Definitive materials Cg Variable Life Insurance Separate Account A

497 - Definitive materials

Published: 1997-05-06 00:00:00
Submitted: 1997-05-06
Period Ending In: NONE
0000893220-97-000898.txt Complete submission text file
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<SEC-DOCUMENT>0000893220-97-000898.txt : 19970507
<SEC-HEADER>0000893220-97-000898.hdr.sgml : 19970507
ACCESSION NUMBER:		0000893220-97-000898
CONFORMED SUBMISSION TYPE:	497
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		19970506
SROS:			NONE

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CG VARIABLE LIFE INSURANCE SEPARATE ACCOUNT A
		CENTRAL INDEX KEY:			0000946730
		STANDARD INDUSTRIAL CLASSIFICATION:	 []
		IRS NUMBER:				060303370
		STATE OF INCORPORATION:			CT
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		497
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	033-60967
		FILM NUMBER:		97596077

	BUSINESS ADDRESS:	
		STREET 1:		1601 CHESTNUT STREET TLP-47
		STREET 2:		P O BOX 7716
		CITY:			PHILADELPHIA
		STATE:			PA
		ZIP:			19192-2475
		BUSINESS PHONE:		2157615586

	MAIL ADDRESS:	
		STREET 1:		1601 CHESTNUT STREET TLP-47
		CITY:			PHILADELPHIA
		STATE:			PA
		ZIP:			19192-2475
</SEC-HEADER>

Form 497 1 FINAL FILING FOR CG VARIABLE LIFE


<PAGE>   1
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

- --------------------------------------------------------------------------------

         THE GROUP VARIABLE UNIVERSAL LIFE INSURANCE POLICY

- --------------------------------------------------------------------------------

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.

<PAGE>   2
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


                                        2

<PAGE>   3
                                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>

                                        3

<PAGE>   4
<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>


                                        4

<PAGE>   5
                                   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.



                                       5

<PAGE>   6
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.

                                        6

<PAGE>   7
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

                                        7

<PAGE>   8
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%.

                                        8

<PAGE>   9
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.

                                        9

<PAGE>   10
                                   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

                                       10

<PAGE>   11
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.


                                       11

<PAGE>   12
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

                                       12

<PAGE>   13
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>   14


- --------
     (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>   15
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>   16
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>   17
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>   18
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>   19
<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>   20
                                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>   21
     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>   22
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>   23
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>   24
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>   25
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>   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.
(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>   27
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>   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>      
             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>


                                       28

<PAGE>   29
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>   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>
             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>   31
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.


                                       31

<PAGE>   32
                                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>   33
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>   34
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>   35
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>   36
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.

                                       36

<PAGE>   37
          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.


                                       37

<PAGE>   38
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.


                                       38

<PAGE>   39
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>   40
                              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.




                                       40

<PAGE>   41
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>   42
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>   43
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>   44
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>   45

<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>   46
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>   47
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>   48
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>   49
                            CONNECTICUT GENERAL LIFE

                                INSURANCE COMPANY

                        CONSOLIDATED FINANCIAL STATEMENTS


                                DECEMBER 31, 1996












                                       49

<PAGE>   50


   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>   51
                   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>   52
                   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>   53
                   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>   54
                   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>   55
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>   56
    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>   57

    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>   58
<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>   59
    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>   60
    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>   61
    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>   62
    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>   63
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>   64
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>   65
    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>   66
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>   67
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>   68
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>   69
    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>   70
    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>   71
    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>   72
    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>   73
                                  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>   74
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>   75
                     GROUP VARIABLE UNIVERSAL LIFE INSURANCE


ISSUE AGE:  40 YEARS                                  MONTHLY PREMIUM(1): $100
COVERAGE AMOUNT:  $100,000

                     Illustration Assuming Current Charges(2)

Gross Investment Return: 0.00%

<TABLE>
<CAPTION>
End of    Annual Premium                                         Premium
Policy    paid at $100                                           Accumulated
Year      per month          Cash Value(3)    Death Benefit      at 5% per year
- ----      ---------          -------------    ---------------    --------------
<S>       <C>                <C>              <C>                <C>
 1        1200                    944.13           100,944         1,232.26
 2        1200                  1,863.56           101,864         2,526.13
 3        1200                  2,758.57           102,759         3,884.69
 4        1200                  3,615.10           103,615         5,311.18
 5        1200                  4,433.58           104,434         6,809.00
 6        1200                  5,214.43           105,214         8,381.71
 7        1200                  5,958.06           105,958        10,033.05
 8        1200                  6,664.88           106,665        11,766.96
 9        1200                  7,318.60           107,319        13,587.57
10        1200                  7,919.81           107,920        15,499.21
11        1200                  8,469.07           108,469        17,506.42
12        1200                  8,966.96           108,967        19,614.00
13        1200                  9,414.05           109,414        21,826.96
14        1200                  9,791.80           109,792        24,150.57
15        1200                 10,104.13           110,104        26,590.35
16        1200                 10,358.00           110,358        29,152.13
17        1200                 10,544.65           110,545        31,841.99
18        1200                 10,664.84           110,665        34,666.35
19        1200                 10,683.51           110,684        37,631.92
20        1200                 10,601.78           110,602        40,745.78
25        1200                  8,329.55           108,330        58,812.09
30        1200                  1,060.62           101,061        81,869.78
</TABLE>


IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND THE INVESTMENT EXPERIENCE OF THE
PORTFOLIOS OF THE FUND. THE DEATH BENEFIT, CASH VALUE AND CASH SURRENDER VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CERTIFICATE YEARS. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOANS OR PARTIAL SURRENDERS WERE MADE. NO REPRESENTATION
CAN BE MADE BY THE COMPANY OR THE SEPARATE ACCOUNT OR THE UNDERLYING FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER A PERIOD OF TIME.

- --------

      1     Premiums are assumed to be paid monthly in arrears.

      2     Current value illustrations use unismoker rates with monthly cost of
            insurance as shown, and assume the following charges: i) mortality
            and expense risk 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.

      3     Except for the Surrender Charge, the Cash Surrender Value does not
            vary from the Cash Value because these illustrations assume that no
            Policy Loans have been made. The Cash Surrender Value will be $25.00
            less than the Cash Value under the Policies for which the Surrender
            Charge of $25.00 is applied.
<PAGE>   76
                     GROUP VARIABLE UNIVERSAL LIFE INSURANCE

ISSUE AGE:  40 YEARS                                  MONTHLY PREMIUM(4): $100
COVERAGE AMOUNT:  $100,000

                    Illustration Assuming Guaranteed Charges(5)

Gross Investment Return: 0.00  %

<TABLE>
<CAPTION>
End of    Annual Premium                                      Premium
Policy    Paid at $100                                        Accumulated
Year      per month         Cash Value(6)    Death Benefit    at 5% per year
- ----      ---------         -------------    -------------    --------------
<S>       <C>               <C>              <C>              <C>
 1        1200                     590.19       100,590           1,232.26
 2        1200                   1,130.78       101,131           2,526.13
 3        1200                   1,620.15       101,620           3,884.69
 4        1200                   2,054.34       102,054           5,311.18
 5        1200                   2,430.63       102,431           6,809.00
 6        1200                   2,747.55       102,748           8,381.71
 7        1200                   3,001.25       103,001          10,033.05
 8        1200                   3,189.14       103,189          11,766.96
 9        1200                   3,308.67       103,309          13,587.57
10        1200                   3,352.58       103,353          15,499.21
11        1200                   3,314.89       103,315          17,506.42
12        1200                   3,183.79       103,184          19,614.00
13        1200                   2,950.00       102,950          21,826.96
14        1200                   2,599.67       102,600          24,150.57
15        1200                   2,121.49       102,121          26,590.35
16        1200                   1,507.93       101,508          29,152.13
17        1200                     751.58       100,752          31,841.99
18        1200                    (154.87)       99,845          34,666.35
19        1200                  (1,218.63)       98,781          37,631.92
20        1200                  (2,453.89)       97,546          40,745.78
25        1200                 (12,016.65)       87,983          58,812.09
30        1200                 (29,591.66)       70,408          81,869.78
</TABLE>


IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND THE INVESTMENT EXPERIENCE OF THE
PORTFOLIOS OF THE FUND. THE DEATH BENEFIT, CASH VALUE AND CASH SURRENDER VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 0% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CERTIFICATE YEARS. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOANS OR PARTIAL SURRENDERS WERE MADE. NO REPRESENTATION
CAN BE MADE BY THE COMPANY OR THE SEPARATE ACCOUNT OR THE UNDERLYING FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER A PERIOD OF TIME.

- --------

      4     Premiums are assumed to be paid monthly in arrears.

      5     Guaranteed illustrations use unismoker rates with the illustrated
            cost of insurance and assume the following charges: i) mortality and
            expense risk 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.

      6     Except for the Surrender Charge, the Cash Surrender Value does not
            vary from the Cash Value because these illustrations assume that no
            Policy Loans have been made. The Cash Surrender Value will be $25.00
            less than the Cash Value under Policies for which the Surrender
            Charge of $25.00 is applied.
<PAGE>   77
                     GROUP VARIABLE UNIVERSAL LIFE INSURANCE


ISSUE AGE:  40 YEARS                                  MONTHLY PREMIUM(7): $100
COVERAGE AMOUNT:  $100,000

                     Illustration Assuming Current Charges(8)

Gross Investment Return: 6.00 %

<TABLE>
<CAPTION>
End of    Annual Premium                                      Premium
Policy    paid at $100                                        Accumulated
Year      per month         Cash Value(9)    Death Benefit    at 5% per year
- ----      ---------         -------------    -------------    --------------
<S>       <C>               <C>              <C>              <C>
 1        1200                   974.83         100,975           1,232.26
 2        1200                 1,982.64         101,983           2,526.13
 3        1200                 3,025.05         103,025           3,884.69
 4        1200                 4,088.99         104,089           5,311.18
 5        1200                 5,175.50         105,175           6,809.00
 6        1200                 6,285.69         106,286           8,381.71
 7        1200                 7,420.72         107,421          10,033.05
 8        1200                 8,581.80         108,582          11,766.96
 9        1200                 9,752.98         109,753          13,587.57
10        1200                10,944.39         110,944          15,499.21
11        1200                12,150.66         112,151          17,506.42
12        1200                13,369.24         113,369          19,614.00
13        1200                14,600.73         114,601          21,826.96
14        1200                15,826.06         115,826          24,150.57
15        1200                17,044.92         117,045          26,590.35
16        1200                18,256.99         118,257          29,152.13
17        1200                19,461.95         119,462          31,841.99
18        1200                20,659.45         120,659          34,666.35
19        1200                20,812.17         121,812          37,631.92
20        1200                22,917.91         122,918          40,745.78
25        1200                27,274.39         127,274          58,812.09
30        1200                26,925.94         126,926          81,869.78
</TABLE>


IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND THE INVESTMENT EXPERIENCE OF THE
PORTFOLIOS OF THE FUND. THE DEATH BENEFIT, CASH VALUE AND CASH SURRENDER VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CERTIFICATE YEARS. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOANS OR PARTIAL SURRENDERS WERE MADE. NO REPRESENTATION
CAN BE MADE BY THE COMPANY OR THE SEPARATE ACCOUNT OR THE UNDERLYING FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER A PERIOD OF TIME.

- --------

      7     Premiums are assumed to be paid monthly in arrears.

      8     Current value illustrations use unismoker rates with monthly cost of
            insurance as shown, and assume the following charges: i) mortality
            and expense risk 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.

      9     Except for the Surrender Charge, the Cash Surrender Value does not
            vary from the Cash Value because these illustrations assume that no
            Policy Loans have been made. The Cash Surrender Value will be $25.00
            less than the Cash Value under the Policies for which the Surrender
            Charge of $25.00 is applied.
<PAGE>   78
                     GROUP VARIABLE UNIVERSAL LIFE INSURANCE

ISSUE AGE:  40 YEARS                                  MONTHLY PREMIUM(10):$100
COVERAGE AMOUNT:  $100,000

                   Illustration Assuming Guaranteed Charges(11)

Gross Investment Return: 6.00  %

<TABLE>
<CAPTION>
End of    Annual Premium                                       Premium
Policy    Paid at $100                                         Accumulated
Year      per month         Cash Value(12)    Death Benefit    at 5% per year
- ----      ---------         --------------    -------------    --------------
<S>       <C>               <C>               <C>              <C>
 1        1200                   609.45           100,609          1,232.26
 2        1200                 1,204.25           101,204          2,526.13
 3        1200                 1,781.28           101,781          3,884.69
 4        1200                 2,334.83           102,335          5,311.18
 5        1200                 2,860.19           102,860          6,809.00
 6        1200                 3,353.63           103,354          8,381.71
 7        1200                 3,808.82           103,809         10,033.05
 8        1200                 4,220.37           104,220         11,766.96
 9        1200                 4,582.66           104,583         13,587.57
10        1200                 4,884.89           104,885         15,499.21
11        1200                 5,117.01           105,117         17,506.42
12        1200                 5,262.39           105,262         19,614.00
13        1200                 5,306.11           105,306         21,826.96
14        1200                 5,227.68           105,228         24,150.57
15        1200                 5,008.14           105,008         26,590.35
16        1200                 4,631.38           104,631         29,152.13
17        1200                 4,080.58           104,081         31,841.99
18        1200                 3,338.15           103,338         34,666.35
19        1200                 2,385.76           102,386         37,631.92
20        1200                 1,196.84           101,197         40,745.78
25        1200                (9,670.20)           90,330         58,812.09
30        1200               (33,246.46)           66,754         81,869.78
</TABLE>


IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND THE INVESTMENT EXPERIENCE OF THE
PORTFOLIOS OF THE FUND. THE DEATH BENEFIT, CASH VALUE AND CASH SURRENDER VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 6% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR
BELOW THAT AVERAGE FOR INDIVIDUAL CERTIFICATE YEARS. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOANS OR PARTIAL SURRENDERS WERE MADE. NO REPRESENTATION
CAN BE MADE BY THE COMPANY OR THE SEPARATE ACCOUNT OR THE UNDERLYING FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER A PERIOD OF TIME.

- --------

      10    Premiums are assumed to be paid monthly in arrears.

      11    Guaranteed illustrations use unismoker rates with the illustrated
            cost of insurance and assume the following charges: i) mortality and
            expense risk 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.

      12    Except for the Surrender Charge, the Cash Surrender Value does not
            vary from the Cash Value because these illustrations assume that no
            Policy Loans have been made. The Cash Surrender Value will be $25.00
            less than the Cash Value under Policies for which the Surrender
            Charge of $25.00 is applied.
<PAGE>   79
                     GROUP VARIABLE UNIVERSAL LIFE INSURANCE


ISSUE AGE:40 YEARS                                    MONTHLY PREMIUM(13):$100
COVERAGE AMOUNT:$100,000

                     Illustration Assuming Current Charges(14)

Gross Investment Return: 12.00 %

<TABLE>
<CAPTION>
End of    Annual Premium                                       Premium
Policy    paid at $100                                         Accumulated
Year      per month         Cash Value(15)    Death Benefit    at 5% per year
- ----      ---------         --------------    -------------    --------------
<S>       <C>               <C>               <C>              <C>
 1        1200                  1,004.99         101,005          1,232.26
 2        1200                  2,104.29         102,104          2,526.13
 3        1200                  3,308.18         103,308          3,884.69
 4        1200                  4,612.81         104,613          5,311.18
 5        1200                  6,029.18         106,029          6,809.00
 6        1200                  7,569.46         107,569          8,381.71
 7        1200                  9,247.15         109,247         10,033.05
 8        1200                 11,083.74         111,084         11,766.96
 9        1200                 13,079.10         113,079         13,587.57
10        1200                 15,243.70         115,244         15,499.21
11        1200                 17,596.00         117,596         17,506.42
12        1200                 20,156.44         120,156         19,614.00
13        1200                 22,947.73         122,948         21,826.96
14        1200                 25,974.70         125,975         24,150.57
15        1200                 29,263.05         129,263         26,590.35
16        1200                 32,841.26         132,841         29,152.13
17        1200                 36,740.92         136,741         31,841.99
18        1200                 40,997.09         140,997         34,666.35
19        1200                 45,610.52         145,611         37,631.92
20        1200                 50,620.16         150,620         40,745.78
25        1200                 82,896.26         182,896         58,812.09
30        1200                130,252.22         230,252         81,869.78
</TABLE>


IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND THE INVESTMENT EXPERIENCE OF THE
PORTFOLIOS OF THE FUND. THE DEATH BENEFIT, CASH VALUE AND CASH SURRENDER VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THAT AVERAGE FOR INDIVIDUAL CERTIFICATE YEARS. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOANS OR PARTIAL SURRENDERS WERE MADE. NO REPRESENTATION
CAN BE MADE BY THE COMPANY OR THE SEPARATE ACCOUNT OR THE UNDERLYING FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER A PERIOD OF TIME.

- --------

      13    Premiums are assumed to be paid monthly in arrears.

      14    Current value illustrations use unismoker rates with monthly cost of
            insurance as shown, and assume the following charges: i) mortality
            and expense risk 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.

      15    Except for the Surrender Charge, the Cash Surrender Value does not
            vary from the Cash Value because these illustrations assume that no
            Policy Loans have been made. The Cash Surrender Value will be $25.00
            less than the Cash Value under the Policies for which the Surrender
            Charge of $25.00 is applied.
<PAGE>   80
                     GROUP VARIABLE UNIVERSAL LIFE INSURANCE

ISSUE AGE:  40 YEARS                                  MONTHLY PREMIUM(16):$100
COVERAGE AMOUNT:  $100,000

                  Illustration Assuming Guaranteed Charges(17)

Gross Investment Return: 12.00  %

<TABLE>
<CAPTION>
End of    Annual Premium                                       Premium
Policy    Paid at $100                                         Accumulated
Year      per month         Cash Value(18)    Death Benefit    at 5% per year
- ----      ---------         --------------    -------------    --------------
<S>       <C>               <C>               <C>              <C>
 1          1200                 628.38           100,628          1,232.26
 2          1200               1,279.35           101,279          2,526.13
 3          1200               1,952.74           101,953          3,884.69
 4          1200               2,645.82           102,646          5,311.18
 5          1200               3,356.85           103,357          6,809.00
 6          1200               4,085.18           104,085          8,381.71
 7          1200               4,827.54           104,828         10,033.05
 8          1200               5,581.59           105,582         11,766.96
 9          1200               6,344.77           106,345         13,587.57
10          1200               7,109.15           107,109         15,499.21
11          1200               7,867.26           107,867         17,506.42
12          1200               8,604.50           108,605         19,614.00
13          1200               9,307.30           109,307         21,826.96
14          1200               9,955.59           109,956         24,150.57
15          1200              10,541.30           110,541         26,590.35
16          1200              11,037.29           110,037         29,152.13
17          1200              11,422.95           111,423         31,841.99
18          1200              11,676.61           111,677         34,666.35
19          1200              11,774.35           111,774         37,631.92
20          1200              11,682.13           111,682         40,745.78
25          1200               6,490.15           106,490         58,812.09
30          1200             (13,683.99)           86,316         81,869.78
</TABLE>

IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND THE INVESTMENT EXPERIENCE OF THE
PORTFOLIOS OF THE FUND. THE DEATH BENEFIT, CASH VALUE AND CASH SURRENDER VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THAT AVERAGE FOR INDIVIDUAL CERTIFICATE YEARS. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOANS OR PARTIAL SURRENDERS WERE MADE. NO REPRESENTATION
CAN BE MADE BY THE COMPANY OR THE SEPARATE ACCOUNT OR THE UNDERLYING FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER A PERIOD OF TIME.

- --------

      16    Premiums are assumed to be paid monthly in arrears.

      17    Guaranteed illustrations use unismoker rates with the illustrated
            cost of insurance and assume the following charges: i) mortality and
            expense risk 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.

      18    Except for the Surrender Charge, the Cash Surrender Value does not
            vary from the Cash Value because these illustrations assume that no
            Policy Loans have been made. The Cash Surrender Value will be $25.00
            less than the Cash Value under Policies for which the Surrender
            Charge of $25.00 is applied.
 
 
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
Additional Files
FileSequenceDescriptionTypeSize
0000893220-97-000898.txt   Complete submission text file   259074

© 2019 SEC.report
SEC CFR Title 17 of the Code of Federal Regulations.