per Policy Year under a Certificate. The Company
reserves the right to waive this fee in some circumstances.
Interest is charged on Certificate loans at an effective annual rate of 8%.
Interest is credited to funds securing the loan at an effective annual rate of
no less than 6%.
In certain instances, the Company may reduce and/or waive certain transaction
fees and/or monthly administrative fees in the sale of Policies to certain
groups.
Costs for sales, administration, and mortality generally vary with the size and
stability of the group, among other factors.
The Company takes all these factors into account when reducing or waiving
charges. To qualify for reduced or waived charges, a group or similar
arrangement must meet certain requirements, including our requirements for size
and ease of administration.
The Company will make any reductions or waivers according to its rules in effect
when an application or enrollment form for a Policy is approved. The Company may
change these rules from time to time. Any variation in the monthly
administrative fees or transaction fees will reflect differences in costs or
services and will not be unfairly discriminatory.
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THE COMPANY
The Company is a stock life insurance company incorporated in Connecticut in
1865. Its Home Office mailing address is Hartford, Connecticut 06152, Telephone
(860) 726-6000. It has obtained authorization to do business in fifty states,
the District of Columbia and Puerto Rico. The Company issues group and
individual life and health insurance policies and annuities. The Company has
various affiliates or wholly-owned subsidiaries which are generally engaged in
the insurance business. The Company is an indirect wholly-owned subsidiary of
CIGNA Corporation, Philadelphia, Pennsylvania.
The Company markets the Policies through independent insurance brokers, general
agents, and registered representatives of broker-dealers who are members of the
National Association of Securities Dealers, Inc.
THE SEPARATE ACCOUNT AND THE FUND ACCOUNTS
Cash Value invested in the Fund Accounts of a Certificate under the Policy is
held in the Separate Account. The Separate Account, CG Variable Life Insurance
Separate Account A, was established pursuant to a May 22, 1995 resolution of the
Board of Directors of the Company. Under Connecticut insurance law, the income,
gains or losses of the Separate Account are credited without regard to the other
income, gains or losses of the Company. The Company serves as the custodian of
the assets of the Separate Account. These assets are held for the Policies. The
Separate Account cannot be charged with liabilities of the Company other than
Fund Account liabilities under the Policies or under other Policies whose
variable values and benefits are supported by the Separate Account, except to
the extent that the Separate Account assets exceed the reserves and other
contract liabilities of the Separate Account.
All obligations arising under the Policies are general corporate liabilities of
the Company. Separate Account assets are invested in shares of Funds.
Owners who allocate Net Premium Payments, or transfer funds from another
account, into a Fund Account are credited with Variable Accumulation Units of
the Fund Account valued at the current Variable Accumulation Unit Value for that
Fund Account. Variable Accumulation Unit Values for a Fund Account vary each
Valuation Day based on the investment performance of the Related Fund. Any and
all distributions made by any Fund with respect to shares held by the Separate
Account will be reinvested in additional shares of the Fund at net asset value.
Deductions, transfers, and surrenders from Fund Accounts will, in effect, be
made by surrendering Variable Accumulation Units of the Fund Account at the then
current Variable Accumulation Unit Value.
The Separate Account is registered with the Securities and Exchange Commission
("Commission") as a unit investment trust under the Investment Company Act of
1940 (the "Act"). Such registration does not involve supervision of the Separate
Account or the Company's management of investment practices or policies by the
Commission. The Company does not guarantee the Separate Account's investment
performance or the performance of the Certificates' Fund Accounts.
The Company has other separate accounts registered as unit investment trusts
with the Commission for
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the purpose of funding the Company's variable annuity contracts and other
variable life insurance contracts.
THE FUNDS
Each of the Fund Accounts under a Certificate is supported solely by the shares
of one of the Funds available as funding vehicles under the Policies. Each of
the Funds is a portfolio of a trust or a corporation which is registered as an
open-end, diversified management investment company under the Act (an
"Investment Company").
The Investment Companies and their investment advisers and distributors are:
Fidelity VIP Equity-Income Portfolio and Fidelity VIP Overseas Portfolio are
portfolios of the Variable Insurance Products Fund; and Fidelity VIP II Asset
Manager Portfolio and Fidelity VIP II Investment Grade Bond Portfolio are
portfolios of the Variable Insurance Products Fund II.
Fidelity Management & Research Company, 82 Devonshire Street, Boston,
Massachusetts, is the investment adviser to Variable Insurance Products Fund and
Variable Insurance Products Fund II. These funds are distributed by Fidelity
Distributors Corporation, 82 Devonshire Street, Boston, Massachusetts, 02103.
American Century VP Capital Appreciation is a portfolio of American Century
Variable Portfolios, Inc.
American Century Investment Management, Inc., Twentieth Century Tower, 4500 Main
Street, Kansas City, Missouri, 64111 is the investment adviser to American
Century Variable Portfolios, Inc. which is distributed by American Century
Variable Portfolios, Inc., 4500 Main Street, P.O. Box 419385, Kansas City, MO.,
64141-6385.
CIGNA VP S&P 500 Index Fund and CIGNA VP Money Market Fund are portfolios of
CIGNA Variable Products Group.
CIGNA Investments, Inc., 900 Cottage Grove Road, Bloomfield, Connecticut, 06152,
is the investment adviser to CIGNA Variable Products Group, which is distributed
by CIGNA Financial Advisors, Inc., 900 Cottage Grove Road, Bloomfield, CT. 06152
The investment advisory fees charged the Funds by their advisers are shown in
the Fund Annual Expenses portion of this section of this Prospectus.
There follows a brief description of the investment objective of each Fund.
There can be no assurance that any of the stated investment objectives will be
achieved.
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CIGNA VP MONEY MARKET FUND
The fund seeks to earn a high level of current income while maintaining a stable
share price by investing in high-quality, short-term money market securities of
different types. It stresses income, preservation of capital, and liquidity, and
does not seek the higher yields or capital appreciation that more aggressive
investments may provide. The fund's yield will vary from day to day and
generally reflects current short-term interest rates and other market
conditions.
FIDELITY VIP II INVESTMENT GRADE BOND PORTFOLIO
The fund seeks high current income by investing primarily in fixed-income
obligations of all types. The fund invests at least 65% of its assets in
investment-grade, fixed income securities such as bonds, notes and debentures,
and maintains a dollar-weighted average maturity of ten years or less. Because
the fund invests in fixed income securities, its share price is related to
changes in interest rates. The fund may use various investment techniques to
hedge the fund's risks, but there is no guarantee that these strategies will
work as intended. With its focus on medium to high-quality investments and
intermediate maturity, the fund has a moderate risk level and yield potential.
FIDELITY VIP II ASSET MANAGER PORTFOLIO
The fund seeks high total return with reduced risk over the long term. The fund
seeks to achieve its investment objective by allocating its assets among stocks,
bonds, short-term and money market instruments and other investments of U.S. and
foreign issuers. The fund spreads its assets among all three asset classes
moderating both its risk and return potential. Because the fund can invest in
bonds and short-term instruments and money market instruments, its returns may
not be as high as a fund that invests only in stocks.
CIGNA VP S&P 500 Index Fund
The fund seeks to match the total return of the S&P 500 while keeping expenses
low.
The S&P is made up of 500 common stocks, most of which trade on the New York
Stock Exchange. The fund's composition may not always be identical to that of
the S&P 500. Because the fund seeks to track, rather than exceed, the
performance of the S&P 500, it is not managed in the same manner as other mutual
funds. It should not be expected to achieve the potentially greater results that
could be obtained by a fund that aggressively seeks growth.
"Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's 500", and
"500" are trademarks of Standard & Poors Corporation and have been licensed for
use by Connecticut General Life Insurance Corporation. The fund is not
sponsored, endorsed, sold or promoted by S&P and S&P makes no representation
regarding the advisability of investing in the Fund Account.
FIDELITY VIP EQUITY-INCOME PORTFOLIO
The fund seeks reasonable income by investing primarily in income-producing
securities. It will
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normally have 65% of its assets invested in such securities. The balance will
tend to be invested in debt obligations many of which are expected to be
convertible into common stock. The fund seeks to achieve a yield that beats that
of the S&P 500. The fund does have the flexibility to invest the balance in all
types of securities, including bonds of varying quality. The fund is designed
for those who want some income from equity and bond investments, but also want
to be invested in the stock market for its long-term growth potential.
AMERICAN CENTURY VP CAPITAL APPRECIATION
The investment objective of American Century VP Capital Appreciation is capital
growth. The fund will seek to achieve its investment objective by investing
primarily in common stocks that are considered by management to have
better-than-average prospects for appreciation. It may purchase securities only
of companies that have a record of at least three years' continuous operation.
FIDELITY VIP OVERSEAS PORTFOLIO
The fund seeks long-term growth of capital by investing primarily in securities
of issuers whose principal activities are outside of the U.S. The fund normally
invests at least 65% of its total assets in securities of issuers from at least
three different countries outside of North America. The fund expects to invest a
majority of its assets in equity securities, but may also invest in debt
securities of any quality. The fund may invest in the securities of any issuer,
including companies and other business organizations, as well as governments and
government agencies. It is important to note that investments in foreign
securities involve risks in addition to those of U.S. investments. The
performance of the fund depends upon currency values, the political and
regulatory environment, and overall economic factors in the countries in which
the fund invests.
FUND ANNUAL EXPENSES
(as a percentage of Fund average net assets)
The management fees for each Fund are based on a percentage of that Fund's
assets under management. The fees below represent the amounts payable to the
investment adviser of each of the Funds on an annual basis as of the date of
this Prospectus, plus other expenses.
<TABLE>
<CAPTION>
Total
Mgmt. Other Annual
Fees Expenses Expenses
---- -------- --------
<S> <C> <C> <C>
CIGNA VP Money Market Fund(1) .35% .15% .50%
Fidelity VIP II Investment Grade Bond Portfolio .45% .13% .58%
Fidelity VIP II Asset Manager Portfolio(2) .64% .10% .74%
CIGNA VP S&P 500 Index Fund(1) .25% .00% .25%
Fidelity VIP Equity-Income Portfolio(2) .51% .07% .58%
American Century VP Capital Appreciation 1.00% .00% 1.00%
Fidelity VIP Overseas Portfolio(2) .76% .17% .93%
</TABLE>
13
<PAGE> 15
- --------
(1)The Investment Advisor for CIGNA Money Market Fund and CIGNA S&P 500
Index Fund has voluntarily agreed to limit total annual expenses to 0.50% and
0.25% of average net assets, respectively.
These agreements are voluntary and may end at any time; however, the Investment
Advisor for the funds has committed to maintain these caps on expenses until May
1, 1998.
The expenses shown here include a cap on other expenses for CIGNA VP Money
Market Fund of 0.15% and for CIGNA VP S&P 500 Index Fund of 0.0%. Without these
caps, total annual expenses are estimated to be 0.153% for CIGNA VP Money
Market Fund, based on results from the inception of the fund on March 1, 1996
through December 31, 1996, and are 0.64% for CIGNA VP S&P 500 Index Fund for
the year ended December 31, 1996. The "but for" numbers are not current.
(2)A portion of the brokerage commissions that certain Fidelity funds pay
was used to reduce fund expenses. In addition, certain funds have entered into
arrangements with their custodian and transfer agent whereby interest earned on
uninvested cash balances was used to reduce custodian and transfer agent
expenses. Including these reductions, the total operating expenses presented in
the table would have been 0.56% for Fidelity VIP Equity-Income Portfolio, 0.92%
for Fidelity VIP Overseas Portfolio, and 0.73% for Fidelity VIP II Asset Manager
Portfolio.
14
<PAGE> 16
The purpose of the above Table is to assist the Certificate Owner in
understanding the various Fund costs and expenses that a Certificate Owner will
incur, directly or indirectly. For additional information, see other subsections
of The Funds section in this prospectus and the discussion in each Fund's
prospectus.
INVESTMENT RISK
There is no assurance that the investment objective of any of the Funds will be
met. A Certificate Owner bears the complete investment risk for those portions
of his Cash Value allocated to a Fund Account. Each of the Fund Accounts
involves inherent investment risk, and such risk varies significantly among the
Fund Accounts. Certificate Owners should read each Fund's prospectus carefully
and understand the Fund Accounts' relative degrees of risk before making or
changing investment choices. Additional Funds may, from time to time, be made
available as underlying investments for the Policies. However, the right to make
such selections will be limited by the terms and conditions imposed on such
transactions by the Company.
All of the funds, except CIGNA VP Money Market Fund and CIGNA VP S&P 500 Index
Fund may invest a portion of their funds in lower-quality debt securities. These
lower-quality debt securities (sometimes called "junk bonds") are often
considered to be speculative and involve greater risk of default or price
changes due to changes in interest rates, economic conditions, and the issuer's
creditworthiness.
As a result, their market prices tend to fluctuate more than higher-quality
securities. Lower-quality securities are those rated lower than Baa by Moody's
Investors Service, Inc., or lower than BBB by Standard & Poor's Corporation.
Certain of the portfolios offered as underlying funds may invest in such
lower-quality debt securities. See the prospectus for each portfolio for a
further discussion of the risks and for additional information regarding the
portfolio's investment policies and restrictions.
SUBSTITUTION OR ELIMINATION OF FUNDS
If the shares of any Fund should no longer be available for investment by the
Separate Account or if, in the judgment of the Company, further investment in
such shares should become inappropriate for the Policies or the Separate
Account, the Company may substitute shares of another Fund or eliminate such
Fund from the Separate Account. No substitution or elimination of securities
supporting any Fund Account may take place without prior approval of the
Commission and under such requirements as it may impose and notification to
Group Policyholders and Owners.
FUND PARTICIPATION AGREEMENTS
The Company has entered into agreements with the various Investment Companies
and their advisers or distributors through which the Company makes the Funds
available under the Policies and performs certain administrative services. In
some cases, the advisers or distributors may compensate the Company for such
services.
ELIGIBILITY
The Policies will be sold to Group Policyholders (employers and unions) who wish
to make variable
15
<PAGE> 17
universal life insurance coverage available to all or a portion of their
Employees (employees of employers and members of unions) and retirees, and their
families. Employees may apply for coverage under the Policy within policy limits
and subject to certain requirements or provide evidence of good health
acceptable to the Company.
Depending upon the coverage selected by the group Policyholder, several
different possible family coverage and continuation provisions may be available.
Employees may be able to apply for variable universal life insurance coverage on
their spouses or term life coverage on their spouses. Employees may be able to
purchase term life insurance coverage on their children. Employees may be able
to continue their coverage upon retirement, leave of absence, and/or termination
of employment. Spouses may be able to continue coverage upon divorce, or death
of the Employee.
No policy or certificates will be issued unless a minimum number or percentage
of Employees eligible applies for coverage under the policy. These minimums will
be determined by the Company, based on group characteristics in advance of
offering to the Employees. No certificate of insurance under the policy will be
issued to an Employee, spouse, or dependent for whom this policy appears to be
an unsuitable investment.
COVERAGE AMOUNTS
AMOUNTS OF COVERAGE
Coverage Amounts for Employees will be in multiples of the Employee's annual
compensation and will be selected by the Employee at the time of enrollment. The
minimum Coverage Amount for Insured Employees is $10,000. The minimum Coverage
Amount for spouses is $10,000 or such lesser amount as may be required by state
law. The maximum Coverage Amount will be agreed upon by the Group Policyholder
and the Company but shall not be more than the lesser of ten times annual
compensation or a fixed dollar maximum.
Coverage for spouses will be in a limited number of selections up to the lesser
of $100,000 or three times the Employee's annual compensation. The maximum
coverage for spouses will be less where required by state law.
Maximum Coverage Amounts are subject to limitation by state law and may vary
from state to state.
GUARANTEED ISSUE AMOUNTS
Employees will be able to purchase insurance on themselves and their spouses in
amounts up to a guaranteed issue amount without providing evidence of good
health acceptable to the Company. The guaranteed issue amount will be agreed
upon between the Group Policyholder and the Company before coverage under the
Policy is offered to Employees. Employees and their spouses will be required to
provide evidence of good health acceptable to the Company for amounts of
insurance in excess of the guaranteed issue amount, for any increases in
coverage, or if they enroll more than 31 days after becoming eligible.
16
<PAGE> 18
CHANGES IN COVERAGE AMOUNTS
Changes in the Coverage Amount of a Certificate can be made by submitting a
written request to the Customer Service Center in a form satisfactory to the
Company.
Increases in an Employee's Coverage Amount may be applied for based on an
increase in the Employee's annual compensation or a higher multiple of the
Employee's compensation. Increases in the Coverage Amount for a spouse or child
may be applied for at any time.
Changes in the Coverage Amount are subject to the following conditions:
o Satisfactory evidence of good health acceptable to the Company and a
supplemental application will be required for an increase in the Coverage
Amount.
o No decrease may reduce the Coverage Amount to less than $10,000 (for
spouses, such lesser amount as may be required by state law).
o No decrease may reduce the Coverage Amount below the minimum required to
maintain the Policy's or the Certificate's status under the Code as a life
insurance contract.
o If the Automatic Increase Feature is available on the Policy and the
Employee has elected it, the Coverage Amount for an Insured Employee will
be increased on the Policy Anniversary Date to maintain his elected
multiple of annual compensation. The amount of the increase may be limited
to an amount predetermined by the group policyholder. Evidence of good
health acceptable to the Company will not be required for increases in
Coverage Amount through the Automatic Increase Feature.
o If the Life Status Change feature is available on the Policy, the coverage
amount for an Insured Employee can be increased by one times the employee's
annual compensation within 31 days of a qualifying Life Status Change
event. Evidence of good health acceptable to the Company will not be
required for this increase in coverage.
AUTOMATIC INCREASE FEATURE
If the Group Policyholder has elected to have this feature offered on the
Policy, and the Employee has elected this feature, the Employee's Coverage
Amount will be increased on each Policy Anniversary Date in order to maintain
his elected multiple of annual compensation. Evidence of good health acceptable
to the Company will not be required for this increase in Coverage Amount. The
amount of the increase may be subject to a dollar and/or percentage limit. This
feature will terminate if the Owner otherwise increases or decreases the
Coverage Amount to an amount which is not a whole multiple of the Employee's
Annual Compensation.
EFFECTIVE DATES
Coverage, for applicants who apply within 31 days of becoming eligible, up to
the guaranteed issue amount, will become effective either when the applicant
becomes eligible or when the completed application is received. For applicants
who apply later, and for amounts in excess of the guaranteed
17
<PAGE> 19
issue amount, coverage will become effective when the Company agrees in writing
to insure the applicant.
For Employees not in active service, the effective date of coverage will be
delayed until the return to active service. For spouses who are disabled or for
spouses and children who are hospitalized or confined at home under medical
care, the effective date of coverage will be delayed until all such conditions
have ended. If the conditions delaying the effective date are not resolved
within 90 days of the original application date, a new application and new
evidence of good health acceptable to the Company will be required.
RIGHT TO EXAMINE
A Certificate may be returned for cancellation and a full refund of premium
within 30 days after the Certificate is received, unless otherwise stipulated by
state law requirements. Any premium payment made prior to the expiration of the
30-day Right-to-Examine period will be held in the Fixed Account and not
allocated to the Separate Account even if the Certificate Owner may have so
directed until three business days following the expiration of the
Right-to-Examine period. If the Certificate is returned for cancellation in a
timely fashion, the refund of premiums paid, without interest, will usually
occur within seven days of notice of cancellation, although a refund of premiums
paid by check may be delayed until the check clears the bank upon which it is
drawn. Any refund will be reduced by partial surrenders or loans plus interest
accrued.
DEATH BENEFIT
AMOUNT OF DEATH BENEFIT
The Death Benefit will be the greater of the Coverage Amount, plus the Net Cash
Value, or the Corridor Death Benefits. The Death Benefit varies, increasing or
decreasing over time, depending on the amount of premium paid and the investment
performance of the Fund Accounts and the Fixed Account. The Death Benefit will
be reduced by any amount paid under the Accelerated Payment Benefit Rider.
PAYMENT OF DEATH BENEFIT
The Death Benefit under the Certificate will be paid in a lump sum within seven
days after receipt at the Customer Service Center of due proof of the Insured's
death (a certified copy of the death certificate) plus such other documentation
as the Company may require as proof of a covered claim under the Certificate.
Payment of the Death Benefit may be delayed if the Certificate is being
contested.
The Death Benefit under the Certificate at any time must be at least the
following "Corridor Percentage" of the Cash Value based on the Insured's
attained age:
18
<PAGE> 20
<TABLE>
<CAPTION>
INSURED'S CORRIDOR INSURED'S CORRIDOR
ATTAINED AGE PERCENTAGE ATTAINED AGE PERCENTAGE
------------ ---------- ------------ ----------
<S> <C> <C> <C>
0-40 250% 70 115%
41 243 71 113
42 236 72 111
43 229 73 109
44 222 74 107
45 215 75 105
46 209 76 105
47 203 77 105
48 197 78 105
49 191 79 105
50 185 80 105
51 178 81 105
52 171 82 105
53 164 83 105
54 157 84 105
55 150 85 105
56 146 86 105
57 142 87 105
58 138 88 105
59 134 89 105
60 130 90 105
61 128 91 104
62 126 92 103
63 124 93 102
64 122 94 101
65 120 95 100
66 119 96 100
67 118 97 100
68 117 98 100
69 116 99 100
</TABLE>
The Company may refuse to accept additional premiums, increase the Coverage
Amount or require the Owner to request a partial surrender of cash value to
assure that this corridor requirement is met. Evidence of good health acceptable
to the Company may be required for any increases in coverage to accommodate the
corridor requirement.
19
<PAGE> 21
PREMIUM PAYMENTS
PREMIUM PAYMENTS
The Certificates provide for flexible premium payments. Premium payments are
payable at the frequency and in the amount selected by the Certificate Owner.
The initial premium payment is due on the Certificate Effective Date. Premiums
may be paid on a lump-sum basis or on a periodic basis (for Insured Employees,
periodic premium payments are ordinarily made through payroll deduction; for
other Eligible Classes, periodic billing may be available). The minimum payment
required is the amount necessary to maintain a positive Net Cash Value. After
the initial premium payment, each subsequent lump-sum premium payment must be at
least $25. The Company reserves the right to decline a premium payment as
specified in other sections of the prospectus.
All premium payments, whether periodic or on a lump-sum basis, will be deemed
received when actually received by the Company at its Customer Service Center;
or, if such premium payment is made by payroll deduction, such premium payment
will be deemed received when the Company has confirmed receipt of a wire
transfer into a bank account maintained by the Company for receipt of premium
from Group Policyholders under these Policies. Such a wire transfer must be
preceded, by 2 business days, by a reconciliation statement identifying the
Group Policyholder, the Certificate number, the Owner and the amount of premium
received for each Certificate. Remittance of premium payments through the
payroll deduction mechanism often requires significant processing time for
collection and reconciliation of individual premium payments and to coordinate
varying payroll cycles with monthly premium due dates. Premium payments are not
deemed received, and cannot be credited to Certificates, until the above
reconciliation and receipt requirements are met.
The Certificate Owner may elect to change the frequency or amount of premium
payments.
Payment of periodic premium or lump-sum premium in any amount will not guarantee
that the Certificate will remain in force. Conversely, failure to pay periodic
premium or lump-sum premium will not necessarily cause a Certificate to lapse. A
Certificate will not lapse as long as the Net Cash Value is adequate to cover
the next monthly deduction.
PREMIUM INCREASES
At any time, the Owner may increase periodic premium payment amounts or make
lump-sum premium payments, but:
o Evidence of good health acceptable to the Company may be required if the
additional premium or the new periodic premium payment would require the
Company to increase the Coverage Amount. If satisfactory evidence of good
health is requested and not provided, the increase in premium will be
refunded without interest and without participation of such amounts in any
Fund Account.
o In no event may the total of all premium payments exceed the then-current
maximum premium limitations established by federal tax law for a
Certificate to qualify as a life insurance contract. If, at any time, a
premium payment would result in total premiums exceeding such maximum
premium
20
<PAGE> 22
limitation, the Company will not accept that premium payment. The premium
payment will be returned or applied as otherwise agreed and no further
premium payments will be accepted until allowed by the then-current maximum
premium limitations prescribed by law.
o If there is any Current Outstanding Loan Balance, any lump-sum premium
payments will be used first as a loan repayment with any excess applied as
an additional Net Premium Payment unless otherwise agreed between the Owner
and the Company.
ALLOCATION OF NET PREMIUM PAYMENTS
At the time of purchase of the Certificate, the Owner decides how to allocate
Net Premium Payments among the Fund Accounts and the Fixed Account. Allocation
to any one Fund Account or to the Fixed Account must be in increments of 5% of
the Net Premium Payment. The portion of any Net Premium Payment allocated to a
Fund Account will be used to purchase Variable Accumulation Units of that Fund
Account.
The number of Variable Accumulation Units credited to the Fund Account for any
single purchase is determined by dividing the amount of the Net Premium Payment
being allocated to that Fund Account by the value of the Variable Accumulation
Unit for that Fund Account.
During the Right-to-Examine period, any Net Premium Payment will be allocated to
the Fixed Account, and interest will be credited from the later of Certificate
Effective Date or the date the Net Premium Payment was received. The Company
will allocate the Net Premium Payments received during the Right to Examine
Period directly to the Fund Account(s) selected by the Owner within three days
after expiration of the Right-to-Examine period.
Unless the Company is directed otherwise by the Certificate Owner, subsequent
Net Premium Payments will be allocated on the same basis as the most recent Net
Premium Payment. Such allocation will occur as of the Valuation Day during which
the payment is received.
The allocation for future premium payments may be changed at any time free of
charge. Any new allocation will be applied to premium payments beginning no
later than one week after the Company receives the notice of the new allocation.
Any new allocation must allocate to any single Fund Account or the Fixed Account
in increments of 5% of the Net Premium Payment.
CERTIFICATE VALUES
CASH VALUE
The Cash Value of the Certificate is the sum of the Fixed Account Value, the
Fund Account Values, and the Loan Account Value.
The Loan Account Value is described under the Certificate Loan Provisions
section of this prospectus.
The Fixed Account Value is the sum of: a) the Fixed Account Value at the end of
the preceding day,
21
<PAGE> 23
minus b) charges or fees charged to the Fixed Account and transfers and
surrenders out of the Fixed Account during that day, plus c) interest on the
difference between a and b, plus d) the sum of all transfers into the Fixed
Account during that day and all net premium allocated to the Fixed Account
during that day.
The Fund Account Value is the product of the number of Variable Accumulation
Units in that Fund Account and the Variable Accumulation Unit Value for that
Fund Account.
Variable Accumulation Units are added to a Fund Account when Net Premium
Payments are allocated to the Fund Account or funds are transferred into the
Fund Account from another Fund Account, the Fixed Account, or the Loan Account.
Variable Accumulation Units are deducted from a Fund Account when funds are
transferred out of the Fund Account to another Fund Account, the Fixed Account,
or the Loan Account. Variable Accumulation Units are also deducted from the Fund
Account when funds are transferred out of the Fund Account for surrender or
partial surrender. Variable Accumulation Units will also be deducted from the
Fund Account when funds are withdrawn from the Fund Account for the Monthly
Deductions, transaction fees, or other charges which are charged to a Fund
Account as provided for in the Policy.
The number of Variable Accumulation Units to be added to or deducted from a Fund
Account is determined by dividing the dollar amount to be credited to or charged
against the Fund Account by the Variable Accumulation Unit Value of a Variable
Accumulation Unit for that Fund Account during the Valuation Period in which the
credit or charge will occur.
The Variable Accumulation Unit Value for a Fund Account is maintained by the
Company and changes from Valuation Period to Valuation Period based on the
investment performance of the Related Fund, the mortality and expense risk
charge, and any charges to the Fund Account for taxes resulting from the
operation of the Separate Accounts. (See Variable Accumulation Unit Value
below.)
The Fixed Account Value is guaranteed; but there is no assurance that the sum of
the Fund Account Values of the Certificate will equal or exceed the Net Premium
Payments allocated to the Fund Accounts.
Each Certificate Owner will be advised at least annually as to the number of
Variable Accumulation Units which are credited to the Certificate, the current
Variable Accumulation Unit Values, the Fund Account Values, the Fixed Account
Value and the Loan Account Value. This information is available daily from the
Customer Service Center.
VARIABLE ACCUMULATION UNIT VALUE
The value of a Variable Accumulation Unit for any Valuation Period is determined
by multiplying the value of that Variable Accumulation Unit for the immediately
preceding Valuation Period by the Net Investment Factor for the current period
for the appropriate Fund Account. The Net Investment Factor is determined
separately for each Fund Account by dividing (a) by (b) and subtracting (c) from
the result, where (a) equals the net asset value per share of the Related Fund
at the end of the Valuation Period plus the per share amount of any distribution
declared by the Fund if the "ex-dividend" date is during the Valuation Period
plus or minus the Fund Account's proportionate share of taxes or provisions for
taxes, if any, attributable to the operation of the Separate Account during the
Valuation Period; (b) equals the net
22
<PAGE> 24
asset value per share of the Related Fund at the beginning of that Valuation
Period, and (c) is the daily charge for mortality and expense risk multiplied by
the number of days in the Valuation Period.
TRANSFERS
While the Certificate is in force, values may, at any time, be transferred from
one Fund Account to another, or from the Fund Accounts to the Fixed Account.
Within the 30 days after each Policy Anniversary, the Owner may also transfer a
portion of the Fixed Account Value to one or more Fund Accounts. The cumulative
amount of any transfers from the Fixed Account within any such 30-day period
cannot exceed 25% of the Fixed Account Value on that Policy Anniversary Date.
The Company may further limit transfers from the Fixed Account at any time.
Transfers will be effective as of the Valuation Day during which the request is
received in good order at the Customer Service Center. Transfers may be subject
to a maximum amount and to limitations imposed by the Funds.
Subject to the above restrictions, up to 12 transfers may be made in any Policy
Year without charge.
Transfers may be made in writing (or by telephone if telephone transactions
have been previously authorized in writing). To make a telephone transfer, the
Certificate Owner must call the Customer Service Center and provide, as
identification, his Certificate number, his Social Security number, and his
personal identification number. A customer service representative will then,
upon ascertaining that telephone transfers are authorized for that Certificate,
take the transfer request, which will be processed as of the next close of
business and confirmed within five business days. The Company disclaims all
liability for losses resulting from unauthorized or fraudulent telephone
transactions, but acknowledges that if it does not follow these procedures,
which it believes to be reasonable, it may be liable for such losses.
Any transfers among the Fund Accounts or from a Fund Account to the Fixed
Account will result in the crediting and cancellation of Variable Accumulation
Units based on the Variable Accumulation Unit values next determined after a
written request is received at the Customer Service Center. The Certificate
Owner should carefully consider current market conditions and each Fund's
investment policies and related risks before transferring money between the Fund
Accounts. See the section of this Prospectus titled "The Funds," and the
prospectuses of the Funds.
NET CASH VALUE
The Net Cash Value is the Cash Value of the Certificate minus the Current
Outstanding Loan Balance.
CHARGES AND FEES
PREMIUM LOAD
A deduction of 3.0% of each premium will be made to cover the premium load. This
load consists of
23
<PAGE> 25
2.50% for state premium taxes and 0.50% for federal income taxes. The load may
be changed from time to time but may not exceed 5%. There is no sales load.
State premium taxes vary from state to state and may be as low as 0.75% and as
high as 3.00%. The 2.5% charge reflects an average state premium tax expense
expected to be incurred for group variable life insurance policies offered in
this Prospectus; although applicable state premium tax laws may assess a tax at
a rate either higher or lower than the charge included in the premium load under
the Policy. This charge may vary from time to time based on changes in state
premium tax laws, which states' premium tax laws are applicable to the policy
and the amounts of premium received in such states; however, the premium load
comprising the combined charges for federal income taxes and state premium taxes
will not exceed 5%. The Company reserves the right to waive the state premium
tax portion of the premium load when it would apply to the value of a policy or
certificate of life insurance underwritten by the Company or an affiliate which
is accepted in exchange for a certificate of insurance under this group variable
universal life insurance policy.
MONTHLY DEDUCTION
A Monthly Deduction is made from the Net Cash Value for administrative expenses.
The monthly administrative fee will be comprised of two fixed dollar monthly
fees.
The first fixed dollar monthly fee, which will not exceed $5.00 per month, will
be charged to each Certificate. The second fixed dollar monthly fee, which will
not exceed $3.00 per month, will be charged, in addition to the first, to
Certificates which have accumulated Cash Value in any Fund Account. The second
fixed dollar monthly fee will be waived for any Certificate whose Net Cash Value
is greater than $10,000. In addition to the guaranteed maximum amounts for each
of the two fixed dollar monthly fees comprising the monthly administrative fee,
the sum of the two fixed dollar monthly fees actually charged at any time is
guaranteed not to exceed $6.00.
This charge is for items such as premium billing and collection, Certificate
value calculation, confirmations and periodic reports.
A Monthly Deduction is also made from the Net Cash Value for the Cost of
Insurance and any charges for additional benefits or coverages. The Cost of
Insurance is determined by multiplying the Coverage Amount by the applicable
Cost of Insurance Rate as determined by the Company. The Cost of Insurance Rate
depends on the attained age, type of benefit, size and type of group, gender mix
of the group, expectations of participation, Eligible Class of Insured,
smoker/non-smoker status, experience, federal and state taxes, rating classes,
expectations of future mortality, whether premiums are paid directly to the
Company or through payroll deduction, the Company's general costs for
distribution and administration of the Policies, and the current Coverage
Amount.
24
<PAGE> 26
The Guaranteed Maximum Cost of Insurance Rates, per $10,000 of Coverage Amount,
for standard risks are set forth in the following Table based on 150% of the
1980 Commissioners Standard Ordinary Male Mortality Tables, Age Last Birthday.
<TABLE>
<CAPTION>
Attained Age Monthly Attained Age Monthly
Last Birthday Rate Last Birthday Rate
------------- ---- ------------- ---------
<S> <C> <C> <C>
16 $ 1.99 37 $ 3.11
17 $ 2.15 38 $ 3.35
18 $ 2.27 39 $ 3.63
19 $ 2.35 40 $ 3.94
20 $ 2.37 41 $ 4.28
21 $ 2.37 42 $ 4.64
22 $ 2.35 43 $ 5.04
23 $ 2.30 44 $ 5.47
24 $ 2.25 45 $ 5.92
25 $ 2.19 46 $ 6.41
26 $ 2.15 47 $ 6.93
27 $ 2.14 48 $ 7.48
28 $ 2.12 49 $ 8.10
29 $ 2.15 50 $ 8.78
30 $ 2.19 51 $ 9.57
31 $ 2.25 52 $ 10.45
32 $ 2.34 53 $ 11.46
33 $ 2.44 54 $ 12.58
34 $ 2.56 55 $ 13.78
35 $ 2.71 56 $ 15.06
36 $ 2.90 57 $ 16.42
</TABLE>
25
<PAGE> 27
The Guaranteed Maximum Cost of Insurance Rates, per $10,000 of Coverage Amount,
for standard risks are set forth in the following Table based on 150% of the
1980 Commissioners Standard Ordinary Male Mortality Tables, Age Last Birthday.
(Continued)
<TABLE>
<CAPTION>
Attained Age Monthly Attained Age Monthly
Last Birthday Rate Last Birthday Rate
------------- ---- ------------- ---------
<S> <C> <C> <C>
58 $ 17.86 79 $ 126.29
59 $ 19.44 80 $ 138.01
60 $ 21.20 81 $ 151.28
61 $ 23.20 82 $ 166.45
62 $ 25.45 83 $ 183.54
63 $ 27.98 84 $ 202.21
64 $ 30.79 85 $ 222.14
65 $ 33.82 86 $ 243.05
66 $ 37.08 87 $ 264.86
67 $ 40.53 88 $ 287.59
68 $ 44.27 89 $ 311.42
69 $ 48.41 90 $ 336.81
70 $ 53.10 91 $ 364.47
71 $ 58.48 92 $ 395.85
72 $ 64.67 93 $ 434.54
73 $ 71.72 94 $ 488.72
74 $ 79.51 95 $ 575.26
75 $ 87.89 96 $ 732.95
76 $ 96.76 97 $1,061.50
77 $106.02 98 $1,508.68
78 $115.76 99 $1,508.68
</TABLE>
If rates are provided on a Smoker/Non-Smoker basis, the following guaranteed
rates will apply:
26
<PAGE> 28
THE GUARANTEED MAXIMUM COST OF INSURANCE, PER $10,000 OF COVERAGE AMOUNT FOR
STANDARD SMOKER RISKS ARE SET FORTH IN THE FOLLOWING TABLE BASED ON 150% OF THE
1980 COMMISSIONER STANDARD ORDINARY MALE SMOKER MORTALITY TABLE.
<TABLE>
<CAPTION>
Attained Age Monthly Attained Age Monthly
Last Birthday Rate Last Birthday Rate
------------- ---- ------------- ---------
<S> <C> <C> <C>
16 $ 2.35 37 $ 3.81
17 $ 2.56 38 $ 4.13
18 $ 2.71 39 $ 4.50
19 $ 2.81 40 $ 4.94
20 $ 2.89 41 $ 5.43
21 $ 2.91 42 $ 5.95
22 $ 2.89 43 $ 6.54
23 $ 2.82 44 $ 7.16
24 $ 2.76 45 $ 7.86
25 $ 2.67 46 $ 8.56
26 $ 2.60 47 $ 9.33
27 $ 2.56 48 $ 10.14
28 $ 2.55 49 $ 11.03
29 $ 2.57 50 $ 12.02
30 $ 2.62 51 $ 13.12
31 $ 2.70 52 $ 14.36
32 $ 2.80 53 $ 15.77
33 $ 2.94 54 $ 17.30
34 $ 3.09 55 $ 18.92
35 $ 3.29 56 $ 20.63
36 $ 3.51 57 $ 22.39
</TABLE>
27
<PAGE> 29
THE GUARANTEED MAXIMUM COST OF INSURANCE, PER $10,000 OF COVERAGE AMOUNT FOR
STANDARD SMOKER RISKS ARE SET FORTH IN THE FOLLOWING TABLE BASED ON 150% OF THE
1980 COMMISSIONER STANDARD ORDINARY MALE SMOKER MORTALITY TABLE.
<TABLE>
<CAPTION>
Attained Age Monthly Attained Age Monthly
Last Birthday Rate Last Birthday Rate
------------- ---- ------------- ---------
<S> <C> <C> <C>
58 $ 24.16 79 $ 144.93
59 $ 26.07 80 $ 156.75
60 $ 28.21 81 $ 169.90
61 $ 30.63 82 $ 184.77
62 $ 33.33 83 $ 201.61
63 $ 36.49 84 $ 219.94
64 $ 39.95 85 $ 239.24
65 $ 43.71 86 $ 259.07
66 $ 47.62 87 $ 279.08
67 $ 51.69 88 $ 299.20
68 $ 55.89 89 $ 319.44
69 $ 60.60 90 $ 340.09
70 $ 65.82 91 $ 364.81
71 $ 71.70 92 $ 392.00
72 $ 78.42 93 $ 423.51
73 $ 86.07 94 $ 465.41
74 $ 94.51 95 $ 529.23
75 $ 103.50 96 $ 647.36
76 $ 113.44 97 $ 885.25
77 $ 123.66 98 $ 1473.40
78 $ 134.04 99 $ 1508.68
</TABLE>
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<PAGE> 30
THE GUARANTEED MAXIMUM COST OF INSURANCE, PER $10,000 OF COVERAGE AMOUNT FOR
STANDARD NONSMOKER RISKS ARE SET FORTH IN THE FOLLOWING TABLE BASED ON 150% OF
THE 1980 COMMISSIONER STANDARD ORDINARY MALE NONSMOKER MORTALITY TABLE.
<TABLE>
<CAPTION>
Attained Age Monthly Attained Age Monthly
Last Birthday Rate Last Birthday Rate
------------- ---- ------------- ---------
<S> <C> <C> <C>
16 $ 1.80 37 $ 2.35
17 $ 1.92 38 $ 2.50
18 $ 2.01 39 $ 2.67
19 $ 2.07 40 $ 2.86
20 $ 2.10 41 $ 3.09
21 $ 2.09 42 $ 3.31
22 $ 2.06 43 $ 3.58
23 $ 2.01 44 $ 3.85
24 $ 1.96 45 $ 4.15
25 $ 1.90 46 $ 4.49
26 $ 1.85 47 $ 4.87
27 $ 1.82 48 $ 5.26
28 $ 1.80 49 $ 5.68
29 $ 1.80 50 $ 6.15
30 $ 1.80 51 $ 6.70
31 $ 1.84 52 $ 7.33
32 $ 1.87 53 $ 8.08
33 $ 1.94 54 $ 8.93
34 $ 2.01 55 $ 9.90
35 $ 2.10 56 $ 10.98
36 $ 2.21 57 $ 12.16
</TABLE>
29
<PAGE> 31
THE GUARANTEED MAXIMUM COST OF INSURANCE, PER $10,000 OF COVERAGE AMOUNT FOR
STANDARD NONSMOKER RISKS ARE SET FORTH IN THE FOLLOWING TABLE BASED ON 150% OF
THE 1980 COMMISSIONER STANDARD ORDINARY MALE NONSMOKER MORTALITY TABLE.
<TABLE>
<CAPTION>
Attained Age Monthly Attained Age Monthly
Last Birthday Rate Last Birthday Rate
------------- ---- ------------- ---------
<S> <C> <C> <C>
58 $ 13.47 79 $ 115.44
59 $ 14.89 80 $ 126.61
60 $ 16.47 81 $ 139.18
61 $ 18.22 82 $ 153.57
62 $ 20.21 83 $ 170.06
63 $ 22.45 84 $ 188.34
64 $ 24.99 85 $ 208.14
65 $ 27.79 86 $ 229.11
66 $ 30.84 87 $ 251.08
67 $ 34.12 88 $ 274.01
68 $ 37.65 89 $ 297.98
69 $ 41.46 90 $ 323.32
70 $ 45.73 91 $ 350.22
71 $ 50.63 92 $ 380.00
72 $ 56.30 93 $ 414.73
73 $ 62.85 94 $ 460.55
74 $ 70.23 95 $ 529.23
75 $ 78.33 96 $ 647.36
76 $ 86.88 97 $ 885.25
77 $ 95.91 98 $1,473.40
78 $ 105.34 99 $1,508.68
</TABLE>
30
<PAGE> 32
In certain instances, the Company may reduce or waive monthly administrative
fees and/or certain transaction fees in the sale of Policies to certain groups.
In addition, the Company may establish different cost of insurance and
administrative fees for different Eligible Classes of Insureds under the Policy
and for different groups insured under different Policies.
Costs for sales, administration, and mortality generally vary with the size and
stability of the group and with Class of insured under the Policy among, other
factors. The Company takes all these factors into account when establishing or
reducing charges.
To qualify for reduced charges, a group or similar arrangement must meet certain
requirements, including our requirements for size and ease of administration.
The Company will make any initial reductions or establish any differences in
rates or administrative fees according to its rules in effect at the time and in
accord with the terms of the Policy. The Company may change these rules from
time to time. Any variation in the monthly administrative fees or transaction
fees will reflect differences in costs or services and will not be unfairly
discriminatory.
The Monthly Deductions are deducted from the Fixed Account and each Fund Account
in the proportion that the value of such account bears to the sum of the Fixed
Account Value and the Fund Account Values. For the Fund Accounts, deductions are
accomplished by decreasing the number of Variable Accumulation Units in the Fund
Account. The Monthly Deductions are due on the first day of each month.
TRANSACTION FEE FOR EXCESS TRANSFERS AND SURRENDERS
There will be a $25 transaction fee for each transfer between funding options in
excess of 12 during any Policy Year. The Company reserves the right to waive
this fee in some situations. Upon surrender of a Certificate, or a partial
surrender, a transaction fee of $25 will be charged.
MORTALITY AND EXPENSE RISK CHARGE
For mortality and expense risks, a daily deduction, currently equivalent to
0.45% per year is made from amounts held in the Fund Accounts. This deduction
may be changed by the Company from time to time, but is guaranteed not to exceed
0.90% per year.
The mortality risk the Company assumes is that the group of lives insured under
the Policies may, on average, live for shorter periods of time than the Company
estimated. The expense risk the Company assumes is that its costs of issuing and
administering Policies may be more than the Company estimated.
If these charges are insufficient to cover actual costs and assumed risks, the
loss will fall on the Company. Conversely, if the charge proves more than
sufficient, any excess will be added to the Company's surplus and may be used
for any proper purpose.
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<PAGE> 33
CERTIFICATE LOANS
If the Certificate is in force and has an accumulated Net Cash Value, the
Company will, upon application, make a loan to the Owner of the Certificate
using the Certificate's Cash Value as security for the loan. The minimum loan
amount is $250. A Certificate loan requires that a loan agreement be executed
and that the Certificate be assigned to the Company.
The loan may be for any amount up to 90% of the Net Cash Value at the time of
the loan. Further, the Company will not make a loan which would require that the
Loan Account Value be greater than 90% of the Cash Value. Interest will accrue
on the Loan at an annual rate of 8% and will be due on the Policy Anniversary
Date or upon surrender or upon termination of the Certificate. Interest not paid
within 30 days of coming due will be added to the Loan Balance as of the date on
which it became due. Funds equaling the change in the amount of the Loan Balance
will, from time to time as the Loan Balance changes, be transferred from the
Fund Accounts and the Fixed Account to the Loan Account. If Certificate values
are held in more than one funding option, withdrawals from each funding option
will be made proportionately from the values in each funding option at the time
of the transfer, unless the Company is instructed otherwise in writing at the
Customer Service Center.
In the event of surrender, lapse, death of the Insured, or any other event
resulting in termination of the Certificate, the Loan Account Value will revert
to the Company in repayment of the Current Outstanding Loan Balance. To the
extent that the Current Outstanding Loan Balance exceeds the Loan Account Value,
such excess will reduce the payment of any proceeds under the Certificate or the
Cash Value.
The Company will credit interest on the Loan Account Value at a rate which will
be not less than an effective annual rate of 6%.
Upon repayment of all or any portion of a loan, and corresponding reduction of
the Loan Balance, funds in the Loan Account in an amount equal to the amount of
the loan repayment will be transferred to the funding options according to
current Net Premium Payment allocations.
A Certificate loan, whether or not repaid, will affect the proceeds payable upon
the Insured's death and the Cash Value because the investment results of the
Fund Accounts or the Fixed Account will apply only to the non-loaned portion of
the Cash Value. The longer a loan is outstanding, the greater the effect is
likely to be. Depending on the investment results of the Fund Accounts or the
Fixed Account while the loan is outstanding, the effect could be favorable or
unfavorable.
SURRENDER, LAPSE, AND REINSTATEMENT
FULL SURRENDER
A full surrender may be made at any time while the Certificate is in force. A
transaction fee of $25 is charged. The Company will pay the Owner the Net Cash
Value (less the transaction fee and any other amounts due the Company) next
computed after receiving the Owner's written request at the Customer Service
Center in a form satisfactory to the Company along with the return of the
Certificate.
32
<PAGE> 34
PARTIAL SURRENDER
A partial surrender may be made at any time by written request to the Customer
Service Center while the Certificate is in force. A transaction fee of $25 is
charged. The amount of a partial surrender may not exceed 90% of the Net Cash
Value at the end of the Valuation Period in which the election would become
effective, and may not be less than $250.
A partial surrender will reduce the Cash Value and the Death Benefit, but it
will not reduce the Coverage Amount.
If, at the time of a partial surrender, the Net Cash Value is attributable to
more than one funding option, the $25 transaction charge and the amount paid
upon the surrender will be taken proportionately from the values in each funding
option, unless the Certificate Owner and the Company agree otherwise.
LAPSE OF A CERTIFICATE
A lapse occurs if a Monthly Deduction due under the Certificate is greater than
the Net Cash Value and no payment to cover the Monthly Deduction is made within
the Grace Period. The Company will send the Owner a lapse notice at least 61
days before the Grace Period expires.
REINSTATEMENT OF A LAPSED CERTIFICATE
If the Certificate lapses, the Owner can apply, in writing, for reinstatement at
any time prior to three years after the date of lapse. The Coverage Amount of
the reinstated Certificate will be the same as the Coverage Amount of the
Certificate at the time of lapse. To reinstate a Certificate, the Company will
require evidence of good health acceptable to the Company (at the Owner's
expense) and an amount sufficient to pay for the current Monthly Deduction plus
one additional Monthly Deduction, plus interest accrued from the date of lapse.
Reinstatement will be effective on the date the Company approves the
reinstatement and will be subject to new contestability and suicide periods.
TERMINATION, CONTINUATION, AND CONVERSION
POLICY TERMINATION
Either the Group Policyholder or the Company may terminate the Policy upon 60
days prior notice to the other party. Upon Policy termination, individual
coverage will be affected as set forth below.
TERMINATION OF INDIVIDUAL COVERAGE
Coverage for an Insured under the Policy will terminate upon lapse or surrender
of the Insured's Certificate, or upon the death of the Insured. Coverage for an
Insured under the Policy will also terminate upon termination of the Policy or
upon loss of eligibility of the Insured, unless the Policy
33
<PAGE> 35
expressly provides for continuation of the Insured's coverage.
Term insurance coverage for an insured dependent child or an insured spouse will
terminate upon termination of the Certificate under which the child or spouse is
covered, or upon the loss of eligibility of the child or spouse, or when the
Certificate Owner terminates the child or spouse coverage, or upon the Child
electing to purchase group variable universal life insurance under the Policy as
provided for in the Policy, or upon the death of the child or spouse.
CONTINUATION
The circumstances in which the Employee or spouse may continue coverage after
Policy termination or loss of eligibility will be determined by the Group
Policyholder in advance of the Policy being issued. For loss of eligibility, the
following options are available to the Group Policyholder. For Employees, the
Group Policyholder may select continuation upon retirement, leave of absence,
and termination of employment. For spouses, except spouses covered by term
coverage, the Group Policyholder may select continuation upon termination of the
Employee's employment, death of the Employee, and divorce of the spouse and the
Employee. For Employees on leave of absence, the Group Policyholder may select
continuation upon retirement, return to active service, or termination of
employment.
For termination of the Policy, the Group Policyholder may elect to allow
continuation if the Insured Employee or spouse is not eligible for coverage
under a successor plan.
Child term coverage and spouse term coverage may continue if the Certificate
upon which the term coverage was elected continues.
If continuation is not available to the Insured as described above, and the
Insured has a Net Cash Value of $250 or greater, coverage under the Policy will
continue for the Insured.
The monthly cost of insurance rates and the monthly administrative fee and its
components may change upon the Insured's continuation of coverage under the
Policy.
CONVERSION
If the Insured's coverage terminates because the insured is no longer a member
of an Eligible Class under the Policy, and continuation is not provided for
under the Policy, the insured may convert the amount of his insurance coverage
which is terminating. If the Insured's coverage terminates because of Policy
termination, and continuation is not provided for under the Policy, and if the
Insured has been covered under the Policy for at least three years, the Insured
may convert up to $10,000 of the life insurance coverage which is terminating.
Such conversions may be to any form of individual life insurance coverage then
offered by the Company except that the coverage may not be term insurance and it
may not contain disability or other supplemental benefits. Evidence of good
health acceptable to the Company will not be required for such conversion. Such
conversions must be applied for within 31 days of termination of coverage.
No conversion is available for lapsed or surrendered coverage or for coverage
which the Insured
34
<PAGE> 36
becomes eligible to replace or continue under another Policy or a group life
insurance policy which replaces the Policy within 30 days.
ADDITIONAL COVERAGE RIDERS
Each of the following optional benefit riders is available for Group
Policyholder selection. Where indicated, the Employee will be able to choose
whether or not he wishes to purchase the coverage provided by the rider. An
additional cost of insurance will be charged as a part of the Monthly Deduction
for each coverage rider which is in effect for the Certificate, except for the
Waiver of Cost of Life Insurance Rider and the Seat Belt Rider, the cost of
which will be included in the cost of life insurance if selected by the
employer.
ACCIDENTAL DEATH, DISMEMBERMENT AND INJURY
The Group Policyholder may select one of three Accident Benefit Riders which
provide additional benefits in the event of death or injury resulting from an
accident within 90 days of the accident. If one of the three riders is selected
by the Group Policyholder, the Employee may elect or decline to be covered for
the benefit provided by the rider.
The first rider provides an additional death benefit equal to the Coverage
Amount.
The second rider provides, in addition to the benefit provided by the first
rider, additional benefits if the insured suffers, as a result of accident, loss
of a hand, loss of a foot, loss of the sight in one eye, loss of the thumb and
index finger of the same hand, or any combination thereof.
The benefit for any covered loss under this rider is a percentage of the
Coverage Amount under the Policy. The maximum amount that will be paid, in
aggregate, for all losses under the rider, resulting from any one accident, is
an amount equal to the Coverage Amount.
The third rider provides, in addition to the benefits provided under the second
rider above, benefits if the insured suffers, as a result of accident, loss of
speech, loss of hearing, quadriplegia, paraplegia, or hemiplegia. The benefit
for any covered loss under this rider is a percentage of the Coverage Amount
under the Policy. The maximum amount that will be paid, in aggregate, for all
losses under this rider, resulting from any one accident, is an amount equal to
the Coverage Amount.
WAIVER OF COST OF LIFE INSURANCE
If elected by the Group Policyholder, all Certificate Owners will be covered by
this rider. Under this optional benefit rider, if the Insured Employee becomes
totally disabled before age 60, the cost of life insurance coverage, the monthly
administrative fee for the Employee's Certificate, and the cost of any child
term coverage provided under the Employee's Certificate will be waived while the
Employee remains continuously and totally disabled following a waiting period of
6 to 12 months. The waiting period will be agreed upon between the Group
Policyholder and the Company before coverage under this Rider becomes effective.
While the specifically identified charges are being waived under this rider, the
Owner may continue to pay premiums which will accumulate as Cash Value subject
to the terms and conditions of the Policy.
35
<PAGE> 37
The Insured must submit proof of continuing Total Disability as reasonably
required by the Company. The Coverage Amount may not be increased while the cost
of insurance is being waived; and, the cost of insurance for spouse coverage,
retiree coverage and any optional benefits or features is not waived under this
rider. Child coverage may not be added after the disability has begun. Coverage
under this rider terminates at age 65.
PAID-UP INSURANCE
If elected by the Group Policyholder, all Certificate Owners will be covered by
this rider.
Under this optional benefit rider, the Owner may use all or any portion of his
Net Cash Value to purchase a policy of Paid-Up insurance in an amount not to
exceed the Coverage Amount in force for the Insured at the time of purchase.
Such coverage is provided under a separate policy but the premium for such
coverage shall be calculated by using the maximum cost of insurance for the
Policy and the minimum interest rate guarantee for the Fixed Account. No
evidence of good health will be required for such coverage. The Coverage Amount
of the Owner's Certificate will be reduced by the amount of coverage purchased
under the Paid-Up policy.
ACCELERATED PAYMENT BENEFIT
If elected by the Group Policyholder, this coverage is available to be elected
or declined by the Certificate Owner. This coverage is available for insured
employees, former employees, spouses, former spouses, retirees and leave of
absence employees.
Under this rider, the Company will pay one of the three following types of
benefit.
The three types of benefit are:
1. Terminal Illness Benefit. The Company will pay up to 60% of the Insured's
Coverage Amount upon receipt of due proof, acceptable to the Company, that
the Insured has a terminal illness. Such proof comprises a written
diagnosis by two unaffiliated physicians stating that the Insured has less
than 12 months to live, and supportive evidence satisfactory to the Company
including but not limited to radiological, histological, and laboratory
reports. Payment will be made in a lump sum.
2. Nursing Care and Custodial Care Facility Benefit. The Company will pay up
to 60% of the Insured's Coverage Amount upon receipt of due proof,
acceptable to the Company, that the Insured:
o has an Impairment, as determined by the Company;
o is confined to a Nursing Care or Custodial Care Facility
(registered as a bed patient on a 24 hour basis) due to the
Impairment;
o provides the Company with written certification from two
unaffiliated Physicians that the Insured is expected to remain
in the Nursing Care or Custodial Care Facility for the rest of
his life; and
o has satisfied the deductible waiting period.
The deductible waiting period is 90 consecutive days. Payment may be
made on a lump-sum basis or on a periodic basis at 2% per month until
thirty monthly payments have been made.
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<PAGE> 38
Impairment is specifically defined in the rider and generally means
the Insured is totally disabled and unable to function without human
assistance or supervision.
3. Specified Disease Benefit. The Company will pay up to 60% of the Insured's
Coverage Amount upon receipt of due proof, acceptable to the Company, that
the Insured has a Specified Disease. Specified Disease means life
threatening cancer, heart attack, renal failure, stroke, specified organ
transplant, or acquired immune deficiency syndrome. Such diseases are
further defined in the rider. Due proof comprises a written diagnosis and
prognosis by a licensed physician certifying the existence of the disease,
and supportive evidence satisfactory to the Company including but not
limited to radiological, histological, or laboratory reports. Payment will
be made in a lump sum.
The Owner may make a claim for only one of the three benefits described above.
Once a benefit has been paid under this rider for an Insured, no further
benefits will be paid for that Insured under this rider. The Death Benefit for
the Insured will be reduced by the amount paid under this rider for the Insured.
SEAT BELT BENEFIT
Under this optional benefit rider, the Company will pay an additional 10% of the
Insured's Coverage Amount (up to a maximum of $10,000) if the Insured dies as a
result of an accident while driving or riding in a private passenger car and
properly wearing his seat belt. Proper use of the seat belt must be certified in
the official accident report.
OTHER POLICY PROVISIONS
DEFERRAL OF PAYMENT
Payment of the surrendered amount from the Fund Accounts may be postponed when
the New York Stock Exchange is closed and for such other periods as the
Securities and Exchange Commission may require. Payment from the Fixed Account
may be deferred up to six months at the Company's option. If the Company
exercises its right to defer such payments from the Fixed Account interest will
be added as required by law.
FIXED BENEFIT POLICY EXCHANGE
Where required by state law, the Owner may, within eighteen months of the
Certificate Effective Date, exchange his Certificate for a Certificate of
insurance under a group flexible premium life insurance policy issued by the
Company ("Exchange Policy"). The date of issue and the age at issue of the
Certificate under the Exchange Policy shall be the same as for the Certificate
under the Policy. Additional coverage and riders elected by the Owner under the
Policy will be provided on the Exchange Policy to the extent available. Premium
rates will be those in effect under the Exchange Policy at the time of exchange
for the class of eligible persons into which the Insured falls. Cash Values will
be equitably adjusted under the Exchange Policy.
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<PAGE> 39
CERTIFICATE OWNER
While the Insured is living, all rights in this Certificate are vested in the
Certificate Owner named in the application, or as subsequently changed, subject
to assignment, if any.
If the Certificate Owner, other than the Insured, dies before the Insured, the
Certificate Owner's rights in this Certificate belong to the Certificate Owner's
estate.
BENEFICIARY
The Beneficiary(ies) shall be as named in the application, or as subsequently
changed.
The Certificate Owner may name a new Beneficiary while the Insured is living.
Any change must be in a written form satisfactory to the Company and recorded at
the Customer Service Center. Once recorded, the change will be effective as of
the date signed; however, the change will not affect any payment made or action
taken by the Company before it was recorded.
If any Beneficiary predeceases the Insured, that Beneficiary's interest passes
to any surviving Beneficiary(ies), unless otherwise provided. Multiple
Beneficiaries will be paid in equal shares, unless otherwise provided. If no
designated Beneficiary survives the Insured, or if no Beneficiary has been
designated, the death proceeds shall be paid to the first surviving class of the
Insured's spouse, the Insured's children, the Insured's parents or the Insured's
siblings. If no member of any of the above classes survives the Insured, the
proceeds will be paid to the Insured's estate.
ASSIGNMENT
While the Insured is living, the Certificate Owner may assign his rights in the
Certificate. The assignment must be in writing in a form acceptable to the
Company, signed by the Certificate Owner and recorded at the Customer Service
Center. No assignment will affect any payment made or action taken by the
Company before it was recorded. The Company is not responsible for any
assignment not submitted for recording, nor is the Company responsible for the
sufficiency or validity of any assignment. The assignment will be subject to all
terms and conditions of the Policy.
INCONTESTABILITY
Statements made by an Insured will not be used to contest the validity of an
Insured's initial coverage after the Certificate has been in force during the
Insured's lifetime for two years from the Certificate Effective Date. For any
increase in Coverage Amount, statements made by an Insured will not be used to
contest the validity of an increase in coverage after it has been in force
during the Insured's lifetime for two years from its effective date of the
increase.
MISSTATEMENT OF AGE
If the age of the Insured has been misstated, the affected benefits will be
adjusted to the amounts which the most recent cost of insurance deducted from
the Cash Value would have purchased at the correct age.
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<PAGE> 40
SUICIDE
If the Insured dies by suicide, while sane or insane, within two years from the
Certificate Effective Date, the Company will pay no more than the sum of the
premiums paid, less any partial surrenders, less the sum of any loans plus
accrued interest. If the Insured dies by suicide, while sane or insane, within
two years from the date an application is accepted for an increase in the
Coverage Amount, the Company will pay no more than a refund of the monthly
charges for the cost of such additional coverage.
STATE VARIATIONS
Certain benefits and other Policy terms may vary from state to state due to the
requirements of state law.
GROUP POLICYHOLDER ELECTIONS
Many insurance features of the Policy are elected by the Group Policyholder
before coverage is offered to employees. Such features would include, but not be
limited to, whether spouse coverage is available and, if so, whether it is term
coverage or variable universal life insurance coverage, availability of child
term insurance, maximum and minimum amounts of coverage, guaranteed issue
amounts, eligibility, continuation and conversion options available, and whether
rates reflect smoker status. The Group Policyholder will negotiate the cost of
insurance rates, administrative fees and any changes in the Policy features
while the Policy is in force.
TELEPHONE TRANSACTIONS
Certain transactions, identified by the Customer Service Center, may be made by
telephone if telephone transactions have been previously authorized in writing
and signed by the current owner. To make a telephone transaction, the
Certificate Owner must call the Customer Service Center and provide, as
identification, his Certificate number, his Social Security number, and his
personal identification number. A customer service representative will then,
upon ascertaining that telephone transfers are authorized for that Certificate,
take the transfer request, which will be processed as of the next close of
business and confirmed within five business days. The Company disclaims all
liability for losses resulting from unauthorized or fraudulent telephone
transactions, but acknowledges that if it does not follow these procedures,
which it believes to be reasonable, it may be liable for such losses.
NONPARTICIPATING POLICIES
These are nonparticipating Policies on which no dividends are payable. These
Policies do not share in the profits or surplus earnings of the Company.
39
<PAGE> 41
DOLLAR COST AVERAGING
Dollar Cost Averaging is a program which, if elected, enables a Certificate
Owner to systematically reallocate specified dollar amounts from the CIGNA VP
Money Market Fund Account to the other Fund Accounts and the Fixed Account at
regular intervals. By allocating an identified sum on a regularly scheduled
basis as opposed to reallocating the total amount at one particular time, a
Certificate Owner may be less susceptible to the impact of market fluctuations.
Dollar Cost Averaging may be selected if the CIGNA VP Money Market Fund Account
Value is at least $3,000. The minimum transfer amount is $250. All Dollar Cost
Averaging transfers will be made effective the first processing day following
the first of the month (or the next Valuation Day, if later). Election of this
arrangement may occur at any time by properly completing the Dollar Cost
Averaging election form, returning it to the Company, and ensuring that
sufficient value is in the CIGNA VPMoney Market Fund Account. Dollar Cost
Averaging will become effective in the month following the month in which the
form is received and the funds are made available in the CIGNA Money Market Fund
Account.
Dollar Cost Averaging will terminate when any of the following occurs: (1) the
number of designated transfers has been completed; (2) the CIGNA VP Money Market
Fund Account Value is insufficient to complete the next transfer; (3) the Owner
requests termination in writing and such writing is received by the end of the
month in order to cancel the transfer scheduled to take effect the following
month; or (4) the Certificate is lapsed, surrendered or otherwise terminated.
There is currently no charge for Dollar Cost Averaging; however, each complete
Dollar Cost Averaging transfer is counted as one of the twelve free transfers
per Policy Year. The Company reserves the right to charge for this program. In
the event there are additional transfers, a transfer fee will be charged.
The main objective of Dollar Cost Averaging is to shield investments from short
term price fluctuations. Since the same dollar amount is transferred to a Fund
Account with each transfer, more Variable Accumulation Units are purchased if
the Variable Accumulation Unit Value is low, and fewer Variable Accumulation
Units are purchased if the Variable Accumulation Unit Value is high. Therefore,
a lower average cost per unit may be achieved over the long term. This plan of
investing allows investors to take advantage of market fluctuations but does not
assure a profit or protect against a loss in declining markets.
TAX MATTERS
The following is a brief discussion of some of the federal tax issues which may
arise in regard to the Policy and Certificates. This discussion is general in
nature and is not intended as tax advice. For specific advice on the effect of
tax laws and rules on the Policy and Certificates, the Owner should consult a
qualified tax adviser.
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<PAGE> 42
TAXATION OF POLICY BENEFITS IN GENERAL
Section 7702 of the Code provides that if certain tests are met, a Policy will
be treated as a life insurance contract for federal tax purposes. The Company
will monitor compliance with these tests. The Policy should thus receive the
same federal income tax treatment as a fixed benefit life insurance contract. As
a result, increases in the Cash Value generally are not taxable to the Owner
until there has been a full or partial surrender, lapse, or other pre-death
distribution. Loan proceeds generally are not taxed, and the death proceeds
payable under a Policy are excludable from gross income of the Beneficiary under
Section 101 of the Code.
Section 7702A of the Code defines modified endowment contracts as those policies
issued or materially changed on or after June 21, 1988 on which the total
premiums paid during the first seven years exceed the amount that would have
been required to be paid if the policy had provided for paid up benefits after
seven level annual premiums. The Code provides for taxation of surrenders,
partial surrenders, loans, collateral assignments and other pre-death
distributions from modified endowment contracts in the same way annuities are
taxed, i.e., they are taxable to the extent the cash value of the policy
exceeds, at the time of distribution, the premiums paid into the policy. A 10%
tax penalty generally applies to the taxable portion of such distributions
unless the Policy Owner is over age 59 1/2 or disabled.
In specific cases, the Certificates under the Policies offered by this
Prospectus may or may not be issued as modified endowment contracts. Where the
Certificates are not issued as modified endowment contracts, the Company will
monitor premiums paid and will notify the Certificate Owner when the
Certificate's non-modified endowment contract status is in jeopardy.
If a Policy is not a modified endowment contract, distributions are generally
treated first as a recovery of the premiums paid into the Policy and second as a
distribution of taxable income; however, a cash distribution during the first 15
years after a policy is issued which causes a reduction in death benefits may
still become fully or partially taxable to the Owner pursuant to Section
7702(f)(7) of the Code. The Certificate Owner should carefully consider this
potential effect and seek further information before initiating any changes in
the terms of the Certificate. Under certain conditions, a Certificate may become
a modified endowment contract as a result of a material change or a reduction in
benefits as defined by Section 7702A(c) of the Code.
A total surrender or termination of the Certificate by lapse may have adverse
tax consequences. If the amount received by the Certificate Owner plus total
Certificate indebtedness exceeds the premiums paid into the Certificate, the
excess will generally be treated as taxable income, regardless of whether or not
the Certificate is a modified endowment contract.
Deductibility of interest that is incurred on any loan under a policy covering
the life of any individual who is an officer or employee of, or who is
financially interested in, the business carried on by the Owner, may be strictly
limited. Any deduction for interest on loans under such policies may also be
subject to certain other restrictions set forth in Section 264 of the Code.
Before taking a Policy Loan, the Owner should consult a tax adviser as to the
tax consequences of such a Loan.
If the Owner of a Policy is a corporation, Code Sections 56(c)(1) and (g)(4)(B)
may subject a portion of any increases in the Cash Value, the receipt by the
Owner of death benefits, and related distributions to the alternative minimum
tax (AMT) which is imposed by Section 55 of the Code. If the Owner is
41
<PAGE> 43
subject to the alternative minimum tax (AMT) in any taxable year, then the Owner
will be subject to special tax rules with respect to such events. These
provisions require an annual accounting under AMT rules for each Policy.
DIVERSIFICATION REQUIREMENTS
In addition to meeting the tests required under Section 7702 and Section 7702A,
Section 817(h) of the Code requires that the investments of separate accounts
such as the Separate Account be adequately diversified. Regulations issued by
the Secretary of the Treasury set the standards for measuring the adequacy of
this diversification. Subject to certain limited relief provisions, a variable
life insurance policy that is based to any extent on a separate account that is
not adequately diversified under these regulations would not be treated as life
insurance under Section 7702 of the Code. To be adequately diversified, each
Fund Account of the Separate Account must meet certain tests. The Company
believes the Separate Account investments meet the applicable diversification
standards.
In 1986, the Treasury Department indicated that guidelines might be issued under
which a variable life insurance policy would not be treated as a life insurance
contract for tax purposes if the owner of the policy had an excessive degree of
control over the investments underlying the policy (e.g., by being able to
transfer values among sub-accounts). No such guidelines have as yet been issued,
and it is not expected that any such guidelines would adversely affect the
Policies.
Should the Secretary of the Treasury issue additional rules or regulations
limiting the number of funds, transfer between funds, exchanges of funds or
changes in investment objectives of funds such that the Policy would no longer
qualify as life insurance under Section 7702 of the Code, the Company will take
whatever steps are available to allow the Policies to continue to qualify as
life insurance under Section 7702.
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under the Code. Since the
Separate Account is not a separate entity from the Company and its operations
form a part of the Company, it will not be taxed separately as a "regulated
investment company" under Sub-chapter M of the Code. Investment income and
realized capital gains on the assets of the Separate Account are reinvested and
taken into account in determining the value of Variable Accumulation Units.
The Company does not initially expect to incur any Federal income tax liability
that would be chargeable to the Separate Account. Based upon these expectations,
no charge is currently being made against the Separate Account for federal
income taxes. If, however, the Company determines that on a separate company
basis such taxes may be incurred, it reserves the right to assess a charge for
such taxes against the Separate Account.
The Company may also incur state and local taxes in addition to premium taxes in
several states. At present, these taxes are not significant. If they increase,
however, additional charges for such taxes may be made.
42
<PAGE> 44
SECTION 848 CHARGES
The current 3.0% premium load is assessed to cover state taxes and federal
income tax liabilities incurred by the Company. This load reflects charges to
cover the expenses of state taxes and for the additional federal income tax
burden under Section 848 of the Code relating to the tax treatment of deferred
acquisition costs. The premium load may be changed from time to time by the
Company, but it may be no greater than 5.0%.
OTHER CONSIDERATIONS
Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of Certificate proceeds depend on the
circumstances of each Certificate Owner or Beneficiary. The Owner should consult
a professional tax adviser to determine the tax consequences of purchasing or
making transactions under the Policy.
The foregoing discussion is general and is not intended as tax advice. Counsel
and other competent advisers should be consulted for more complete information.
This discussion is based on the Company's understanding of Federal income tax
laws as they are currently interpreted by the Internal Revenue Service. No
representation is made as to the likelihood of continuation of these current
laws and interpretations.
OTHER MATTERS
VOTING RIGHTS
In accordance with its view of presently applicable law, the Company will vote
the shares of each Fund held in the Separate Account at meetings of the
shareholders of the particular Fund in accordance with written instructions
received from Certificate Owners having Variable Accumulation Units of the
related Fund Account. The Company will vote shares for which it has not received
instructions, as well as shares attributable to it, in the same proportion as it
votes shares for which it has received instructions. The Funds do not hold
regular meetings of shareholders.
If, however, the Act or any regulation thereunder is amended or if the present
interpretation thereof should change, and as a result the Company determines
that it is permitted to vote the Fund shares in its own right, it may elect to
do so. The number of votes which a Certificate Owner has the right to instruct
will be calculated separately for each Related Fund. This number will be
determined by calculating the proportion of the Certificate Owner's Cash Value
in the Fund Account to the amount of the Separate Account's investment in the
Related Fund and multiplying that proportion by the number of votes the Separate
Account has in the Related Fund. In determining the number of votes, fractional
shares will be recognized. The number of votes that a Certificate Owner has the
right to instruct will be determined as of the date coincident with the date
established by the Fund for determining shareholders eligible to vote at the
meeting of the Fund, but not more than 60 days before the meeting of the Fund.
Voting instructions will be solicited by written communication at least 14 days
prior to such meeting of the Fund. Each Certificate Owner having a voting
interest in the Fund will receive appropriate proxy
43
<PAGE> 45
materials and reports.
The Company will vote the Fund shares as to which no timely instructions are
received in proportion to the voting instructions from others with an interest
in the particular Fund Account. Voting instructions to abstain on any item to be
voted upon will be applied to reduce the votes eligible to be cast by the
Company.
The Company may, if required by State insurance regulatory authorities,
disregard voting instructions if the instructions require that the shares be
voted so as to cause a change in the sub-classification or investment objectives
of the Fund or to approve or disapprove an investment advisory contract for a
Fund.
A change would be disapproved only if the proposed change is contrary to state
law or prohibited by state regulatory authorities or the Company determines that
the change would have an adverse effect on the Separate Account in that the
proposed investment policy for a Fund may result in overly speculative or
unsound investments. In the event the Company does disregard voting
instructions, a summary of that action and the reasons for such action will be
included in the next annual report to Certificate Owners.
The Funds' shares are issued and redeemed only in connection with qualified
plans, and variable annuity contracts and variable life insurance policies
issued through separate accounts of the Company and other life insurance
companies. The Funds do not foresee any disadvantage to Certificate Owners
arising out of the fact that shares may be made available to separate accounts
which are used in connection with both variable annuity and variable life
insurance products. Nevertheless, the Funds' Boards intend to monitor events in
order to identify any material irreconcilable conflicts which may possibly arise
and to determine what action, if any, should be taken in response thereto. If
such a conflict were to occur, one of the separate accounts might withdraw its
investment in a Fund. This might force a Fund to sell portfolio securities at
disadvantageous prices.
DIRECTORS AND OFFICERS OF THE COMPANY
The following persons are Directors and officers of the Company. The address of
each is 900 Cottage Grove Road, Hartford, CT 06152 and each has been employed by
the Company for more than five years except Mr. Jones, Mr. Alexander and Dr.
Schaffer. Prior to April 1994, Mr. Jones was employed by NAC Re Corporation.
Prior to December 1994, Mr. Alexander was employed by E. I. DuPont DeNemour as
Director, Human Resources. Prior to May 1993, Dr. Schaffer was Vice President,
Professional Affairs, Aetna Health Plans, Aetna Life & Casualty and until 1990
was Vice President, Quality Management, Humana, Inc. Prior to January, 1995, Mr.
Pacey was with Digital Equipment Corporation.
44
<PAGE> 46
<TABLE>
<CAPTION>
POSITIONS AND OFFICERS
NAME WITH THE COMPANY
---- ----------------------
<S> <C>
Thomas C. Jones President
(Principal Executive Officer)
James T. Kohan Vice President and Actuary
(Principal Financial Officer)
Robert Moose Vice President
(Principal Account Officer)
David C. Kopp Corporate Secretary
Andrew G. Helming Secretary
Stephen C. Stachelek Vice President and Treasurer
Harold W. Albert Director
Robert W. Burgess Director
John G. Day Director and Chief Counsel
Joseph M. Fitzgerald Director and Senior Vice President
H. Edward Hanway Director and Chairman of the Board
Carol M. Olsen Director and Senior Vice President
John E. Pacy Director and Senior Vice President
Marc L. Preminger Director, Senior Vice President
and Chief Financial Officer
Arthur C. Reeds, III Director and Senior Vice President
Patricia L. Rowland Director and Senior Vice President
W. Allen Schaffer, M.D. Director and Senior Vice President
</TABLE>
DISTRIBUTION OF POLICIES
The Policies will be sold by licensed insurance agents in those states where the
Policies may lawfully be sold. Such agents will be registered representatives of
broker-dealers registered under the Securities Exchange Act of 1934 who are
members of the National Association of Securities Dealers, Inc. (NASD). The
Policies will be distributed by the Company's principal underwriter, CIGNA
Financial Advisors, Inc. ("CFA"), whose address is the same as the Company's.
CFA is a Connecticut corporation organized in 1967, and is the principal
underwriter for other registered separate accounts maintained by the Company.
Gross first year commissions paid by the Company, including expense
reimbursement allowances, on the sale of these Policies are not more than 20% of
premium payments. Gross renewal commissions paid by the Company will not exceed
15% of premium payments.
45
<PAGE> 47
OTHER CONTRACTS ISSUED BY THE COMPANY
The Company does presently and will, from time to time, offer other variable
annuity contracts and variable life insurance policies with benefits which vary
in accordance with the investment experience of a separate account of the
Company.
RIGHT TO TAKE ACTIONS REGARDING THE SEPARATE ACCOUNT
The Company reserves the right to take certain actions in connection with
Separate Account operations. These actions will be taken in accordance with
applicable laws (including obtaining any required regulatory approvals).
Specifically, the Company reserves the right to:
o add, combine, or remove any Fund,
o create new separate accounts,
o combine the Separate Account with one or more other separate accounts,
o operate the Separate Account as a management investment company under
the Act or in any other form permitted by law,
o deregister the Separate Account under the Act,
o manage the Separate Account under the direction of a committee or
discharge such committee at any time,
o transfer any assets in any Fund Account to another Fund Account, or to
one or more separate accounts or to the Company's general account, and
o to take any actions necessary to comply with, or to obtain and
continue any exemptions from the Act.
STATE REGULATION
The Company is subject to the laws of Connecticut governing insurance companies
and to regulation by the Connecticut Insurance Department. An annual statement
in a prescribed form is filed with the Insurance Department each year covering
the operation of the Company for the preceding year and its financial condition
as of the end of such year. Regulation by the Insurance Department includes
periodic examination to determine the Company's contract liabilities and
reserves so that the Insurance Department may certify the items are correct. The
Company's books and accounts are subject to review by the Insurance Department
at all times and a full examination of its operations is conducted periodically
by the National Association of Insurance Commissioners. Such regulation does
not, however, involve any supervision of management or investment practices or
policies. A blanket bond for $10 million covers all of the officers and
employees of the Company.
REPORTS TO CERTIFICATE OWNERS
The Company maintains Policy records and will mail to each Certificate Owner, at
the last known address of record, an annual statement showing the amount of the
current Death Benefit, the Cash Value, and Net Cash Value, premiums paid and
monthly charges deducted since the last report, the amounts invested in the
Fixed Account, in each Fund Account, and any Loan Account Value.
Certificate Owners will also be sent annual reports containing financial
statements for the Separate
46
<PAGE> 48
Account as required by the 1940 Act. In addition, Certificate Owners will
receive periodic statements of significant transactions, such as changes in
Coverage Amount, changes in net premium payment allocation, transfers among Fund
Accounts, premium payments, loans, loan repayments, reinstatement and
termination.
ADVERTISEMENTS
The Company is rated by independent financial rating services, including
Moody's, Standard & Poor's, Duff & Phelps and A. M. Best Company. The purpose of
these ratings is to reflect the financial strength or claims-paying ability of
the Company. The ratings are not intended to reflect the investment experience
or financial strength of the Separate Account. The Company may advertise these
ratings from time to time. Furthermore, the Company may occasionally include in
advertisements comparisons of currently taxable and tax deferred investment
programs, based on selected tax brackets, or discussions of alternative
investment vehicles and general economic conditions.
LEGAL PROCEEDINGS
There are no material legal or administrative proceedings pending or known to be
contemplated, other than ordinary routine litigation incidental to the business,
to which the Company and the Separate Account are party, or to which any of
their property is subject. The principal underwriter, CFA, is not engaged in any
material litigation of any nature.
EXPERTS
Actuarial opinions regarding Deferred Acquisition Cost Tax (DAC Tax) referred to
in this Registration Statement have been rendered by Benjamin Clement, FSA, MAAA
as stated in the opinion filed as an Exhibit to the Registration Statement given
on the authority of Mr. Clement as an expert in actuarial matters. Legal matters
involving the federal securities laws have been reviewed by Jorden, Burt,
Berenson & Johnson, Washington, D.C.
Legal matters in connection with the Policies described herein are being passed
upon by Jerold H. Rosenblum, Esq., Chief Counsel, CIGNA Group Insurance, 1601
Chestnut Street, Philadelphia, PA 19192 in the opinion filed as an Exhibit to
the Registration statement given on his authority as an expert in these matters.
The consolidated financial statements of Connecticut General Life Insurance
Company as of December 31, 1996 and 1995 and for each of the three years in the
period ended December 31, 1996 included in this Prospectus have been so included
in reliance on the report of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
REGISTRATION STATEMENT
A Registration Statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, with respect to the
Policies offered hereby. This prospectus does not contain all the information
set forth in the Registration Statement and amendments thereto and exhibits
filed as a part thereof, to all of which reference is hereby made for further
information concerning the
47
<PAGE> 49
Separate Account, the Company, and the Policies offered hereby. Statements
contained in this Prospectus as to the content of Policies and other legal
instruments are summaries. For a complete statement of the terms thereof,
reference is made to such instruments as filed.
FINANCIAL STATEMENTS
There follow consolidated balance sheets of the Company and its subsidiaries as
of December 31, 1996 and 1995 and related consolidated statements of income and
retained earnings and cash flows for the years ended December 31, 1996, 1995
and 1994.
These financial statements should be considered only as bearing upon the ability
of the Company to meet its obligations under the Policies. No financial
statements of the Separate Account are included, because as of the date of this
Prospectus the Separate Account had not yet commenced operations.
48
<PAGE> 50
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
49
<PAGE> 51
REPORT OF INDEPENDENT ACCOUNTANTS
February 11, 1997
The Board of Directors and Shareholder of
Connecticut General Life Insurance Company
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income and retained earnings and of cash flows
present fairly, in all material respects, the financial position of Connecticut
General Life Insurance Company and its subsidiaries at December 31, 1996 and
1995, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
<PAGE> 52
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
(In millions)
- --------------------------------------------------------------------------------------------------------------------
For the years ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Premiums and fees $ 5,314 $ 4,998 $ 4,960
Net investment income 3,199 3,138 2,805
Realized investment gains (losses) 37 (7) 27
Other revenues 9 9 8
------- ------- -------
Total revenues 8,559 8,138 7,800
------- ------- -------
BENEFITS, LOSSES AND EXPENSES
Benefits, losses and settlement expenses 6,069 5,892 5,574
Policy acquisition expenses 143 127 89
Other operating expenses 1,477 1,358 1,363
------- ------- -------
Total benefits, losses and expenses 7,689 7,377 7,026
------- ------- -------
INCOME BEFORE INCOME TAXES 870 761 774
------- ------- -------
Income taxes (benefits):
Current 394 301 220
Deferred (81) (44) 45
------- ------- -------
Total taxes 313 257 265
------- ------- -------
NET INCOME 557 504 509
Dividends declared (600) (252) (300)
Retained earnings, beginning of year 3,220 2,968 2,759
- --------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS, END OF YEAR $ 3,177 $ 3,220 $ 2,968
====================================================================================================================
</TABLE>
The Notes to Financial Statements are an integral part of these statements
51
<PAGE> 53
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
(In millions)
- -----------------------------------------------------------------------------------------------------
As of December 31, 1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities, at fair value (amortized cost, $19,882; $20,147) $20,816 $22,162
Mortgage loans 10,152 10,218
Equity securities, at fair value (cost, $59; $54) 41 66
Policy loans 7,133 6,925
Real estate 1,025 1,158
Other long-term investments 193 193
Short-term investments 417 138
------- -------
Total investments 39,777 40,860
Cash and cash equivalents - -
Accrued investment income 619 626
Premiums and accounts receivable 817 991
Reinsurance recoverables 1,303 1,258
Deferred policy acquisition costs 780 689
Property and equipment, net 276 319
Current income taxes 12 21
Deferred income taxes, net 639 403
Goodwill 488 503
Other assets 249 149
Separate account assets 22,555 18,177
- -----------------------------------------------------------------------------------------------------
Total assets $67,515 $63,996
=====================================================================================================
LIABILITIES
Contractholder deposit funds $29,621 $29,762
Future policy benefits 8,187 8,547
Unpaid claims and claim expenses 1,170 1,151
Unearned premiums 200 95
------- -------
Total insurance and contractholder liabilities 39,178 39,555
Accounts payable, accrued expenses
and other liabilities 1,808 1,872
Separate account liabilities 22,365 18,075
- -----------------------------------------------------------------------------------------------------
Total liabilities 63,351 59,502
- -----------------------------------------------------------------------------------------------------
CONTINGENCIES - NOTE 11
SHAREHOLDER'S EQUITY
Common stock (6 shares outstanding) 30 30
Additional paid-in capital 766 766
Net unrealized appreciation on investments 188 476
Net translation of foreign currencies 3 2
Retained earnings 3,177 3,220
- -----------------------------------------------------------------------------------------------------
Total shareholder's equity 4,164 4,494
- -----------------------------------------------------------------------------------------------------
Total liabilities and shareholder's equity $67,515 $63,996
=====================================================================================================
</TABLE>
The Notes to Financial Statements are an integral part of these statements
52
<PAGE> 54
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
(In millions)
- --------------------------------------------------------------------------------------------------
For the years ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 557 $ 504 $ 509
Adjustments to reconcile net income to net cash
provided by operating activities:
Insurance liabilities 57 (90) (249)
Reinsurance recoverables (11) 1,201 282
Premiums and accounts receivable 77 32 (188)
Deferred income taxes, net (82) (44) 45
Other assets 43 (14) 68
Accounts payable, accrued expenses,
other liabilities and current income taxes (113) 212 (192)
Other, net (149) 22 (24)
------- ------- -------
Net cash provided by operating activities 379 1,823 251
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from investments sold:
Fixed maturities--available for sale 1,589 1,070 1,389
Fixed maturities--held to maturity - - 12
Mortgage loans 640 383 496
Equity securities 13 119 41
Real estate 345 299 242
Other (primarily short-term investments) 3,613 2,268 1,005
Investment maturities and repayments:
Fixed maturities--available for sale 2,634 478 686
Fixed maturities--held to maturity - 1,756 1,764
Mortgage loans 630 420 194
Investments purchased:
Fixed maturities--available for sale (3,834) (3,054) (2,390)
Fixed maturities--held to maturity - (1,385) (1,788)
Mortgage loans (1,300) (1,908) (882)
Equity securities (3) (20) (12)
Policy loans (207) (2,129) (1,614)
Other (primarily short-term investments) (3,930) (2,334) (1,093)
Other, net (94) (119) (129)
------- ------- -------
Net cash provided by (used in) investing activities 96 (4,156) (2,079)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Contractholder deposit funds:
Deposits and interest credited 7,260 7,489 6,388
Withdrawals and benefit payments (7,135) (4,985) (4,216)
Dividends paid to Parent (600) (252) (300)
Other, net - 1 36
------- ------- -------
Net cash (used in) provided by financing activities (475) 2,253 1,908
- --------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents - (80) 80
Cash and cash equivalents, beginning of year - 80 -
- --------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ - $ - $ 80
==================================================================================================
Supplemental Disclosure of Cash Information:
Income taxes paid, net of refunds $ 385 $ 211 $ 411
Interest paid $ 7 $ 7 $ 5
- --------------------------------------------------------------------------------------------------
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
53
<PAGE> 55
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS
Connecticut General Life Insurance Company and its subsidiaries (the
Company) provide insurance and related financial services throughout the United
States and in many locations worldwide. Principal products and services include
group life and health insurance, individual life insurance and annuity products,
and retirement and investment products and services. The Company is a
wholly-owned subsidiary of Connecticut General Corporation, which is an indirect
wholly-owned subsidiary of CIGNA Corporation (CIGNA).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) BASIS OF PRESENTATION: The consolidated financial statements include the
accounts of the Company and all significant subsidiaries. These consolidated
financial statements have been prepared in conformity with generally accepted
accounting principles, and reflect management's estimates and assumptions, such
as those regarding medical costs and interest rates, that affect the recorded
amounts. Significant estimates used in determining insurance and contractholder
liabilities, related reinsurance recoverables, and valuation allowances for
investment assets are discussed throughout the Notes to Financial Statements.
Certain reclassifications have been made to prior years' amounts to conform with
the 1996 presentation.
B) RECENT ACCOUNTING PRONOUNCEMENTS: In 1996, the Company implemented
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
SFAS No. 121 requires write-down to fair value when long-lived assets to be held
and used are impaired. Long-lived assets to be disposed of, including real
estate held for sale, must be carried at the lower of cost or fair value less
costs to sell. Depreciation of assets to be disposed of is prohibited. The
effect of implementing SFAS No. 121 was not material to the Company.
In 1993, the Company implemented SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," which required that debt and equity
securities be classified into different categories and carried at fair value if
they are not classified as held-to-maturity. During the fourth quarter of 1995,
the Financial Accounting Standards Board (FASB) issued a guide to implementation
of SFAS No. 115, which permitted a one-time opportunity to reclassify securities
subject to SFAS No. 115. Consequently, the Company reclassified all
held-to-maturity securities to available-for-sale as of December 31, 1995. The
non-cash reclassification of these securities, which had an aggregate amortized
cost of $9.2 billion and fair value of $10.1 billion, resulted in an increase of
approximately $396 million, net of policyholder-related amounts and deferred
income taxes, in net unrealized appreciation included in Shareholder's Equity as
of December 31, 1995.
In 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan," which provides guidance on the accounting and disclosure
for impaired loans. In 1994, the FASB issued SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosures," which
eliminates the income recognition requirements of SFAS No. 114. The Company
adopted SFAS Nos. 114 and 118 in the first quarter of 1995, which resulted in a
$6 million increase in net income.
C) FINANCIAL INSTRUMENTS: In the normal course of business, the Company
enters into transactions involving various types of financial instruments,
including investments such as fixed maturities and equity securities and
off-balance-sheet financial instruments such as investment and loan commitments
and financial guarantees. These instruments are subject to risk of loss due to
interest rate and market fluctuations and most have credit risk. The Company
evaluates and monitors each financial
54
<PAGE> 56
instrument individually and, where appropriate, uses certain derivative
instruments or obtains collateral or other forms of security to minimize risk of
loss.
Financial instruments that are subject to fair value disclosure requirements
(insurance contracts, real estate, goodwill and taxes are excluded) are carried
in the financial statements at amounts that approximate fair value, except for
Mortgage Loans and Contractholder Deposit Funds (non-insurance products). For
these financial instruments, the fair value was not materially different from
the carrying amount as of December 31, 1996 and 1995. Fair values of off-balance
sheet financial instruments as of December 31, 1996 and 1995 were not material.
Fair values for financial instruments are estimates that, in many cases, may
differ significantly from the amounts that could be realized upon immediate
liquidation. In cases where market prices are not available, estimates of fair
value are based on discounted cash flow analyses which utilize current interest
rates for similar financial instruments with comparable terms and credit
quality. The fair value of liabilities for contractholder deposit funds was
estimated using the amount payable on demand, and for those not payable on
demand, discounted cash flow analyses.
D) INVESTMENTS: Investments in fixed maturities, which are classified as
available-for-sale, include bonds, asset-backed securities, including
collateralized mortgage obligations (CMOs), and redeemable preferred stocks.
Fixed maturities are carried at fair value, with unrealized appreciation or
depreciation included in Shareholder's Equity. Fixed maturities are considered
impaired and written down to fair value when a decline in value is considered to
be other than temporary.
Mortgage loans are carried principally at unpaid principal balances, net of
valuation reserves. Mortgage loans are considered impaired when it is probable
that the Company will not collect all amounts according to the contractual terms
of the loan agreement. If impaired, a valuation reserve is utilized to record
any change in the fair value of the underlying collateral below the carrying
value of the mortgage loan.
Fixed maturities and mortgage loans that are delinquent or restructured to
modify basic financial terms, typically to reduce the interest rate and, in
certain cases, extend the term, are placed on non-accrual status. Net investment
income on such investments is recognized only when payment is received.
Real estate investments are either held for the production of income or held
for sale. Real estate investments held for the production of income are carried
at depreciated cost less any write-downs to fair value. Depreciation is
generally calculated using the straight-line method based on the estimated
useful lives of these assets.
Real estate investments held for sale are generally those which are acquired
through the foreclosure of mortgage loans. The Company's policy is to
rehabilitate, re-lease and sell foreclosed properties, which generally takes two
to four years. At the time of foreclosure, properties are valued at fair value
less estimated costs to sell and reclassified from mortgage loans to real estate
held for sale. Subsequent to foreclosure, these investments are carried at the
lower of cost or current fair value less estimated costs to sell. Adjustments to
the carrying value as a result of changes in fair value subsequent to
foreclosure are recorded as valuation reserves, and reported in realized
investment gains and losses. The Company considers several methods in
determining fair value for real estate, with emphasis placed on the use of
discounted cash flow analyses and, in some cases, the use of third-party
appraisals. Effective with the implementation of SFAS No. 121, real estate held
for sale is no longer depreciated.
Equity securities, which include common and non-redeemable preferred stocks,
are carried at fair value, with unrealized appreciation or depreciation included
in Shareholder's Equity. Short-term investments are carried at fair value, which
approximates cost. Equity securities and short-term investments are classified
as available for sale.
Policy loans are generally carried at unpaid principal balances.
Realized investment gains and losses result from sales, investment asset
write-downs and changes in valuation reserves. Realized investment gains and
losses do not include amounts attributable to experience-rated pension
policyholders' contracts and participating life policies (policyholder share).
Realized investment gains and losses are based upon specific identification of
the investment assets.
55
<PAGE> 57
Unrealized investment gains and losses for investments carried at fair value
are included in Shareholder's Equity net of policyholder-related amounts and
deferred income taxes.
See Note 3(F) for a discussion of the Company's accounting policies for
derivative financial instruments.
E) CASH AND CASH EQUIVALENTS: Short-term investments with a maturity of
three months or less at the time of purchase are reported as cash equivalents.
F) REINSURANCE RECOVERABLES: Reinsurance recoverables are estimates of
amounts to be received from reinsurers, including amounts under reinsurance
agreements with affiliated companies. Allowances are established for amounts
estimated to be uncollectible.
G) DEFERRED POLICY ACQUISITION COSTS: Acquisition costs consist of
commissions, premium taxes and other costs, which vary with, and are primarily
related to, the production of revenues. Acquisition costs for universal life
products and contractholder deposit funds are deferred and amortized in
proportion to total estimated gross profits over the expected lives of the
contracts. Acquisition costs for annuity and other individual life insurance
products are deferred and amortized, generally in proportion to the ratio of
annual revenue to the estimated total revenues over the contract periods.
Deferred policy acquisition costs are reviewed to determine if they are
recoverable from future income, including investment income. If such costs are
estimated to be unrecoverable, they are expensed. If such costs are estimated to
be unrecoverable or are accelerated as a result of treating unrealized
investment gains and losses as though they had been realized, a deferred
acquisition cost valuation allowance may be established or adjusted, with a
comparable offset in net unrealized appreciation (depreciation).
H) PROPERTY AND EQUIPMENT: Property and equipment are carried at cost less
accumulated depreciation. When applicable, cost includes interest and real
estate taxes incurred during construction and other construction-related costs.
Depreciation is calculated principally on the straight-line method based on the
estimated useful lives of the assets. Accumulated depreciation was $427 million
and $387 million at December 31, 1996 and 1995, respectively.
I) OTHER ASSETS: Other Assets consists of various insurance-related assets,
principally ceded unearned premiums, reinsurance deposits and other amounts due
from affiliated companies.
J) GOODWILL: Goodwill represents the excess of the cost of businesses
acquired over the fair value of their net assets. Goodwill is amortized on
systematic bases over periods, not exceeding 40 years, that correspond with the
benefits estimated to be derived from the acquisitions. The Company evaluates
the carrying amount of goodwill by analyzing historical and estimated future
income and undiscounted estimated cash flows of the related businesses. Goodwill
is written down when impaired. Amortization periods are revised if it is
estimated that the remaining period of benefit of the goodwill has changed.
Accumulated amortization was $99 million and $84 million at December 31, 1996
and 1995, respectively.
K) SEPARATE ACCOUNTS: Separate account assets and liabilities are
principally carried at market value and represent policyholder funds maintained
in accounts having specific investment objectives. The investment income, gains
and losses of these accounts generally accrue to the policyholders and,
therefore, are not included in the Company's revenues and expenses.
L) CONTRACTHOLDER DEPOSIT FUNDS: Liabilities for Contractholder Deposit
Funds consist of deposits received from customers and investment earnings on
their fund balances, less administrative charges and, for universal life fund
balances, mortality charges.
M) FUTURE POLICY BENEFITS: Future policy benefits are liabilities for life,
health and annuity products. Such liabilities are established in amounts
adequate to meet the estimated future obligations of policies in force. These
liabilities are computed using premium assumptions for group annuity policies
and the net level premium method for individual life policies, and are based
upon estimates as to future investment yield, mortality and withdrawals that
include provisions for adverse deviation. Future policy benefits for individual
life insurance and annuity policies are computed using interest rates ranging
from 2% to 11%, generally graded down from 1 to 20 years. Mortality, morbidity,
and withdrawal assumptions are based on either the Company's own experience or
various actuarial tables.
56
<PAGE> 58
N) UNPAID CLAIMS AND CLAIM EXPENSES: Liabilities for unpaid claims and claim
expenses are estimates of payments to be made on reported and incurred but not
reported insurance claims.
O) UNEARNED PREMIUMS: Premiums for group life, and accident and health
insurance are reported as earned on a pro rata basis over the contract period.
The unexpired portion of these premiums is recorded as Unearned Premiums.
P) OTHER LIABILITIES: Other Liabilities consist principally of
postretirement and postemployment benefits and various insurance-related
liabilities, including amounts related to reinsurance contracts. Also included
in Other Liabilities are liabilities for guaranty fund assessments that can be
reasonably estimated.
Q) TRANSLATION OF FOREIGN CURRENCIES: Foreign operations primarily utilize
the local currencies as their functional currencies, and assets and liabilities
are translated at the rates of exchange as of the balance sheet date. The
translation gain or loss on such functional currencies, net of applicable taxes,
is generally reflected in Shareholder's Equity. Revenues and expenses are
translated at the average rates of exchange prevailing during the year.
R) PREMIUM AND FEES, REVENUES AND RELATED EXPENSES: Premiums for group life
and accident and health insurance are recognized as revenue on a pro-rata basis
over their contract periods. Benefits, losses and settlement expenses are
recognized when incurred.
Premiums for individual life insurance as well as individual and group
annuity products, excluding universal life and investment-related products, are
recognized as revenue when due. Benefits, losses and settlement expenses are
matched with premiums.
Revenues for universal life products consist of net investment income and
mortality, administration and surrender fees assessed against the fund balances
during the period. Net investment income represents investment income on assets
supporting universal life products and is recognized as earned. Fees for
mortality are recognized ratably over the policy year. Administration fees are
recognized as services are provided, and surrender charges are recognized as
earned. Benefit expenses for universal life products consist of benefit claims
in excess of fund balances, which are recognized when claims are filed, and
interest credited in accordance with contract provisions.
Revenues for investment-related products consist of net investment income
and contract fees assessed against the fund balances during the period. Net
investment income represents investment income on assets supporting
investment-related products and is recognized as earned. Contract fees are based
upon related administrative expenses and are assessed ratably over the contract
year. Benefit expenses for investment-related products primarily consist of
interest credited in accordance with contract provisions.
S) PARTICIPATING BUSINESS: Certain life insurance policies contain dividend
payment provisions that enable the policyholder to participate in a portion of
the earnings of the Company's business. The participating insurance in force
accounted for approximately 7% of total insurance in force at December 31, 1996,
and 1995, and 5% at December 31, 1994.
T) INCOME TAXES: The Company and its domestic subsidiaries are included in
the consolidated United States federal income tax return filed by CIGNA. In
accordance with a tax sharing agreement with CIGNA, the provision for federal
income tax is computed as if the Company were filing a separate federal income
tax return, except that benefits arising from tax credits and net operating and
capital losses are allocated to those subsidiaries producing such attributes to
the extent they are utilized in CIGNA's consolidated federal income tax
provision.
Deferred income taxes are generally recognized when assets and liabilities
have different values for financial statement and tax reporting purposes. See
Note 6 for additional information.
NOTE 3 - INVESTMENTS
A) FIXED MATURITIES: Fixed maturities are net of cumulative write-downs of
$95 million and $103 million, including policyholder share, as of December 31,
1996 and 1995, respectively.
The amortized cost and fair value by contractual maturity periods for fixed
maturities, including policyholder share, as of December 31, 1996 were as
follows:
57
<PAGE> 59
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Amortized Fair
(In millions) Cost Value
- ----------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 936 $ 955
Due after one year through five years 5,252 5,419
Due after five years through ten years 4,591 4,773
Due after ten years 3,301 3,702
Asset-backed securities 5,802 5,967
- ----------------------------------------------------------------
Total $19,882 $20,816
================================================================
</TABLE>
Actual maturities could differ from contractual maturities because issuers
may have the right to call or prepay obligations with or without call or
prepayment penalties. Also, the Company may extend maturities in some cases.
58
<PAGE> 60
Gross unrealized appreciation (depreciation) for fixed maturities, including
policyholder share, by type of issuer was as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
December 31, 1996
- ----------------------------------------------------------------------------------------------------------
Amortized Unrealized Unrealized Fair
(In millions) Cost Appreciation Depreciation Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal government bonds $ 475 $ 160 $ - $ 635
State and local government bonds 174 13 (4) 183
Foreign government bonds 121 6 - 127
Corporate securities 13,310 742 (148) 13,904
Asset-backed securities 5,802 226 (61) 5,967
- ----------------------------------------------------------------------------------------------------------
Total $19,882 $1,147 $(213) $20,816
==========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
- -------------------------------------------------------------------------------------------------------------
Amortized Unrealized Unrealized Fair
(In millions) Cost Appreciation Depreciation Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal government bonds $ 503 $ 300 $ - $ 803
State and local government bonds 207 24 (1) 230
Foreign government bonds 131 9 (1) 139
Corporate securities 13,773 1,427 (73) 15,127
Asset-backed securities 5,533 371 (41) 5,863
- -------------------------------------------------------------------------------------------------------------
Total $ 20,147 $ 2,131 $ (116) $ 22,162
=============================================================================================================
</TABLE>
Asset-backed securities include investments in CMOs as of December 31, 1996
of $2.2 billion carried at fair value (amortized cost, $2.1 billion), compared
with $2.1 billion carried at fair value (amortized cost, $2.0 billion) as of
December 31, 1995. Certain of these securities are backed by Aaa/AAA-rated
government agencies. All other CMO securities have high quality ratings through
use of credit enhancements provided by subordinated securities or mortgage
insurance from Aaa/AAA-rated insurance companies. CMO holdings are concentrated
in securities with limited prepayment, extension and default risk, such as
planned amortization class bonds. The Company's investments in interest-only and
principal-only CMOs, which are subject to interest rate risk due to accelerated
prepayments, represented approximately 0.1% and 1.9% of total CMO investments at
December 31, 1996 and 1995, respectively.
At December 31, 1996, contractual fixed maturity investment commitments were
$93 million. The majority of investment commitments are for the purchase of
investment grade fixed maturities, bearing interest at a fixed market rate, and
require no collateral. These commitments are diversified by issuer and maturity
date, and it is estimated that approximately 75% will be disbursed in 1997.
B) MORTGAGE LOANS AND REAL ESTATE: The Company's mortgage loans and real
estate investments are diversified by property type and location and, for
mortgage loans, by borrower. Mortgage loans are collateralized by the related
properties and generally approximate 75% of the property's value at the time the
original loan is made.
59
<PAGE> 61
At December 31, the carrying values of mortgage loans and real estate
investments, including policyholder share, were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------
(In millions) 1996 1995
- ----------------------------------------------------------
<S> <C> <C>
Mortgage Loans $10,152 $10,218
------- -------
Real estate:
Held for sale 586 671
Held for production of income 439 487
------- -------
Total real estate 1,025 1,158
- ----------------------------------------------------------
Total $11,177 $11,376
==========================================================
</TABLE>
At December 31, mortgage loans and real estate investments comprised the
following property types and geographic regions:
<TABLE>
<CAPTION>
- ------------------------------------------------
(In millions) 1996 1995
- ------------------------------------------------
<S> <C> <C>
Property type:
Retail facilities $ 4,453 $ 4,327
Office buildings 4,241 4,493
Apartment buildings 1,272 1,246
Hotels 665 711
Other 546 599
- ------------------------------------------------
Total $11,177 $11,376
================================================
Geographic region:
Central $ 3,452 $ 4,032
Pacific 3,132 2,580
Middle Atlantic 1,920 1,951
South Atlantic 1,526 1,647
New England 1,147 1,166
- ------------------------------------------------
Total $11,177 $11,376
================================================
</TABLE>
MORTGAGE LOANS
At December 31, 1996, scheduled mortgage loan maturities were as follows:
1997 - $.9 billion; 1998 - $.7 billion; 1999 - $1.3 billion; 2000 - $1.5
billion; 2001 - $1.2 billion; and $4.7 billion thereafter. Actual maturities
could differ from contractual maturities because borrowers may have the right to
prepay obligations with or without prepayment penalties; the maturity date may
be extended; and loans may be refinanced. During 1996 and 1995, the Company
refinanced at current market rates approximately $477 million and $379 million,
respectively, of its mortgage loans relating to borrowers that were unable to
obtain alternative financing.
At December 31, 1996, contractual commitments to extend credit under
commercial mortgage loan agreements amounted to approximately $397 million, all
of which were at a fixed market rate of interest. These commitments expire
within six months, and are diversified by property type and geographic region.
At December 31, 1996, the Company's impaired mortgage loans were $814
million, including $442 million before valuation reserves totaling $94 million,
and $372 million which had no valuation reserves. At December 31, 1995, the
Company's impaired mortgage loans were $838 million, including $447 million
before valuation reserves totaling $82 million, and $391 million which had no
valuation reserves.
60
<PAGE> 62
During the year ended December 31, changes in reserves for impaired mortgage
loans, including policyholder share, were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------
(In millions) 1996 1995
- ---------------------------------------------------------
<S> <C> <C>
Reserve balance - January 1 $ 82 $ 127
Transfers to foreclosed real estate (29) (27)
Charge-offs upon sales (19) (33)
Net increase in valuation reserves 60 15
- ---------------------------------------------------------
Reserve balance - December 31 $ 94 $ 82
=========================================================
</TABLE>
During 1996 and 1995, impaired mortgage loans, before valuation reserves,
averaged approximately $852 million and $935 million, respectively. Interest
income recorded and cash received on these loans was approximately $73 million
and $71 million in 1996 and 1995, respectively.
REAL ESTATE
During 1996, 1995 and 1994, non-cash investing activities included real
estate acquired through foreclosure of mortgage loans, which totaled $107
million, $144 million and $127 million, respectively.
Valuation reserves and cumulative write-downs related to real estate,
including policyholder share, were $273 million and $310 million as of December
31, 1996 and 1995, respectively.
Net income for 1996 included $19 million and $1 million for net investment
income and write-downs upon foreclosures, respectively, for real estate held for
sale.
C) SHORT-TERM INVESTMENTS AND CASH EQUIVALENTS: At December 31, 1996 and
1995, short-term investments and cash equivalents, in the aggregate, primarily
included debt securities, principally corporate securities of $418 million and
$203 million, respectively.
D) NET UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS: Unrealized
appreciation (depreciation) for investments carried at fair value as of December
31 was as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
(In millions) 1996 1995
- ------------------------------------------------------------------
<S> <C> <C>
Unrealized appreciation:
Fixed maturities $ 1,147 $ 2,131
Equity securities 8 23
------- -------
1,155 2,154
------- -------
Unrealized depreciation:
Fixed maturities (213) (116)
Equity securities (26) (11)
------- -------
(239) (127)
------- -------
Less policyholder-related amounts 610 1,279
------- -------
Shareholder net unrealized appreciation 306 748
Less deferred income taxes 118 272
- ------------------------------------------------------------------
Net unrealized appreciation $ 188 $ 476
==================================================================
</TABLE>
Net unrealized appreciation for investments carried at fair value is
included as a separate component of Shareholder's Equity, net of
policyholder-related amounts and deferred income taxes. The net unrealized
(depreciation) appreciation for these investments, primarily fixed maturities,
during 1996, 1995 and 1994 was ($288) million, $542 million and ($494) million,
respectively.
61
<PAGE> 63
During 1995 and 1994, certain fixed maturities were carried at amortized
cost in the financial statements. The change in net unrealized appreciation
(depreciation) for such investments was ($14) million and ($1.2) billion during
1995 and 1994, respectively.
E) NON-INCOME PRODUCING INVESTMENTS: At December 31, the carrying values of
investments, including policyholder share, that were non-income producing during
the preceding 12 months were as follows:
<TABLE>
<CAPTION>
- ------------------------------------
(In millions) 1996 1995
- ------------------------------------
<S> <C> <C>
Fixed maturities $ 52 $ 75
Mortgage loans 14 17
Real estate 172 234
- ------------------------------------
Total $238 $326
====================================
</TABLE>
F) DERIVATIVE FINANCIAL INSTRUMENTS: The Company's investment strategy is to
manage the characteristics of investment assets, such as liquidity, currency,
yield and duration, to reflect the underlying characteristics of the related
insurance and contractholder liabilities, which vary among the Company's
principal product lines. In connection with this investment strategy, the
Company's use of derivative instruments, including interest rate and currency
swaps, purchased options and futures contracts, is limited to hedging
applications to minimize market risk.
Hedge accounting treatment requires a probability of high correlation
between the changes in the market value or cash flows of the derivatives and the
hedged assets or liabilities. Under hedge accounting, the changes in market
value or cash flows of the derivatives and the hedged assets or liabilities are
recognized in net income in the same period. If the Company's use of derivatives
does not qualify for hedge accounting treatment, the derivative is recorded at
fair value and changes in its fair value are recognized in net income without
considering changes in the hedged asset or liability.
The Company routinely monitors, by individual counterparty, exposure to
credit risk associated with swap and option contracts and diversifies the
portfolio among approved dealers of high credit quality. Futures contracts are
exchange-traded and, therefore, credit risk is limited since the exchange
assumes the obligations. The Company manages legal risks by following industry
standardized documentation procedures and by monitoring legal developments.
Underlying contract, notional or principal amounts associated with
derivatives at December 31 were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------
(In millions) 1996 1995
- ---------------------------------------
<S> <C> <C>
Interest rate swaps $335 $508
Currency swaps 275 335
Purchased options 632 -
Futures 45 22
- ---------------------------------------
</TABLE>
Under interest rate swaps, the Company agrees with other parties to
periodically exchange the difference between variable rate and fixed rate asset
cash flows to provide stable returns for related liabilities. The Company uses
currency swaps (primarily Canadian dollars, pounds sterling and Swiss francs) to
match the currency of investments to that of the associated liabilities. Under
currency swaps, the parties exchange principal and interest amounts in two
relevant currencies using agreed-upon exchange amounts.
The net interest cash flows from interest rate and currency swaps are
recognized currently as an adjustment to net investment income, and the fair
value of these swaps is reported as an adjustment to the related investments.
Using purchased options to reduce the effect of changes in interest rates or
equity indexes on liabilities, the Company pays an up-front fee to receive cash
flows from third parties when interest rates
62
<PAGE> 64
or equity indexes vary from specified levels. Purchased options that qualify for
hedge accounting are recorded consistent with the related liabilities, at
amortized cost plus adjustments based on current equity indexes, and income is
reported as an adjustment to benefit expense. Purchased options are reported in
other assets, and fees paid are amortized to benefit expense over their
contractual periods. Purchased options with underlying notional amounts of $112
million at December 31, 1996 that are designated as hedges, but do not qualify
for hedge accounting, are reported in other long-term investments at fair value
with changes in fair value recognized as realized investment gains and losses.
Interest rate futures are used to temporarily hedge against the changes in
market values of bonds and mortgage loans to be purchased or sold. Under futures
contracts, changes in the contract values are settled in cash daily with the
exchange on which the instrument is traded. These changes in contract values are
deferred and recorded as adjustments to the carrying value of the related bond
or mortgage loan. Deferred gains and losses are amortized into net investment
income over the life of the investments purchased or are recognized in full as
realized investment gains and losses if investments are sold. Gains and losses
on futures contracts deferred in anticipation of investment purchases were
immaterial at December 31, 1996 and 1995.
The effects of interest rate and currency swaps, purchased options and
futures on the components of net income for 1996, 1995 and 1994 were not
material.
As of December 31, 1996 and 1995, the Company's variable interest rate
investments consisted of approximately $1.3 billion and $1.4 billion of fixed
maturities, respectively. As of December 31, 1996 and 1995, the Company's fixed
interest rate investments consisted of $19.5 billion and $20.6 billion,
respectively, of fixed maturities, and $10.2 billion and $10.0 billion,
respectively, of mortgage loans.
G) OTHER: As of December 31, 1996 and 1995, the Company had no concentration
of investments in a single investee exceeding 10% of Shareholder's Equity.
NOTE 4 - INVESTMENT INCOME AND GAINS AND LOSSES
A) NET INVESTMENT INCOME: The components of net investment income, including
policyholder share, for the year ended December 31 were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
(In millions) 1996 1995 1994
- ---------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities $1,647 $1,663 $1,596
Equity securities - 15 20
Mortgage loans 921 866 776
Policy loans 548 499 365
Real estate 227 301 291
Other long-term investments 23 33 23
Short-term investments 35 46 8
------ ------ ------
3,401 3,423 3,079
Less investment expenses 202 285 274
- ---------------------------------------------------------------
Net investment income $3,199 $3,138 $2,805
===============================================================
</TABLE>
Net investment income attributable to policyholder contracts, which is
included in the Company's revenues and is primarily offset by amounts included
in Benefits, Losses and Settlement Expenses, was approximately $1.8 billion for
1996 and 1995, and $1.5 billion for 1994 . Net investment income for separate
accounts, which is not reflected in the Company's revenues, was $1.1 billion,
$885 million and $693 million for 1996, 1995 and 1994, respectively.
As of December 31, 1996, fixed maturities and mortgage loans on non-accrual
status, including policyholder share, were $160 million and $360 million,
including restructured investments of $88 million and $304 million,
respectively. As of December 31, 1995, fixed maturities and mortgage loans on
non-accrual status, including policyholder share, were $149 million and $523
million, including restructured investments of $105 million and $447 million,
respectively. If interest on these
63
<PAGE> 65
investments had been recognized in accordance with their original terms, net
income would have been increased by $15 million, $18 million and $14 million in
1996, 1995 and 1994, respectively.
64
<PAGE> 66
B) REALIZED INVESTMENT GAINS AND LOSSES: Realized gains and losses on
investments, excluding policyholder share, for the year ended December 31 were
as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
(In millions) 1996 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Realized investment gains (losses):
Fixed maturities $ 11 $(10) $ 4
Equity securities 1 5 2
Mortgage loans (12) (5) -
Real estate 15 4 15
Other 22 (1) 6
---- ---- ---
37 (7) 27
Income tax expenses (benefits) 17 (2) 12
- ---------------------------------------------------------------------
Net realized investment gains (losses) $ 20 $ (5) $15
=====================================================================
</TABLE>
Realized investment gains and losses include impairments in the value of
investments, net of recoveries, of $40 million, $27 million and $33 million in
1996, 1995 and 1994, respectively.
Realized investment gains (losses) for separate accounts, which are not
reflected in the Company's revenues, were $305 million, $412 million and ($51)
million for the years ended December 31, 1996, 1995 and 1994, respectively.
Realized investment gains (losses) attributable to policyholder contracts, which
also are not reflected in the Company's revenues, were $82 million and ($6)
million for the years ended December 31, 1996 and 1995, respectively. There were
no realized investment gains (losses) attributable to policyholder contracts for
the year ended December 31, 1994.
Sales of available-for-sale fixed maturities and equity securities,
including policyholder share, for the year ended December 31 were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------
(In millions) 1996 1995 1994
- --------------------------------------------------------------
<S> <C> <C> <C>
Proceeds from sales $ 4,236 $ 1,667 $ 2,116
Gross gains on sales $ 146 $ 78 $ 73
Gross losses on sales $ (70) $ (53) $ (70)
- --------------------------------------------------------------
</TABLE>
Prior to the SFAS No. 115 reclassification described in Note 2(B), $171
million of fixed maturities classified as held-to-maturity, including
policyholder share, were transferred to the available-for-sale category in 1995
with no material effect on Shareholder's Equity.
NOTE 5 - SHAREHOLDER'S EQUITY AND DIVIDEND RESTRICTIONS
The Connecticut Insurance Department (the Department) recognizes as net
income and surplus (shareholder's equity) those amounts determined in conformity
with statutory accounting practices prescribed or permitted by the Department,
which differ in certain respects from generally accepted accounting principles.
As of December 31, 1996, there were no permitted accounting practices utilized
by the Company that were materially different from those prescribed by the
Department.
Capital stock of the Company at December 31, 1996 and 1995 consisted of
5,978,322 shares of common stock authorized, issued and outstanding (par value
$5.00).
The Company's statutory net income was $611 million, $390 million and $428
million for 1996, 1995 and 1994, respectively. Statutory surplus was $2.1
billion at December 31, 1996 and 1995. The Connecticut Insurance Holding Company
Act limits the amount of annual dividends or other distributions available to
shareholders of Connecticut insurance companies without the Department's prior
approval. During 1996, the Company paid a total of $600 million in dividends to
its Parent, of which $200 million received prior approval from the Department in
accordance with requirements.
65
<PAGE> 67
Under current law, the maximum dividend distribution that may be made by the
Company during 1997 without prior approval is $629 million. The amount of
restricted net assets as of December 31, 1996 was approximately $3.5 billion.
NOTE 6 - INCOME TAXES
The Company's net deferred tax asset of $639 million and $403 million as of
December 31, 1996 and 1995, respectively, reflects management's belief that the
Company's taxable income in future years will be sufficient to realize the net
deferred tax asset based on the Company's earnings history and its future
expectations. In determining the adequacy of future taxable income, management
considered the future reversal of its existing taxable temporary differences and
available tax planning strategies that could be implemented, if necessary.
In accordance with the Life Insurance Company Income Tax Act of 1959, a
portion of the Company's statutory income was not subject to current income
taxation but was accumulated in an account designated Policyholders' Surplus
Account. Under the Tax Reform Act of 1984, no further additions may be made to
the Policyholders' Surplus Account for tax years ending after December 31, 1983.
The balance in the account of approximately $450 million at December 31, 1996
would result in a tax liability of $158 million only if distributed to the
shareholder or if the account balance exceeded a prescribed maximum. No income
taxes have been provided on this amount because, in management's opinion, the
likelihood that these conditions will be met is remote.
CIGNA's federal income tax returns are routinely audited by the Internal
Revenue Service (IRS), and provisions are made in CIGNA's financial statements
in anticipation of the results of these audits.
In management's opinion, adequate tax liabilities have been established for
all years.
The tax effect of temporary differences which give rise to deferred income
tax assets and liabilities as of December 31 were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
(In millions) 1996 1995
- --------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Other insurance and contractholder liabilities $387 $324
Employee and retiree benefit plans 177 176
Investments, net 228 225
Other 74 72
---- ----
Total deferred tax assets 866 797
---- ----
Deferred tax liabilities:
Policy acquisition expenses 21 25
Depreciation 88 97
Unrealized appreciation on investments 118 272
---- ----
Total deferred tax liabilities 227 394
- --------------------------------------------------------------------
Net deferred income tax asset $639 $403
====================================================================
</TABLE>
Total income taxes for the year ended December 31 were less than the amount
computed using the nominal federal income tax rate of 35% for the following
reasons:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
(In millions) 1996 1995 1994
- --------------------------------------------------------------------
<S> <C> <C> <C>
Tax expense at nominal rate $ 305 $ 266 $ 271
Tax-exempt interest income (5) (6) (7)
Dividends received deduction (7) (7) (3)
Amortization of goodwill 4 4 4
Resolved federal tax audit issues - - (2)
Other 16 - 2
- --------------------------------------------------------------------
Total income taxes $ 313 $ 257 $ 265
====================================================================
</TABLE>
66
<PAGE> 68
NOTE 7 - PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT
BENEFITS PLANS
A) PENSION PLANS: The Company provides retirement benefits to eligible
employees and agents. These benefits are provided through a plan sponsored by
CIGNA covering most domestic employees (the Plan) and by several separate
pension plans for various subsidiaries, agents and foreign employees.
The Plan is a non-contributory, defined benefit, trusteed plan available to
eligible domestic employees. Benefits are based on employees' years of service
and compensation during the highest three or, if service commenced after
December 31, 1988, five consecutive years of employment, offset by a portion of
the Social Security benefit for which they are eligible. CIGNA funds at least
the minimum amount required by the Employee Retirement Income Security Act of
1974. Allocated pension cost for the Company was $26 million, $23 million and
$31 million in 1996, 1995 and 1994, respectively.
The Plan, and several separate pension plans for various subsidiaries and
agents, had deposits with the Company totalling approximately $2.2 billion and
$2.0 billion at December 31, 1996 and 1995, respectively.
B) OTHER POSTRETIREMENT BENEFITS PLANS: In addition to providing pension
benefits, the Company provides certain health care and life insurance benefits
to retired employees, spouses and other eligible dependents through various
plans sponsored by CIGNA. A substantial portion of the Company's employees may
become eligible for these benefits upon retirement. CIGNA's contributions for
health care benefits depend upon a retiree's date of retirement, age, years of
service and other cost-sharing features, such as deductibles and coinsurance.
Under the terms of the benefit plans, benefit provisions and cost-sharing
features can be adjusted. In general, retiree health care benefits are not
funded by CIGNA, but are paid as covered expenses are incurred. Retiree life
insurance benefits are paid from plan assets or as covered expenses are
incurred.
In 1996, CIGNA amended its health care plan for certain current and future
retirees effective January 1, 1997, whereby health benefits will be provided
primarily through CIGNA's managed care networks in exchange for a fixed
reimbursement amount per retiree from Medicare. The effect of the plan amendment
was to reduce CIGNA's other postretirement benefit liability by $110 million.
The reduction of the liability is being amortized into income over the average
remaining employee service period, approximately 17 years, through a reduction
of the expense for postretirement benefits other than pensions allocated to the
Company.
An employer's postretirement benefit liability is primarily measured by
determining the present value of the projected future costs of health benefits
based on an estimate of health care cost trend rates. Expense for postretirement
benefits other than pensions allocated to the Company totalled $16 million for
1996, $20 million for 1995 and $28 million for 1994. The other postretirement
benefit liability included in Accounts Payable, Accrued Expenses and Other
Liabilities as of December 31, 1996 and 1995 was $424 million and $427 million,
including net intercompany payables of $40 million and $28 million,
respectively, for services provided by affiliates' employees.
C) OTHER POSTEMPLOYMENT BENEFITS: The Company provides certain salary
continuation (severance and disability), health care and life insurance benefits
to inactive and former employees, spouses and other eligible dependents through
various employee benefit plans sponsored by CIGNA.
Although severance benefits accumulate with additional service, the Company
recognizes severance expense when severance is probable and the costs can be
reasonably estimated. Postemployment benefits other than severance generally do
not vest or accumulate; therefore, the estimated cost of benefits is accrued
when determined to be probable and estimable, generally upon disability or
termination. See Note 10 for additional information regarding severance accrued
as part of cost reduction initiatives.
D) CAPITAL ACCUMULATION PLANS: CIGNA sponsors various capital accumulation
plans in which employee contributions on a pre-tax basis (401(k)) are
supplemented by CIGNA matching contributions. Contributions are invested, at the
election of the employee, in one or more of the following investments: CIGNA
common stock fund, several non-CIGNA stock and bond portfolios
67
<PAGE> 69
and a fixed-income fund. The Company's allocated expense for such plans totaled
$16 million for 1996 and $14 million for each of 1995 and 1994.
NOTE 8 - REINSURANCE
In the normal course of business, the Company enters into agreements,
primarily relating to short- duration contracts, to assume and cede reinsurance
with other insurance companies. Reinsurance is ceded primarily to limit losses
from large exposures and to permit recovery of a portion of direct losses,
although ceded reinsurance does not relieve the originating insurer of
liability. The Company evaluates the financial condition of its reinsurers and
monitors concentrations of credit risk arising from similar geographic regions,
activities, or economic characteristic of its reinsurers.
Failure of reinsurers to indemnify the Company, as a result of reinsurer
insolvencies and disputes, could result in losses. As of December 31, 1996 and
1995 there were no allowances for uncollectible amounts. While future charges
for unrecoverable reinsurance may materially affect results of operations in
future periods, such amounts are not expected to have a material adverse effect
on the Company's liquidity or financial condition.
The effects of reinsurance on net earned premiums and fees for the year
ended December 31 were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
(In millions) 1996 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-DURATION CONTRACTS
Premiums and fees:
Direct $ 3,709 $ 3,374 $ 3,419
Assumed 571 818 716
Ceded (193) (391) (291)
- ---------------------------------------------------------------------
Net earned premiums and fees $ 4,087 $ 3,801 $ 3,844
=====================================================================
LONG-DURATION CONTRACTS
Premiums and fees:
Direct $ 1,228 $ 1,189 $ 1,068
Assumed 165 127 126
Ceded (166) (119) (78)
- ---------------------------------------------------------------------
Net earned premiums and fees $ 1,227 $ 1,197 $ 1,116
=====================================================================
</TABLE>
The effects of reinsurance on written premiums and fees for short-duration
contracts were not materially different from the amounts shown in the above
table. Benefits, losses and settlement expenses for 1996, 1995 and 1994 were net
of reinsurance recoveries of $359 million, $442 million and $415 million,
respectively.
NOTE 9 - LEASES AND RENTALS
Rental expenses for operating leases, principally with respect to buildings,
amounted to $68 million, $60 million and $62 million in 1996, 1995 and 1994,
respectively.
As of December 31, 1996, future net minimum rental payments under
non-cancelable operating leases were $128 million, payable as follows: 1997 -
$42 million; 1998 - $31 million; 1999 - $27 million; 2000 - $13 million; 2001 -
$6 million; and $9 million thereafter.
NOTE 10 - SEGMENT INFORMATION
68
<PAGE> 70
The Company operates principally in three segments: Employee Life and Health
Benefits, Employee Retirement and Savings Benefits, and Individual Financial
Services. Other Operations consists principally of the results of the Company's
settlement annuity business.
69
<PAGE> 71
Summarized financial information with respect to the business segments for
the year ended and as of December 31 was as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
(In millions) 1996 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Employee Life and Health Benefits $ 4,510 $ 4,243 $ 4,194
Employee Retirement and Savings Benefits 1,899 1,914 1,887
Individual Financial Services 1,950 1,800 1,546
Other Operations 200 181 173
- ------------------------------------------------------------------------------------
Total $ 8,559 $ 8,138 $ 7,800
- ------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES
Employee Life and Health Benefits $ 287 $ 294 $ 323
Employee Retirement and Savings Benefits 293 232 258
Individual Financial Services 298 252 237
Other Operations (8) (17) (44)
- ------------------------------------------------------------------------------------
Total $ 870 $ 761 $ 774
- ------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS
Employee Life and Health Benefits $ 7,065 $ 7,629 $ 7,197
Employee Retirement and Savings Benefits 40,122 37,609 33,588
Individual Financial Services 17,930 16,189 12,612
Other Operations 2,398 2,569 2,111
- ------------------------------------------------------------------------------------
Total $ 67,515 $ 63,996 $ 55,508
- ------------------------------------------------------------------------------------
</TABLE>
During 1995, the Company recorded a $13 million pre-tax charge, included in
Other Operating Expenses, for cost reduction initiatives in the Employee Life
and Health Benefits segment. The charge consisted primarily of severance-related
expenses representing costs associated with nonvoluntary employee terminations
covering approximately 1,100 employees. The cash outlays associated with the
restructuring initiatives began in the third quarter of 1995 and will continue
through 1997, with $6 million paid in 1996. As of December 31, 1996, $7 million
of severance was paid to 625 terminated employees. The Company has funded, and
will continue to fund, these costs through liquid assets, and such funding has
not and will not have a material adverse effect on its liquidity.
NOTE 11 - CONTINGENCIES
A) FINANCIAL GUARANTEES: The Company is contingently liable for financial
guarantees provided in the ordinary course of business on the repayment of
principal and interest on certain industrial revenue bonds. The contractual
amounts of financial guarantees reflect the Company's maximum exposure to credit
loss in the event of nonperformance. To limit the Company's exposure in the
event of default of any guaranteed obligation, various programs are in place to
ascertain the creditworthiness of guaranteed parties and to monitor this status
on a periodic basis.
The industrial revenue bonds guaranteed directly by the Company have
remaining maturities of up to 19 years. The guarantees provide for payment of
debt service only as it becomes due; consequently, an event of default would not
cause an acceleration of scheduled principal and interest payments. The
principal amount of the bonds guaranteed by the Company at December 31, 1996 and
1995 was $234 million and $266 million, respectively. Revenues in connection
with industrial revenue bond guarantees are derived principally from equity
participations in the related projects and are included in Net Investment Income
as earned. Loss reserves for financial guarantees are established when a default
has occurred or when the Company believes that a loss has been incurred. During
1994, losses for industrial revenue bonds were $1 million. There were no such
losses in 1996 and 1995.
70
<PAGE> 72
The Company also guarantees a minimum level of benefits for certain separate
account contracts and, in the event that separate account assets are
insufficient to fund minimum policy benefits, the Company is obligated to fund
the difference. As of December 31, 1996 and 1995, the amount of minimum benefit
guarantees for separate account contracts was $4.9 billion and $5.1 billion,
respectively. Reserves in addition to the separate account liabilities are
established when the Company believes a payment will be required under one of
these guarantees. No such reserves were required as of December 31, 1996 and
1995. Guarantee fees are part of the overall management fee charged to separate
accounts and are recognized in income as earned.
Although the ultimate outcome of any loss contingencies arising from the
Company's financial guarantees may adversely affect results of operations in
future periods, they are not expected to have a material adverse effect on the
Company's liquidity or financial condition.
B) REGULATORY AND INDUSTRY DEVELOPMENTS: The Company's businesses are
subject to a changing social, economic, legal, legislative and regulatory
environment that could affect them. Some of the changes include initiatives to:
change certain federal corporate tax laws; restrict insurance pricing and the
application of underwriting standards; reform health care; and expand
regulation. Some of the more significant issues are discussed below.
In August 1996, Congress passed legislation that phases out over a
three-year period the tax deductibility of policy loan interest for most
leveraged corporate-owned life insurance (COLI) products. For 1996, 31% of
revenues and 29% of operating income for the Individual Financial Services
segment were from leveraged COLI products that are affected by this legislation.
The effect of the legislation on this segment's income is not expected to be
material through 1998. Beginning in 1999, the effect of the legislation is
uncertain; however, it could have a material adverse effect on the segment's
income. The Company does not expect this legislation to have a material effect
on its consolidated results of operations, liquidity or financial condition.
The Company expects proposals for federal and state legislation seeking some
health care insurance reforms. Due to uncertainties associated with the timing
and content of any health care legislation, the effect on the Company's future
results of operations, liquidity or financial condition cannot be reasonably
estimated at this time.
The National Association of Insurance Commissioners is currently developing
standardized statutory accounting principles, which are scheduled to take effect
in 1999. The effect on the Company's statutory net income, surplus and liquidity
cannot be reasonably estimated at this time.
In recent years, the number of insurance companies that are impaired or
insolvent has increased. This is expected to result in an increase in mandatory
assessments by state guaranty funds of, or voluntary payments by, solvent
insurance companies to cover losses to policyholders of insolvent or
rehabilitated companies. Mandatory assessments, which are subject to statutory
limits, can be partially recovered through a reduction in future premium taxes
in some states. The Company recorded pre-tax charges of $53.9 million, $37.0
million and $27.9 million for 1996, 1995 and 1994, respectively, for guaranty
fund assessments that can be reasonably estimated before giving effect to future
premium tax recoveries. Although future assessments and payments may adversely
affect results of operations in future periods, such amounts are not expected to
have a material adverse effect on the Company's liquidity or financial
condition.
The eventual effect on the Company of the changing environment in which it
operates remains uncertain.
C) LITIGATION: The Company is routinely engaged in litigation incidental to
its business. While the outcome of all litigation involving the Company,
including insurance-related litigation, cannot be determined, litigation is not
expected to result in losses that differ from recorded reserves by amounts that
would be material to results of operations, liquidity or financial condition.
NOTE 12 - RELATED PARTY TRANSACTIONS
The Company has assumed the settlement annuity and group pension business
written by Life Insurance Company of North America (LINA), an affiliate.
Reserves held by the Company with respect to this business were $1.7 billion at
December 31, 1996 and 1995.
71
<PAGE> 73
The Company cedes long-term disability business to LINA. Reinsurance
recoverables from LINA at December 31, 1996 and 1995 were $917 million and $973
million, respectively.
The Company had lines of credit available from affiliates totaling $600
million at both December 31, 1996 and 1995. All borrowings are payable upon
demand with interest rates equivalent to CIGNA's average monthly short-term
borrowing rate plus 1/4 of 1%. Interest expense was $1 million for 1996, 1995
and 1994. As of December 31, 1996 and 1995, there were no borrowings outstanding
under such lines.
The Company extended lines of credit to affiliates totalling $600 million at
December 31, 1996 and 1995. All loans are payable upon demand with interest
rates equivalent to CIGNA's average monthly short-term borrowing rate. There
were no amounts outstanding as of December 31, 1996 or 1995.
The Company, together with other CIGNA subsidiaries, has entered into a
pooling arrangement known as the CIGNA Corporate Liquidity Account (the Account)
for the purpose of maximizing earnings on funds available for short-term
investments. Withdrawals from the Account, up to the total amount of the
participant's investment in the Account, are allowed on a demand basis. As of
December 31, 1996 and 1995, the Company had a balance in the Account of $80
million and $212 million, respectively.
CIGNA allocates to the Company its share of operating expenses incurred at
the corporate level. The Company also allocates a portion of its operating
expenses to affiliated companies on whose behalf it performs certain
administrative services.
72
<PAGE> 74
ILLUSTRATIONS
The following tables show how cash value and death benefit would change over an
extended period of time assuming uniform hypothetical investment performances of
0%, 6%, and 12%. If the actual investment performance were to average 0%, 6%, or
12% but were to vary up and down over the period illustrated, the actual cash
values and death benefits would vary from those illustrated in the following
tables.
These illustrations assume that, over the period illustrated, there are no
policy loans made; no partial surrenders are made; no changes are made in the
face amount of coverage; no optional coverages, riders or benefits are
purchased; no premium payments are made other than the monthly premiums
specified in the illustration; no allocation is made to the Fixed Account; no
transfers of cash value between Fund Accounts are made beyond 12 per year;
monthly cost of insurance charges are as illustrated during each policy year;
and the illustrations are based on the specified face amount, age, and premium
payments.
Current value illustrations use rates from Section 79 of the Internal Revenue
Code with linear interpolation between central ages, and assume the following
charges; i) mortality and expense charges of 0.45% effective annual rate
assessed daily on the aggregate cash value invested in the Fund Accounts, ii)
premium load of 3.00% applied to each premium payment as it is received, iii)
monthly administrative fees of $2.20 per month for the duration of the period
illustrated plus $1.05 per month for each month in which the Net Cash Value does
not exceed $10,000.
Guaranteed illustrations use rates equal to the maximum rates in the Policy
based on 150% of the 1980 CSO Male Mortality Table, and assume the following
charges: i) mortality and expense charges of 0.90% effective annual rate
assessed daily on the aggregate cash value invested in the Fund Accounts, ii)
premium load of 5.00% applied to each premium payment as it is received, iii)
monthly administrative fees of $5.00 per month for the duration of the period
illustrated plus $1.00 per month for each month in which the Net Cash Value does
not exceed $10,000.
The last column of the tables shows the amount which would accumulate if an
amount equal to each premium payment illustrated were invested, and earned
interest, after taxes, at 5% per year compounded annually.
Illustrated values and benefits take into account investment management fees and
other expenses of the underlying funds. These investment management fees and
other expenses of the underlying funds are illustrated at an assumed effective
annual rate of 0.65% of the aggregate cash value in the Fund Accounts.
At present, CIGNA Variable Products Group has agreed to limit total expenses for
the investment management fees plus other expenses for the Money Market Fund to
0.50% effective annual charge and for the S&P 500 Index Fund to 0.25% effective
annual charge. Although this agreement may end at any time, CIGNA Variable
Products Group has represented that this cap on expenses will continue until May
1, 1998, and beyond that date, expenses will be as described in the then current
prospectuses of the Money Market Fund and the S&P 500 Index Fund.
Investment management fees and other expenses may be more or less than the
assumed rate used for illustration purposes depending upon the allocations made
by the Certificate Owner.
The illustrations assume that no federal, state, or local income tax will be
charged to CG Variable Life Insurance Separate Account A.
Taking into account the investment management fees and the other expenses of the
funds, as described above, the mortality and expense risk charges, the gross
rates of return of 0%, 6%, and 12% correspond to actual rates of return of
- -1.10%, 4.90%, and 10.90% based on the current charge for mortality and expense
risks, and to -1.55%, 4.45%, and 10.45% based on the guaranteed maximum charge
for mortality and expense risks.
73
<PAGE> 75
Upon request, the Company will provide comparable illustrations based upon the
age of the requesting insured and illustrating the face amount and premium
payment requested by the insured. The Company will provide illustrations based
on current charges and costs of insurance as well as illustrations based on
maximum certificate charges and costs of insurance.
74
<PAGE> 76
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, CG Variable Life Insurance Separate Account A, certifies that it
meets all of the requirements for effectiveness of this Registration Statement
pursuant to rule 485 (b) under the Securities Act of 1933, and has duly caused
this amendment to its registration statement to be signed on its behalf by the
undersigned thereunto duly authorized, and its seal to be hereunto affixed and
attested, all in the city of Philadelphia and the Commonwealth of Pennsylvania
on the ____ day of April, 1997.
(SEAL) CG VARIABLE LIFE INSURANCE
SEPARATE ACCOUNT A
--------------------------
(Registrant)
(SEAL) CONNECTICUT GENERAL LIFE
INSURANCE COMPANY
--------------------------
(Depositor)
BY: /S/ JEROLD H. ROSENBLUM
-----------------------
ATTEST:
---------------------
---------------------
Title
<PAGE> 77
Pursuant to the requirements of the Securities Act of 1933, this amendment to
the registration statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE AND TITLE DATE
------------------- ----
<S> <C>
/s/ THOMAS C. JONES *
- ---------------------------------------------
Thomas C. Jones
President (Principal Executive Officer)
/s/ JAMES T. KOHAN *
- ---------------------------------------------
James T. Kohan
Vice President and Actuary
(Principal Financial Officer)
/s/ ROBERT MOOSE *
- ---------------------------------------------
Robert Moose
Vice President (Principal Accounting Officer)
/s/ HAROLD W. ALBERT *
- ---------------------------------------------
Harold W. Albert, Director
/s/ ROBERT W. BURGESS *
- ---------------------------------------------
Robert W. Burgess, Director
/s/ JOHN G. DAY *
- ---------------------------------------------
John G. Day, Director
/s/ JOSEPH M. FITZGERALD *
- ---------------------------------------------
Joseph M. Fitzgerald, Director
/s/ H. EDWARD HANWAY *
- ---------------------------------------------
H. Edward Hanway, Director
/s/ CAROL M. OLSEN *
- ---------------------------------------------
Carol M. Olsen, Director
/s/ JOHN E. PACY *
- ---------------------------------------------
John E. Pacy, Director
/s/ MARC L. PREMINGER *
- ---------------------------------------------
Marc L. Preminger, Director
</TABLE>
<PAGE> 78
/s/ ARTHUR C. REEDS, III *
- ---------------------------------------------
Arthur C. Reeds, III, Director
/s/ PATRICIA L. ROWLAND *
- ---------------------------------------------
Patricia L. Rowland, Director
/s/ W. ALLEN SCHAFFER, M.D. *
- ---------------------------------------------
W. Allen Schaffer, M. D., Director
*BY: /s/ JEROLD H. ROSENBLUM
------------------------------------
JEROLD H. ROSENBLUM
Attorney-in-Fact
<PAGE> 79
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS UNDERTAKING TO FILE
REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to
file with the Securities and Exchange Commission such supplementary and
periodic information, documents, and reports as may be prescribed by
any rule or regulation of the Commission heretofore or hereafter duly
adopted pursuant to authority conferred in that section.
RULE 484 UNDERTAKING
The following provisions regarding the Indemnification of Directors and
Officers of the Registrant are applicable:
Connecticut Law: Except where an applicable insurance policy is
procured, Connecticut General Statutes ("C.G.S.") Section 33-320a is
the sole source of indemnification rights for directors and officers of
Connecticut corporations and for persons who may be deemed to be
controlling persons by reason of their status as a shareholder,
director, officer, employee or agent of a Connecticut corporation.
Under C.G.S. Section 33-320a, a corporation shall indemnify any
director or officer who was or is a party, or was threatened to be made
a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter referred to as "proceeding") by virtue of the fact that he
or the person whose legal representative he is: (i) is or was a
director or officer of the corporation; (ii) while a director or an
officer of the corporation, is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee or agent
of another foreign or domestic corporation, partnership, joint venture,
trust or other enterprise (hereinafter referred to as "enterprise"),
other than an employee benefit plan or trust; or (iii) while a director
or an officer of the corporation, is or was a director or officer
serving at the request of the corporation as a fiduciary of an employee
benefit plan or trust maintained for the benefit of employees of the
corporation or any other enterprise, against "covered
<PAGE> 80
expenditures" if (and only if) his conduct met the applicable statutory
eligibility standard.The types of expenditures which are covered and
the statutory eligibility standard vary according to the type of
proceeding to which the director or officer is or was a party or was
threatened to be made a party.
According to C.G.S. Section 33-320a, in non-derivative
proceedings other than ones brought in connection with an alleged claim
based upon the purchase or sale by a director or officer of securities
of the corporation or of another enterprise, which the director or
officer serves or served at the request of the corporation, the
corporation shall indemnify a director or officer against judgments,
fines, penalties, amounts paid in settlement and reasonable expenses,
including attorney's fees, actually incurred by him in connection with
the proceeding, or any appeal therein,
IF AND ONLY IF he acted (i) in good faith and (ii) in a manner he
reasonably believed to be in the best interests of the corporation or,
in the case of a person serving as a fiduciary of any employee benefit
plan or trust, in a manner he reasonably believed to be in the best
interests of the corporation or in the best interest of the
participants and beneficiaries of such employee benefit plan or trust
and consistent with the provisions of such employee benefit plan or
trust. However, where the proceeding brought is criminal in nature,
C.G.S. Section 33-320a requires that the director or officer must
satisfy the additional condition that he had no reasonable cause to
believe that his conduct was unlawful in order to be indemnified. A
director or officer also will be entitled to indemnification as
described above if (i) he is successful on the merits in the defense of
any non-derivative proceeding brought against him or (ii) a court shall
have determined that in view of all the circumstances he is fairly and
reasonably entitled to be indemnified. The decision about whether the
director or officer qualifies for indemnification under C.G.S. Section
33-320a may be made (i) in writing by a majority of those members of
the board of directors who were not parties to the proceeding in
question, (ii) in writing by independent legal counsel selected by a
consent in writing signed by a majority of those directors who were not
parties to the proceeding, or (iii) by the shareholders of the
corporation
<PAGE> 81
at a special or annual meeting by an affirmative vote of at least a
majority of the voting power of shares not owned by parties to the
proceeding. A director or officer also may apply to a court of
competent jurisdiction for indemnification even though he previously
applied to the board, independent legal counsel or the shareholders and
his application for indemnification was rejected.
For purposes of C.G.S. Section 33-320a, the termination of any
proceeding by judgment, order, settlement, conviction or upon a plea of
nolo contendere or its equivalent shall not create, of itself, a
presumption that the director or officer did not act in good faith or
in a manner which that director or officer did not believe reasonably
to be in the best interests of the corporation or of the participants
and beneficiaries of an employee benefit plan or trust and consistent
with the provisions of such plan or trust.
Likewise, the termination of a criminal act or proceeding shall not
create, of itself, a presumption that the director or officer had
reasonable cause to believe that his conduct was unlawful.
In non-derivative proceedings based on the purchase or sale of
securities of the corporation or of another enterprise, which the
director or officer serves or served at the request of the corporation,
C.G.S. Section 33-320a provides that the corporation shall indemnify
the director or officer only after a court shall have determined upon
application that in view of all the circumstances, the director or
officer is fairly and reasonably entitled to be indemnified.
Furthermore, the expenditures for which the director or officer shall
be indemnified shall be only such amount as the court determines to be
appropriate.
Pursuant to C.G.S. Section 33-320a, where a director or officer was or
is a party or was threatened to be made a party to a derivative
proceeding, the corporation shall indemnify him against expenses,
including attorneys' fees, actually and reasonably incurred by him in
connection with the proceeding or any appeal therein, in relation to
matters as to which he is finally adjudged not to have breached his
duty to the corporation. The corporation also shall indemnify a
director or officer where the court determines that, in view of all the
circumstances, such person is
<PAGE> 82
fairly and reasonably entitled to be indemnified; however, in such a
situation, the individual shall be indemnified only for such amount as
the court determines to be appropriate. Furthermore, the statute
provides that the corporation shall not indemnify a director or officer
for amounts paid to the corporation, to a plaintiff or to counsel for a
plaintiff in settling or otherwise disposing of a threatened or pending
action, with or without court approval, or for expenses incurred in
defending a threatened action or a pending action which is settled or
otherwise disposed of without court approval.
C.G.S. Section 33-320a also provides that expenses incurred in
defending a proceeding may be paid by the corporation in advance of the
final disposition of such proceeding upon authorization of the board of
directors, provided said expenses are indemnifiable under the statute
and the director or officer agrees to repay such amount if he is later
found not entitled to indemnification by the corporation.
Lastly, C.G.S. Section 33-320a is intended to be an exclusive statute.
A corporation established under Connecticut statute cannot indemnify a
director or officer (other than a director or officer who is or was
serving at the request of the corporation as a director, officer,
partner, trustee, employee or agent of another enterprise), to an
extent either greater or less than that authorized by the statute, and
any provision in the certificate of incorporation, the by-laws, a
shareholder or director resolution, or agreement or otherwise that is
inconsistent with the statute is invalid. Notwithstanding the above,
C.G.S. Section 33-320a specifically authorizes a corporation to procure
insurance providing greater indemnification rights than those set out
in the statute the premium cost of which may be shared with the
director or officer on such basis as may be agreed upon.
The directors and officers may also be covered by an errors and
omissions or other insurance policies. The Bylaws of CIGNA Corporation
provide that any person who at any time serves as a director or officer
of the Company or any majority owned ultimate subsidiary of CIGNA
Corporation shall be indemnified or reimbursed against and for any and
all claims for which they become subject by reason of such
<PAGE> 83
service.
Insofar as indemnification for liability arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
REPRESENTATIONS UNDER SECTION 26 (e) OF THE INVESTMENT COMPANY ACT OF
1940
The fees and charges under the Policy, in the aggregate, are reasonable
in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by the Company.
<PAGE> 84
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement is comprised of the following
documents:
The Facing Sheet.
The Prospectus consisting of 79 pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484 under the Securities Act
of 1933.
<PAGE> 85
The signatures.
Powers of Attorney.
The following Exhibits:
1. The following Exhibits correspond to those required
by Paragraph A of the instructions as to Exhibits in
Form N-8B-2:
A. (1) Resolution of Board of Directors of
Connecticut General Life Insurance Company
establishing the Separate Account. Incorporated by
reference to Exhibit 1 A (1) Registration
Statement on Form S-6 (File Number 33-609670)
filed July 11, 1995 by CG Variable Life Insurance
Separate Account A as Registrant and Connecticut
General Life Insurance Company as Depositor. )
(2) Not Applicable.
(3) Distributing contracts:
(a) Distribution Agreement between
Connecticut General Life Insurance
Company and CIGNA Financial
Advisors, Inc. - Incorporated by
reference to Exhibit 3 (a)
Registration Statement on Form S-6
(File Number 33-609670) filed July
11, 1995 by CG Variable Life
Insurance Separate Account A as
Registrant and Connecticut General
Life Insurance Company as
Depositor.
(b) Not Applicable.
<PAGE> 86
(c) Not Applicable.
(4) Not Applicable.
(5) Group Variable Universal Life
Insurance Policy
(6) (a) Certificate of Incorporation of
Connecticut General Life
Insurance Company -Incorporated
by Reference to Exhibit #6 (b)
of Post Effective Amendment #1
to Registration Statement on
Form N-4 (File Number 33-83020)
filed June 22, 1995 by CG
Variable Annuity Separate
Account II as Registrant and
Connecticut General Life
Insurance Company as Depositor.
(b) By-laws of Connecticut General
Life Insurance Company -
Incorporated by Reference to
Exhibit #6 (b) of Post Effective
Amendment #1 to Registration
Statement on Form N-4 (File
Number 33-83020) filed June 22,
1995 by CG Variable Annuity
Separate Account II as
Registrant and Connecticut
General Life Insurance Company
as Depositor.
(7) Not Applicable.
(8) Participation Agreements between Separate
Account and underlying Investment Companies
- Incorporated by reference to Exhibit 8 of
Registration Statement on Form S-6 (File
Number 33-609670) filed July 11, 1995 by CG
<PAGE> 87
Variable Life Insurance Separate Account A
as Registrant and Connecticut General Life
Insurance Company as Depositor.
(9) Not Applicable.
(10) Form of Application for Group Variable
Universal Life Insurance Policy. -
Incorporated by reference to Exhibit 10 to
Pre-effective Amendment #2 to Registration
Statement on Form S-6 (File Number
33-609670) filed December 22, 1995 by CG
Variable Life Insurance Separate Account A
as Registrant and Connecticut General Life
Insurance Company as Depositor.
(11) Memorandum describing Connecticut General
Life Insurance Company's issuance,
transfer, and redemption procedures for the
Policy Incorporated by reference to Exhibit
11 Registration Statement on Form S-6 (File
Number 33-609670) filed December 22, 1995 by
CG Variable Life Insurance Separate Account
A as Registrant and Connecticut General Life
Insurance Company as Depositor.
B. (1) Not Applicable.
(2) Not Applicable.
C. Not Applicable.
2. Opinion of Counsel as to the legality of the securities
being registered.
3. Not Applicable.
<PAGE> 88
4. Not Applicable.
5. Opinion and Consent of Benjamin Clement as to actuarial
matters pertaining to the securities being registered.
6. Consent of Price Waterhouse LLP .
7. Consent of counsel opining as to the legality of the
securities being registered - see Exhibit 2.
8. Opinion and consent of Jorden Burt Berenson & Johnson.
<PAGE> 89
CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-8B-2
<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
----------- ---------------------
<S> <C>
1 Cover Page; The Separate Account and
the Fund Accounts
2 Cover Page; The Company
3 Not Applicable
4 Distribution of Policies
5 The Separate Account and The Fund
Accounts
6 Not Applicable
7 Not Applicable
8 Financial Statements
9 Legal Proceedings
10 Highlights; Full Surrender; Partial
Surrender; Right-to-Examine Period;
Conversion; Transfers; The Separate
Account and the Fund Accounts; Voting
Rights; Lapse; Right to Take Action
Regarding the Separate Account;
Premium Payments
11 The Separate Account and The Fund
Accounts; The Funds
12 Cover Page; The Separate Account and
The Fund Accounts; The Funds
13 Cover Page; Highlights; Charges and
Fees
14 Highlights; Eligibility
15 Premium Payments; Charges and Fees
</TABLE>
<PAGE> 90
<TABLE>
<S> <C>
16 The Funds
17 Surrender, Lapse, and Reinstatement;
Transfers; Right to Examine Period;
Certificate Loans
18 Tax Matters
19 Reports to Certificate holders
</TABLE>
<PAGE> 91
<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
----------- ---------------------
<S> <C>
20 Not Applicable
21 Certificate Loans
22 Not Applicable
23 Not Applicable
24 Incontestability; Suicide;
Misstatement of Age
25 The Company
26 Fund Participation Agreements
27 The Company
28 Directors and Officers
29 The Company
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 The Company
36 Not Applicable
37 Not Applicable
38 Distribution of Policies
39 Distribution of Policies
40 Not Applicable
</TABLE>
<PAGE> 92
<TABLE>
<S> <C>
41 Distribution of Policies
42 Not Applicable
43 Not Applicable
44 The Separate Account and The Fund
Accounts; Account Certificates; The
Funds; Charges and Fees
</TABLE>
<PAGE> 93
<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
----------- ---------------------
<S> <C>
45 Not Applicable
46 The Separate Account and The Fund
Accounts; Certificate Values; The
Funds; Surrender, Lapse and
Reinstatement; Charges and Fees
47 Premium Payments; The Funds
48 Not Applicable
49 Not Applicable
50 Not Applicable
51 Cover Page; Highlights; Eligibility;
Coverage Amount; Termination,
Continuation, and Conversion; Premium
Payments
52 The Funds; Substitution or
Elimination of Securities
53 Tax Matters
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Financial Statements
</TABLE>
<PAGE> 1
EXHIBIT 1 A (1)
RESOLUTION OF THE BOARD OF DIRECTORS
OF
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
ESTABLISHING THE SEPARATE ACCOUNT
Incorporated by reference to Exhibit 1 A (1)
Registration Statement on Form S-6 (File Number
33-609670) filed July 11, 1995
by CG Variable Life Insurance Separate Account A as Registrant
and Connecticut General Life Insurance Company as Depositor.
<PAGE> 1
EXHIBIT 1 A (3) (a)
DISTRIBUTION AGREEMENT BETWEEN
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
AND
CIGNA FINANCIAL ADVISORS, INC.
Incorporated by reference to Exhibit 3 (a) Registration
Statement on Form S-6 (File Number 33-609670) filed
July 11, 1995 by CG Variable Life Insurance Separate
Account A as Registrant and Connecticut General Life
Insurance Company as Depositor.
<PAGE> 1
EXHIBIT 1 A (5)
GROUP VARIABLE UNIVERSAL LIFE INSURANCE POLICY AND
CERTIFICATE
<PAGE> 2
Mailing Address: Hartford, Connecticut 06152
Home Office: Bloomfield, Connecticut
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
(REFERRED TO HEREIN AS "THE COMPANY")
POLICYHOLDER: [ABC COMPANY]
ADDRESS: [123 MAIN STREET
YOUR STATE, USA]
POLICY POLICY POLICY
NUMBER: [XXXXX] EFFECTIVE DATE: [X/X/XX] ANNIVERSARY DATE: [X/X]
This group Policy contains the terms under which the Company agrees to insure
certain persons and pay benefits.
The Company and the Policyholder have agreed to all the terms of this group
Policy.
INSURING AGREEMENTS
The group Policy is issued to the Policyholder in consideration of its
application, subject to payment of the required premium in accordance with
agreed terms. The Company agrees to insure eligible persons as described in the
Certificate of Insurance and the Policy Schedule for the benefits provided in,
and subject to the terms, conditions and limitations set forth in the Policy,
the Certificate of Insurance, and the Policy Schedule under which such person is
eligible. The Certificate(s) are included in and made a part of this group
Policy.
An Employee will become eligible and insured in accordance with the terms of the
Eligibility and Effective Date of Insurance sections of the Certificate.
ALL BENEFITS AND VALUES PROVIDED BY THE POLICY WHEN BASED ON THE INVESTMENT
EXPERIENCE OF THE FUND ACCOUNTS ARE VARIABLE AND NOT GUARANTEED AS TO DOLLAR
AMOUNT.
This Policy is issued in the state of [Your State] and shall be governed by its
laws.
[SIG] [SIG]
-------------------- ---------------------
Corporate Secretary PRESIDENT
<PAGE> 3
GROUP VARIABLE UNIVERSAL LIFE INSURANCE POLICY
2
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
The Schedule Page
<S> <C>
Policy Schedule 3
All Other Schedule Sections Certificate
Definitions Certificate
Eligibility Certificate
Effective Date of Insurance Certificate
Life Insurance Death Benefit Certificate
Premium Payments 5 and Certificate
Fund Account Provisions Certificate
Certificate Value Provisions Certificate
Surrenders, Loan and Reinstatement Provisions Certificate
Termination Provisions Certificate
Continuation Provisions Certificate
Conversion Provisions Certificate
Table of Guaranteed Maximum Monthly Cost of Insurance Rates Certificate
Ownership and Assignment Provisions Certificate
Beneficiary Provisions Certificate
General Provisions 6 and Certificate
[Accelerated Payment Benefit Rider]
[Paid-Up Life Insurance Option Rider]
[Seat Belt Benefit Rider]
[Supplemental Accidental Death Benefit Rider]
[Supplemental Accidental Death and Dismemberment Benefit Rider]
[Supplemental Accidental Death, Dismemberment,
Loss of Sight, Speech and Hearing; or Paralysis Benefit Rider]
[Waiver of Cost of Life Insurance During Total Disability Rider]
[Spouse Term Life Insurance Rider]
</TABLE>
3
<PAGE> 5
POLICY SCHEDULE
POLICYHOLDER: [ABC COMPANY]
EMPLOYER: [ABC COMPANY]
CLASSES OF ELIGIBLE EMPLOYEES:
<TABLE>
<S> <C>
LIFE INSURANCE BENEFITS
FOR EMPLOYEE
[MAXIMUM GUARANTEED ISSUE: [$40,000]]
MAXIMUM ISSUE: [$!]
[AUTOMATIC INCREASE FEATURE: [Optional/Automatic] ]
[FOR SPOUSE:
MAXIMUM GUARANTEED ISSUE: [$20,000]
MAXIMUM ISSUE: [$!] ]
[FOR DEPENDENT CHILD(REN) TERM INSURANCE:
MAXIMUM ISSUE: [$!] ]
ADDITIONAL BENEFITS: EFFECTIVE DATE
[Accelerated Payment Benefit Rider XX/XX/XX]
[Paid-up Life Insurance Option Rider XX/XX/XX]
[Seat Belt Benefit Rider XX/XX/XX]
[Supplemental Accidental Death Benefit Rider XX/XX/XX]
[Supplemental Accidental Death & Dismemberment Benefit Rider XX/XX/XX]
[Supplemental Accidental Death, Dismemberment, Loss of Sight,
Speech & Hearing; or Paralysis Benefit Rider XX/XX/XX]
[Waiver of Cost of Life Insurance During Total Disability Rider XX/XX/XX]
[Spouse Term Life Insurance Rider XX/XX/XX]
</TABLE>
4
<PAGE> 6
AVAILABLE INVESTMENT OPTIONS
<TABLE>
<CAPTION>
FUND GROUPS FUNDS
<S> <C>
Fund Manager A Fidelity VIP II Investment Grade Bond Portfolio
Fidelity VIP Equity-Income Portfolio
Fidelity VIP II Asset Manager Portfolio
Fidelity VIP Overseas Portfolio
Fund Manager B American Century VP Capital Appreciation
Fund Manager C CIGNA [Variable Products] Money Market Fund
CIGNA [Variable Products] S&P 500 Index Fund
</TABLE>
CIGNA FIXED ACCOUNT
The Separate Account for the Policy is CG Variable Life Insurance Separate
Account A - A Connecticut General Life Insurance Company separate investment
account established on May 22, 1995.
5
<PAGE> 7
PREMIUM PROVISIONS
PAYMENT OF POLICY PREMIUM. The total premium payable by the Policyholder under
the Policy will be the sum of all amounts payroll deducted as Premium for the
Policy each month and payroll deduction services for collection of all premium
contributed by Employees. The first premium will be due on the Policy Effective
Date. After that, premiums will be due on the first day of each month, unless
the Policyholder and the Company agree on some other method of premium payment
from time to time. The premiums are payable at the designated Customer Service
Center and will be deemed received only when an accurate reconciliation is
received, two business days prior to the receipt of the premium, and the premium
is actually received at the Customer Service Center or when wire transferred
into a bank account established by the Company for receipt of premium under this
Policy.
If any premium is not paid when due, the Policy will be cancelled as of the date
the premium is due, except as provided in the Grace Period section.
GRACE PERIOD. A Grace Period of 61 days will be granted for the payment of the
payroll deducted premium under the Policy. The Policy will be in force during
that Grace Period. If such premium is not paid in the Grace Period, the Policy
will cease at the end of that period. The Policy will cease before that date if
the Policyholder gives written notice of cancellation in advance to the Company.
When the Policy ceases, the Policyholder will be liable to the Company for all
premiums past due.
6
<PAGE> 8
GENERAL PROVISIONS
ENTIRE CONTRACT. The entire contract will be made up of the Policy, the
application of the Policyholder, a copy of which is attached to the Policy, the
Certificate(s), the Coverage Verification Pages, any Policy or Certificate
riders, and the applications, if any, of the Insureds.
POLICY CHANGES. Changes may be made in the Policy only by amendment, signed by
the Policyholder and by the Company acting through its President or Director. No
agent may change or waive any terms of the Policy.
INSURANCE DATA. The Policyholder will give the Company all of the data that it
needs to calculate the premium and all other data that it may reasonably
require. Failure of the Policyholder to give this data will not void or
discontinue an Insured's insurance. The Company has the right to examine the
Policyholder's records relative to these benefits at any reasonable time while
the Policy is in effect, and maintains this right until all rights and
obligations under the Policy are finally fulfilled.
STATEMENTS NOT WARRANTIES. All statements made by the Policyholder or by an
applicant will, in the absence of fraud, be deemed representations and not
warranties. No statement made by the Policyholder or by the applicant to obtain
insurance will be used to void or reduce the insurance unless it is made in
writing, and is signed by the Policyholder or the applicant and a copy is sent
to the Policyholder, the applicant or his Beneficiary.
CLERICAL ERROR. An Insured's coverage will not be affected by error or delay in
keeping records of insurance under this Policy. If such an error or delay is
found, the premium will be adjusted fairly.
CERTIFICATES. The Company will issue a Certificate to each Owner. The
Certificate will show the benefits provided under this Policy. It will set forth
any changes in benefits due to age and to whom benefits will be paid.
CONFORMITY WITH STATE STATUTES. Any provision of this Policy which, as of its
effective date, is in conflict with the laws of the state where it is delivered,
is amended to conform to the minimum requirements of such laws.
7
<PAGE> 9
Mailing Address: Hartford, Connecticut 06152
Home Office: Bloomfield, Connecticut
CONNECTICUT GENERAL LIFE INSURANCE COMPANY ("the Company") certifies that it
insures the person(s) named in the Coverage Verification Pages attached to this
Certificate for the benefits provided by the Group Variable Universal Life
Insurance Policy No. [XXXXXX-X] (the "Policy") issued to the [ABC Company] as
indicated in the Coverage Verification Pages.
NOTICE: This Certificate does not apply to any Insured unless the Coverage
Verification Pages showing the Insured's name, eligibility class,
and the Certificate Effective Date are attached.
[EMPLOYER: ABC Company ]
POLICYHOLDER: [ABC Company ]
POLICY EFFECTIVE DATE: [XX/XX/XX]
This Certificate is included in and made a part of the Policy. It describes the
main features of the insurance.
This Certificate takes the place of any other issued to the Insured on a prior
date which described the insurance.
30-DAY RIGHT TO EXAMINE
If the Owner is not satisfied with this Certificate for any reason, it may be
returned to the Company within 30 days after receipt. During this time, any
premium paid will be placed in the Fixed Account, and if the Certificate is so
returned, it will be deemed void from the Certificate Effective Date and the
Company will return any premium that has been paid, less any loans, interest
accrued and partial surrenders made during the Right to Examine period. If the
Certificate is not returned during the Right to Examine period, all premiums
will be allocated within three days of the end of the Right to Examine period as
provided for in the Allocation of Premium Payments provision.
The amount of insurance payable upon the death of the Insured will be determined
as provided in the Life Insurance Benefit provisions of the Certificate.
THE BENEFITS AND VALUES PROVIDED BY THE POLICY WHEN BASED ON THE INVESTMENT
EXPERIENCE OF THE FUND ACCOUNTS ARE VARIABLE AND ARE NOT GUARANTEED AS TO
DOLLAR AMOUNT. LOANS MAY NOT EXCEED 90% OF THE NET CASH VALUE.
[SIG] [SIG]
------------------------- ------------------------
Corporate Secretary PRESIDENT
<PAGE> 10
CERTIFICATE OF GROUP VARIABLE UNIVERSAL LIFE INSURANCE
2
<PAGE> 11
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CERTIFICATION.............................................................. 1
DEFINITIONS................................................................ 4
SCHEDULE OF BENEFITS ("THE SCHEDULE")...................................... 9
[Guaranteed Issue Amount.......................................... 10]
[Amounts Exceeding the Guaranteed Issue Amount.................... 11]
Maximum and Minimum Amounts of Coverage........................... 11
CHANGES IN COVERAGE AMOUNT................................................. 12
[Automatic Increase Feature....................................... 12]
Increases in Coverage Amount...................................... 12
Decreases in Coverage Amount...................................... 13
Premiums Held Pending Acceptance of Coverage Amount............... 13
Maximums and Minimums............................................. 13
Increase Due to Minimum Coverage Amount Provisions................ 14
ELIGIBILITY................................................................ 15
EFFECTIVE DATE OF INSURANCE................................................ 17
LIFE INSURANCE BENEFIT..................................................... 20
PREMIUM PAYMENTS........................................................... 22
Premiums.......................................................... 22
Allocation of Net Premium Payments................................ 22
Limits on Allocation of Net Premium Payments...................... 22
Interruptions of Premium Payments................................. 23
Grace Period for Insured.......................................... 23
FUND ACCOUNT PROVISIONS.................................................... 24
Separate Account and Fund Accounts................................ 24
</TABLE>
3
<PAGE> 12
<TABLE>
<S> <C>
Investment Risk................................................... 25
Investment of the Fund Account Assets............................. 25
Substitution or Elimination of Securities......................... 25
Transfer Privilege................................................ 26
Limits on Transfers............................................... 26
CERTIFICATE VALUE PROVISIONS............................................... 27
Cash Value........................................................ 27
Fixed Account Value............................................... 27
Loan Account Value................................................ 27
Fund Account Value................................................ 27
Crediting and Cancelling Variable Accumulation Units.............. 28
Variable Accumulation Unit Value.................................. 28
Net Investment Factor............................................. 28
Monthly Cost of Insurance Rates................................... 29
Monthly Deduction................................................. 29
Net Cash Value.................................................... 30
Lapse (Insufficient Net Cash Value)............................... 30
Basis of Computations............................................. 30
SURRENDERS, LOANS AND REINSTATEMENT PROVISIONS............................. 31
TERMINATION PROVISIONS..................................................... 34
CONTINUATION PROVISIONS.................................................... 35
CONVERSION PROVISIONS...................................................... 37
TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE ..................... 38
OWNERSHIP AND ASSIGNMENT PROVISIONS........................................ 44
BENEFICIARY PROVISIONS..................................................... 45
</TABLE>
4
<PAGE> 13
<TABLE>
<S> <C>
GENERAL PROVISIONS......................................................... 46
</TABLE>
5
<PAGE> 14
EXPLANATION OF TERMS
You will find terms starting with capital letters throughout your Certificate
and the Coverage Verification Pages. To help you understand your benefits, the
location of the definition of these terms is indicated in the Table of Contents,
or the definition is provided in the Definitions section of this Certificate.
The male pronoun, whenever used, includes the female pronoun.
THE SCHEDULE
The Schedule is a brief outline of the amounts of coverage available upon
initial enrollment. For a full description of each benefit, refer to the
appropriate section listed in the Table of Contents.
6
<PAGE> 15
DEFINITIONS
ACTIVE SERVICE
An Employee will be considered in Active Service with the Employer on a day
which is one of the Employer's scheduled work days if he is performing in
the usual way all of the regular duties of his work for the Employer. Such
service can occur at one of the Employer's places of business or at some
location to which the Employer's business requires him to travel. An
Employee will be deemed in Active Service on a day which is not one of the
Employer's scheduled work days only if he was in Active Service on the
preceding scheduled work day.
ANNUAL COMPENSATION
An Insured Employee's rate of pay as reported by the Employer. It does not
include [overtime, bonus, additional compensation, or pay for more than 40
hours in a week.] A Retiree's Annual Compensation will be his rate of pay
in effect immediately prior to retirement. A Leave of Absence Employee's
Annual Compensation will be his rate of pay in effect immediately prior to
going on a Leave of Absence.
ATTAINED AGE
An Insured's age on his last birthday either prior to or on the same date
as the Policy Effective Date or the Policy Anniversary Date, whichever is
later.
CASH VALUE
Cash Value is the sum of the Fixed Account Value, the Fund Account Values,
and the Loan Account Value.
CERTIFICATE EFFECTIVE DATE
The Certificate Effective Date is the date this Certificate becomes
effective, as shown in the Coverage Verification Pages.
CURRENT OUTSTANDING LOAN BALANCE
The Loan Balance plus all interest accrued but not yet paid.
[DEPENDENT CHILD
The unmarried Child of an Employee who is:
a) at least 15 days of age, but less than [19] years old; or
b) [19] or more years old, but less than [25] years, and enrolled in a
school as a full-time student and primarily supported by the Employee;
or
c) [19] or more years old, primarily supported by the Employee, and
incapable of self-sustaining employment by reason of mental or physical
handicap. Proof of the Child's condition and dependence must be
submitted to the Company within 31 days after the date the Child ceases
to qualify as a Dependent under a) or b) above. During the next two
years, the Company may, from time to time, require proof of the
continuation of such condition and dependence. After that, the Company
may require proof no more than once a year.
The term "Child" means a Child born to, legally adopted by, or under the
legal guardianship of the Employee. It also means a stepchild of the
Employee living with the Employee.]
7
<PAGE> 16
EMPLOYEE
An Employee of the Employer in one of the Classes of Eligible Employees
described in the Classes of Eligible Persons provisions. [The term does not
include Employees who are part-time or temporary or who normally work less
than [30] hours a week for the Employer.]
EMPLOYER
The Employer is shown on the first page of this Certificate and is the
group Policyholder.
FIXED ACCOUNT
The account which provides for a guaranteed minimum interest rate of not
less than 4% per year. Fixed Account assets are general assets of the
Company and are distinguishable from those allocated to a separate account
of the Company.
[FORMER INSURED DEPENDENT CHILD
An Insured Dependent Child who: (a) no longer qualifies as a Dependent
Child, and who has elected to continue his insurance under the Policy; or
(b) is at least [22 years of age] and has elected to be insured as a Former
Insured Dependent Child instead of being insured as an Insured Dependent
Child.]
FORMER INSURED EMPLOYEE
An Insured Employee who no longer qualifies as such and who has elected to
continue his insurance under the Policy.
[FORMER INSURED SPOUSE
An Insured Spouse who: (a) no longer qualifies as such and who has elected
to continue his insurance under the Policy; or (b) a Spouse of a Former
Insured Employee who has elected to be insured under the Policy on or after
the date the Insured Employee becomes a Former Insured Employee.]
FUND ACCOUNT
An account, the value of which varies based on the net investment
performance of a specific Fund, as described in the Fund Account
Provisions. Assets in a Fund Account are not guaranteed.
FUND ACCOUNT VALUE
The Cash Value portion which is determined by multiplying the number of
Variable Accumulation Units in the Fund Account by the current Variable
Accumulation Unit Value.
FUNDS
One or more of CIGNA [Variable Products] Money Market Fund, Fidelity VIP II
Investment Grade Bond Portfolio, Fidelity VIP II Asset Manager Portfolio,
CIGNA [Variable Products] S&P 500 Index Fund, Fidelity VIP Equity-Income
Portfolio, American Century VP Capital Appreciation, Fidelity VIP Overseas
Portfolio.
Each Fund is an open-end management investment company, or a portfolio of
an open-end management investment company, whose investment performance is
used in determining the investment performance of a Fund Account under the
Policy.
8
<PAGE> 17
DEFINITIONS (CONTINUED)
9
<PAGE> 18
DEFINITIONS (CONTINUED)
GENERAL ACCOUNT
The Company's general asset account in which along with other assets of the
Company, assets supporting the non-variable portion of the Policy are held.
[GUARANTEED ISSUE AMOUNT
The Coverage Amount that an Insured may purchase without satisfying the
Insurability Requirement. The Maximum Guaranteed Issue Amount for each
Class of Insureds is specified in The Schedule. The Company reserves the
right to change this amount from time to time.]
INSURABILITY REQUIREMENT
The requirement that an eligible person submit evidence of good health
acceptable to the Company in order to be insured. The Company may require
that the eligible person provide such evidence at his own expense. Further,
the Company may require different evidence of good health for different
amounts of insurance.
INSURED
A person who is eligible for insurance in one of the Eligible Classes under
the Policy, who has elected the insurance, and for whom premium has been
paid and whose coverage has not ceased.
LAPSE
The Insured's coverage ends due to insufficient Net Cash Value (See Lapse
section). The insurance will remain in force, subject to the terms and
conditions of the Policy, until the Net Cash Value is insufficient to cover
the Monthly Deduction, as provided in the Lapse and Grace Period for
Insured provisions.
[LIFE STATUS CHANGE
A Life Status Change is defined as any of the following events:
o marriage, legal separation, annulment, or divorce;
o death of Employee's Spouse or Dependent Child;
o birth, adoption or legal guardianship of a child;
o stepchild living with the Employee; or
o purchase of a primary home.]
LOAN ACCOUNT
The account in which assets securing a Loan against the Certificate are
held after transfer out of the Fixed Account and the Fund Accounts. The
Loan Account assets are general assets of the Company and are
distinguishable from those allocated to a separate account of the Company
and to the Fixed Account.
LOAN BALANCE
The sum of all loans granted under the Certificate less any loan repayments
plus all unpaid interest added to the Loan Balance as provided for in the
Certificate Loan provisions.
MONTHLY ADMINISTRATIVE FEES
Two fixed monthly charges to the Certificate representing the Company's
cost of administering the Certificates. These charges are set forth in the
Coverage Verification Pages.
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<PAGE> 19
DEFINITIONS (CONTINUED)
MONTHLY DEDUCTION
The Monthly Deduction means monthly charges made to the Cash Value; these
charges include the cost of insurance, the Monthly Administrative Fees, and
charges for any supplemental riders or benefits (see Monthly Deduction
section).
NET CASH VALUE
The Net Cash Value means the Cash Value minus any Current Outstanding Loan
Balance (see Certificate Value Provisions).
NET PREMIUM PAYMENT
The amount of a premium payment, less the premium load for taxes shown in
the Coverage Verification Pages. The Net Premium Payment is the amount
allocated to the Fixed Account and the Fund Accounts.
OWNER
The Owner of a Certificate under a Policy on the Certificate Effective Date
is the person designated as Owner in the Coverage Verification Pages. If no
person is designated as the Owner, the Employee will be the Owner.
[PAID-UP INSURANCE
A life insurance policy issued by the Company or an affiliate of the
Company under which no further premiums are payable but under which the
insurance coverage continues in effect. For purposes of determining the
Guaranteed Issue Amount and the Maximum Amount of Insurance under this
Certificate, Paid-up Insurance shall mean Paid-up Insurance purchased under
the Policy or a Replaced Policy.]
POLICY ANNIVERSARY DATE
The Policy Anniversary Date as stated in the Coverage Verification Pages.
POLICY EFFECTIVE DATE
The date the Policy issued to the Policyholder becomes effective.
POLICY YEAR
The period starting on a Policy Anniversary Date and continuing to the next
Policy Anniversary Date. The initial Policy Year may be less than 12
months.
RELATED FUND
The Fund whose investment performance is the basis for a specific Fund
Account's investment performance.
REPLACED POLICY
Any policy of [group universal life insurance] or group variable universal
life insurance issued by the Company or an affiliate of the Company to the
Employer, or to a trust to which the Employer subscribes, which policy is
discontinued, or sponsorship of which policy is discontinued, within 90
days of the Policy Effective Date of this Policy.
RETIREE
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<PAGE> 20
DEFINITIONS (CONTINUED)
A former Employee of the Employer who has satisfied the Employer's
requirements for retirement.
12
<PAGE> 21
DEFINITIONS (CONTINUED)
SEPARATE ACCOUNT
CG Variable Life Insurance Separate Account A established on May 22, 1995.
[SPOUSE
Except for the purpose of eligibility for insurance, the lawful Spouse of
an Employee, including a Spouse who is legally separated, divorced, or
widowed.]
SUCCESSOR PLAN
A life insurance plan available through the Employer within 90 days of
termination of the Policy for which the Insureds are, or will become,
eligible to obtain similar insurance.
VALUATION DAY
Every day on which the New York Stock Exchange ("NYSE") is open for
business, except any day on which trading on the NYSE is restricted, or on
which an emergency exists, as determined by the Securities and Exchange
Commission, so that valuation or disposal of securities is not practicable.
VALUATION PERIOD
The period of time for which a Fund determines its net asset value; a
Valuation Period is the period of time between the ends of two consecutive
Valuation Days. A Valuation Period may be longer than one day.
VARIABLE ACCUMULATION UNIT
A unit of measure used in calculating the value of each Fund Account.
13
<PAGE> 22
THE SCHEDULE
LIFE INSURANCE
AMOUNTS OF INSURANCE AVAILABLE
When applying, an applicant may elect a Coverage Amount from the Coverage
Amounts available for his Eligible Class as set forth in this Schedule.
ELIGIBLE CLASS COVERAGE AMOUNT
Insured Employee An amount elected [equal to 1, 2, 3, 4, or 5
times the Employee's Annual Compensation,
rounded to the next higher $10,000, if not
already an even multiple of $10,000,]. The
sum of the Coverage Amount, [the Paid-up
Insurance, if any,] and any insurance
continued or converted under a Replaced
Policy may not exceed the lesser of [X]
times the Employee's Annual Compensation or
[$1,000,000].
Maximum Guaranteed Issue Amount [$!]
[Insured Spouse An amount elected in increments of
[$10,000]. The sum of the Coverage Amount,
[the Paid-up Insurance, if any,] and any
insurance continued or converted under a
Replaced Policy may not exceed [an amount
equal to: (a) 3 times the Employee's Annual
Compensation; or (b) $100,000, whichever is
less].
Maximum Guaranteed Issue Amount [$!] ]
[Insured Dependent Child [$10,000] ]
[Former Insured Dependent Child [$50,000] ]
Former Insured Employee An amount elected up to the Insured's last
Coverage Amount as an Insured Employee.
14
<PAGE> 23
THE SCHEDULE
15
<PAGE> 24
THE SCHEDULE
LIFE INSURANCE
AMOUNTS OF INSURANCE AVAILABLE (CONTINUED)
ELIGIBLE CLASS COVERAGE AMOUNT
[Former Insured Spouse and An amount elected in increments of
Spouse of a Former Insured [$10,000]. The sum of the Coverage Amount,
Employee [the Paid-up Insurance, if any,] and any
insurance continued or converted under a
Replaced Policy may not exceed [an amount
equal to: (a) 3 times the Employee's Annual
Compensation; or (b) $100,000, whichever is
less.] ]
[Retiree An amount elected up to the Insured's last
Coverage Amount as an Insured Employee.
Maximum Guaranteed Issue Amount [$!] ]
[Leave of Absence Employee An amount elected up to the Insured's last
Coverage Amount as an Insured Employee.]
[GUARANTEED ISSUE AMOUNT
The Guaranteed Issue Amount is the amount of coverage for which the
applicant may become insured under the Policy without satisfying the
Insurability Requirement. The Guaranteed Issue Amount is the Maximum
Guaranteed Issue Amount shown above less any amount of coverage continued or
converted under any Replaced Policy.]
For purposes of determining [the Guaranteed Issue Amount and] the Maximum
Amount of Coverage, "Replaced Policy" means any policy of group universal
life insurance or group variable universal life insurance issued by the
Company or an affiliate of the Company to the Employer, or to a trust to
which the Employer subscribes, which policy is discontinued, or sponsorship
of which policy is discontinued, within 90 days of the Policy Effective
Date.
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<PAGE> 25
THE SCHEDULE
LIFE INSURANCE (CONTINUED)
[AMOUNTS EXCEEDING THE GUARANTEED ISSUE AMOUNT
If the Coverage Amount initially elected for an Insured is higher than the
Guaranteed Issue Amount, he will become insured for the amount that exceeds
the Guaranteed Issue Amount only if he satisfies the Insurability
Requirement for that amount. Premiums paid for coverage in excess of the
Guaranteed Issue Amount prior to written acceptance by the Company will be
held in the Fixed Account until the excess coverage is accepted or declined.
If the excess coverage is accepted, the Net Premiums will be allocated as
provided for in the Allocation of Net Premium Payments provision during the
next Valuation Period after the Company accepts the excess coverage. If the
coverage is declined, the premiums will be returned without interest and
less any Partial Surrenders and Loans plus accrued interest.]
MAXIMUM AND MINIMUM AMOUNTS OF COVERAGE
The Coverage Amount for an Insured may not, at any time, be less than
[$10,000]. [The Coverage Amount for an Insured Spouse or an Insured Former
Spouse may not be less than [$10,000 or 50% of the Insured Employee's
Coverage Amount if the Insured Employee's Coverage Amount is less than
$20,000].] The sum of the Coverage Amount, [any Paid-up Insurance] for the
[Insured Employee, or Former Insured Employee, or Retiree, or a Leave of
Absence Employee], and any insurance continued or converted under a Replaced
Policy may not at any time exceed the lesser of [X] times the Employee's
Annual Compensation or [$1,000,000]. [The sum of the Coverage Amount, any
Paid-up Insurance for the Insured Spouse, or Former Insured Spouse and any
insurance continued or converted under a Replaced Policy may not at any time
exceed an amount equal to: (a) [3 times] the Employee's Annual Compensation;
or (b) $100,000, whichever is less. The sum of the Coverage Amount and the
Paid-up Insurance for a Former Insured Dependent Child may not, at any time,
exceed $50,000. ]
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<PAGE> 26
CHANGES IN COVERAGE AMOUNT
[AUTOMATIC INCREASE FEATURE
If an Insured Employee is covered for the Automatic Increase Feature:
o his Coverage Amount will be increased on the Policy Anniversary Date
in order to maintain his elected multiple of his Annual
Compensation;
o he will not be required to satisfy the Insurability Requirement for
the increased amount, provided he is in Active Service[; and
o the increase amount will be limited to [$,%!] per increase].
When an eligible Employee becomes insured, he [will/may elect to] be
enrolled for the Automatic Increase Feature [unless it is rejected.]
When a Certificate Owner otherwise increases or decreases the Coverage
Amount to an amount which is not a whole multiple of Annual Compensation,
the Automatic Increase Feature will be terminated.
If an Insured Employee is not enrolled for the Automatic Increase Feature
when he first becomes insured, or if the feature is elected and later
revoked, the feature may be elected at a later date. If the feature is
elected at a later date, the Insured Employee must satisfy the Insurability
Requirement before he is enrolled for the feature.
[For purposes of the Automatic Increase Feature, Annual Compensation does
not include commissions.] ]
INCREASES IN COVERAGE AMOUNT
On any date while an Insured is covered, the Owner may elect to:
o increase the Coverage Amount based on a higher multiple of the
Insured Employee's Annual Compensation; or
o increase the Insured Employee's Coverage Amount based on an increase
in his Annual Compensation[; or
o increase the Coverage Amount of an Insured Spouse, Insured Dependent
Child, Former Insured Dependent Child, Former Insured Employee,
Former Insured Spouse, or Retiree].
However, the Insured will become covered for the elected higher Coverage
Amount only if he satisfies the Insurability Requirement for that amount
[unless the Insurability Requirement is otherwise not applicable under the
Automatic Increase Feature]. The effective date of the increase will be the
day the Company agrees in writing to accept the Insured for the higher
Coverage Amount.
[Within 31 days following a Life Status Change, an election may be made to
increase the Insured Employee's Coverage Amount by [one times the Employee's
Annual Compensation], without evidence of insurability. ]
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<PAGE> 27
CHANGES IN COVERAGE AMOUNT
INCREASES IN COVERAGE AMOUNT (CONTINUED)
[The Guaranteed Issue Amount applies only to initial enrollment. Unless an
increase in coverage is exempted from the Insurability Requirement under the
Automatic Increase Feature or, in the case of an increase of [one times the
Employee's Annual Compensation] within 31 days following a Life Status
Change, that increase in coverage will require evidence of insurability
acceptable to the Company, regardless of whether the proposed new Coverage
Amount exceeds the Guaranteed Issue Amount, if any. ]
If an Insured Employee is not in Active Service on the date he would
otherwise become insured for an increased Coverage Amount, he will become
insured for the increase on the date he returns to Active Service. If he
does not return to Active Service within 90 days from the date the Company
agrees in writing to accept him for the higher Coverage Amount, he must
again satisfy the Insurability Requirement.
If, on the date [an Insured Spouse, Former Insured Employee, Former Insured
Spouse, Former Insured Dependent Child, or Retiree] would otherwise become
insured for an increased Coverage Amount: (a) he is hospitalized; and/or (b)
he is unable to engage in the normal activities of a person of the same age
and sex, he will become insured for the increase on the day after the
conditions described under (a) and/or (b) have ended. If all of these
conditions have not ended within 90 days from the date the Company agrees in
writing to accept him for the higher Coverage Amount, he must again satisfy
the Insurability Requirement.
DECREASES IN COVERAGE AMOUNT
The Owner may decrease the Coverage Amount at any time by notifying the
Company. The decrease in Coverage Amount will become effective on the first
of the month after written notice has been received by the Company. The
Company may refuse any decrease in an Insured's Coverage Amount if the
Company has determined that such change would adversely affect the Policy's
or the Certificate's qualification as a life insurance contract under the
Internal Revenue Code. Decreases in the Coverage Amount will apply first to
the most recent increase in Coverage Amount, then to successively earlier
increases, then to the initially elected Coverage Amount.
PREMIUMS HELD PENDING ACCEPTANCE OF COVERAGE AMOUNT
Premiums paid for any amount of coverage for which the Insurability
Requirement must be satisfied will be held in the Fixed Account until the
coverage is accepted or declined by the Company in writing. If the coverage
is accepted, the Net Premium Payment will be allocated as provided for in
the Allocation of Net Premium Payments provision. If the coverage is
declined, the premium for that coverage will be returned without interest
and less any partial surrenders and loans plus accrued interest.
MAXIMUMS AND MINIMUMS
All changes in Coverage Amounts are subject to the Maximum and Minimum
Coverage Amounts as set forth in The Schedule.
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<PAGE> 28
CHANGES IN COVERAGE AMOUNT (CONTINUED)
INCREASES DUE TO MINIMUM COVERAGE AMOUNT PROVISIONS
If the Cash Value increases solely as a result of increases in Variable
Accumulation Unit Value and/or interest credited to the Fixed Account, and
the Company determines that, as a result of such increase, the Coverage
Amount must be increased to preserve the qualification of the Policy and the
Certificate as life insurance under the Internal Revenue Code, evidence of
insurability shall not be required for such increase.
If, however, the Cash Value increases for any other reason, and the Company
determines that as a result of such increase, the Coverage Amount must be
increased to preserve the qualification of the Policy or the Certificate as
life insurance under the Internal Revenue Code, evidence of insurability
will be required for such increase.
In any event, the Owner may decline the increase of the Coverage Amount if
he withdraws at least an amount of Cash Value which the Company determines
will avoid having the Policy or Certificate fail to qualify as life
insurance under the Internal Revenue Code for the foreseeable future.
20
<PAGE> 29
ELIGIBILITY
ELIGIBLE CLASSES
A person may be insured under only one of the Eligible Classes shown below,
even though he may be eligible under more than one Class.
INSURED EMPLOYEE
Each Employee of the Employer in one of the Classes of Eligible Employees
shown below will become eligible to be insured as an Insured Employee on the
later of:
o the Policy Effective Date; or
o the date he becomes an Employee of the Employer in one of the Classes
of Eligible Employees.
CLASSES OF ELIGIBLE EMPLOYEES
[Each Employee]
[INSURED SPOUSE
Each Spouse of an eligible Employee will become eligible to be insured as an
Insured Spouse on the later of:
o the date the Employee becomes eligible himself; or
o the date the person becomes a Spouse of an eligible Employee;
provided the Spouse is less than [65] years of age on that date.
For the purpose of eligibility, the Spouse must be a lawful Spouse and not
legally separated from the Employee. ]
[INSURED DEPENDENT CHILD
An Insured, other than an Insured Dependent Child or Former Insured
Dependent Child, is eligible to elect coverage for his Dependent Child(ren)
on the later of the date such Insured:
o elects coverage for himself; or
o acquires a Dependent Child.
In no event will a Dependent Child be eligible to become insured under two
Certificates at the same time.]
[FORMER INSURED DEPENDENT CHILD
An Insured Dependent Child whose coverage under the Policy would otherwise
cease because he no longer qualifies as a Dependent Child will become
eligible to be insured as a Former Insured Dependent Child on the date he
ceases to be an Insured Dependent Child (see Continuation).
In addition, an Insured Dependent Child whose insurance as a Dependent Child
has not yet ceased and who is at least [22 years of age] is eligible to be
insured as a Former Insured Dependent Child.]
FORMER INSURED EMPLOYEE
[An Insured Employee or a Leave of Absence Employee] who no longer qualifies
as such, will become eligible to be insured as a Former Insured Employee on
the date he ceases to be an
21
<PAGE> 30
ELIGIBILITY
Insured Employee [or a Leave of Absence Employee], provided he is not
eligible under any other Class.
22
<PAGE> 31
ELIGIBILITY
ELIGIBLE CLASSES (CONTINUED)
[FORMER INSURED SPOUSE
An Insured Spouse who no longer qualifies as such, will become eligible to
be insured as a Former Insured Spouse on the date he ceases to be an Insured
Spouse, provided he is not eligible under any other Class.
In addition, the Spouse of a Former Insured Employee who is not insured on
the date the Insured Employee becomes a Former Insured Employee, is eligible
to be insured as a Former Insured Spouse, provided that the Spouse is less
than [65] years of age. For the purpose of eligibility, the Spouse must be a
lawful Spouse and not legally separated from the Former Insured Employee.]
[RETIREE
[A retired Employee of the Employer will be eligible to be insured as a
Retiree on the Policy Effective Date.] An Insured Employee or a Leave of
Absence Employee will be eligible to be insured as a Retiree on the date he
retires as an Employee of the Employer in accordance with the Employer's
requirements for retirement.]
[LEAVE OF ABSENCE EMPLOYEE
An Insured Employee who is on an Employer-approved leave of absence will
become eligible to be insured as a Leave of Absence Employee on the date the
Insured Employee's leave of absence is approved by the Employer.]
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<PAGE> 32
EFFECTIVE DATE OF INSURANCE
[INSURED EMPLOYEE, INSURED SPOUSE, INSURED DEPENDENT CHILD, AND RETIREE]
If coverage is elected before or within 31 days after the date [an Insured
Employee, Insured Spouse, Insured Dependent Child, or Retiree] becomes
eligible, his insurance will become effective, [in an amount not to exceed
the Guaranteed Issue Amount,] on the later of: (a) the date he becomes
eligible; or (b) the date his completed and signed application is received
by the Company.
[If coverage is elected for [an Insured Employee, an Insured Spouse or a
Retiree] for an amount in excess of the Guaranteed Issue Amount, he will
become insured for the amount that exceeds the Guaranteed Issue Amount on
the date the Company agrees in writing to insure him for that amount. The
Company will require him to satisfy the Insurability Requirement before it
agrees to insure him for the higher amount.]
If coverage is elected more than 31 days after [an Insured Employee, Insured
Spouse, Insured Dependent Child, or Retiree] becomes eligible, he will
become insured on the date the Company agrees in writing to insure him. The
Company will require him to satisfy the Insurability Requirement before the
Company agrees to insure him for any amount.
INSURED EMPLOYEE
If an Employee is not in Active Service on the date his insurance would
otherwise begin, he will become insured on the date he returns to Active
Service. If an Employee does not return to Active Service within 90 days
from the date the Company receives the completed original application, a new
application, and new evidence of good health acceptable to the Company will
be required.
[INSURED SPOUSE
If, on the date insurance would otherwise become effective, a Spouse:
1. is hospitalized; or
2. is confined at home under the care of a medical doctor for sickness
or injury; and/or
3. has had his level of activity significantly reduced so that he
requires human supervision or assistance to perform any of the
following Activities of Daily Living: (a) mobility; (b) transferring;
(c) feeding; (d) dressing; or (e) toileting; which another person of
the same age and sex could normally perform; and/or
4. is receiving any disability benefits from any source due to any
sickness or injury;
his insurance will begin on the day after all of the conditions set forth
under 1, 2, 3, and 4 (above) have ended. If all of these conditions have not
ended within 90 days from the date the Company receives the completed
original application, a new application and new evidence of good health
acceptable to the Company will be required.]
[INSURED DEPENDENT CHILD
If, on the date his insurance would otherwise begin, a Dependent Child: (a)
is hospitalized; or (b) is confined at home under the care of a medical
doctor for sickness or injury, his insurance will begin on the day after all
of the conditions described under (a) or (b) have ended. If all of these
conditions have not ended within 90 days from the date the Company receives
the completed original application, a new application and new evidence of
good health acceptable to the Company will be required.]
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<PAGE> 33
EFFECTIVE DATE OF INSURANCE
25
<PAGE> 34
EFFECTIVE DATE OF INSURANCE
[INSURED DEPENDENT CHILD (CONTINUED)
If coverage for a Dependent Child is in force and the Employee acquires
another Dependent Child, coverage for that Child will become effective on
the later of: (a) the date the Child is 15 days old; or (b) in the case of
adoption, the first day of any waiting period prior to the finalization of
the Child's adoption. Notice must be given to the Company within 31 days of
birth or adoption.]
[FORMER INSURED DEPENDENT CHILD
If an Insured Dependent Child elects to be insured as a Former Insured
Dependent Child, his insurance will become effective on the later of: (a)
the date his coverage as an Insured Dependent Child ceases; or (b) the date
the completed and signed application is approved by the Company.
If an Insured Dependent Child does not elect to be insured as a Former
Insured Dependent Child within 90 days after he becomes eligible, he will
not be eligible to elect this coverage at a later date.
If, on the date he becomes insured as a Former Insured Dependent Child, he:
(a) is hospitalized; and/or (b) is confined at home under the care of a
medical doctor for sickness or injury, he will not be insured for any
Coverage Amount in excess of his existing Coverage Amount until the day
after all of the conditions described under (a) and (b) have ended.
In addition, an Insured Dependent Child, whose insurance as a Dependent
Child has not yet ceased, has the option to elect to be insured as a Former
Insured Dependent Child instead of being insured as an Insured Dependent
Child, provided he is at least [22 years of age]. The Effective Date of
Insurance for such Former Insured Dependent Child will be the later of: (a)
the first day of the month after he elects the coverage as a Former Insured
Dependent Child; or (b) the date the required premium is paid to the
Company.]
[FORMER INSURED SPOUSE
For the purpose of determining the Effective Date of Insurance for a Spouse
who is not insured on the date the Insured Employee becomes a Former Insured
Employee or a Retiree, and who becomes insured as a Spouse of a Former
Insured Employee, the provisions shown for an Insured Spouse in the
Effective Date of Insurance section will apply.]
[RETIREE
If coverage for a Retiree is elected before or within 31 days after he
becomes eligible as a Retiree, his insurance will become effective on the
later of: (a) the date he becomes eligible; or (b) the date the completed
and signed application is received by the Company.
If the Owner does not elect to insure the Retiree within 31 days after he
becomes eligible as a Retiree, the Owner may not elect this coverage at a
later date.]
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<PAGE> 35
EFFECTIVE DATE OF INSURANCE (CONTINUED)
[LEAVE OF ABSENCE EMPLOYEE
The Effective Date of Insurance for a Leave of Absence Employee will be the
later of: (a) the date the Employer approves his leave of absence; or (b)
the date the Employee begins his leave of absence, provided the required
premium is paid directly to the Company within the grace period.
A Leave of Absence Employee must apply to return to Insured Employee status
within 31 days of his return to Active Service. If a Leave of Absence
Employee applies to return to Insured Employee status more than 31 days
after his return to Active Service, he must satisfy the Insurability
Requirement before the Company agrees to insure him.]
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<PAGE> 36
LIFE INSURANCE BENEFIT
DEATH BENEFIT
If an Insured dies, the Company will pay the Death Benefit in effect on the
date of death. The Death Benefit will be paid in a lump sum to the Insured's
Beneficiary as soon as due proof of death is received by the Company. The
Death Benefit will be an amount equal to the greater of:
o the Insured's Coverage Amount on the date of death plus the Net Cash
Value, if any; or
o an amount that, as determined by the Company, is required to preserve
the qualification of the Policy as a life insurance policy under the
Internal Revenue Code less any Current Outstanding Loan Balance.
The Death Benefit will be reduced by any accelerated payment benefit
previously paid under the Policy and by any amounts due the Company under
the Policy.
If proceeds are not paid within 30 days of receipt of due proof of death,
the Company will pay interest from the date of death to the date of payment
at the rate of [X%] or any other rate required by law.
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<PAGE> 37
LIFE INSURANCE BENEFIT (CONTINUED)
MINIMUM DEATH BENEFIT
The Minimum Death Benefit allowable at any time under this Certificate
("Minimum Death Benefit") is a percentage of the Cash Value. The Minimum
Death Benefit depends on the Attained Age of the Insured and is given in the
following table:
TABLE OF MINIMUM DEATH BENEFITS
<TABLE>
<CAPTION>
ATTAINED AGE PERCENTAGE OF ATTAINED AGE PERCENTAGE OF
OF INSURED CASH VALUE OF INSURED CASH VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
40 or less 250% 61 128%
41 243% 62 126%
42 236% 63 124%
43 229% 64 122%
44 222% 65 120%
45 215% 66 119%
46 209% 67 118%
47 203% 68 117%
48 197% 69 116%
49 191% 70 115%
50 185% 71 113%
51 178% 72 111%
52 171% 73 109%
53 164% 74 107%
54 157% 75 - 90 105%
55 150% 91 104%
56 146% 92 103%
57 142% 93 102%
58 138% 94 101%
59 134% 95 - 99 100%
60 130%
- -----------------------------------------------------------------------------------------------------
</TABLE>
NOTE: See Increases Due to Minimum Death Benefit Provisions.
The Company reserves the right to increase the Coverage Amount, to reject Cash
Value contributions, or return Cash Value to the extent necessary to preserve
qualification of the Policy
29
<PAGE> 38
LIFE INSURANCE BENEFIT (CONTINUED)
and/or Certificate as a life insurance contract under the Internal Revenue Code.
30
<PAGE> 39
PREMIUM PAYMENTS
PREMIUMS
Premiums may be paid on a periodic or a lump-sum basis. If the Insured or
Owner is an Employee, premium payments may be paid through payroll
deduction. In all other cases, premiums will be paid directly to the Company
and will be billed by the Company on a quarterly, semi-annual, or annual
basis. Premium shall be considered received under the Policy only when
actually received by the Company at the offices of the Customer Service
Center designated in the Coverage Verification Pages, and not when received
by the Policyholder, Employer, or any other agent, broker, or third party
administrator. Premiums may not exceed an amount that, in the Company's
opinion, is required to preserve the qualification of the Policy and/or
Certificate as a life insurance contract under the Internal Revenue Code
without regard to the Minimum Death Benefit provision, and/or to prevent the
Policy and/or Certificate from being treated as a Modified Endowment
Contract under the Internal Revenue Code. (See Qualification under Internal
Revenue Code section.)
The first premium payment will be due on the Certificate Effective Date.
Lump sum premiums must be at least [$25.00] each.
Unless otherwise specified by the Owner, if there is any indebtedness, any
lump sum payments made on the Policy will be used first as a Loan repayment
with any excess treated as lump sum premium payments.
ALLOCATION OF NET PREMIUM PAYMENTS
Net premium payments shall be allocated to the Fixed Account and/or to the
Fund Accounts as directed by the Owner, subject to the Limits on Allocation
of Net Premium Payments provision set forth below. The Net Premium Payment
associated with the initial premium payment will be allocated in accordance
with the allocation percentages specified in the application, within three
business days of the later of expiration of the 30-Day Right to Examine
period, the Effective Date of Coverage, the Company's written acceptance of
coverage in excess of the Guaranteed Issue amount, or the date the premium
is actually received by the Company. Subsequent Net Premium Payments will be
allocated on the same basis as the most recent previous Net Premium Payment
unless the Company is otherwise instructed in writing to change the
allocation percentages. A change in the allocation percentages may be made
by telephone if such telephone changes have previously been authorized in
writing. The Company will not be legally responsible for: (a) any liability
if acting in good faith upon any change in allocation instructions given by
telephone; or (b) for the authenticity of such instructions. If the Owner
has not directed the Company as to allocation of Net Premium Payments, all
Net Premium Payments will be allocated to the Fixed Account.
LIMITS ON ALLOCATION OF NET PREMIUM PAYMENTS
There is no minimum allocation percentage to the Fixed Account or a Fund
Account; however, all allocations must be made in [5%] increments and in
aggregate must total 100%. Premium payments will be allocated net of the
Premium Load for Taxes specified in the Coverage Verification Pages.
31
<PAGE> 40
PREMIUM PAYMENTS (CONTINUED)
INTERRUPTIONS OF PREMIUM PAYMENTS
If the Owner ceases to pay (or have paid) the periodic premium payments or
lump sum premiums, the insurance will remain in force, subject to the terms
and conditions of the Policy, by continuing to deduct the Monthly Deduction
from the Cash Value. The insurance will remain in force, subject to the
terms and conditions of the Policy, until the Net Cash Value is insufficient
to cover the Monthly Deduction, as provided in the Lapse and Grace Period
for Insured provisions.
GRACE PERIOD FOR INSURED
If the Net Cash Value for any Insured on the date that a Monthly Deduction
is due is less than the required Monthly Deduction, a Grace Period for
Insured of at least 61 days will be granted to the Owner to pay a premium
sufficient to cover the required Monthly Deductions for the next premium
payment period. If such premium is not paid within the Grace Period for
Insured, the coverage will Lapse without value at the end of the Grace
Period for Insured.
At least 61 days before the end of the Grace Period for Insured, the Company
will notify the Owner that there is insufficient Net Cash Value to cover the
next Monthly Deduction. Failure to give notice will not extend the Death
Benefit beyond the grace period. If the Insured dies during the Grace Period
for Insured, the Company will deduct any overdue Monthly Deduction from the
Death Benefit payable.
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<PAGE> 41
FUND ACCOUNT PROVISIONS
SEPARATE ACCOUNT AND FUND ACCOUNTS
Assets accumulated by the Company under the Policy and other variable life
insurance policies on a variable basis are held in the Separate Account
designated in the Coverage Verification Pages. The Separate Account was
established by a resolution of the Company's Board of Directors as a
separate account under the governing laws of Connecticut, the Company's
state of domicile, and registered as a unit investment trust under the
Investment Company Act of 1940 (the "Act"). Under Connecticut law, the
Separate Account assets (except assets in excess of its reserves and other
contractual liabilities) cannot be charged with the general liabilities of
the Company. The Separate Account assets are owned and controlled
exclusively by the Company, and the Company is not a trustee with respect to
these assets.
The Separate Account's assets are invested in shares of Funds made available
as funding vehicles under the Policy. For each Fund that is offered as a
funding vehicle, the Company maintains Variable Accumulation Units whose
values reflect the investment performance of the Fund.
Each Fund Account Value under this Certificate reflects the aggregate number
of Variable Accumulation Units for the Fund Account purchased by the Owner.
Variable Accumulation Units are purchased by the Owner through allocation of
Net Premium Payments, or transfer of Fixed, Loan, or other Fund Account
Values to the Fund Account. Variable Accumulation Units for different Fund
Accounts will have different values due to the differing investment
performances of the Related Funds.
The Company reserves the right to take certain actions in connection with
the operation of the Separate Account. Any such actions will be taken in
accordance with applicable laws (including obtaining any required regulatory
approvals). Specifically, the Company reserves the right to:
o add, combine, or remove any Fund Account,
o create new Separate Accounts,
o combine the Separate Account with one or more other separate
accounts,
o operate the Separate Account as a management investment
company under the Act or in any other form permitted by law,
o deregister the Separate Account under the Act,
o manage the Separate Account under the direction of a committee or
discharge such committee at any time,
o transfer any assets in any Fund Account to another Fund Account, or
to one or more separate accounts or to our general account, and
o to take any actions necessary to comply with, or to obtain and
continue any exemptions from, the Act.
The assets of the Separate Account shall be valued as often as policy
benefits vary, but no less often than monthly.
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<PAGE> 42
FUND ACCOUNT PROVISIONS (CONTINUED)
INVESTMENT RISK
Each Fund Account's value is always determined by the number and value of
the Variable Accumulation Units for the Fund Account held by the Owner under
the Certificate. The change in value of the Variable Accumulation Units for
each Fund is always determined by the Related Fund's share values, the per
share mortality and expense charges under the Policy, and the per share
charges or credits for taxes attributable to the operation of the Separate
Account. Fund Share values may vary reflecting the risks of changing
economic conditions and the ability of a Fund's investment adviser to manage
that Fund and anticipate changes in economic conditions. The Owner bears the
entire investment risk of gain or loss of Fund Account assets.
INVESTMENTS OF THE FUND ACCOUNT ASSETS
All amounts allocated to a Fund Account will be used to purchase Variable
Accumulation Units for the Fund Account. Each Fund is registered and
regulated under the Act as an open-end management investment company or a
portfolio of an open-end management investment company.
All Fund Accounts available as funding vehicles under the Policy as of the
Certificate Effective Date are listed in the application for the Certificate
and in the Coverage Verification Pages. The Company may add or delete Fund
Accounts at any time or may change Fund Accounts in accordance with the
Substitution or Elimination of Securities provision.
Any and all distributions made by a Fund will be reinvested in additional
shares of that Fund at the then current net asset value. Deductions by the
Company from a Fund Account for taxes attributable to operation of the
Separate Account and for mortality and expense charges will be made by
redeeming a number of Fund shares at the then current net asset value equal
in total value to the amount to be deducted. Such reinvestment and
deductions will affect the value, but not the number, of the Variable
Accumulation Units for the Fund Account held by the Owner in the Fund
Account.
SUBSTITUTION OR ELIMINATION OF SECURITIES
Shares of a particular Fund may not always be available for purchase or the
Company may decide that further investment in a Fund is no longer
appropriate in view of the purposes of the Separate Account or in view of
legal, regulatory or federal income tax restrictions. In such event, shares
of another registered open-end investment company or unit investment trust
may be substituted both for Fund shares already purchased and/or for
purchase in the future, provided that these substitutions meet applicable
Internal Revenue Service diversification guidelines and any necessary
regulatory or other approvals of such substitutions have been obtained. In
the event of any substitution pursuant to this provision, the Company may
make appropriate amendment(s) to the Policy to reflect the substitution.
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<PAGE> 43
FUND ACCOUNT PROVISIONS (CONTINUED)
TRANSFER PRIVILEGE
At any time while the Policy is in effect, other than during the 30-Day
Right to Examine period, the Owner may transfer all or part of the Fund
Account Values to the Fixed Account and/or to one or more of the Fund
Accounts then available under the Policy. The Owner may transfer part of the
Fixed Account Value to one or more Fund Accounts, subject to the provisions
set forth below. Transfers, and other transactions indicated by the Company
from time to time, may be made in writing, or by telephone if telephone
transfers have been previously authorized in writing [or electronically].
Transfer requests must be received at the Customer Service Center prior to
the time of day set forth in the prospectus on a day on which the New York
Stock Exchange ("NYSE") is open for business, in order to be processed as of
the close of business on the date the request is received; otherwise, the
transfer will be processed on the next business day the NYSE is open for
business. The Company will not be legally responsible for: (a) any liability
if acting in good faith upon any transaction instructions given by telephone
[or electronically]; or (b) for the authenticity of such instructions.
Transfers involving Fund Accounts will reflect the purchase or cancellation
of Variable Accumulation Units having an aggregate value equal to the dollar
amount being transferred to or from a particular Fund Account. The purchase
or cancellation of such units shall be made using Variable Accumulation Unit
Values of the applicable Fund Account determined as of the end of the
Valuation Period in which the transfer is effective. Transfers to the Fixed
Account will earn interest as specified under the Fixed Account Value
provision.
Unless otherwise changed by the Company to be less restrictive, transfers
shall be subject to the following conditions: (a) Up to [12] transfers may
be made during any Policy Year without charge; however, for each transfer in
excess of [12], a transfer fee as set forth in the Coverage Verification
Pages will be deducted on a pro rata basis from the Fixed Account and/or
Fund Accounts from which the transfer is being made; (b) No Partial
Surrender transaction fee will be imposed as a result of the transfer; (c)
The amount being transferred may not exceed the Company's maximum amount
limit then in effect; (d) Transfers among the Fund Accounts or from a Fund
Account to the Fixed Account can be made at any time; (e) Transfers from the
Fixed Account are subject to the Limits on Transfers provision as set forth
below; (f) Transfers involving Fund Account(s) shall be subject to such
additional terms and conditions as may be imposed by the Funds.
LIMITS ON TRANSFERS
Transfers from the Fixed Account may only be made during the 30-day period
following each Policy Anniversary Date and are subject to a maximum
aggregate annual limit of [25%] of the Fixed Account Value as of that Policy
Anniversary Date. Additionally, the Company has the right to limit the
dollar amount of such transfers. Additional limitations on transfers are set
forth in the Transfer Privileges provision.
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<PAGE> 44
CERTIFICATE VALUE PROVISIONS
CASH VALUE
The Cash Value at the end of any day (after the NYSE closing time) equals:
a) The Fixed Account Value at the end of that day; plus
b) The Loan Account Value at the end of that day; plus
c) The sum of the Fund Account Values at the end of that day.
FIXED ACCOUNT VALUE
The Fixed Account Value at the end of the day preceding the Certificate
Effective Date is zero.
The Fixed Account Value at the end of any subsequent day equals:
a) The Fixed Account Value at the end of the preceding day; plus
b) All portions of Net Premium Payments allocated to the Fixed Account
during that day; plus
c) All amounts transferred into the Fixed Account from Fund Accounts or
the Loan Account; minus
d) All amounts charged to the Fixed Account during that day to pay all
or part of any Monthly Deductions due under this Certificate; minus
e) All amounts transferred out of the Fixed Account during that day for
Surrenders, Partial Surrenders, Loans, or Fund Transfers; minus
f) All amounts charged to the Fixed Account during that day to pay all
or part of any transaction fees or other charges due under this
Certificate; plus
g) Interest accrued on the sum of a) minus d) minus e) minus f).
Interest will accrue on the Fixed Account daily at a rate which will be the
greater of:
o 4% effective annual yield (.010746% compounded daily); or
o a rate determined by the Company from time to time. Such rate will
be established on a prospective basis.
The rate to be credited will be announced by the Company from time to time.
LOAN ACCOUNT VALUE
The Loan Account Value will be equal to the sum of all amounts transferred
into the Loan Account as provided for under this Certificate, plus interest
credited to the Loan Account daily at a rate which will produce an effective
annual yield of not less than 6%.
FUND ACCOUNT VALUE
Each Fund Account Value during any Valuation Period shall be determined by
multiplying the number of Variable Accumulation Units held in such Fund
Account under this Certificate at the end of the Valuation Period by the
Variable Accumulation Unit Value for that Fund Account during the Valuation
Period.
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<PAGE> 45
CERTIFICATE VALUE PROVISIONS (CONTINUED)
CREDITING AND CANCELLING VARIABLE ACCUMULATION UNITS
The number of Variable Accumulation Units in a Fund Account will be
increased to reflect portions of Net Premium payments allocated to that Fund
Account and to reflect amounts transferred to that Fund Account from the
Fixed Account, the Loan Account, or from other Fund Accounts. The number of
Variable Accumulation Units in the Fund Account will be decreased to reflect
portions of the Monthly Deduction, Transaction Fees, or other charges which
are charged to a Fund Account as provided for in this Certificate. The
number of Variable Accumulation Units in a Fund Account will also be
decreased when funds are transferred out of the Fund Account for Surrenders,
Partial Surrenders, Loans, Fund Transfers, or such other transfers as are
provided for in this Certificate. The number of Variable Accumulation Units
to be credited or charged to a Fund Account is determined by dividing the
dollar amount credited or charged to the particular Fund Account by the
Variable Accumulation Unit Value for the particular Fund Account for the
Valuation Period during which the change in the number of Variable
Accumulation Units will occur.
VARIABLE ACCUMULATION UNIT VALUE
The Variable Accumulation Unit Value for each Fund Account was established
at $10.00 for the first Valuation Period of the particular Fund Account. The
Variable Accumulation Unit Value for that Fund Account for any subsequent
Valuation Period is determined by multiplying the Variable Accumulation Unit
Value for that Fund Account for the immediately preceding Valuation Period
by the Net Investment Factor for that Fund Account for the current Valuation
Period. The Variable Accumulation Unit Value may increase, decrease or
remain constant from Valuation Period to Valuation Period.
NET INVESTMENT FACTOR
The Net Investment Factor is an index applied to measure the investment
performance of a Fund Account from one Valuation Period to the next. The Net
Investment Factor may be greater or less than or equal to 1.0; therefore,
the value of a Variable Accumulation Unit may increase, decrease or remain
the same.
The Net Investment Factor for any Fund Account for any Valuation Period is
determined by dividing (a) by (b) and then subtracting (c) from the result
where:
(a) is the net result of:
(1) the net asset value (as described in the prospectus for the Fund) of
a share of the Related Fund determined as of the end of the Valuation
Period; plus
(2) the per-share amount of any dividend or other distribution declared
by the Related Fund if the date occurs during the Valuation Period; plus
or minus
(3) a per-share credit or charge with respect to any taxes paid or
reserved for by the Company during the Valuation Period which are
determined by the Company to be attributable to the operation of the
Separate Account;
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<PAGE> 46
CERTIFICATE VALUE PROVISIONS
NET INVESTMENT FACTOR (CONTINUED)
(b) is the net asset value of a share of the Related Fund determined as of
the end of the preceding Valuation Period; and
(c) is the asset charge determined by the Company for the Valuation Period
to reflect the charges for assuming the mortality and expense risks.
The asset charge factor for any Valuation Period is equal to the daily asset
charge rate multiplied by the number of 24-hour periods in the Valuation
Period multiplied by the Fund Account's value as of the end of the preceding
Valuation Period. The daily asset charge rate will be determined annually by
the Company, but in no event may it exceed the maximum specified in the
Coverage Verification Pages.
MONTHLY COST OF INSURANCE RATES
The Monthly Cost of Insurance Rates are based on the Insured's Attained Age,
the type of benefit, the size and type of group, gender mix of the group,
expectations of participation, the Eligible Class of Insured,
smoker/non-smoker status, experience and persistency of the group, federal
and state taxes, rating classes, expectations due to future mortality,
whether premiums for that Insured are paid directly to the Company or
through payroll deductions and, the Company's general costs for distribution
and administration of the Policies. Adjustments in the Monthly Cost of
Insurance Rates may be made by the Company from time to time, but not more
than once a year, and will apply to Insureds of the same Eligible Class.
Under no circumstances will the Monthly Cost of Insurance Rates for Life
Insurance ever be greater than those shown in the Table of Guaranteed
Maximum Life Insurance Rates. Such guaranteed maximum rates are based on
150% of the 1980 Commissioners Standard Ordinary Male Mortality Table (age
last birthday).
MONTHLY DEDUCTION
The Monthly Deduction will be due on the first of each calendar month and
will be deducted from the Fixed Account and the Fund Accounts. The Monthly
Deduction will be the sum of:
o the Monthly Cost of Insurance Rate for life insurance, based on the
Insured's Attained Age, multiplied by the Coverage Amount on that
date; and
o the Monthly Cost of Insurance Rate for additional benefits, if any,
multiplied by the Insured's Coverage Amount for each such additional
benefit; and
o the Monthly Cost of Insurance Rate for all Insured Dependent Children
[and/or Insured Spouse], if Dependent Child [and/or Insured Spouse]
coverage is elected, multiplied by the Insured Dependent Child
[and/or Insured Spouse] Coverage Amount; and
o the Monthly Administrative Fees as set forth in the Coverage
Verification Pages.
The Monthly Administrative Fees may be different for each Eligible Class of
Insureds. A Monthly Administrative Fee will be charged to each Certificate.
An additional Monthly Administrative Fee will be charged to each Certificate
with an accumulated Cash Value in any Fund Account. This additional Monthly
Administrative Fee will be waived for each month in which the Certificate's
Net Cash Value is greater than [$10,000].
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<PAGE> 47
[BLANK PAGE]
39
<PAGE> 48
CERTIFICATE VALUE PROVISIONS
MONTHLY DEDUCTION (CONTINUED)
The Monthly Administrative Fees may change from time to time. The maximum
amounts of these Monthly Administrative Fees are set forth in the Coverage
Verification Pages.
The amount of the Monthly Deduction will be deducted from the Fixed Account
and each Fund Account in the same proportion that the value of each account
bears to the sum of the Fixed Account Value and the Fund Account Values as
of the date on which the deduction is made.
NET CASH VALUE
The Net Cash Value at the end of any day (after the NYSE closing time)
equals:
a) the Cash Value at the end of that day; minus
b) the Current Outstanding Loan Balance at the end of that day.
The Current Outstanding Loan Balance equals the current Loan Balance plus
all interest accrued but not paid.
LAPSE (INSUFFICIENT NET CASH VALUE)
If the Net Cash Value on any date is insufficient to cover any due but
unpaid Monthly Deduction, the insurance for that person and any riders will
terminate at the end of the Grace Period for Insured. This termination will
be termed a Lapse under the Policy.
BASIS OF COMPUTATIONS
A detailed statement of the method of computing all values under this
Certificate will be filed with the insurance department of any jurisdiction
where required.
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<PAGE> 49
SURRENDERS, LOANS AND REINSTATEMENT PROVISIONS
SURRENDER
The Owner may terminate his insurance and Surrender the Certificate at any
time by submitting a written request in a form acceptable to the Company
along with his Certificate, including the Coverage Verification Pages. Upon
Surrender, the Owner will receive the Net Cash Value as of the date of
Surrender, less any applicable Surrender fee and less any other amounts due
the Company under this Certificate.
The Company will charge a transaction fee as set forth in the Coverage
Verification Pages for Surrender and the transaction fee will be deducted
from the amount of the Surrender received by the Owner.
Payment of the proceeds of a Surrender is subject to the Deferment of
Payments provision of this Certificate.
PARTIAL SURRENDER
A Partial Surrender may be elected by the Owner on any day while this
Certificate is in effect by submitting a signed written request in a form
satisfactory to the Company. The amount of the Partial Surrender must be at
least [$250] and may not exceed 90% of the Net Cash Value at the time such
Partial Surrender is processed by the Company.
When a Partial Surrender is made, the amount of the Partial Surrender will
be deducted from the Fixed Account and the Fund Accounts. Unless the Company
and the Owner agree otherwise, the amount of the Partial Surrender will be
charged to the Fixed Account and the Fund Accounts in shares that reflect
the same proportion to the amount of the Partial Surrender as each of such
accounts bears to the sum of the Fixed Account Value and the Fund Account
Values.
The Company will charge a transaction fee as set forth in the Coverage
Verification Pages for each Partial Surrender and the Company reserves the
right to limit the number of Partial Surrenders in a 12-month period. The
transaction fee will be deducted from the amount of the Partial Surrender
received by the Owner.
Payment of Partial Surrender amounts is subject to the Deferment of Payments
provision of this Certificate.
LOAN PROVISIONS
Provided there is sufficient Net Cash Value as specified below, the Company
will grant a Loan against an Insured's Cash Value. The Owner will be
required to sign a proper Loan agreement, including an Assignment of the
Certificate to the Company, in a form approved by the Company, and such
other documents as may be required by the Company at the time. The Insured's
Cash Value will be the security for the Loan and for any accrued interest
not yet paid to the Company. The minimum Loan amount is [$250]; however, the
Company reserves the right to change this amount from time to time.
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<PAGE> 50
SURRENDERS, LOANS AND REINSTATEMENT PROVISIONS
LOAN PROVISIONS (CONTINUED)
The Company will not grant a Loan in an amount that exceeds 90% of the Net
Cash Value at the time the Loan is processed. Further, the Company will not
grant a Loan which would require that the Loan Account Value be greater than
90% of the Cash Value.
The payment of the Loan amount is subject to the Deferment of Payment
provisions of this Certificate.
Interest will accrue daily on the Loan Balance at a rate which will produce
an effective annual yield of 8%. Accrued Loan interest is due and payable to
the Company on the Policy Anniversary Date or upon Surrender or termination
of the Certificate or as otherwise agreed by the Owner and the Company.
Interest which remains unpaid 30 days after it becomes due and payable will
be added to the Loan Balance as of the date upon which it was payable.
The Loan Balance shall equal, at any time, the sum of all Loans granted
under the Certificate, less any Loan repayments, plus all unpaid interest
added to the Loan Balance as described above.
The Current Outstanding Loan Balance shall equal the current Loan Balance
plus all interest accrued but not yet payable on the Loan Balance.
Unless otherwise agreed between the Owner and the Company, the amount of any
such Loan will be transferred into the Loan Account from the Fixed Account
and each of the Fund Accounts in amounts that reflect the same proportion to
the amount of the Loan as the value of each of such accounts bears to the
sum of the Fixed Account Value and the Fund Account Values. Additional
amounts will be transferred to the Loan Account as additional Loans are made
and as interest is added to the Loan Balance.
Upon Surrender, payment of the Death Benefit under the Certificate, or
termination of the Certificate for any other reason, the Loan Account will
be paid to the Company in repayment of the Current Outstanding Loan Balance.
To the extent the Current Outstanding Loan Balance exceeds the Loan Account
Value upon such Surrender, payment of the Death Benefit, or termination for
any other reason, the excess will be deducted from the Cash Value or reduce
the payment of proceeds under the Certificate.
The Current Outstanding Loan Balance may be repaid in full or in part at any
time during the lifetime of the Insured; however, the minimum Loan repayment
amount is [$25.00] or the amount of the Current Outstanding Loan Balance, if
less. The amount of any Loan repayment will be transferred from the Loan
Account into the Fixed Account and the Fund Accounts in the proportion in
which current Net Premium Payments are being allocated to those accounts,
unless otherwise agreed to in writing by the Owner and the Company.
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<PAGE> 51
SURRENDERS, LOANS AND REINSTATEMENT PROVISIONS (CONTINUED)
REINSTATEMENT
If an Insured's coverage has Lapsed, it may be reinstated at any time prior
to three years after the date of Lapse if:
o the Insured's Certificate has not been Surrendered; and
o a written request for Reinstatement and a new application form are
sent to the Company; and
o at his own expense, satisfactory evidence of good health is submitted
to the Company; and
o premiums are paid equal to two times the Monthly Deduction plus
interest accrued from date of Lapse.
The effective date of the reinstated coverage will be the date the Company
agrees in writing to accept the Insured.
If an Insured's coverage Lapses while on an Employer-approved leave of
absence under the Family and Medical Leave Act, it may be reinstated within
31 days of returning to Active Service without providing evidence of good
health. Reinstatement will be subject to new incontestability and suicide
periods.
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<PAGE> 52
TERMINATION PROVISIONS
INDIVIDUAL TERMINATIONS
The insurance on [an Insured Employee, Insured Spouse, Former Insured
Employee, Former Insured Spouse, Former Insured Dependent Child, Retiree,
and Leave of Absence Employee] will cease on the earliest date below:
o the date the Policy terminates, if no continuation is specifically
provided for in the
Continuation section of the Policy; or
o the date the Insured's coverage Lapses; or
o the date the Insured's Certificate is Surrendered; or
o the date the Insured is no longer eligible for the Class in which he
was insured, if no continuation is specifically provided for in the
Continuation section of the Policy; or
o the date of death of the Insured.
If the Policy terminates or the Insured ceases to qualify for his Eligible
Class, and continuation of coverage is not specifically provided for in the
Continuation Provisions, the Insured's coverage may be converted as provided
in the Conversion Privilege section. If the Insured's coverage Lapses or is
Surrendered, neither Continuation nor Conversion is available.
[The insurance on an Insured Dependent Child [and/or Insured Spouse] will
cease on the earliest date below:
o the date of Individual Termination (as described above) of the
Certificate of Insurance under which the Dependent Child [and/or
Insured Spouse] is insured; or
o the date the Owner terminates the coverage for the Insured Dependent
Child [and/or Insured Spouse]; or
o the first of the month after the date the Insured Dependent Child is
no longer eligible for the insurance as a Dependent Child [and/or
Insured Spouse]; or
o the date the Insured Dependent Child becomes the Owner of his own
Group Variable Universal Life Insurance Certificate; or
o the date of death of the Insured Dependent Child [and/or Insured
Spouse].]
POLICY TERMINATION
The Employer may terminate the Policy by giving the Company written notice
60 days before the termination date. The Company may terminate the Policy by
giving the Employer written notice 60 days before the termination date.
The Employer will give written notice of termination to the Owners at least
31 days before the termination date. No additional persons will be insured
under the Policy after the termination date; however, persons insured under
the Policy on the termination date may continue their coverage as provided
for in the Continuation section. All premium payments will then be payable
directly to the Company.
Notwithstanding the above, [an Insured Employee, Former Insured Employee,
Insured Spouse, and Former Insured Spouse] who continues his coverage after
termination of the Policy may insure his Dependent Child(ren), subject to
the terms and conditions set forth herein.
The Employer will furnish all necessary data to the Company, including the
current addresses for all Insureds, as of 31 days prior to termination, and
shall continue to provide the Company any information and data which the
Company reasonably determines it may need to meet its obligations under the
Policy until such obligations are ended.
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<PAGE> 53
CONTINUATION PROVISIONS
LOSS OF ELIGIBILITY
If an Insured Employee ceases to be eligible as an Insured Employee, his
coverage continues [if any of the following events occurs:
o he becomes eligible as a Retiree, in which case he continues as a
Retiree with up to [$!] of his Coverage Amount or multiple of his
Annual Compensation; or]
[ o he becomes eligible as a Leave of Absence Employee, in which case
he continues as a Leave of Absence Employee with up to [$!] of his
Coverage Amount or multiple of his Annual Compensation; or]
o he becomes eligible as a Former Insured Employee, in which case he
continues as a Former Insured Employee with up to [$!] of his
Coverage Amount or multiple of his Annual Compensation.
[If an Insured Spouse ceases to be eligible as an Insured Spouse, his
coverage continues if any of the following events occurs:
o the Employee terminates employment with the Employer, in which case
the Insured Spouse continues as a Former Insured Spouse with up to
[$!] of his Coverage Amount; or
o the Employee dies, in which case the Insured Spouse continues as a
Former Insured Spouse with up to [$!] of his Coverage Amount; or
o the Insured Spouse is no longer married to the Employee, in which
case the Insured Spouse continues as a Former Insured Spouse with up
to [$!] of his Coverage Amount.]
[An Insured Dependent Child [and/or Insured Spouse]'s coverage continues if
the Insured Employee or Insured Spouse through whom he became insured is
eligible to continue coverage.]
[If a Leave of Absence Employee ceases to be eligible as a Leave of Absence
Employee, his coverage continues if any of the following events occurs:
o he becomes eligible as a Retiree, in which case he continues as a
Retiree with up to [$!] of his Coverage Amount or multiple of his
Annual Compensation; or
o he becomes eligible as a Former Insured Employee, in which case he
continues as a Former Insured Employee with up to [$!] of his
Coverage Amount or multiple of his Annual Compensation; or
o he becomes eligible as an Employee, in which case he continues up to
100% of his Coverage Amount.]
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<PAGE> 54
CONTINUATION PROVISIONS (CONTINUED)
POLICY TERMINATION
If the Policy terminates and the Insured Employee is not eligible for
coverage under a Successor Plan, he continues as a Former Insured Employee,
with up to [$!] of his Coverage Amount or multiple of his Annual
Compensation.
[If the Policy terminates and the Insured Spouse is not eligible for
coverage under a Successor Plan, he continues as a Former Insured Spouse,
with up to [$!] of his Coverage Amount.]
[If the Policy terminates and the Leave of Absence Employee is not eligible
for coverage under a Successor Plan, he continues as a Former Insured
Employee, with up to [$!] of his Coverage Amount or multiple of his Annual
Compensation.]
If the Policy terminates and [a Former Insured Employee, Former Insured
Spouse, Former Insured Dependent Child, or Retiree] is not eligible under a
Successor Plan, [each] continues as an Insured in the same Eligible Class,
with up to [$!] of his Coverage Amount or multiple of his Annual
Compensation.
If the Policy terminates and the Insured is eligible for coverage under a
Successor Plan, he may not continue coverage under the Policy.
NET CASH VALUE $250 OR GREATER
If the above Continuation Provisions do not provide for continuation of
coverage under this Certificate, but the Net Cash Value under this
Certificate is [$250] or greater, the coverage under this Certificate
continues. [An Insured Employee, a Leave of Absence Employee, a Retiree, or
a Former Insured Employee] will continue as a Former Insured Employee; [an
Insured Spouse or a Former Insured Spouse will continue as a Former Insured
Spouse; and a Former Dependent Child will continue as a Former Dependent
Child.]
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[CONVERSION PROVISIONS
CONVERSION PRIVILEGE
If all or part of the Coverage Amount for an Insured ends because the
Insured ceases to be a member of an Eligible Class, the Owner may convert up
to the amount of insurance which ends, less any amount which the Insured
becomes eligible to continue or replace under the Policy or under a
Successor Plan.
If coverage for an Insured ends because the Policy terminates and the
individual has been insured under the Policy for at least [three] years, the
Owner may convert up to [$10,000], less any amount which the Insured becomes
eligible to continue or replace under the Policy or under a Successor Plan.
To convert, the Owner may apply for any type of life insurance currently
being issued by the Company at the age and in the amount applied for, except
that the new insurance may not:
o be term insurance; or
o contain disability or any other supplemental benefits.
To apply for conversion insurance, the Owner must, within 31 days after
coverage under the Policy ends:
o submit an application to the Company; and
o pay the required premium.
Conversion coverage will become effective on the 31st day after the date
coverage under the Policy ends, provided: (a) the application has been
received by the Company; and (b) the required premium has been paid.
Evidence of insurability will not be required for the converted amount.
Premium for the conversion insurance will be based on:
o the age and class of risk of the Insured; and
o the type and amount of coverage issued.
If the Insured dies during the 31-day conversion period, life insurance
benefits will be paid under the group Policy, regardless of whether he
applied for conversion insurance. If a conversion policy is issued, it will
replace coverage for that type and amount of insurance under the Policy.
EXTENSION OF CONVERSION PERIOD
If an Insured is eligible for conversion, and the Owner is not notified of
this right at least 15 days prior to the end of the 31-day conversion
period, the conversion period will be extended. The Owner will have 15 days
from the date notice is given to apply for conversion insurance. In no event
will the conversion period be extended beyond 60 days. Notice, for the
purposes of this section, means written notice presented to the Owner by the
Employer or mailed to the Owner's last known address as reported by the
Employer.
If the Insured dies during the extended conversion period, but more than 31
days after his coverage under the Policy terminates:
o life insurance benefits will not be paid under the Policy; and
o life insurance benefits will be paid under the conversion insurance,
provided: (a) the Insured's application for conversion insurance has
been received by the Company; and
47
<PAGE> 56
(b) the required premium has been paid. ]
48
<PAGE> 57
TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE
RATES BASED ON 150% OF THE 1980 COMMISSIONERS
STANDARD ORDINARY MALE MORTALITY TABLE
PER $10,000 OF INSURANCE
<TABLE>
<CAPTION>
Attained Age Monthly Attained Age Monthly
Last Birthday Rate Last Birthday Rate
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
16 $ 1.99 37 $ 3.11
17 $ 2.15 38 $ 3.35
18 $ 2.27 39 $ 3.63
19 $ 2.35 40 $ 3.94
20 $ 2.37 41 $ 4.28
21 $ 2.37 42 $ 4.64
22 $ 2.35 43 $ 5.04
23 $ 2.30 44 $ 5.47
24 $ 2.25 45 $ 5.92
25 $ 2.19 46 $ 6.41
26 $ 2.15 47 $ 6.93
27 $ 2.14 48 $ 7.48
28 $ 2.12 49 $ 8.10
29 $ 2.15 50 $ 8.78
30 $ 2.19 51 $ 9.57
31 $ 2.25 52 $ 10.45
32 $ 2.34 53 $ 11.46
33 $ 2.44 54 $ 12.58
34 $ 2.56 55 $ 13.78
35 $ 2.71 56 $ 15.06
36 $ 2.90 57 $ 16.42
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
49
<PAGE> 58
TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE
RATES BASED ON 150% OF THE 1980 COMMISSIONERS
STANDARD ORDINARY MALE MORTALITY TABLE (CONTINUED)
PER $10,000 OF INSURANCE
<TABLE>
<CAPTION>
Attained Age Monthly Attained Age Monthly
Last Birthday Rate Last Birthday Rate
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
58 $ 17.86 79 $ 126.29
59 $ 19.44 80 $ 138.01
60 $ 21.20 81 $ 151.28
61 $ 23.20 82 $ 166.45
62 $ 25.45 83 $ 183.54
63 $ 27.98 84 $ 202.21
64 $ 30.79 85 $ 222.14
65 $ 33.82 86 $ 243.05
66 $ 37.08 87 $ 264.86
67 $ 40.53 88 $ 287.59
68 $ 44.27 89 $ 311.42
69 $ 48.41 90 $ 336.81
70 $ 53.10 91 $ 364.47
71 $ 58.48 92 $ 395.85
72 $ 64.67 93 $ 434.54
73 $ 71.72 94 $ 488.72
74 $ 79.51 95 $ 575.26
75 $ 87.89 96 $ 732.95
76 $ 96.76 97 $ 1061.50
77 $ 106.02 98 $ 1508.68
78 $ 115.76 99 $ 1508.68
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
50
<PAGE> 59
TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE
RATES BASED ON 150% OF THE 1980 COMMISSIONERS STANDARD
ORDINARY MALE SMOKER MORTALITY TABLE
PER $10,000 OF INSURANCE
<TABLE>
<CAPTION>
Attained Age Monthly Attained Age Monthly
Last Birthday Rate Last Birthday Rate
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
16 $ 2.35 37 $ 3.81
17 $ 2.56 38 $ 4.13
18 $ 2.71 39 $ 4.50
19 $ 2.81 40 $ 4.94
20 $ 2.89 41 $ 5.43
21 $ 2.91 42 $ 5.95
22 $ 2.89 43 $ 6.54
23 $ 2.82 44 $ 7.16
24 $ 2.76 45 $ 7.86
25 $ 2.67 46 $ 8.56
26 $ 2.60 47 $ 9.33
27 $ 2.56 48 $ 10.14
28 $ 2.55 49 $ 11.03
29 $ 2.57 50 $ 12.02
30 $ 2.62 51 $ 13.12
31 $ 2.70 52 $ 14.36
32 $ 2.80 53 $ 15.77
33 $ 2.94 54 $ 17.30
34 $ 3.09 55 $ 18.92
35 $ 3.29 56 $ 20.63
36 $ 3.51 57 $ 22.39
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE> 60
TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE
RATES BASED ON 150% OF THE 1980 COMMISSIONERS STANDARD
ORDINARY MALE SMOKER MORTALITY TABLE (CONTINUED)
PER $10,000 OF INSURANCE
<TABLE>
<CAPTION>
Attained Age Monthly Attained Age Monthly
Last Birthday Rate Last Birthday Rate
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
58 $ 24.16 79 $ 144.93
59 $ 26.07 80 $ 156.75
60 $ 28.21 81 $ 169.90
61 $ 30.63 82 $ 184.77
62 $ 33.33 83 $ 201.61
63 $ 36.49 84 $ 219.94
64 $ 39.95 85 $ 239.24
65 $ 43.71 86 $ 259.07
66 $ 47.62 87 $ 279.08
67 $ 51.69 88 $ 299.20
68 $ 55.89 89 $ 319.44
69 $ 60.60 90 $ 340.09
70 $ 65.82 91 $ 364.81
71 $ 71.70 92 $ 392.00
72 $ 78.42 93 $ 423.51
73 $ 86.07 94 $ 465.41
74 $ 94.51 95 $ 529.23
75 $ 103.50 96 $ 647.36
76 $ 113.44 97 $ 885.25
77 $ 123.66 98 $ 1473.40
78 $ 134.04 99 $ 1508.68
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE> 61
TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE
RATES BASED ON 150% OF THE 1980 COMMISSIONERS STANDARD
ORDINARY MALE NONSMOKER MORTALITY TABLE
PER $10,000 OF INSURANCE
<TABLE>
<CAPTION>
Attained Age Monthly Attained Age Monthly
Last Birthday Rate Last Birthday Rate
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
16 $ 1.80 37 $ 2.35
17 $ 1.92 38 $ 2.50
18 $ 2.01 39 $ 2.67
19 $ 2.07 40 $ 2.86
20 $ 2.10 41 $ 3.09
21 $ 2.09 42 $ 3.31
22 $ 2.06 43 $ 3.58
23 $ 2.01 44 $ 3.85
24 $ 1.96 45 $ 4.15
25 $ 1.90 46 $ 4.49
26 $ 1.85 47 $ 4.87
27 $ 1.82 48 $ 5.26
28 $ 1.80 49 $ 5.68
29 $ 1.80 50 $ 6.15
30 $ 1.80 51 $ 6.70
31 $ 1.84 52 $ 7.33
32 $ 1.87 53 $ 8.08
33 $ 1.94 54 $ 8.93
34 $ 2.01 55 $ 9.90
35 $ 2.10 56 $ 10.98
36 $ 2.21 57 $ 12.16
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE> 62
TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE
RATES BASED ON 150% OF THE 1980 COMMISSIONERS STANDARD
ORDINARY MALE NONSMOKER MORTALITY TABLE (CONTINUED)
PER $10,000 OF INSURANCE
<TABLE>
<CAPTION>
Attained Age Monthly Attained Age Monthly
Last Birthday Rate Last Birthday Rate
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
58 $ 13.47 79 $ 115.44
59 $ 14.89 80 $ 126.61
60 $ 16.47 81 $ 139.18
61 $ 18.22 82 $ 153.57
62 $ 20.21 83 $ 170.06
63 $ 22.45 84 $ 188.34
64 $ 24.99 85 $ 208.14
65 $ 27.79 86 $ 229.11
66 $ 30.84 87 $ 251.08
67 $ 34.12 88 $ 274.01
68 $ 37.65 89 $ 297.98
69 $ 41.46 90 $ 323.32
70 $ 45.73 91 $ 350.22
71 $ 50.63 92 $ 380.00
72 $ 56.30 93 $ 414.73
73 $ 62.85 94 $ 460.55
74 $ 70.23 95 $ 529.23
75 $ 78.33 96 $ 647.36
76 $ 86.88 97 $ 885.25
77 $ 95.91 98 $ 1473.40
78 $ 105.34 99 $ 1508.68
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
54
<PAGE> 63
OWNERSHIP AND ASSIGNMENT PROVISIONS
OWNER
Unless otherwise specified on the application or unless Ownership is
transferred in accordance with the provisions of the Policy:
o the [Insured Employee] will be the Owner of the coverage for himself,
[his Insured Spouse, his Former Insured Spouse, and his Insured
Dependent Child, if any;]
[ o the Former Insured Dependent Child will be the Owner of the coverage
for himself; and
o the Former Insured Employee, Retiree, and Leave of Absence Employee
will be the Owner of the coverage for himself, his Former Insured
Spouse, and his Insured Dependent Child, if any].
RIGHTS OF OWNER
While an Insured is alive, the Owner may exercise all rights and privileges
under the Certificate, including the right to: (a) release or Surrender the
Certificate to the Company; (b) agree with the Company to any change in the
Certificate; (c) transfer all rights and privileges to another person; (d)
change the Beneficiary; and (e) assign his Certificate.
All rights and privileges of the Owner may be exercised without the consent
of any designated Beneficiary, unless the Owner has given up the right to
change the Beneficiary.
Unless provided otherwise, if the Owner is a person other than the Insured
and dies before the Insured, all the rights and privileges of the Owner will
vest in the Owner's executors or administrators.
TRANSFER OF OWNERSHIP
The Owner may transfer all his rights and privileges by Assignment to a
third party. On the effective date of transfer, that third party will become
the Owner and will have all the rights and privileges of the Owner. The
Owner may revoke any transfer prior to its effective date.
Unless provided otherwise, a transfer will not affect the interest of any
Beneficiary designated prior to the effective date of the transfer.
A transfer of ownership or a revocation of transfer must be in writing in a
form satisfactory to the Company and filed with the Company. A transfer or a
revocation will take effect on the later of the effective date specified by
the Owner or the date it is recorded by the Company. Any payment made or any
action taken or allowed by the Company before a transfer or a revocation is
recorded and effective, will be without prejudice to the Company. The
Company does not assume responsibility for the validity or sufficiency of
any Assignment.
55
<PAGE> 64
BENEFICIARY PROVISIONS
BENEFICIARY DESIGNATION
The Owner may designate a Beneficiary to whom the proceeds will be paid in
the event of death of the Insured. Upon the death of an Insured Dependent
Child [and/or Insured Spouse], the Coverage Amount will be paid to the Owner
of the Certificate under which the Insured Dependent Child [and/or Insured
Spouse] was covered unless otherwise designated by the Owner.
If a Beneficiary dies before the Insured, that Beneficiary's interest will
end; such Beneficiary's share will be paid in equal shares to the other
Beneficiaries, if there are any. This does not apply if other arrangements
have been filed with the Company.
If there is no surviving Beneficiary or the Owner has not designated a
Beneficiary, benefits will be paid to the first surviving class of the
following classes of Beneficiaries:
o the Insured's Spouse; or
o the Insured's Child or Children; or
o the Insured's parents; or
o the Insured's siblings.
If there is no surviving member of any of the above classes, the benefits
will be paid to the Owner or Owner's estate. If the Beneficiary is a minor
or is not able to give valid receipt for any payment due him, such payment
will be made to his legal guardian.
Payment in the manner described above will release the Company from all
liability to the extent of any payment made.
CHANGE OF BENEFICIARY
The Owner may change the Beneficiary at any time without the consent of the
Beneficiary, unless the Beneficiary designation is irrevocable. Any change
must be made in writing in a form satisfactory to the Company and signed by
the Owner. Consent of the Beneficiary will not be required to effect any
changes other than an irrevocable Beneficiary designation.
No change in Beneficiary will take effect until this form is received by the
Company. When this form is received, the change will take effect as of the
date of the form. If the Insured dies before the form is received, the
Company's obligations under the Policy will be satisfied to the extent of
any payment that was made before receipt of the form.
56
<PAGE> 65
GENERAL PROVISIONS
MISSTATEMENT OF AGE
If an Insured's age has been misstated, the Company will adjust all benefits
to the amounts that the cost of insurance deducted would have purchased for
the correct age, subject to the Qualification Under Internal Revenue Code
provision.
INCONTESTABILITY
The Company will not contest the validity of this insurance after it has
been in force for two years from the date of issue or Reinstatement, except
for nonpayment of premiums. No statement made by an Insured as to his
insurability will be used to contest the validity of the insurance after it
has been in force prior to the contest for a period of two years during the
Insured's lifetime. No statement made by an Insured will be used to contest
the validity of his coverage unless it is made in writing, signed by him and
a copy given to him or his Beneficiary. Any increase in the Coverage Amount
effective after an Insured first becomes insured or reinstates coverage will
be incontestable only after such increase has been in force for two years
during the Insured's lifetime. The basis for contesting an increase in the
Coverage Amount will be limited to material misrepresentations made in the
application for the increase.
ANNUAL CERTIFICATE REPORT
The Company will send a report to each Owner once a year to be attached to
the Certificate. The report will show the current Coverage Amount, the Death
Benefit, the Cash Value, and any Loan Balance. The report will also show
interest earned, gains and losses in the Fund Accounts, premiums paid and
any other information required by applicable laws.
PAYMENT OF PROCEEDS
Proceeds, as used in the Policy, means an amount payable:
o on the date an Owner Surrenders the Certificate; or
o upon the death of the Insured.
The proceeds payable upon receipt of due proof of an Insured's death will be
as described in the Death Benefit section. If an Insured dies as a direct
result of an accidental bodily injury, the proceeds may also include any
supplemental benefit, if available and elected.
If an Owner Surrenders the Certificate, the proceeds will be the Net Cash
Value less any applicable Surrender fee and less any other amounts due the
Company under this Certificate. The proceeds are subject to the adjustments
described in the Policy.
DEFERMENT OF PAYMENTS
Amounts payable as a result of Loans, Surrenders, Partial Surrenders, or for
any other reason, will be paid upon receipt of such documentation as may be
required by the Company at the time. However, payment of amounts from the
Fund Accounts may be postponed when the NYSE is closed or when the
Securities and Exchange Commission (SEC) declares an emergency.
Additionally, the Company reserves the right to defer the payment of such
amounts from the Fixed Account for a period not to exceed 6 months from the
date written request is received by the Company. During any such deferred
period, the amount payable will bear interest as required by law.
57
<PAGE> 66
GENERAL PROVISIONS (CONTINUED)
[SUICIDE
If an Insured commits suicide, while sane or insane, within two years from
the date his insurance becomes effective, his Death Benefit will be limited
to a refund of the premiums paid, less: (a) any Current Outstanding Loan
Balance; and (b) the amount of any Partial Surrenders.
If an Insured commits suicide, while sane or insane, within two years from
the effective date of any increase in the Insured's Coverage Amount, the
Death Benefit payment with respect to such increase will be limited to a
refund of the monthly charges for the cost of the increase.]
QUALIFICATION UNDER INTERNAL REVENUE CODE
The Policy is designed to qualify as a life insurance policy under the
Internal Revenue Code, as amended, and to never become a Modified Endowment
Contract, as defined in Section 7702A of the Code. The Company reserves the
right to: (a) limit or decline an Insured's payments; (b) limit or decline
Coverage Amount changes; (c) amend the Policy and Certificates; (d)
distribute Cash Value; or (e) take any other action it deems necessary to
preserve the qualification of the Policy as a life insurance policy under
the Internal Revenue Code.
58
<PAGE> 67
COVERAGE VERIFICATION PAGE
OWNER: [Mr. John Doe GROUP POLICY NUMBER: [XXXXXXX]
123 Main Street
Anywhere, CT 06000] CERTIFICATE NUMBER: [XX-XXXXXX]
CERTIFICATE EFFECTIVE DATE: [XX/XX/XX]
INSURED: [John Doe] ISSUE AGE: [42] ELIGIBILITY CLASS: [Insured Employee]
POLICYHOLDER: [ABC Company] POLICY EFFECTIVE DATE: [XX/XX/XX]
[EMPLOYER: [ABC Company]] POLICY ANNIVERSARY DATE: [XX/XX]
LIFE INSURANCE BENEFITS:
Coverage Amount: [$40,000.00]
<TABLE>
<CAPTION>
ADDITIONAL BENEFITS RIDER EFFECTIVE DATE
<S> <C> <C>
[Automatic Increase Feature: [Elected/Declined] XX/XX/XX]
[Dependent Child(ren) Term Insurance: [$!] XX/XX/XX]
[Spouse Term Life Insurance Rider [$!] XX/XX/XX]
[Accelerated Payment Benefit Rider XX/XX/XX]
[Paid-up Insurance Option Rider XX/XX/XX]
[Seat Belt Benefit Rider XX/XX/XX]
[Supplemental Accidental Death Benefit Rider XX/XX/XX]
[Supplemental Accidental Death & Dismemberment Benefit Rider XX/XX/XX]
[Supplemental Accidental Death, Dismemberment, Loss of Sight,
Speech & Hearing; or Paralysis Benefit Rider XX/XX/XX]
[Waiver of Cost of Life Insurance During Total Disability Rider XX/XX/XX]
</TABLE>
LOANS, SURRENDERS:
Loan and Surrender information only pertains if you have accumulated a Cash
Value.
MINIMUM LOAN AMOUNT: [$250.00]
MINIMUM PARTIAL SURRENDER: [$250.00]
SURRENDER FEE: [$25.00]
PARTIAL SURRENDER FEE: [$25.00]
[Beneficiary information may be verified by contacting the Company's Customer
Service Center at 1455 Valley Center Parkway, Bethlehem, PA 18017,
1.800.828.3485.]
THIS COVERAGE IS UNDERWRITTEN BY: Connecticut General Life Insurance Company.
59
<PAGE> 68
COVERAGE VERIFICATION PAGE (CONTINUED)
EXPENSE CHARGES AND FEES
PREMIUM LOAD FOR TAXES
A charge of up to 5.0% of each premium payment will be deducted to
cover applicable state taxes and federal income tax liabilities. The
current charge is [3.0%].
MONTHLY ADMINISTRATIVE FEE
A Monthly Administrative Fee will be charged to each Certificate in an
amount not to exceed $5.00 per month. The current Monthly
Administrative Fee to be charged to each Certificate is [$!] per month.
For each Certificate which has accumulated Cash Value in any Fund
Account, an additional Monthly Administrative Fee will be charged, in
an amount not to exceed $3.00 per month. The current additional Monthly
Administrative Fee to be charged to each Certificate which has
accumulated a Cash Value in any Fund Account is [$!] per month. The
additional Monthly Administrative Fee for Certificates which have
accumulated Cash Value in any Fund Account will be waived for any month
in which the Net Cash Value of the Certificate is greater than
[$10,000].
The sum of the two Monthly Administrative Fees will not exceed $6.00
per month.
CHARGES AND FEES ASSOCIATED WITH THE FUND ACCOUNTS
For mortality and expense risk, an asset charge is deducted from each
Fund Account at the end of each Valuation Period. This charge may be
changed by the Company from time to time, but it is guaranteed not to
exceed a daily rate which is equivalent to 0.90% annually of the Fund
Account's Value. As of the Certificate Effective Date, this charge was
equal to a daily rate which is equivalent to [.45%] annually.
In addition, Daily Fund Operating Expenses will be applied by each Fund
as set forth in the prospectus for the applicable Fund(s).
TRANSACTION FEE
A transaction fee of [$25] will be charged for each fund transfer in
excess of [12] transfers made during any Policy Year and to each
Surrender and Partial Surrender.
CHANGES TO EXPENSES, FEES AND CHARGES
The Company reserves the right to change the Transaction Fees from time
to time. The Company also reserves the right to change the Premium
Load, the Monthly Administrative Fee, and the charges for mortality and
expense risk; however, these charges and fees may not exceed the
maximums set forth above.
60
<PAGE> 69
COVERAGE VERIFICATION PAGE (CONTINUED)
<TABLE>
<CAPTION>
FUND GROUPS FUNDS INITIAL ALLOCATION OF
NET PREMIUM PAYMENTS
<S> <C> <C>
Fund Manager A Fidelity VIP II Investment Grade Bond Portfolio __________%
Fidelity VIP Equity-Income Portfolio __________%
Fidelity VIP II Asset Manager Portfolio __________%
Fidelity VIP Overseas Portfolio __________%
Fund Manager B American Century VP Capital Appreciation __________%
Fund Manager C CIGNA [Variable Products] Money Market Fund __________%
CIGNA [Variable Products] S&P 500 Index Fund __________%
CIGNA FIXED ACCOUNT __________%
TOTAL 100%
</TABLE>
NOTE: Net premium payments also may be allocated to the Fixed Account.
The Separate Account for the Policy is CG Variable Life Insurance Separate
Account A - A Connecticut General Life Insurance Company separate investment
account established on May 22, 1995.
LIMITS ON ALLOCATION OF NET PREMIUM PAYMENTS
There is no minimum allocation percentage to the Fixed Account or a
Fund Account; however, all allocations must be made in [5%] increments
and in aggregate must total 100%. Premium payments will be allocated
after deduction of the Premium Load. If no allocation is made by the
Owner, all net premiums will be allocated to the Fixed Account.
LIMITS ON TRANSFERS FROM THE FIXED ACCOUNT
A Transfer from the Fixed Account to any or all of the Fund Accounts
may be made only during the 30-day period following each Policy
Anniversary Date and is subject to a maximum aggregate annual limit of
25% of the Fixed Account Value as of the Policy Anniversary Date.
Additionally, the Company has the right to limit the dollar amount of
such transfers. Additional limitations on Transfers are set forth in
the Transfer Privileges provision.
GUARANTEED MINIMUM INTEREST RATES
The interest rate used to credit interest on the Fixed Account Value
will be determined by the Company from time to time, but will never be
less than an effective annual rate of 4% (.010746% compounded daily).
The interest rate used to credit interest on the Loan Account Value
will be determined by the Company from time to time, but will never be
less than an effective annual rate of 6%. (As of the Certificate
Effective Date, the interest rate used to credit interest on the Loan
Account Value will be an effective annual rate of x%.)
61
<PAGE> 70
PAID-UP INSURANCE OPTION RIDER
This rider is made a part of the Policy/Certificate to which it is attached.
This rider takes effect on the Policy Effective Date unless a later date is
shown in the Certificate Coverage Verification Pages.
ELECTION OF OPTION
At any time after a Cash Value has accumulated under the Certificate, the
Owner may elect:
o to use a portion of the Net Cash Value to purchase
Paid-up Insurance; or
o to Surrender his Certificate and use all of the Net Cash Value, less
applicable transaction fees, to purchase Paid-up Insurance.
Such Paid-up Insurance will be provided under a separate policy of life
insurance issued by the Company or an affiliate of the Company. Evidence of
good health will not be required for such Paid-up Insurance.
The amount of Paid-up Insurance will be determined by applying the amount
Surrendered, less applicable transaction fees, as a single premium, using
the guaranteed maximum life insurance rates and the guaranteed minimum
interest rates at the Insured's then Attained Age. However, the amount of
Paid-up Insurance may not exceed an Insured's Coverage Amount in force for
him on the date of purchase.
The Coverage Amount under the Insured's Certificate will be reduced by the
amount of Paid- Up insurance purchased under this rider at the time such
Paid-Up Insurance becomes effective.
The Paid-up Insurance will be payable as set forth in the payment
provisions in the Paid-up Insurance Policy.
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
/s/ David C. Kopp /s/ Thomas C. Jones
--------------------- -----------------------
Corporate Secretary PRESIDENT
<PAGE> 71
ACCELERATED PAYMENT BENEFIT RIDER
This rider is made a part of the Policy/Certificate to which it is attached.
This rider takes effect on the Policy Effective Date unless a later date is
shown in the Certificate Coverage Verification Pages.
The effective date of insurance under this rider is subject to the terms and
conditions set forth in the Certificate.
Any benefits paid under the Nursing Care and Custodial Care Facility Benefit,
the Terminal Illness Benefit, or Specified Disease Benefit will reduce the
amount of the Insured's Death Benefit.
This rider has no Cash Value or Loan value.
NOTICE: BENEFITS WHICH ARE PAID UNDER THIS ACCELERATED PAYMENT BENEFIT
INSURANCE RIDER WILL REDUCE THE DEATH BENEFIT UNDER THE LIFE
INSURANCE.
BENEFITS PAID UNDER THIS ACCELERATED PAYMENT BENEFIT RIDER MAY BE
TAXABLE. IF SO, THE OWNER OR BENEFICIARY MAY INCUR A TAX
OBLIGATION. AS WITH ALL TAX MATTERS, THE OWNER SHOULD CONSULT HIS
PERSONAL TAX ADVISOR TO ASSESS THE IMPACT OF THIS BENEFIT.
BENEFITS OF THIS RIDER ARE NOT PAYABLE IF THE CERTIFICATE TO WHICH
IT IS ATTACHED IS NOT IN FORCE.
THIS IS NOT A LONG-TERM CARE BENEFIT. BENEFITS PAID UNDER THIS
RIDER MAY NOT BE SUFFICIENT TO COVER ALL EXPENSES ASSOCIATED WITH
A LONG-TERM STAY IN A NURSING CARE OR CUSTODIAL CARE FACILITY.
[30-DAY RIGHT TO EXAMINE RIDER
If the Owner is not satisfied with this rider for any reason, it may be
cancelled within 30 days after receipt. The Company will return any premium that
has been paid. In that case, the rider will be void as if it had never been
issued. ]
<PAGE> 72
DEFINITIONS
ACTIVITIES OF DAILY LIVING
The term "Activities of Daily Living" means the following:
o MOBILITY: moving from one place to another. It means:
a) walking on a level surface, with or without
equipment; or
b) using a wheelchair most or all of the time
to move on a level surface.
o DRESSING: putting on and taking off all necessary items of
clothing. (Clothing includes braces and
artificial limbs, if they are usually worn.)
o TOILETING: cleansing self after elimination and adjusting
clothing before and after using the toilet.
o TRANSFERRING: moving into or out of a bed, chair, or other seat
(e.g., toilet), with or without equipment.
o FEEDING: getting food into the body, by any means, after
it has been prepared and made available to the
person.
[COGNITIVE IMPAIRMENT
An Insured will be considered to have a Cognitive Impairment if he:
o is disabled due to Alzheimer's disease or irreversible organic senile
dementia, as diagnosed by a Physician; and
o needs continuous human supervision to function without causing danger
to himself or others. ]
[CUSTODIAL CARE FACILITY
The term "Custodial Care Facility" means an institution, or that distinct
part of an institution, which meets the following requirements:
o it is operated under applicable licensing and any other legal
requirements which apply to its operation; and
o it provides for compensation, room and board, and 24-hour Custodial
Care Services; and
o it keeps daily medical records on all patients. ]
[CUSTODIAL CARE SERVICES
The term "Custodial Care Services" means services which:
o provide assistance to an Insured with an Impairment in performing the
Activities of Daily Living or provide supervision of an Insured with a
Cognitive Impairment;
o are required to be performed by trained personnel; and
o are not primarily to treat an injury or a sickness. ]
[FUNCTIONAL IMPAIRMENT
An Insured will be considered to have a Functional Impairment if he is
unable to perform two or more Activities of Daily Living without human
assistance. ]
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DEFINITIONS (CONTINUED)
HOSPITAL
The term "Hospital" means:
o an institution licensed as a Hospital which: a) maintains, on its
premises, all facilities necessary for medical and surgical treatment;
b) provides such treatment on an inpatient basis, for compensation,
under the supervision of a staff of Physicians; and c) provides 24-hour
service by Registered Graduate Nurses;
o an institution which qualifies as a Hospital, a psychiatric Hospital or
a tuberculosis Hospital, and a provider of services under Medicare, if
such institution is accredited as a Hospital by the Joint Commission on
the Accreditation of Hospitals;
o an institution which: a) specializes in the treatment of mental
illness, alcohol or drug abuse or other related illness; b) provides
residential treatment programs; and c) is licensed in accordance with
the laws of the appropriate legally authorized agency;
o a free-standing surgical facility; or
o an institution which meets any one of the above requirements and is
owned or operated by the U.S. Government.
[IMPAIRMENT
The term "Impairment" means a Cognitive or Functional Impairment, as
defined in this rider. ]
[NURSING CARE FACILITY
The term "Nursing Care Facility" means an institution, or that distinct
part of an institution, which meets the following requirements:
o it is operated under applicable licensing and any other laws which
apply to its operation; and
o it provides, on an inpatient basis, skilled nursing care or
intermediate nursing care for injury, sickness or physical
rehabilitation; and
o it is under the full-time supervision of a Physician or a Registered
Graduate Nurse; and
o it maintains a complete daily written record on the condition of, and
the services actually received by each patient and that record is made
available to us; and
o it provides inpatient nursing care of sick or injured persons who must
be under the care of a Physician.
The term "Nursing Care Facility" will not include an institution which is
primarily a place for the blind, the deaf, the mentally ill or the mentally
retarded, or a place for the treatment of alcohol or drug abuse. ]
PHYSICIAN
The term "Physician" means a licensed medical practitioner who is
practicing within the scope of his or her license and who is licensed to
prescribe and administer drugs or to perform surgery.
[PRE-EXISTING CONDITION
The term "Pre-existing Condition" means a disease or condition for which
the Insured: (a) received medical treatment, care or advice; (b) took
prescribed drugs or medicines; or (c) consulted a Physician during the 12
months prior to the effective date of his
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<PAGE> 74
coverage under the Policy. ]
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<PAGE> 75
DEFINITIONS (CONTINUED)
[SPECIFIED DISEASE
The term "Specified Disease" means a person has been diagnosed by a
Physician as having one of the following diseases or conditions:
o Life-Threatening Cancer; "life-threatening cancer" means any malignant
disease or neoplasm characterized by abnormal cells that grow and
spread in an uncontrolled manner. The term "life-threatening cancer"
does not include pre-malignant lesions, carcinoma in situ, skin cancer
other than malignant melanoma, carcinoid of the appendix, intraductal
non-invasive carcinoma of the breast, stage 1 Hodgkin's disease and
stage 1 transitional carcinoma of the urinary bladder or benign tumors
but does include Leukemia and Hodgkin's Disease (other than stage 1).
The diagnosis of "cancer" or a malignant tumor must be based on
criteria established by the American Board of Pathology and
histopathologic or histocytologic study.
o Heart Attack; "Heart Attack" means acute myocardial infarction caused
by coronary thrombosis or coronary occlusion diagnosed by a Physician.
Supporting evidence must include electrocardiographic studies (EKG) and
appropriate blood and clinical findings. If such studies are not
available at the time of the attack, subsequent studies, when
available, must confirm the episode by the demonstration of changes
compatible with a heart attack and that were not known to be present
prior to the episode in question. The term "heart attack" does not
include any other diseases or abnormality of the heart or
cardiovascular system; or associated or intercurrent diseases or
injuries that may be the cause or result of a heart attack; or any
other diseases or injuries.
o Renal Failure; "Renal Failure" means the end stage of chronic,
irreversible failure of both kidneys to function, necessitating regular
renal dialysis.
o Stroke; "Stroke" means a condition of sudden onset resulting in
permanent brain damage as a result of a subarachnoid hemorrhage,
thrombosis, embolism or of a sudden occlusion or spontaneous rupture of
a blood vessel in the head or neck, including apoplexy or cerebral
vascular accident. The term "stroke" does not include transient
ischemic attacks (TIA), brief episodes of altered brain function due to
inadequate blood flow to the brain from any cause nor other diseases or
injuries involving the brain or that may be the cause or result of
brain damage.
o Specified Organ Transplant; "Specified Organ Transplant" means the
replacement of a person's heart, liver or lungs with a corresponding
organ from a human donor.
o Acquired Immune Deficiency Syndrome (AIDS). "AIDS" means a person has
tested positive for human immunodeficiency virus (HIV) infection and
has been diagnosed as having a disease indicative of AIDS by a
Physician using definitive diagnostic methods. The term "AIDS" does
include HIV encephalopathy (dementia) and HIV wasting syndrome. ]
[TERMINAL ILLNESS
A Terminal Illness will be considered to exist if a person has a written
diagnosis and prognosis by two unaffiliated Physicians that he has 12
months or less to live. ]
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[BLANK PAGE]
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<PAGE> 77
[TERMINAL ILLNESS BENEFIT
BENEFIT
The Company will pay a one-time Terminal Illness Benefit, up to [60%] of
the Insured's Coverage Amount, when the Company receives verification that
an Insured has a Terminal Illness. The Terminal Illness Benefit is based on
the Insured's Coverage Amount under the Policy in effect on the Benefit
Determination Date. This benefit is payable in a lump sum. [An Insured is
not eligible for payment under this benefit if the Nursing Care and
Custodial Care Facility Benefit or Specified Disease Benefit has been
paid.]
BENEFIT DETERMINATION DATE
The term "Benefit Determination Date" means the date the Company verifies
that an Insured is terminally ill. The Terminal Illness Benefit cannot be
greater than [60%] of the Coverage Amount in effect on the Benefit
Determination Date.
DETERMINATION OF TERMINAL ILLNESS
For the purpose of determining the existence of a Terminal Illness, the
Company will require that the Insured submit the following:
o a written diagnosis and prognosis by two unaffiliated Physicians
licensed to practice in the United States, stating that the
Insured has 12 months or less to live; and
o supportive evidence satisfactory to the Company, including, but
not limited to, radiological, histological, and laboratory reports
documenting the Terminal Illness.]
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<PAGE> 78
[NURSING CARE AND CUSTODIAL CARE FACILITY BENEFIT
BENEFIT
The Company will pay a one-time Nursing Care and Custodial Care Facility
Benefit, up to [60%] of the Insured's Coverage Amount. The Nursing Care and
Custodial Care Facility Benefit is based on the Insured's Coverage Amount
in effect under the Policy on the date the Insured satisfies the Deductible
Waiting Period. This benefit is payable in a lump sum or in equal monthly
installments for [30] months. [An Insured is not eligible for payment under
this benefit if the Terminal Illness Benefit or Specified Disease Benefit
has been paid.]
An Insured becomes eligible for the Nursing Care and Custodial Care
Facility Benefit provided he:
o has an Impairment, as determined by the Company; and
o is confined in a Nursing Care or Custodial Care Facility
(registered as a bed patient on a 24-hour basis), due to the
Impairment; and
o provides the Company with written certification (from two
unaffiliated Physicians licensed to practice in the United States)
that the Insured is expected to remain in the Nursing Care or
Custodial Care Facility for the rest of his life; and
o has satisfied the required Deductible Waiting Period.
DEDUCTIBLE WAITING PERIOD
The Deductible Waiting Period is 90 consecutive days in an Insured's
lifetime. The Deductible Waiting Period begins on the date that the Company
verifies that the Insured has an Impairment and was confined in a Nursing
Care or Custodial Care Facility (registered as a bed patient on a 24-hour
basis).
Once the Company verifies that the Insured has an Impairment, the Insured
must continue to be confined due to the Impairment for each additional day
needed to satisfy the Deductible Waiting Period.
All days for which the Insured is confined in a Nursing Care or Custodial
Care Facility within 90 days prior to the date the Company verifies he has
an Impairment will be applied to the Deductible Waiting Period.
MONTHLY PAYMENT
If the Owner elects a Monthly Payment, payment begins on the first day of
the first month after the date the Insured becomes eligible for such
payment. Monthly Payment will end on the earliest of the following:
o the date the Owner has received [30] Monthly Payments; or
o the date coverage under this rider terminates; or
o the date the Insured dies.
If the Insured dies after the initial payment is made, but before all
installments are paid, the remaining payments will be paid in accordance
with the Beneficiary Provisions applicable to the life insurance benefit.
LIMITATIONS
No Nursing Care and Custodial Care Facility Benefit will be paid for any
confinement
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<PAGE> 79
in an institution located outside the United States.]
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<PAGE> 80
[NURSING CARE AND CUSTODIAL CARE FACILITY BENEFIT (CONTINUED)
EXCLUSIONS
No benefits are payable under this rider if an Impairment is caused by, or
a confinement is due to:
o alcoholism or drug abuse;
o mental illness, other than Cognitive Impairment;
o commission of a felony or engaging in an illegal act; or
o attempted suicide or intentionally self-inflicted injury, while sane or
insane. ]
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[SPECIFIED DISEASE BENEFIT
BENEFIT
The Company will pay a one-time Specified Disease Benefit, up to [60%] of
the Insured's Coverage Amount, when the Company receives verification that
an Insured has a Specified Disease. The Specified Disease Benefit is based
on the Insured's Coverage Amount under the Policy in effect on the Benefit
Determination Date. This benefit is payable in a lump sum. An Insured is
not eligible for payment under this benefit if the Terminal Illness Benefit
or Nursing Care and Custodial Care Facility Benefit has been paid.
BENEFIT DETERMINATION DATE
The term "Benefit Determination Date" means the date the Company verifies
that an Insured has a Specified Disease. The Specified Disease Benefit
cannot be greater than [60%] of the Coverage Amount in effect on the
Benefit Determination Date.
LIMITATION
The Company will not pay a Specified Disease Benefit for a Pre-existing
Condition. This limitation will not apply if:
o the Insured: (a) receives no medical treatment, care or advice;
(b) does not take prescribed drugs or medicines; or (c) does not
consult with a Physician for the disease or condition for 12
months after the effective date of this insurance; or
o the Insured's coverage under the Policy has been effective for 24
straight months.
DETERMINATION OF SPECIFIED DISEASE
For the purposes of determining the existence of a Specified Disease, the
Company will require that the Insured submit the following:
o a written diagnosis and prognosis by two Physicians licensed to
practice in the United States certifying the existence of a
Specified Disease; and
o supportive evidence satisfactory to the Company, including but
not limited to radiological, histological or laboratory reports
documenting the Specified Disease. ]
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PREMIUM PROVISIONS
PREMIUM
The premium for this rider will be included in the Monthly Deduction and
will be shown in the Certificate Coverage Verification Pages.
[WAIVER OF PREMIUM
The Monthly Deduction for an Insured and his Insured Dependent Child(ren),
if any, will be waived for any month for which Monthly Payments are
payable.]
CHANGE IN PREMIUMS
Any premiums for insurance under this rider may be changed by the Company
from time to time with at least 31 days' advance written notice. Any such
change will be made on a class basis.
TERMINATION OF INSURANCE UNDER THIS RIDER
The insurance under this rider for [an Insured Employee, Insured Spouse,
Former Insured Employee, Former Insured Spouse, Retiree, or Leave of
Absence Employee] will cease on the earliest of the following dates:
o the date the Insured's coverage ends under the Certificate; or
o the last day for which the Insured has paid the required premium for
this rider, subject to the Grace Period for Insured; or
o the date [the Terminal Illness Benefit or Specified Disease Benefit]
becomes payable to an Insured who applied for such benefit[; or
o the date that the Lump Sum Payment for the Nursing Care and Custodial
Care Facility Benefit becomes payable to an Insured who applied for
such benefit; or]
[ o the date that the Monthly Payments for the Nursing Care and Custodial
Care Facility Benefit end for an Insured on whose behalf such benefits
were paid.]
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<PAGE> 83
GENERAL PROVISIONS
NOTICE OF CLAIM
Written notice of a claim must be given to the Company within 60 days
after[: 1) the start of the confinement in a Nursing Care or Custodial Care
Facility; or 2) a diagnosis and prognosis of a Terminal Illness or
Specified Disease has been made.] If the notice is not given in that time,
the claim will not be invalidated or reduced if it is shown that written
notice was given as soon as was reasonably possible.
CLAIM FORMS
When the Company receives written notice of a claim, the Company will send
forms for filing proof of loss. If the claimant does not get these claim
forms within 15 days after the Company receives the notice of claim, the
proof of loss requirements will be met by submitting, within 90 days,
written proof of the nature and extent of the loss.
PROOF OF LOSS
Written proof of loss must be given to the Company within 90 days after the
date of loss. Failure to furnish proof within 90 days shall not invalidate
or reduce any claim if it was not reasonably possible to furnish such proof
within such time. Such proof must be furnished as soon as reasonably
possible, but in no event, except in the absence of legal capacity, later
than one year from the time proof is required.
PAYMENT OF CLAIM
All benefits under this rider will be paid to the Owner. If the Insured
dies prior to the payment of an eligible claim for an Accelerated Benefit,
the life insurance benefit shall be paid in accordance with the Beneficiary
Provisions applicable to the life insurance benefit. Any payment made by
the Company prior to being advised of the Insured's death shall discharge
the Company of any obligation to the extent the benefit was paid.
LEGAL ACTION
No one may sue for payment of claim: a) less than 60 days after due proof
of loss is furnished; or b) more than three years after the date proof of
loss is required by the Policy.
RECOVERY OF OVERPAYMENT
If an overpayment has been made by the Company, the Company has the right,
at any time, to recover that overpayment from the person to whom or on
whose behalf it was made.
EXAMINATION
The Company may require, at its expense, an examination of the Insured and
a review of the documented evidence by a Physician of its choice.
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
/s/ [ILLEGIBLE] /s/ Thomas C. Jones
--------------------- -----------------------
Corporate Secretary PRESIDENT
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SEAT BELT BENEFIT RIDER
This rider is made a part of the Policy/Certificate to which it is attached.
This rider takes effect on the Policy Effective Date unless a later date is
shown in the Certificate Coverage Verification Pages.
BENEFIT
The Company will pay a Seat Belt Benefit if an [Insured Employee] dies as a
result of an accident which occurs:
o while covered under the Policy; and
o while driving or riding as a passenger in a Private Passenger Car,
and
(a) the car is equipped with seat belts;
(b) the seat belt was in actual use and properly fastened at
the time of the accident; and
(c) the use and position of the seat belt is certified in the
official report of the accident. However, if an official
report is not available and it is unclear if the Insured
was properly wearing a seat belt, the Company will pay the
Limited Seat Belt Benefit. If such report indicates that a
seat belt was not in use, the Company will not pay the Seat
Belt Benefit.
"Private Passenger Car" means a validly registered four-wheel vehicle which
is includes station wagons, jeeps, pick-up trucks, and van-type cars.
The Seat Belt Benefit will not be paid for an accident which occurs while
the Insured is participating in a race, speed or endurance test.
The Seat Belt Benefit is payable to the [Insured Employee's] designated
Beneficiary, or if there is none, to the Owner or Owner's estate. The
benefit will be equal to the lesser of:
o [10%] of the Insured's Coverage Amount, but no less than [$1,000]; or
o [$10,000].
The Limited Seat Belt Benefit is [$1,000].
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
/s/ [ILLEGIBLE] /s/ THOMAS C. JONES
--------------------- -----------------------
Corporate Secretary PRESIDENT
<PAGE> 85
Mailing Address: Hartford, Connecticut 06152
Home Office: Bloomfield, Connecticut
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
SPOUSE'S TERM LIFE INSURANCE RIDER
This rider is made a part of the Policy/Certificate to which it is attached.
This rider takes effect on the [Policy Effective Date/Employer Participation
Date] unless a later date is shown on the Certificate Coverage Verification
Page.
DEATH BENEFIT
[We/The Company] will pay the amount of term life insurance in effect to
the Beneficiary of the [Insured Spouse, Class B Insured] for whom coverage
has been elected and the applicable cost of insurance paid when [we/the
Company] receive[s] due proof of death.
Death must occur on or before the earliest of:
o the date the [Insured Spouse, Class B Insured] is no longer eligible; or
o the Policy Anniversary Date that is the same as or next follows the
[Insured Spouse, Class B Insured]'s [65th] birthday; or
o the date the Owner requests termination of this rider; or
o the date the [Insured Employee, Class A Insured]'s coverage ends.
DEFINITION OF SPOUSE
For the purpose of eligibility, "Spouse" means the lawful Spouse of a[n]
[Insured Employee, Former Insured Employee, Class A Insured, Class E
Insured]'s lawful Spouse who is not legally separated from the [Employee].
[The term "Spouse" also includes Domestic Partner.] Spouse does not include
any person who is eligible for insurance under the Policy as an Employee of
the Employer.
AMOUNT OF INSURANCE AVAILABLE
Guaranteed Issue Amount: The amount of insurance which can be elected for
a[n] [Insured Spouse, Class B Insured] is an
amount elected in increments of [$10,000]. The
sum of the Coverage Amount, [the Paid-up
Insurance, if any,] and any insurance continued
[or converted under a Replaced Policy] may not
exceed an amount equal to: (a) [3 times] the
Employee's Annual Compensation; or (b)
[$100,000], whichever is less.
Maximum Coverage Amount: [$!]
ELIGIBILITY
Each Spouse of an eligible [Employee] will become eligible to be insured as
a[n] [Insured Spouse, Class B Insured] on the later of:
o the date the Employee becomes insured; or
o the date the person becomes a Spouse of an [Insured Employee, Former
Insured Employee, Class A Insured];
provided the Spouse is less than [65] years of age on that date.
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EFFECTIVE DATE OF INSURANCE
If coverage is elected before or within 31 days after the date a Spouse
becomes eligible, his insurance will become effective, in an amount not to
exceed the Guaranteed Issue Amount, on the later of: (a) the date he
becomes eligible; or (b) the date the completed and signed [enrollment
form/application] is received by [us/the Company].
If coverage is elected for a Spouse for an amount in excess of the
Guaranteed Issue Amount, he will become insured for the amount that exceeds
the Guaranteed Issue Amount on the date [we/the Company] agree[s] in
writing to insure him for that amount. [We/The Company] will require the
Spouse to satisfy the Insurability Requirement before [we/it agree[s] to
insure him for the higher amount.
If coverage is elected more than 31 days after a Spouse becomes eligible,
he will become insured under this rider on the date [we/the Company]
agree[s] in writing to insure him. [We/The Company] will require the Spouse
to satisfy the Insurability Requirement before [we/it] agree[s] to insure
him for any amount.
If, on the date coverage under this rider would begin, a Spouse:
o is hospitalized; and/or
o is confined at home under the care of a doctor for sickness or injury;
and/or
o has had his level of activity significantly reduced so that he
requires human supervision or assistance to perform any of the
following Activities of Daily Living: (a) mobility; (b) transferring;
(c) feeding; (d) dressing; or (e) toileting; which another person of
the same age and sex could normally perform; and/or
o is receiving any disability benefits from any source due to any
sickness or injury;
his insurance will begin on the day after the conditions set forth above
have ended. If all of these conditions have not ended within 90 days from
the date [we/the Company] receive[s] the completed and signed original
enrollment form, a new enrollment form will be required.] [We/The Company]
will require the Spouse to satisfy the Insurability Requirement before
[we/it] agree[s] to insure him for any amount.
BENEFICIARY
The Owner of the Certificate may designate a Beneficiary to whom the
proceeds will be paid in the event of the death of the [Insured Spouse,
Class B Insured]. If no Beneficiary is named on the date of the [Insured
Spouse, Class B Insured]'s death, the benefit will be paid in accordance
with the Beneficiary Provisions applicable to the life insurance benefit
set forth in the Certificate to which this rider is attached.
CONTINUATION PROVISION
A[n] [Insured Spouse, Class B Insured]'s coverage under this rider
continues if the [Insured Employee, Class A Insured] through whom he became
insured is eligible to continue coverage in accordance with the
[Continuation Provisions, Cancellation Provisions] set forth in the
Certificate to which this rider is attached.
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CONVERSION PRIVILEGE
If the [Insured Spouse, Class B Insured]'s coverage under this rider ends
for any reason, except nonpayment of premiums, the Owner may convert up to
the amount of insurance which ends, less any amount which the [Insured
Spouse, Class B Insured] becomes eligible to continue or replace under the
Policy or under a Successor Plan.
To convert, the Owner may apply for any type of life insurance currently
being issued by [us/the Company] at the age and in the amount applied for,
except that the new insurance may not:
o be term insurance (except for the first year after this rider ends.
For that year, he may elect single premium term insurance to precede
the permanent plan.); or
o contain disability or any other supplemental benefits.
To apply for conversion insurance, the Owner must, within 31 days after
coverage under this rider ends:
o submit an application to [us/the Company]; and
o pay the required premium.
Conversion coverage will become effective on the 31st day after the date
coverage under this rider ends, provided: (a) the application has been
received by [us/the Company]; and (b) the required premium has been paid.
Evidence of insurability will not be required for the converted amount.
Premium for the conversion insurance will be based on:
o the age and class of risk of the [Insured Spouse, Class B Insured]; and
o the type and amount of coverage issued.
If the [Insured Spouse, Class B Insured] dies during the 31-day conversion
period, life insurance benefits will be paid under this rider regardless of
whether he applied for conversion insurance. If a conversion policy is
issued, it will replace coverage for that type and amount of insurance
under this rider.
EXTENSION OF CONVERSION PERIOD
If a[n] [Insured Spouse, Class B Insured] is eligible for conversion, and
the Owner is not notified of this right at least 15 days prior to the end
of the 31-day conversion period, the conversion period will be extended.
The Owner will have 15 days from the date notice is given to apply for
conversion insurance. In no event will the conversion period be extended
beyond 60 days. Notice, for the purposes of this section, means written
notice presented to the Owner by the Employer or mailed to the Owner's last
known address as reported by the Employer.
If the [Insured Spouse, Class B Insured] dies during the extended
conversion period, but more than 31 days after his coverage under this
rider terminates:
o life insurance benefits will not be paid under this rider; and
o life insurance benefits will be paid under the conversion insurance,
provided: (a) the
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[Insured Spouse, Class B Insured]'s application for conversion
insurance has been received by [us/the Company]; and (b) the
required premium has been paid.
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INDIVIDUAL TERMINATIONS
A[n] [Insured Spouse, Class B Insured]'s Term Life insurance will end on
the earliest date below:
o the date the [Insured Spouse, Class B Insured] is no longer eligible;
or
o the date this rider is cancelled; or
o the last day for which the required premium for this rider has been
paid; or
o the Policy Anniversary Date that is the same as or next follows the
[Insured Spouse, Class B Insured]'s [65th] birthday; or
o the Policy Anniversary Date that is the same as or next follows the
retirement date of a[n] [Insured Employee, Class A Insured]; or
o the date of death of the [Insured Spouse, Class B Insured].
TERMINATION OF THE RIDER
The [Policyholder/Employer] may terminate this rider by giving [us/the
Company] written [GRAPHIC OMITTED]notice 60 days before the termination
date. [We/The Company] may terminate this rider by giving the
[Policyholder/Employer] written notice 60 days before the termination date.
The termination of this rider will not affect the coverage under any
Certificate riders in force prior to the date this rider is terminated. No
new Certificate riders will be issued after the date this rider is
terminated.
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
/s/ David C. Kopp /s/ Thomas C. Jones
--------------------- -----------------------
Corporate Secretary PRESIDENT
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SUPPLEMENTAL ACCIDENTAL DEATH BENEFIT RIDER
This rider is made a part of the Policy/Certificate to which it is attached.
This rider takes effect on the Policy Effective Date unless a later date is
shown in the Coverage Verification Pages.
BENEFITS
The Company will pay the Supplemental Accidental Death Benefit, in addition
to the Life Insurance Death Benefit, to the Beneficiary of the [Insured
Employee, Insured Spouse, Former Insured Employee, Former Insured Spouse or
Leave of Absence Employee] who has elected and paid the applicable cost of
insurance for the Supplemental Accidental Death Benefit, when the Company
receives due proof of death. Death must result directly from an accidental
bodily injury, and independently of all other causes. Death must occur
within 90 days of the accident causing the injury and while coverage is in
force. The Supplemental Accidental Death Benefit payable will be equal to
the Insured's Coverage Amount in force on the date of his death.
LIMITATIONS
Benefits under this rider will not be paid if the accidental death in any
way results from:
o intentionally self-inflicted injury, suicide or any attempt thereat,
while sane or insane;
o mental infirmity;
o sickness, disease, bodily infirmity, or bacterial or viral
infection, even if contracted by accident. This exclusion does not
apply to bacterial infection that is the natural and foreseeable
result of an accidental external cut or wound;
o declared or undeclared war, an act of war, or service in any
military force of any country while such country is engaged in war;
o performing police duty as a member of a military organization;
o taking part in the commission of a felony;
o voluntary use of any controlled substance, unless prescribed for the
Insured by his Physician. The term "controlled substance" is defined
in Title II of the Federal Comprehensive Drug Abuse Prevention and
Control Act of 1970, as now or hereafter amended; or
o travel or flight in any aircraft, except as a passenger on a
commercial flight, Employer aircraft, or a military air transport
passenger flight.
TERMINATION
An Insured's Supplemental Accidental Death Benefit will cease on the
earliest date below:
o the date the Insured's insurance ceases as described in the
Certificate; or
o the last day for which the Insured has paid the required premium for
this rider; or
o the date this rider is cancelled; or
o the Policy Anniversary Date that is the same as or next follows the
retirement date of an Insured Employee; or
o the Policy Anniversary Date that is the same as or next follows the
[65th] birthday of [an Insured Spouse, Former Insured Employee,
Former Insured Spouse, or Leave of Absence Employee].
The Insured must notify the Company of the occurrence of any of the above
events. If premium is collected for this benefit beyond the date this
benefit ceases, such premium will be returned and no benefit will be
payable in the event of death.
<PAGE> 91
TERMINATION (CONTINUED)
[If an Insured Employee or Former Insured Employee's cost of life insurance
is waived as described in the Waiver of Cost of Life Insurance During Total
Disability Rider, his Supplemental Accidental Death Benefit will cease on
the date his Waiver of Cost of Life Insurance is approved by the Company.
This rider will be reinstated on the date his Waiver of Cost of Life
Insurance ceases, provided the required premium is paid to the Company for
his life insurance and his Supplemental Accidental Death Benefit Rider.]
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
/s/ [ILLEGIBLE] /s/ Thomas C. Jones
--------------------- -----------------------
Corporate Secretary PRESIDENT
2
<PAGE> 92
SUPPLEMENTAL ACCIDENTAL DEATH AND DISMEMBERMENT
BENEFIT RIDER
This rider is made a part of the Policy/Certificate to which it is attached.
This rider takes effect on the Policy Effective Date unless a later date is
shown in the Certificate Coverage Verification Pages.
BENEFITS
The Company will pay the Supplemental Accidental Death and Dismemberment
Benefit to the Insured's Beneficiary in the event of loss of life, and to
the Owner in the event of other covered losses, upon receipt of due proof
that the [Insured Employee, Insured Spouse, Former Insured Employee, Former
Insured Spouse, or Leave of Absence Employee] has suffered a loss, as shown
in the Table of Losses and Benefits while insured for the Supplemental
Accidental Death and Dismemberment Benefit. The loss must be as a direct
result of that injury, independent of all other causes. The loss must occur
within 90 days after the date of the accident causing the loss.
The Supplemental Accidental Death and Dismemberment Benefit payable will be
equal to the Coverage Amount in force on the Insured on the date of the
loss, multiplied by the percentage shown in the Table of Losses and
Benefits for such loss. The maximum that will be paid for all losses
resulting from injuries received by an Insured in any one accident will be
his Coverage Amount.
TABLE OF LOSSES AND BENEFITS
<TABLE>
<CAPTION>
TYPE OF LOSS % OF COVERAGE AMOUNT
<S> <C>
Loss of Life 100%
Loss of Both Hands 100%
Loss of Both Feet 100%
Loss of Entire Sight of Both Eyes 100%
Loss of One Hand and One Foot 100%
Loss of One Hand and Entire Sight of One Eye 100%
Loss of One Foot and Entire Sight of One Eye 100%
Loss of One Hand 50%
Loss of One Foot 50%
Loss of Entire Sight of One Eye 50%
Loss of Thumb and Index Finger of the Same Hand 25%
</TABLE>
Loss of a hand or foot means complete Severance through or above the wrist
or ankle joint. Loss of sight means the total, permanent loss of sight of
the eye. The loss of sight must be irrecoverable by natural, surgical or
artificial means. Loss of a thumb and index finger means complete Severance
through or above the metacarpophalangeal joints (the joints between the
fingers and the hand).
(In California, loss of a thumb and index finger means loss by complete
Severance of at least one whole phalanx of each.) (In South Carolina, the
complete severance of four whole fingers from one hand equals the loss of
one hand.)
"Severance" means the complete separation and dismemberment of the part from
the body.
<PAGE> 93
LIMITATIONS
Benefits under this rider will not be paid if the loss in any way results
from:
o intentionally self-inflicted injury, suicide or any attempt thereat,
while sane or insane;
o mental infirmity;
o sickness, disease, bodily infirmity, or bacterial or viral
infection, even if contracted by accident. This exclusion does not
apply to bacterial infection that is the natural and foreseeable
result of an accidental external cut or wound;
o declared or undeclared war, an act of war or service in any military
force of any country while such country is engaged in war;
o performing police duty as a member of a military organization;
o taking part in the commission of a felony;
o voluntary use of any controlled substance, unless prescribed for the
Insured by his Physician. The term "controlled substance" is defined
in Title II of the Federal Comprehensive Drug Abuse Prevention and
Control Act of 1970, as now or hereafter amended; or
o travel or flight in any aircraft, except as a passenger on a
commercial flight, Employer aircraft, or a military air transport
passenger flight.
TERMINATION
[An Insured's] coverage provided by this rider will cease on the earliest
date below:
o the date the insurance ceases, as described in the Certificate;
or
o the last day for which the Insured has paid the required premium
for this rider; or
o the date this rider is cancelled; or
o the Policy Anniversary Date that is the same as or next follows
the normal retirement date of an Insured Employee; or
o the Policy Anniversary Date that is the same as or next follows
the [65th] birthday of [an Insured Spouse, Former Insured
Employee, Former Insured Spouse, or Leave of Absence Employee].
The Insured must notify the Company of the occurrence of any of the above
events. If premium is collected for this benefit beyond the date this
benefit ceases, such premium will be returned and no benefit will be payable
in the event of loss beyond the termination date.
[If an Insured Employee or Former Insured Employee's cost of life insurance
is waived as described in the Waiver of Cost of Life Insurance During Total
Disability Rider, his Supplemental Accidental Death and Dismemberment
Benefit will cease on the date his Waiver of Cost of Life Insurance is
approved by the Company. This rider will be reinstated on the date his
Waiver of Cost of Life Insurance ceases, provided the required premium is
paid to the Company for his life insurance and his Supplemental Accidental
Death and Dismemberment Benefit Rider.]
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
/s/ [ILLEGIBLE] /s/ THOMAS C. JONES
--------------------- -----------------------
Corporate Secretary PRESIDENT
2
<PAGE> 94
SUPPLEMENTAL ACCIDENTAL DEATH, DISMEMBERMENT, LOSS OF SIGHT, SPEECH AND HEARING;
OR PARALYSIS BENEFIT RIDER
This rider is made a part of the Policy/Certificate to which it is attached.
This rider takes effect on the Policy Effective Date unless a later date is
shown in the Certificate Coverage Verification Pages.
BENEFITS
The Company will pay the below scheduled benefit to the Insured's
Beneficiary in the event of loss of life and to the Owner in the event of
all other covered losses, upon receipt of due proof that the [Insured
Employee, Insured Spouse, Former Insured Employee, Former Insured Spouse,
or Leave of Absence Employee] has suffered a loss, as shown in the Table of
Losses and Benefits, while insured for the Supplemental Accidental Death,
Dismemberment, Loss of Sight, Speech and Hearing; or Paralysis Benefit. The
loss must be as a direct result of that injury, independent of all other
causes. The loss must occur within 90 days after the date of the accident
causing the loss.
The benefit payable will be equal to the Coverage Amount in force on the
Insured on the date of the loss, multiplied by the percentage shown in the
Table of Losses and Benefits for such loss. The maximum that will be paid
for all losses resulting from injuries received by an Insured in any one
accident will be his Coverage Amount.
TABLE OF LOSSES AND BENEFITS
<TABLE>
<CAPTION>
TYPE OF LOSS % OF COVERAGE AMOUNT
<S> <C>
Loss of Life 100%
Loss of Both Hands 100%
Loss of Both Feet 100%
Loss of Entire Sight of Both Eyes 100%
Loss of One Hand and One Foot 100%
Loss of One Hand and Entire Sight of One Eye 100%
Loss of One Foot and Entire Sight of One Eye 100%
Loss of Speech and Hearing (both ears) 100%
Quadriplegia (total Paralysis of both upper and lower limbs) 100%
Paraplegia (total Paralysis of both lower limbs) 50%
Loss of One Hand 50%
Loss of One Foot 50%
Loss of Entire Sight of One Eye 50%
Loss of Speech 50%
Loss of Hearing (both ears) 50%
Hemiplegia (total Paralysis of upper and lower limbs on one
side of body) 50%
Loss of Thumb and Index Finger of the Same Hand 25%
</TABLE>
Loss of a hand or foot means complete Severance through or above the wrist
or ankle joint. Loss of sight means the total, permanent loss of sight of
the eye. The loss of sight must be irrecoverable by natural, surgical or
artificial means. Loss of speech means total, permanent and irrecoverable
loss of audible communication. Loss of hearing means total and permanent
loss of hearing in both ears which cannot be corrected by any means. Loss of
a thumb and index finger means complete Severance through or above the
metacarpophalangeal joints (the
<PAGE> 95
joints between the fingers and the hand).
<PAGE> 96
TABLE OF LOSSES AND BENEFITS (CONTINUED)
(In California, loss of a thumb and index finger means loss by complete
Severance of at least one whole phalanx of each.) (In South Carolina, the
complete Severance of four whole fingers from one hand equals the loss of
one hand.)
"Severance" means the complete separation and dismemberment of the part
from the body.
"Paralysis" means loss of use, without Severance, of a limb. This loss must
be determined by a Physician to be complete and not reversible.
LIMITATIONS
Benefits under this rider will not be paid if the loss in any way results
from:
o intentionally self-inflicted injury, suicide or any attempt
thereat, while sane or insane;
o mental infirmity;
o sickness, disease, bodily infirmity, or bacterial or viral
infection, even if contracted by accident. This exclusion does
not apply to bacterial infection that is the natural and
foreseeable result of an accidental external cut or wound;
o declared or undeclared war, an act of war or service in any
military force of any country while such country is engaged in
war;
o performing police duty as a member of a military organization;
o taking part in the commission of a felony;
o voluntary use of any controlled substance, unless prescribed for
the Insured by his Physician. The term "controlled substance" is
defined in Title II of the Federal Comprehensive Drug Abuse
Prevention and Control Act of 1970, as now or hereafter amended;
or
o travel or flight in any aircraft, except as a passenger on a
commercial flight, Employer aircraft, or a military air transport
passenger flight.
TERMINATION
An Insured's coverage provided by this rider will cease on the earliest
date below:
o the date the Insured's insurance ceases, as described in the
Certificate; or
o the last day for which the Insured has paid the required premium
for this rider; or
o the date this rider is cancelled; or
o the Policy Anniversary Date that is the same as or next follows
the normal retirement date of an Insured Employee; or
o the Policy Anniversary Date that is the same as or next follows
the [65th] birthday of [an Insured Spouse, Former Insured
Employee, Former Insured Spouse, or Leave of Absence Employee].
The Insured must notify the Company of the occurrence of any of the above
events. If premium for this benefit is collected beyond the date this
benefit ceases, such premium will be returned and no benefit will be
payable in the event of loss beyond the termination date.
3
<PAGE> 97
TERMINATION (CONTINUED)
[If an Insured Employee or Former Insured Employee's cost of life insurance
is waived as described in the Waiver of Cost of Life Insurance During Total
Disability Rider, his Supplemental Accidental Death, Dismemberment, Loss of
Sight, Speech and Hearing; or Paralysis Benefit will cease on the date his
Waiver of Cost of Life Insurance is approved by the Company. This rider
will be reinstated on the date his Waiver of Cost of Life Insurance ceases,
provided the required premium is paid to the Company for his life insurance
and his Supplemental Accidental Death, Dismemberment, Loss of Sight, Speech
and Hearing; or Paralysis Benefit Rider.]
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
/s/ [ILLEGIBLE] /s/ THOMAS C. JONES
--------------------- -----------------------
Corporate Secretary PRESIDENT
4
<PAGE> 98
WAIVER OF COST OF LIFE INSURANCE DURING TOTAL DISABILITY RIDER
This rider is made a part of the Policy/Certificate to which it is attached.
This rider takes effect on the Policy Effective Date unless a later date is
shown in the Coverage Verification Pages.
BENEFIT
If an Insured Employee or Former Insured Employee becomes Totally Disabled
(as defined) before age [60], his cost of life insurance, the Monthly
Administrative Fee, [and the cost of insurance for his Insured Dependent
Child(ren)'s life insurance, for whom he has elected coverage and who are
covered under his Certificate], will be waived while he remains
continuously Totally Disabled. In addition, any cost of insurance deducted
from his Cash Value by the Company for his life insurance under this
Certificate [and the life insurance for his Insured Dependent Child(ren),
if any,] on or after the date he becomes Totally Disabled, will be refunded
to the Owner. No additional changes in coverage will be allowed after the
Waiver is approved by the Company.
PROOF OF LOSS
In order to qualify for the Waiver of Cost of Life Insurance, an Insured
Employee or Former Insured Employee must submit due proof that he has been
continuously Totally Disabled for [six] months or more. Such proof must be
submitted to the Company no later than one year from the date the Insured
Employee or Former Insured Employee becomes Totally Disabled. After his
cost of life insurance [and the cost of life insurance for his Insured
Dependent Child(ren), if any,] has been waived for one year, such cost of
life insurance will be waived for additional periods of one year if:
o he remains continuously Totally Disabled; and
o he submits to the Company, during the three months before the end
of each such one-year period, proof of the continuation of Total
Disability.
However, the Insured Employee or Former Insured Employee is required to pay
his cost of life insurance [and the cost of life insurance for his Insured
Dependent Child(ren), if any,] if such cost of life insurance:
o was due more than one year before the Company received proof of
his Total Disability; or
o was due but not yet paid if the Insured Employee or Former Insured
Employee becomes Totally Disabled during a Grace Period for
Insureds.
DEATH BENEFIT DURING WAIVER OF COST OF LIFE INSURANCE
If an Insured Employee or Former Insured Employee dies while his cost of
life insurance is being waived, the Death Benefit will be paid only if the
Company receives proof, within one year of his death, that his Total
Disability was continuous from the date we received the last proof of Total
Disability until the date he died.
The Death Benefit payable for [an Insured Employee, Former Insured
Employee, or Insured Dependent Child(ren)] will be the Coverage Amount
determined from The Schedule which was in effect on the day before the date
the Insured Employee or Former Insured Employee became Totally Disabled,
plus the Net Cash Value.
The Coverage Amount may not be increased while the cost of life insurance
is being waived.
<PAGE> 99
TOTAL DISABILITY OR TOTALLY DISABLED
An Insured Employee or Former Insured Employee will be considered Totally
Disabled when he is completely unable to engage in any occupation for wage
or profit because of injury or sickness.
At any time while an Insured Employee or Former Insured Employee's cost of
life insurance is being waived, the Company will have the right to require
proof of his continuing Total Disability and, at its own expense, to have a
Physician of its choice examine him. However, after he has been Totally
Disabled for two years, the Company will require proof no more than once a
year.
TERMINATION
This rider will cease for an Insured Employee or Former Insured Employee
[and his Insured Dependent Child(ren)] on the earliest of:
o the date the Insured Employee or Former Insured Employee is no
longer Totally Disabled; or
o the date the Insured Employee or Former Insured Employee refuses
to submit to any physical examination required by the Company; or
o the last day of any one-year period of Total Disability during
which the Insured Employee or Former Insured Employee fails to
give proof of continuous Total Disability; or
o the date the Insured Employee or Former Insured Employee attains
age [65]; or
o the date the Certificate terminates.
An Insured Employee or Former Insured Employee whose Waiver of Cost of Life
Insurance ceases [for himself and any Insured Dependent Child(ren)] may
continue this insurance by paying the Monthly Deduction directly to the
Company, or through payroll deduction for an Insured Employee, or by having
adequate Cash Value to cover the Monthly Deduction.
For the purposes of this rider, an Insured Employee or Former Insured
Employee's cost of life insurance is deemed to include his Monthly
Administrative Fee.
This rider does not apply to any supplemental coverage, if elected, nor to
any insurance for [an Insured Spouse, Former Insured Spouse,] Former
Insured Dependent Child(ren), Retiree, or Leave of Absence Employee.
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
/s/ [ILLEGIBLE] /s/ THOMAS C. JONES
--------------------- -----------------------
Corporate Secretary PRESIDENT
2
<PAGE> 1
EXHIBIT 1 A (6) (a)
CERTIFICATE OF INCORPORATION OF
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
INCORPORATED BY REFERENCE TO EXHIBIT #6 (a) OF POST EFFECTIVE
AMENDMENT #1 TO REGISTRATION STATEMENT ON FORM N-4 (FILE NUMBER 33-
83020) FILED JUNE 22, 1995 BY CG VARIABLE ANNUITY SEPARATE ACCOUNT II AS
REGISTRANT AND CONNECTICUT GENERAL LIFE INSURANCE COMPANY AS
DEPOSITOR.
<PAGE> 1
EXHIBIT 1 A (6) (b)
BY-LAWS OF CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
INCORPORATED BY REFERENCE TO EXHIBIT #6 (b) OF POST EFFECTIVE
AMENDMENT #1 TO REGISTRATION STATEMENT ON FORM N-4 (FILE NUMBER 33-
83020) FILED JUNE 22, 1995 BY CG VARIABLE ANNUITY SEPARATE ACCOUNT II AS
REGISTRANT AND CONNECTICUT GENERAL LIFE INSURANCE COMPANY AS
DEPOSITOR.
<PAGE> 1
EXHIBIT 1 A (8)
FORM OF PARTICIPATION AGREEMENT BETWEEN
SEPARATE ACCOUNT
AND
INVESTMENT COMPANIES
Incorporated by reference to Exhibit 8 of Registration
Statement on Form S-6 (File Number 33-609670) filed
July 11, 1995 by CG Variable Life Insurance Separate
Account A as Registrant and
Connecticut General Life Insurance Company as Depositor.
<PAGE> 1
EXHIBIT 1 A (10)
FORM OF APPLICATION FOR
GROUP VARIABLE LIFE INSURANCE POLICY
Incorporated by reference to Exhibit 10 to
Pre-effective Amendment #2 to Registration Statement
on Form S-6 (File Number
33-609670) filed December 22, 1995 by CG Variable Life Insurance
Separate Account A as Registrant and Connecticut General Life
Insurance Company as Depositor.
<PAGE> 2
Mailing Address: Hartford, Connecticut 06152
Home Office: Bloomfield, Connecticut
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
APPLICATION FOR [GROUP VARIABLE UNIVERSAL LIFE
INSURANCE]
APPLICATION is hereby made to the Company for group Policy No.XXXXX by [ABC
Company] whose main office address is [Anytown, Your State].
This Application is attached to and made a part of the group Policy. The group
Policy will be effective on [XX/XX/XX, provided the minimum participation
requirement is met].
Said group Policy is hereby approved and the terms thereof are hereby accepted
by the Policyholder. This Application is executed in duplicate; one counterpart
being attached to said group Policy and the other being returned to the Company.
It is agreed that this Application supersedes any previous application for said
group Policy.
[ABC COMPANY]
Signed at [ XYZ State ] by___________________________________
(Signature and Title)
On [ ] Witness [ ]
(Licensed Resident Agent where required
by law)
(THIS COPY TO REMAIN ATTACHED TO THE POLICY)
XX40046(Rev)
********************************************************************************
Mailing Address: Hartford, Connecticut 06152
Home Office: Bloomfield, Connecticut
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
APPLICATION FOR [GROUP VARIABLE UNIVERSAL LIFE
INSURANCE]
APPLICATION is hereby made to the Company for group Policy No.XXXXX by [ABC
Company] whose main office address is [ Anytown, Your State].
This Application is attached to and made a part of the group Policy. The group
Policy will be effective on [XX/XX/XX, provided the minimum participation
requirement is met].
Said group Policy is hereby approved and the terms thereof are hereby accepted
by the Policyholder. This Application is executed in duplicate; one counterpart
being attached to said group Policy and the other being returned to the Company.
It is agreed that this Application supersedes any previous application for said
group Policy.
[ABC COMPANY]
Signed at [ XYZ State ] by___________________________________
(Signature and Title)
On [ ] Witness [ ]
(Licensed Resident Agent where required
by law)
(THIS COPY TO BE RETURNED TO THE COMPANY)
<PAGE> 1
EXHIBIT 1 A (11)
MEMORANDUM DESCRIBING
CONNECTICUT GENERAL LIFE INSURANCE COMPANY'S
ISSUANCE, TRANSFER, AND REDEMPTION PROCEDURES
FOR THE POLICY
Incorporated by reference to Exhibit 11 Registration
Statement on Form S-6 (File Number 33-609670) filed
December 22, 1995 by CG Variable Life Insurance
Separate Account A as Registrant and Connecticut
General Life Insurance Company as Depositor.
<PAGE> 1
EXHIBIT 2
OPINION OF COUNSEL AS TO THE LEGALITY OF THE
SECURITIES BEING REGISTERED
<PAGE> 2
April --, 1997
Securities and Exchange Commission
450 Fifth Street, N. W.
Washington, D. C. 20549
Re: Post Effective Amendment #1 to Form S-6 Registration Statement
CG Variable Life Insurance Separate Account A (the "Separate Account")
Dear Sirs:
As Chief Counsel of the CIGNA Group Insurance division of Connecticut General
Life Insurance Company (the "Company"), I am familiar with the actions of the
Board of Directors establishing the Separate Account and its method of operation
and authorizing the filing of a registration statement, and amendments thereto,
under the Securities Act of 1933 for the securities to be issued by the Separate
Account and under the Investment Company Act of 1940 for the Account itself.
In the course of preparing this opinion, I have reviewed the initial
Registration Statement filed July 11, 1995 as amended by subsequent filings,
this Amendment to the Registration Statement, the group variable life insurance
policies which is the subject of the Registration Statement, and such other
matters as I deemed necessary or appropriate. Based on such a review I am of the
opinion that the group variable universal life insurance policies (and the
certificates thereunder) which are the subject of the Registration Statement
under the Securities Act of 1933 filed for the Separate Account and hereby being
amended, will, when issued, be legally issued and will represent the binding
obligations of the Company, the depositor for the Separate Account.
I consent to the use of this opinion as an Exhibit to the Registration Statement
and to the reference to me under the heading "Experts" in said Registration
Statement.
Very truly yours,
/s/ Jerold H. Rosenblum
Jerold H. Rosenblum
Chief Counsel
<PAGE> 1
EXHIBIT 5
OPINION OF BENJAMIN CLEMENT AS TO ACTUARIAL
MATTERS
<PAGE> 2
April 21, 1997
Connecticut General Life Insurance Company
Two Liberty Place
1601 Chestnut Street
Philadelphia, Pa.
19192
Re: CG Variable Life Insurance Separate Account A
Post Effective Amendment #1 to Registration Statement
S-6 File No. 33-60967
Ladies and Gentlemen:
This opinion is furnished in connection with Post-Effective Amendment #1 to the
Registration Statement filed by Connecticut General Life Insurance Company under
the Securities Act of 1933 recorded as File No. 33-60967. The prospectus
included in the Registration Statement on Form S-6 describes flexible premium
group variable universal life insurance policies (the "Policies"). The forms of
Policies were prepared under my direction, and I am familiar with the
Registration Statement, as amended, and the Exhibits thereto.
In my opinion, the illustrations of benefits under the Policies included in the
Section entitled "Illustrations" in the prospectus, based on assumptions stated
in the illustrations, are consistent with the provisions of the respective forms
of the Policies. The age selected in the illustrations is representative of the
manner in which the Policy operates.
In addition, I have reviewed the fees and charges to the policy, and in my
opinion, the fees and charges, are, in the aggregate, reasonable in relation to
the services rendered, the expenses expected to be incurred, and the risks
assumed by the Company.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to my name under the heading "Experts" in the
prospectus.
Very truly yours,
/s/ Benjamin A. Clement
Benjamin A. Clement, FSA, MAAA
Associate Actuary
<PAGE> 1
EXHIBIT 6
CONSENT OF PRICE WATERHOUSE LLP
<PAGE> 2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment No. 1 to the registration statement of the CG Variable
Life Insurance Separate Account A on Form S-6 of our report dated February 11,
1997, relating to the consolidated financial statements of Connecticut General
Life Insurance Company, which appears in such Prospectus. We also consent to
the reference to us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE, LLP
Hartford, Connecticut
April 24, 1997
<PAGE> 1
EXHIBIT 7
CONSENT OF COUNSEL
<PAGE> 2
SEE EXHIBIT 2
<PAGE> 1
EXHIBIT 8
OPINION AND CONSENT OF
JORDEN, BURT, BERENSON, & JOHNSON
<PAGE> 2
Connecticut General Life Insurance Company
Two Liberty Place
1601 Chestnut Street
P.O. Box 7716
Philadelphia, Pa.
19192-2475
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectus contained in Post-Effective Amendment No. 1 to the
Registration Statement on Form S-6 (File No. 33-60967) filed by Connecticut
General Life Insurance Company ("CG Life") and CG Variable Life Insurance
Separate Account A with the Securities and Exchange Commission pursuant to the
Securities Act of 1933.
Very truly yours,
/s/ Michael Berenson
Jorden, Burt, Berenson & Johnson
