SEC File No. 333-011611
SEC File No. 811-02047
As filed with the Securities and Exchange Commission
on April 5, 1996
_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 12 [X]
(Check appropriate box or boxes)
MBL VARIABLE CONTRACT ACCOUNT-2
(Previously known as Mutual Benefit Variable Contract Account-2)
(Exact name of Registrant)
MBL LIFE ASSURANCE CORPORATION
Successor to The Mutual Benefit Life Insurance Company
(Name of Depositor)
520 Broad Street
Newark, New Jersey 07102-3111
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code: (201) 481-8000
Judith C. Keilp, Esq.
Counsel
MBL Life Assurance Corporation
520 Broad Street
Newark, New Jersey 07102-3111
(Name and Address of Agent for Service)
_________________________________________________________________
Approximate Date of Proposed Public Offering: As soon as
practicable after the effective date of the Registration Statement
under the Securities Act of 1933.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940,
the Registrant has elected to register an indefinite amount of
securities. The $500 filing fee required pursuant to Rule 24f-2
has been paid.
The registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933 or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT-2
previously known as
MUTUAL BENEFIT VARIABLE CONTRACT ACCOUNT-2
________________________________________________________________
CROSS REFERENCE SHEET
Cross reference sheet showing location in the Prospectus of
information required by the Items in Part A of Form N-4.
Item Number Heading in Prospectus
1 Cover Page
2 Index of Terms
3 Summary of Group Variable Annuity
Contracts
4 Performance Related Information,
Accumulation Unit Values
5 The Account, The Fund
6 Charges and Expenses
7 Accumulation Account;
General Rights; Other Contract
Provisions
8 Annuity
9 Accumulation Accounts - Death
Benefit
10 Accumulation Accounts
11 Accumulation Account - Redemption
12 Federal Income Tax Status
13 Legal Developments
14 Table of Contents - Statement of
Additional Information
____________________________________________________________
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT-2
MBL Life Assurance Corporation
520 Broad Street, Newark, New Jersey 07102-3111
, 1996
The group variable annuity contracts (the "Contracts")
described in this Prospectus were issued by The Mutual Benefit
Life Insurance Company ("Mutual Benefit Life") and assumptively
reinsured by MBL Life Assurance Corporation ("MBL Life") to
provide for retirement payments and other benefits for persons
covered ("Participants") under plans qualified for federal income
tax advantages ("Qualified Plans") under Section 401, 403(b), 408
or 457 of the Internal Revenue Code of 1986, as amended (the
"Code"). Contracts were issued to employers or associations
which established Qualified Plans or to trustees or custodians
serving in conjunction with such Plans ("Contract Holders"). The
Contracts provide benefits for Participants covered under those
Plans and their beneficiaries. In most cases, a Group Fixed
Annuity Companion Contract (the "Companion Contract"), which is
not described in this Prospectus, was also issued to the Contract
Holder.
Sales of new Contracts ceased July 16, 1991. MBL Life does
not intend to resume sales of new Contracts. As of the effective
date of this Prospectus, however, additional purchase payments
are being accepted from existing and new Participants under the
Contracts.
Under the Contracts, purchase payments will be accumulated
before retirement ("Accumulation Period"), and annuity payments
can be received after retirement ("Annuity Period"), on a
variable basis. Variable accumulations and variable annuity
payments are funded through MBL Variable Contract Account-2 (the
"Account"), which is a "separate account" of MBL Life. The
Account invests in shares of MBL Growth Fund, Inc. (the "Fund"),
a mutual fund with the primary investment objective of long-term
appreciation of capital.
Existing Contracts, issued by Mutual Benefit Life, were
assumed and reinsured as of May 1, 1994 by MBL Life, in
accordance with the Rehabilitation Plan of Mutual Benefit Life as
approved by the Superior Court of New Jersey. Substantially all
of the assets and certain liabilities, including all insurance
liabilities, of Mutual Benefit Life were transferred to MBL Life
as of May 1, 1994 (the "Transfer"). In addition, the assets and
liabilities of the Account were transferred to a new separate
account of MBL Life. MBL Life agreed to assume all the assets
and liabilities of the Account. (See "The Account - Legal
Developments".)
This Prospectus sets forth concisely the information about
the Account that Contract Holders and Participants should know
before investing. Additional information about the Account has
been filed with the Securities and Exchange Commission (the
"SEC") including a Statement of Additional Information which is
incorporated herein by reference. The Statement of Additional
Information is available upon request and without charge from MBL
Life. Write to: Pension and Investment Products, MBL Life
Assurance Corporation, 520 Broad Street, Newark, New Jersey
07102-3111, Attn: MBL VARIABLE CONTRACT ACCOUNT-2, or telephone:
1-800-435-3191. Contract Holder or Participant inquiries may be
made to the same address or telephone number. The table of
contents for the Statement of Additional Information appears on
page __.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED
BY THE CURRENT PROSPECTUS OF MBL GROWTH FUND, INC.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
The date of the Statement of Additional Information is ,
1996.
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY OF GROUP VARIABLE ANNUITY CONTRACTS
Fee Table . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Eligible Contract Holders . . . . . . . . . . . . . . . . . . 5
Basic Provisions . . . . . . . . . . . . . . . . . . . . . . . 5
Variable Accumulation Account . . . . . . . . . . . . . . . . 5
Variable Annuity . . . . . . . . . . . . . . . . . . . . . . . 6
Assumption of Risks. . . . . . . . . . . . . . . . . . . . . . 6
Redemption and Death Benefit . . . . . . . . . . . . . . . . . 6
ACCUMULATION UNIT VALUES . . . . . . . . . . . . . . . . . . . 7
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 7
PERFORMANCE RELATED INFORMATION. . . . . . . . . . . . . . . . 7
THE ACCOUNT
Organization . . . . . . . . . . . . . . . . . . . . . . . . . 8
Legal Developments . . . . . . . . . . . . . . . . . . . . . . 8
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Administration and Distribution. . . . . . . . . . . . . . . . 10
THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . 10
CHARGES AND EXPENSES
Premium Tax. . . . . . . . . . . . . . . . . . . . . . . . . . 11
Charges for Expense Risk, Mortality Risk and
Minimum Death Benefit. . . . . . . . . . . . . . . . . . . . 11
Investment Advisory Fee. . . . . . . . . . . . . . . . . . . . 12
Other Charges. . . . . . . . . . . . . . . . . . . . . . . . . 12
ACCUMULATION ACCOUNT
Purchase Payments. . . . . . . . . . . . . . . . . . . . . . . 12
Variable Accumulation Account. . . . . . . . . . . . . . . . . 12
Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Death Benefit . . . . . . . . . . . . . . . . . . . . . . . . 16
ANNUITY
Annuity Commencement Date . . . . . . . . . . . . . . . . . . 16
Purchase of Annuity. . . . . . . . . . . . . . . . . . . . . . 17
Forms of Annuity . . . . . . . . . . . . . . . . . . . . . . . 17
Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . 18
Variable Annuity Unit Value. . . . . . . . . . . . . . . . . . 18
GENERAL RIGHTS
Voting Rights. . . . . . . . . . . . . . . . . . . . . . . . . 19
Confirmation of Transactions . . . . . . . . . . . . . . . . . 20
Reports . . . . . . . . . . . . . . . . . . . . . . . . . . 20
457 Plan Participant . . . . . . . . . . . . . . . . . . . . . 20
FEDERAL INCOME TAX STATUS
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . 20
Taxation of MBL Life . . . . . . . . . . . . . . . . . . . . . 21
Tax Status of the Contract . . . . . . . . . . . . . . . . . . 21
Retirement Plans . . . . . . . . . . . . . . . . . . . . . . . 22
Taxation of Distribution . . . . . . . . . . . . . . . . . . . 24
Withholding . . . . . . . . . . . . . . . . . . . . . . . . . 25
Possible Changes in Taxation . . . . . . . . . . . . . . . . . 25
Other Tax Consequences . . . . . . . . . . . . . . . . . . . . 25
OTHER CONTRACT PROVISIONS
Beneficiary. . . . . . . . . . . . . . . . . . . . . . . . . . 25
Non-Assignability. . . . . . . . . . . . . . . . . . . . . . . 25
Portability. . . . . . . . . . . . . . . . . . . . . . . . . . 25
Failure of Plan to Qualify . . . . . . . . . . . . . . . . . . 26
Discontinuance . . . . . . . . . . . . . . . . . . . . . . . . 26
Transfer to New Funding Agency . . . . . . . . . . . . . . . . 26
Changes in Contract. . . . . . . . . . . . . . . . . . . . . . 27
Other Changes. . . . . . . . . . . . . . . . . . . . . . . . . 27
TABLE OF CONTENTS - STATEMENT OF ADDITIONAL INFORMATION. . . . 28
INDEX OF TERMS
The following terms are explained on the pages indicated.
Account . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Accumulation Period. . . . . . . . . . . . . . . . . . . . . . 1
Annuity Commencement Date. . . . . . . . . . . . . . . . . . . 16
Annuity Period . . . . . . . . . . . . . . . . . . . . . . . . 1
Beneficiary. . . . . . . . . . . . . . . . . . . . . . . . . . 25
Code . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Companion Contract . . . . . . . . . . . . . . . . . . . . . . 1
Contract Holder. . . . . . . . . . . . . . . . . . . . . . . . 1
IRA Plan . . . . . . . . . . . . . . . . . . . . . . . . 5, 23
First Priority . . . . . . . . . . . . . . . . . . . . . . . . 10
401 Plan . . . . . . . . . . . . . . . . . . . . . . . . 5, 22
403(b) Plan. . . . . . . . . . . . . . . . . . . . . . . . 5, 23
457 Plan . . . . . . . . . . . . . . . . . . . . . . . . 5, 23
MBL Life . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Mutual Benefit Life . . . . . . . . . . . . . . . . . . . . . 1
Net Purchase Payment . . . . . . . . . . . . . . . . . . . . . 5
1940 Act . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Participant. . . . . . . . . . . . . . . . . . . . . . . . . . 1
Qualified Plan . . . . . . . . . . . . . . . . . . . . . . . . 1
Rehabilitation Plan . . . . . . . . . . . . . . . . . . . . . 1
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Valuation Date . . . . . . . . . . . . . . . . . . . . . . . . 13
Variable Accumulation Account. . . . . . . . . . . . . . . . . 5
Variable Accumulation Unit . . . . . . . . . . . . . . . . . . 12
Variable Annuity . . . . . . . . . . . . . . . . . . . . . . . 6
Variable Annuity Unit. . . . . . . . . . . . . . . . . . . . . 18
<PAGE>
SUMMARY OF GROUP VARIABLE ANNUITY CONTRACTS
Fee Table
The purpose of the Fee Table is to help Contract Holders and
Participants (see "Basic Provisions") understand the various
Account and Fund expenses which they will bear, directly or
indirectly. The Fee Table, including the Example below, shows
the expenses that are deducted from both the Account and the
Fund. For a description of the Account's expenses, see "Charges
and Expenses". For a description of the Fund's expenses, see
"Management" in the Fund Prospectus.
Account Annual Expenses
(as a percentage of average daily Account value)
Expense Risk Charge 0.25%
Mortality Risk and Death Benefit Charge 0.12%
Total Account Annual Expenses 0.37%
Fund Annual Expenses
(as a percentage of Fund's daily average net assets)
Management Fees 0.37%
Other Expenses 0.49%
Total Fund Expenses* 0.86%
Example
A $1,000 investment in the Account would be subject to the
expenses indicated, assuming (1) a 5.0% annual return and (2)
redemption at the end of each time period shown;**
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$13 $39 $68 $149
This example should not be considered a representation of
past or future expenses for the Account.
Actual expenses may be greater or less than those shown
above. Similarly, the annual rate of return assumed in the
Example is not an estimate or guarantee of future investment
performance.
The expenses listed above do not include premium taxes,
currently charged by various states of up to 3.5%, which will be
deducted and paid to the states as required. (See "Charges and
Expenses - Premium Tax".)
_____________________________________
* The Fund's investment adviser has agreed to assume all
operating expenses of the Fund which, on an annual basis,
exceed 1.5% of the first $30 million of the Fund's average
daily net asset value and which exceed 1% of any amount in
excess of $30 million. The operating expenses of the Fund
did not exceed these limits during the 1995 fiscal year;
therefore, the amount of expenses incurred has not been
affected.
** There are no charges imposed upon redemption.
<PAGE>
Eligible Contract Holders
The Contracts described in this Prospectus are designed to
provide variable benefits for the following Qualified Plans:
1. employees covered under annuity purchase arrangements
adopted pursuant to Section 403(b) of the Code by public
school systems and non-profit organizations described in
Section 501(c)(3) of the Code ("403(b) Plans"), including
former employees who have been covered under other such
annuity purchase arrangements and have not withdrawn their
account balances;
2. employees covered under plans maintained by corporations,
partnerships and sole proprietorships which are qualified
under Section 401 of the Code ("401 Plans");
3. employees covered under deferred compensation plans
qualified under Section 457 of the Code ("457 Plans");
4. employees covered under individual retirement account plans
qualified under Section 408 of the Code ("IRA Plans" or "408
Plans").
The Code affords certain federal income tax advantages to
employers, employees and beneficiaries covered under these plans.
(See "Federal Income Tax Status".)
Basic Provisions
Net Purchase Payments made for or by Participants are
invested during the Accumulation Period before retirement. "Net
Purchase Payment" means the amount of a purchase payment for a
Participant, less any premium tax. At retirement, the current
value of the accumulation may be used to buy annuities designed
to provide Participants with monthly payments for life or shorter
specified periods, during the Annuity Period following
retirement.
The Companion Contract, which is not described in this
Prospectus, was issued to the Contract Holder in conjunction with
each Contract issued. The charges and benefits under the
Companion Contract are included in the terms of that contract,
which is separate from the Contracts described in this
Prospectus.
New Participants, who enroll after the effective date of
this Prospectus, participating in plans qualified under Section
408 of the Code and, for residents of New York, plans qualified
under Section 403(b), are entitled to a return of their initial
premium payments without cost within ten days of purchase under a
ten-day revocation provision.
Variable Accumulation Account. Under the Contract, Net Purchase
Payments and/or permitted transfers from the Companion Contract
and/or MBL Variable Contract Account-7 ("VCA-7") are allocated to
an Account established on behalf of a Participant ("Variable
Accumulation Account"). (See "Transfers".) Amounts allocated to
a Variable Accumulation Account are placed in the Account. The
assets of the Account are invested in shares of the Fund, a
mutual fund with the primary investment objective of long-term
appreciation of capital. The value of a Participant's Variable
Accumulation Account varies up or down from day to day, depending
on the value of the securities owned by the Fund, and no
assurance of investment results is made.
Variable Annuity. The funds used to buy a variable annuity
remain in the Account. Since the Account invests in shares of
the Fund, the dollar amount of variable annuity payments varies
up and down from month to month, depending on the value of the
securities owned by the Fund, and no assurance of investment
results is made.
Assumption of Risks
MBL Life assumes the expense and mortality risks under the
Contracts. In doing so, it agrees (1) to pay all expenses during
the life of the Contracts, even if the charges made under the
Contracts do not cover the actual expenses incurred, (2) to
continue making life annuity payments under the Contracts, even
if Annuitants, as a class, live longer than actuarially assumed,
and, (3) to pay the minimum death benefit due. (See
"Accumulation Account - Death Benefit".) A charge is imposed on
the Account for MBL Life's assumption of these risks. (See
"Charges and Expenses -Risk and Death Benefit Charges".)
Redemption and Death Benefit
Subject to any Qualified Plan restriction, the current value
of a Participant's Variable Accumulation Account may be
withdrawn, in whole or in part, at any time before the annuity
payments begin (the "Annuity Commencement Date") under a
Contract. (See "Accumulation Account - Redemption".) A penalty
and/ or tax may be incurred under the Code upon withdrawal of
amounts accumulated under the Contracts offered by this
Prospectus, including a 10% penalty generally imposed on the
taxable amount of withdrawals prior to age 59 1/2 (subject to
certain exceptions). (See "Federal Income Tax Status".)
If a Participant dies before retirement, his or her
beneficiary receives the greater of either (1) the current value
of the Participant's Variable Accumulation Account as of the date
MBL Life receives due proof of death, or (2) the full amount of
all purchase payments less all transfers and redemptions made for
the Participant.
ACCUMULATION UNIT VALUES
The Accumulation Unit values as of the beginning of the
period and the end of the period for each of the last ten fiscal
years, as well as the total number of Accumulation Units
outstanding at the end of each fiscal year, are as follows:
<PAGE>
Accumulation Accumulation Number of
Unit Value- Unit Units
Beginning Value-End Outstanding
Year Ending of Period of Period End of Period
December 31, 1995 $86.596 $116.231 307,509
December 31, 1994 85.055 86.596 328,954
December 31, 1993 75.010 85.055 354,251
December 31, 1992 65.668 75.010 379,590
December 31, 1991 53.234 65.668 494,857
December 31, 1990 56.416 53.234 1,014,455
December 31, 1989 44.032 56.416 909,129
December 31, 1988 34.625 44.032 810,345
December 31, 1987 35.483 34.625 794,267
December 31, 1986 29.344 35.483 717,772
December 31, 1985 22.813 29.344 767,545
FINANCIAL STATEMENTS
The financial statements for the Account (as well as the
auditor's report thereon) may be found in the Account's 1995 Audited
Financial Statements. The Account will furnish without charge an
additional copy of these Audited Financial Statements upon request
made to Pension and Investment Products, MBL Life Assurance
Corporation, 520 Broad Street, Newark, New Jersey 07102-3111, Attn:
MBL VARIABLE CONTRACT ACCOUNT-2, or by telephoning 1-800-435-3191.
The financial statements of MBL Life may be found in the
Statement of Additional Information.
PERFORMANCE RELATED INFORMATION
The Account may from time to time advertise "average annual total
return". Average annual total return measures the change in the value
of an investment in the Account's Variable Accumulation Units over the
periods illustrated. (See "Variable Accumulation Account".) This
performance-related information is based upon the Account's past
performance. The investment return and principal value on an
investment in the Account's units will fluctuate so that the units,
when redeemed, may be worth more or less than their original cost.
When the Account advertises its average annual total return, it
will be calculated for one year, five years and ten years and will
assume a total redemption at the end of each period. Average annual
total return is calculated by comparing the value of a hypothetical
$1,000 investment in the Account at the beginning of the relevant
period to the value of the investment at the end of the period
assuming a redemption of all Variable Accumulation Units (see
"Variable Accumulation Account") at the end of the period. (See the
Account's Statement of Additional Information, "Calculation of
Performance Data".) There are no nonrecurring charges to be deducted
upon a redemption of all units.
Average annual total return at the Account level includes all
recurring Contract charges currently applicable. As of the date of
this Prospectus, the only Contract charge currently applicable is 1) a
charge of 0.37%, of which 0.25% is allocated for MBL Life's assumption
of expense risks and 0.12% is allocated for its assumption of
mortality risks and the provisions of the minimum death benefit (see
"Charges and Expenses - Charges for Expense Risk, Mortality Risk and
Minimum Death Benefit", and "Accumulation Account - Death Benefit").
The one-time Participant enrollment fee (up to $15.00) and annual
administration charge (up to $10.00 and up to $0.50 per purchase
payment and transfer, or 2.00% of accumulation accounts, if less)
which were deducted until December 31, 1988, and which were eliminated
as of January 1, 1989, are included in the average annual total return
figures illustrated. The total return figures, as illustrated, do not
take into account any sales charge which would have been deducted from
the purchase payment, if made prior to January 1, 1989. The inclusion
of the sales charge in the total figures would have reduced the
average annual total return illustrated for each period.
The Account may from time to time advertise a comparison of its
average annual total return to the Standard and Poor's 500 Stock Index
(S&P 500) which represents an unmanaged, weighted index of 500
industrial, transportation, utility and financial companies widely
regarded by investors as representative of the stock market. As a
benchmark, this index is not subject to any charges for investment
advisory or other expenses of the type charged at either the Account
or the Fund level. Therefore, the comparison shown in any advertising
by the Account, with this benchmark, may be of limited use.
To calculate the average annual total return, the value of a
Variable Accumulation Account terminated on December 29, 1995 is
divided by the $1,000 purchase payment made by a Participant at the
beginning of each period illustrated. The result of that calculation
is the total growth rate for that period. The total growth rate is
then "annualized" to obtain the average annual percentage increase
(decrease) during the period illustrated. An annualized rate assumes
that a single rate of return, applied each year during the period
illustrated, will produce the ending value, taking into account the
effect of compounding.
THE ACCOUNT
Organization
The Account is registered with the SEC as an investment company,
in the form of a "unit investment trust", under the Investment Company
Act of 1940 (the "1940 Act"). Registration under the 1940 Act
involves regulation by the SEC, but does not involve supervision or
management of investment practices or policies of either the Account
or the Registrant. The Account was established in 1969 under New
Jersey law pursuant to a resolution of the Board of Directors of
Mutual Benefit Life. The assets and liabilities of the Account were
transferred to a separate account of MBL Life as of May 1, 1994
pursuant to a resolution of the Board of Directors of MBL Life.
MBL Life is a New Jersey stock life insurance company,
incorporated in 1972, with its principal office at 520 Broad Street,
Newark, New Jersey. Its stock is held in a Stock Trust, pursuant to
the Rehabilitation Plan of Mutual Benefit Life, MBL Life's former
parent. <PAGE>
Legal Developments
The Account was originally a separate account of Mutual Benefit
Life. On July 16, 1991, the Superior Court of New Jersey ("Court")
entered an Order ("Order") appointing the Insurance Commissioner of
the State of New Jersey as Rehabilitator of Mutual Benefit Life,
thereby granting the Rehabilitator immediate exclusive possession and
control of, and title to, the business and assets of Mutual Benefit
Life, including those of the Account.
In view of the terms and conditions of the Order, on July 16,
1991, Mutual Benefit Life, on behalf of the Account, immediately
ceased acceptance of applications for new Contracts and additional
purchase payments under existing Contracts. The cessation of
additional purchase payments continued from July 16, 1991 until the
effective date of this Prospectus. Because the Account was a separate
account of Mutual Benefit Life, the assets and liabilities of the
Account were maintained separate and apart from Mutual Benefit Life's
general account assets and liabilities. Transfers to the VCA-7
Contract were temporarily suspended. Transfers from the Account to
the Companion Contract were temporarily prohibited and withdrawals
from the Companion Contract were restricted during the Rehabilitation
Period. Death benefit payments upon the death of each Participant
continued to be made to the beneficiaries.
A Rehabilitation Plan was developed by the Rehabilitator, the
terms of which were subsequently approved and confirmed by the Court
in January 1994. Certain terms and conditions of the Rehabilitation
Plan have been appealed by parties to the Rehabilitation Plan, and
litigation brought against Mutual Benefit Life, the ultimate
resolution of which cannot be determined at this time.
The Rehabilitation Plan stipulated that the assets and
liabilities of the Account would be transferred from Mutual Benefit
Life to a separate account of MBL Life. The transfer was effected
pursuant to an assumption reinsurance transaction on May 1, 1994.
Under the Rehabilitation Plan, MBL Life assumed substantially all of
the business, assets and liabilities of Mutual Benefit Life. MBL Life
will operate under and is governed by the terms and conditions of the
Rehabilitation Plan until the termination of the Rehabilitation
Period, not later than December 31, 1999. While the Rehabilitation
Plan was developed based on the Rehabilitator's best estimates, no
assurance can be provided that the Rehabilitation Plan will ultimately
be successful. For more information, see the financial statements of
MBL Life contained in the Statement of Additional Information.
As of May 1, 1994, all of the issued and outstanding shares of
MBL Life were placed in a Stock Trust which is to terminate at the end
of the Rehabilitation Period. The Commissioner of Insurance was
appointed Trustee of the Stock Trust. On July 5, 1995, Alan J. Bowers
was appointed President and Chief Executive Officer of MBL Life.
MBL Life reserves all rights regarding the use of its name, or
any part of its name, including the right to withdraw its use by the
Account or to grant its use to any other investment company or entity.
<PAGE>
Assets
The assets placed in the Account include (1) amounts allocated to
provide Variable Accumulation Accounts or variable annuities under the
Contracts and (2) advances made by MBL Life for support of its
obligations under the Contracts.
While the Account is an asset of MBL Life, it is held separately
from all other assets of MBL Life. The Contracts provide that any
income, gains or losses, whether or not realized, from assets
allocated to the Account, in accordance with the Contract, are
credited to or charged against the Account without regard to any other
income, gains or losses of MBL Life. The assets of the Account may
not be charged with liabilities arising out of any other business of
MBL Life. The Contracts also provide that MBL Life shall maintain the
assets of the Account in an amount at least equal to the amount
required for MBL Life to meet its obligations under the Contracts, as
determined at least once each year. MBL Life will transfer cash from
its general account to make up any deficiency in the Account and,
conversely, may transfer any excess assets in cash from the Account to
its general account or hold any such excess in the Account.
Advances made to the Account by Mutual Benefit Life prior to
December 31, 1989 in connection with the operation of the Account were
not subject to deductions for the enrollment fee, the sales charge and
the administrative charge then in effect. To the extent that the 1940
Act requires MBL Life to hold voting rights with respect to such
amounts, MBL Life, as a matter of policy, will cast its votes on each
matter in the same proportion as those cast by Contract Holders.
Administration and Distribution
The Account has no directors, officers, or employees. First
Priority Investment Corporation ("First Priority") serves as the
Account's principal underwriter. First Priority is a wholly-owned
indirect subsidiary of MBL Life. First Priority also serves as
principal underwriter for MBL Variable Contract Account-3, and MBL
Variable Contract Account-7, which are other separate accounts of MBL
Life, and as distributor for mutual funds sponsored by MBL Life.
First Priority also engages in the sale of other investment company
securities and other financial products. Administrative services
necessary for the operation of the Account and the Contracts are
provided by MBL Life. These administrative services include, but are
not limited to, processing purchase payments, annuity payments,
redemptions and transfers; making commission payments; furnishing
confirmation notices and periodic reports; preparing prospectuses,
voting materials and tax reports; and providing or arranging for
accounting, actuarial and legal services.
THE FUND
The primary objective of the Account is to provide annuity
payments which are designed to guard against adverse changes in the
cost of living both during the Accumulation Period and during the
Annuity Period. In seeking to achieve this objective, the assets of
the Account are invested in shares of the Fund, a mutual fund
investing primarily in common stocks and other equity type
investments. Information about the Fund, including its investment
objectives and policies, is set out in the Fund prospectus which
should be read together with this Prospectus. The investor should
read the Fund's prospectus carefully before investing. Copies of the
Fund's Prospectus and Statement of Additional Information are
available upon request and without charge from MBL Life. Write to:
Pension and Investment Products, MBL Life Assurance Corporation, 520
Broad Street, Newark, New Jersey 07102-3111, Attn: MBL Variable
Contract Account-2, or telephone: 1-800-435-3191.
The Fund's investment adviser is Markston Investment Management
("Markston"), a partnership between Markston International, Inc. and
MBL Sales Corporation ("MBL Sales"). MBL Sales is a wholly-owned
indirect subsidiary of MBL Life.
Historically, the value of a sizeable and representative group of
common stocks, held for an extended period of time, has tended to
rise, particularly during periods of rising costs. However, there has
been no exact correlation, and for some periods, the value of common
stocks has fallen, while the cost of living was rising. Accordingly,
no assurance can be given that the Account will achieve its objective.
The Account buys Fund shares with no sales load. Any dividend or
capital gains distribution received from the Fund is ordinarily
credited in the form of additional Fund shares. To the extent nec-
essary to make payments promised under the Contracts, the Account
redeems Fund shares at net asset value with no redemption fee.
CHARGES AND EXPENSES
Premium Tax
Premium taxes, ranging up to 3.50%, are currently levied by
various states. If premium taxes are incurred by an Account, a charge
for the amount of these taxes will be made when the taxes are
incurred.
Charges for Expense Risk, Mortality Risk and Minimum Death Benefit
A charge at the annual rate of 0.37% is made daily against each
Participant's Variable Accumulation Account and against each
Annuitant's variable annuity. The allocation of the charge during the
Accumulation Period is 0.25% for MBL Life's assumption of expense
risks and 0.12% for its assumption of mortality risks and the
provision of the minimum death benefit. After the commencement of
annuity payments, all of this 0.37% is for mortality risks. MBL Life
reserves the right to alter the allocation of the charge between these
items, based on its experience in administering the Contracts.
If these charges are less than the expenses assumed, MBL Life may
suffer a loss. However, if the charges are more than the expenses
assumed by MBL Life, then there will be a contribution to MBL Life's
surplus, which may be used for any legitimate corporate purpose,
including distribution of the Contracts.
<PAGE>
Investment Advisory Fee
For the investment advisory services of Markston, the Fund pays a
periodic fee based on a percentage of net assets. The fee is
reflected in the net asset value computation for the Fund, computed
and accrued daily and paid quarterly.
The investment advisory compensation arrangement as well as the
expenses of the Fund are fully described in the Fund's prospectus and
the Fund's Statement of Additional Information.
Other Charges
Currently, no charges are made against the Account for MBL Life's
federal income taxes, or provisions for such taxes, that may be
attributable to the Account. MBL Life may charge the Account for its
portion of any income tax charged to MBL Life on the Account or its
assets. Under present laws, MBL Life may incur state and local taxes
(in addition to premium taxes) in several states. At present, these
taxes are not significant. If they increase, however, MBL Life may
decide to make charges for such taxes, or provisions for such taxes,
against the Account. Any charges made against the Account could have
an adverse effect on the investment experience of the Account.
ACCUMULATION ACCOUNT
Purchase Payments
Initial Net Purchase Payments are invested at the value next
computed, not later than two business days, after an application in
good order and payment has been received by MBL Life at its Home
Office in Newark, New Jersey (the "Home Office").
The Contracts offer flexible purchase payment arrangements which
may be tailored for individual plans as follows:
Frequency. Purchase payments may be made for active Participants
whenever desired, except not more frequently than every two
weeks.
Amount. Under 403(b), 408, and 457 Plans, the annuity purchase
agreement or salary reduction agreement, between each Participant
and his or her employer must specify that contributions on the
Participant's behalf will be at least $240 during each year under
the Plan.
Continuity. Purchase payments for a Participant may be
discontinued at any time, without any effect on the Participant's
rights under the Contract. Purchase payments may be resumed at a
later date at no additional charge.
Variable Accumulation Account
Net Purchase Payments are allocated to a Participant's Variable
Accumulation Account and transfers from VCA-7 are applied to purchase
Variable Accumulation Units. Each Variable Accumulation Unit
represents a proportionate interest in the assets of the Account. The
investment performance of the Fund and deduction of charges and
expenses (see "Charges and Expenses") affect the value of the Variable
Accumulation Units as described below.
The number of Variable Accumulation Units purchased is equal to
each Net Purchase Payment, divided by the current dollar value of a
Variable Accumulation Unit, after the initial purchase payment, at the
value next computed after receipt of each purchase payment.
The value of a Variable Accumulation Unit was $10 for January 21,
1971, the day when sales of the Contracts commenced. For a list of
the Variable Accumulation Unit values on the last Valuation Date of
each quarter for each of the last ten fiscal years, see the Account's
Statement of Additional Information. For a list of the Variable
Accumulation Unit values on the last Valuation Date of each of the
last ten fiscal years, see "Accumulation Unit Values".
The Variable Accumulation Unit is calculated as of the end of
each Valuation Date, which is a day when the New York Stock Exchange
is open for trading. For any Valuation Date, the Variable
Accumulation Unit value is equal to the value for the preceding
Valuation Date multiplied by the Net Investment Factor for the current
Valuation Date. For any day which is not a Valuation Date, the
Variable Accumulation Unit value is equal to the value for the
following Valuation Date. The Variable Accumulation Unit value may
vary either up or down on each Valuation Date.
The Net Investment Factor for any Valuation Date is equal to the
Gross Investment Factor less a deduction at an effective annual rate
of 0.37% for the expense and mortality risk and death benefit charges.
The Gross Investment Factor as of a Valuation Date is equal to (1) the
net asset value of a Fund share computed as of the close of regular
trading on the New York Stock Exchange on that date, plus the per
share amount of any dividends and other distributions made by the Fund
since the preceding Valuation Date, less a deduction for any
applicable taxes (at present, no such federal tax is payable), divided
by (2) the net asset value of a Fund share computed as of such close
on the preceding Valuation Date. For a hypothetical example
illustrating the computation of the Variable Accumulation Unit value
and the Net Investment Factor, see the Account's Statement of
Additional Information. In effect, each Net Purchase Payment (after
the first) is invested in Variable Accumulation Units at the value
next computed after receipt of such payment by MBL Life at its Home
Office. Thereafter, Variable Accumulation Units credited under a
Contract will vary up or down in value, depending on the value of the
Fund shares held by the Account.
Transfers
Transfers between the Companion Contract and the Variable
Accumulation Account will be subject to the transfer provisions
contained in the Companion Contract, including any limitations or
restrictions contained in that contract. Transfers may be made only
on a Valuation Date as defined in this Prospectus. All transfers will
be based on the Variable Accumulation Unit value calculated on the
effective date of the transfer.
<PAGE>
MBL Life reserves the right to impose restrictions upon the
transfer privilege at any time, upon 30 days written notice to each
Contract Holder affected. In such event, transfers will be permitted
only once a quarter. This restriction may only be applied to
Contracts to the extent that (1) the expected total annual deposit by
a Contract Holder on behalf of all Participants to both the Variable
Accumulation Account and the Companion Contract and VCA-7 Contract, if
any, is $3 million or more, or (2) there are existing plan assets
under the Contracts representing purchase payments made by the
employer, association or corporation sponsoring the plan, other than
as a result of a Participant salary reduction arrangement, or (3) the
plan sponsor controls the allocation of contributions among this VCA-2
Contract, the Companion Contract, and the VCA-7 Contract, or (4) the
plan sponsor controls transfers among the VCA-2 Contracts, the
Companion Contract and the VCA-7 Contract before imposing such a
restriction. MBL Life will submit appropriate changes to the Contract
to the state insurance commissions for approval.
To the extent that a VCA-2 Contract Holder also holds a contract
for VCA-7, the Contract Holder may provide Qualified Plan Participants
the opportunity to provide for retirement and other benefits through
pooled investments in short-term debt instruments. The objective of
VCA-7 is to provide as high a level of current income as is consistent
with preservation of capital and maintenance of liquidity.
If a VCA-7 Contract was issued, amounts may be transferred
between a Qualified Plan Participant's Variable Accumulation Account
under the VCA-2 Contract to the VCA-7 Contract as described under
"Transfers" except that transfers to the VCA-7 Contract may not exceed
once a quarter. Transfers to the VCA-7 Contract are subject to the
charges, limitations and restrictions contained in the VCA-7 Contract.
Amounts transferred to a VCA-2 Contract from a VCA-7 Contract will be
subject to charges imposed under those contracts.
Until the termination of the Rehabilitation Period, no later than
December 31, 1999, transfers from the Variable Accumulation Account
under the VCA-2 Contract to the Companion Contract may only be made
upon retirement. (See "The Account - Legal Developments".)
Variable Accumulation Account values will also be transferred to
the Companion Contract upon the death of a Participant (see
"Accumulation Account - Death Benefit"), or if a Qualified Plan fails
to qualify under the Code (see "Other Contract Provisions - Failure of
Plan to Qualify").
MBL Life reserves the right to impose restrictions upon the
transfer privilege at any time, upon 30 days written notice to each
Contract Holder affected, as described under "Transfers".
A VCA-7 prospectus is available upon request made to Pension and
Investment Products, MBL Life Assurance Corporation, 520 Broad Street,
Newark, New Jersey 07102-3111, Attn: MBL VARIABLE CONTRACT ACCOUNT-7
or by telephoning 1-800-435-3191.
<PAGE>
Redemption
The current value of a Participant's Variable Accumulation
Account may be withdrawn or transferred to another tax qualified
investment, in whole or in part, at any time before his or her Annuity
Commencement Date under the Contract. However, under 401, 403(b) or
457 Plans, the withdrawal right may be restricted in accordance with
applicable federal income tax law. (See "Federal Income Tax Status".)
Certain plans may require forfeiture of non-vested employer
contributions, such as upon termination of employment, and may also
provide that certain contributions may not be withdrawn until the
occurrence of a specified event, such as attainment of age 59 1/2.
The terms of your plan should be reviewed to determine if
contributions on your behalf are so restricted. Any partial
redemption must amount to at least $240.
Redemption is effected by canceling a sufficient portion of the
Variable Accumulation Account to pay the amount requested. The number
of units canceled in the Variable Accumulation Account is based on
their value next computed after receipt of a written request by MBL
Life at its Home Office. Requests may be made on forms provided to
Contract Holders by MBL Life, or by letter. Forms may be obtained by
calling 1-800-435-3191.
A request for partial redemption of a Participant's Variable
Accumulation Account is treated as a request for complete redemption
if the total value of the account would otherwise be less than $240,
or if the redemption request is for an amount which exceeds the value
of the account. After complete redemption of a Participant's Variable
Accumulation Account, no further purchase payments may be made for the
Participant without the consent of MBL Life.
Payment of the amount redeemed is made within seven days after
receipt of request, unless (1) the New York Stock Exchange is closed
(for reasons other than holidays and weekends), or trading on the New
York Stock Exchange is restricted, (2) an emergency exists, as
determined by the SEC, so that valuation of the assets of the Account,
or redemption of the Fund shares held by the Account, is not
reasonably practicable, or (3) the SEC permits postponement by order.
The withdrawal of funds from the Account may adversely affect tax
benefits otherwise available under the Code. (See "Federal Income Tax
Status".) Under 403(b) Plans, current restrictions imposed by the
Code limit withdrawals. (See "Federal Income Tax Status - 403(b)
Plans".)
The preceding discussion of redemption applies only to the
Variable Accumulation Account. Redemption of amounts under the
Companion Contract will be subject to the redemption provisions
contained in the Companion Contract, including any limitations or
charges specified in that contract.
<PAGE>
Death Benefit
If a Participant dies before the Annuity Commencement Date, MBL
Life will cancel the Participant's Variable Accumulation Account and
transfer the value of such account, or, if greater, the full amount of
all purchase payments less transfers and redemptions made for the
Participant, as of the date MBL Life receives satisfactory written
notice of death, to the Companion Contract where the proceeds will be
held at the interest rate specified in the Companion Contract until
final disposition. (See "The Account - Legal Development".) No sales
charges will be imposed on the transfer of the Variable Accumulation
Account to the Companion Contract. In lieu of transferring the
Participant's Variable Accumulation Account to the Companion Contract,
MBL Life may pay all of such account value to the beneficiary in a
single sum, if the beneficiary has made a written request for such
payment. The Contracts require the beneficiary to make the written
request within 90 days of the Participant's death. If the beneficiary
is a spouse, the Variable Accumulation Account may be continued at the
spouse's election; however, no further purchase payments may be made.
In general, the rights of beneficiaries are subject to the same
conditions as corresponding rights of Participants. In addition, the
rights of a beneficiary may be subject to restrictions imposed by the
Participant in designating his or her beneficiary.
ANNUITY
Annuity Commencement Date
A Participant's Variable Accumulation Account Value generally
must begin to be distributed in accordance with Code Section
403(b)(10) no later than April 1 of the calendar year following the
calendar year in which the Participant reaches age 70 1/2. A
surviving spouse who has made the election in Section 4.3(c) of the
Contract must begin to receive the Variable Accumulation Account Value
no later than April 1 of the calendar year following the calendar year
in which the Participant would have reached age 70 1/2.
Where the Participant is a public school employee, the above
required distribution date may, generally, be extended to the April 1
of the calendar year following the later of (1) the calendar year in
which the Participant reaches age 70 1/2, or (2) retires from such
employment. Distributions will be made in accordance with the terms
of the Contract. The preceding distribution requirement does not
apply to tax-deferred annuity account balances accrued before January
1, 1987.
A Participant may elect to apply all or part of his or her
Account Value as consideration for the purchase of an annuity
("Annuity Consideration"). The date on which such annuity is to
begin, as elected by the Participant, shall be specified in a written
notice to MBL Life, provided however, that such date may not be
earlier than 15 days after the date of receipt by MBL Life of such
notice.
<PAGE>
Purchase of Annuity
Effective on a Participant's Annuity Commencement Date, as
specified in the written notice to MBL Life, the Participant's Annuity
Consideration shall be applied to provide an annuity for the
Participant subject to the following:
(a) Any premium tax on Annuity Consideration that MBL Life is
required to pay, based on the state of residence of the
Participant, will be deducted from the Annuity Consideration.
(b) The amount remaining after deduction of the premium tax will be
applied to provide an annuity. Unless the use of another table
of amounts of annuity shall have been agreed to in writing by the
Contract Holder and MBL Life, the amount of each monthly payment
of the annuity will be determined by dividing the remaining
Annuity Consideration by the appropriate rate determined in
accordance with the Variable Annuity Table (Table 1 of the
Contract) according to the form of annuity and the age of the
annuitant on the Annuity Commencement Date.
If a Participant's first annuity payment would be less than $20,
the value of the Variable Accumulation Account may be paid to the
Participant in a lump sum as a complete redemption, at the discretion
of MBL Life.
MBL Life will issue a certificate to each Annuitant at the time
the first annuity payment becomes payable, describing the
Participant's rights under the annuity. Once any life annuity takes
effect, it may not be redeemed or changed to any other form of
annuity.
Forms of Annuity
The Participant may elect one of the alternate forms listed below:
(a) Period-Certain and Life Annuity
The Period-Certain and Life Option provides a monthly annuity to
the Participant during the Participant's lifetime, the first 60,
120, 180 or 240 payments of which, as specified by the
Participant in the notice of election of this option, shall be
period-certain payments. If at the death of the Participant any
period-certain payments remain unpaid, such unpaid period-certain
payments shall be continued to the Participant's beneficiary.
(b) Contingent Annuitant With Ten Years Certain
The Contingent Annuitant Option provides a monthly annuity
payable to the Participant during his or her lifetime, and
payable after his or her death to the Contingent Annuitant
designated by the Participant at the time of election of this
option, during such Contingent Annuitant's lifetime. The first
120 payments are designated as period-certain payments.
<PAGE>
If at the death of the second to die of the Participant and his
or her Contingent Annuitant any period-certain payments remain
unpaid, such unpaid period-certain payments shall be continued to
the Participant's beneficiary. The amount of monthly annuity
payable to the Contingent Annuitant may be 100%, 67%, or 50% of
the reduced annuity payable to the Participant, as specified in
the notice of election of this option. Regardless of the
selected percentage, however, the annuity payable to the
Contingent Annuitant, before 120 payments have been made, shall
be equal to 100% of the annuity payable to the Participant.
(c) Period-Certain Annuity
The Period-Certain Annuity provides a monthly annuity payable for
a period-certain of 60, 120 or 180 months as selected by the
Participant. Upon expiration of the period-certain payments, no
further payments are due. If at the death of the Participant any
period-certain payments remain unpaid, they shall be continued to
the Participant's beneficiary until the total period-certain
payments selected have been made to the Participant and the
beneficiary.
(d) Other Forms
Other forms of annuity may be selected by the Participant with
the written consent of MBL Life.
Annuity Payments
The first annuity payment is payable on the Annuitant's Annuity
Commencement Date under the Contract. The second and subsequent
annuity payments are payable monthly thereafter. The method for
determining the amount of the first, second and subsequent annuity
payments is described in the Account's Statement of Additional
Information.
Variable Annuity Unit Value
The value of a Variable Annuity Unit for any month is calculated
as of the end of the fourteenth day preceding the first day of the
month. It is equal to the Variable Annuity Unit value for the
previous month multiplied by the product of .997137 and the ratio of
(1) the Variable Accumulation Unit value for the fourteenth day
preceding the first day of the month, divided by (2) the Variable
Accumulation Unit value for the fourteenth day preceding the first day
of the previous month. The Variable Annuity Unit value may vary
either up or down each month.
The factor of .997137, applied each month, reflects an assumed
investment result at an effective annual rate of 3 1/2%. This assumed
investment result is also used in determining the rates which appear
in the tables in the Contracts and which are used to determine the
amount of the first payment under a variable annuity. An assumed
investment result higher than 3 1/2% may be used for a particular
group in order to provide larger variable annuity payments during the
initial months, by mutual agreement between the Contract Holder and
MBL Life. However, a higher assumed investment result also means a
lower factor than .997137 in the determination of the Variable Annuity
Unit values for that particular group. For example, if the assumed
investment result is 4 1/2% instead of 3 1/2%, the variable annuity
payments to a retired male Participant, age 65, under a life annuity
with 120 monthly payments certain will start about 8% higher, but this
advantage will steadily diminish, and the payments after the eighth
year (approximately) will become lower with the 4 1/2% assumption than
they would be with the 3 1/2% assumption.
The Variable Annuity Unit value will vary up or down each month
only to the extent that the actual net investment results are more or
less favorable than the assumed investment results. The actual net
investment results include both income and market value changes of the
Account value, as reflected in the ratio of the two applicable
Variable Accumulation Unit values. For a hypothetical example
illustrating the computation of the Variable Annuity Unit value and a
list of the Variable Annuity Unit values for the last month of each
quarter for each of the last ten fiscal years, see the Account's
Statement of Additional Information.
GENERAL RIGHTS
Voting Rights
Contract Holders have the right to instruct MBL Life as to voting
Fund shares held by the Account on all matters to be voted on by Fund
shareholders. The number of votes attributed to each Contract Holder
is determined by dividing the value of all Variable Accumulation
Accounts under the Contract by the net asset value of one Fund share.
The number of Fund shares attributable to Annuitants under the
Contract is determined by dividing the reserves maintained in the
Account to meet variable annuity obligations under the Contract by the
net asset value of one Fund share.
During the Accumulation Period, Participants have the right to
instruct Contract Holders as to casting applicable votes with respect
to Variable Accumulation Accounts under 403(b) Plans or their own
purchase payments under Qualified Plans. During the Annuity Period,
Annuitants have similar rights with respect to the variable annuities.
The number of votes attributable to an Annuitant decreases as variable
annuity payments are made.
MBL Life furnishes Fund proxy material and voting instruction
forms to each Contract Holder and Participant. Fund shares held by
the Account for which MBL Life receives no voting instructions will be
voted on each matter in the same proportion as such shares for which
voting instructions are received. Fund shares held by MBL Life will
also be voted on each matter in the same proportion as such shares for
which voting instructions are received.
<PAGE>
Confirmation of Transactions
Within five business days after the end of each calendar quarter,
a quarterly statement will be sent to each Participant detailing all
activity in the Participant's Variable Accumulation Account for the
previous quarter, including purchase payments, redemptions and
transfers, the dates of each such transaction, the amounts allocated
to the Variable Accumulation Account, the sales and other charges
deducted, and the total account value at the end of the period. New
Participants will be sent a confirmation upon receipt of the first
purchase payment, and quarterly statements thereafter. In some cases,
confirmations may be sent more frequently than quarterly.
Reports
During the Accumulation Period, MBL Life furnishes a quarterly
report for each Participant showing as of a specified date (1) the
number of units in his or her Variable Accumulation Account and
(2) the Variable Accumulation Unit value. During the Annuity Period,
MBL Life will include with each variable annuity payment a statement
showing the number of Variable Annuity Units and the Variable Annuity
Unit value used in determining the amount of the annuity payment.
In addition, MBL Life will furnish, for each Participant and
Annuitant, a semi-annual report showing the financial position of the
Account, and a schedule of the common stocks and other investments
held by the Fund.
457 Plan Participants
The rights and benefits of employees participating in a 457 Plan
differ from those of Participants covered under Contracts issued under
other circumstances. Under a 457 Plan, the Contract Holder is usually
the employer, and the assets of such Plan are part of the general
assets of the employer. A Participant must look exclusively to his or
her employer and the employer's financial resources for any benefits
to which the Participant is entitled. Accordingly, all rights of 457
Plan Participants referred to or described in this Prospectus are
vested in the Contract Holder.
FEDERAL INCOME TAX STATUS
Introduction
The following discussion is a general discussion of federal
income tax considerations relating to the Contract and is not intended
as tax advice. This discussion is not intended to address the tax
consequences resulting from all of the situations in which a person
may be entitled to or may receive a distribution under the Contract.
Any person concerned about these tax implications should consult a
competent tax advisor before initiating any transaction. This
discussion is based upon MBL Life's understanding of the present
federal income tax laws as they are currently interpreted by the
Internal Revenue Service ("IRS"). No representation is made as to the
likelihood of the continuation of the present federal income tax laws
or of the current interpretation by the IRS. Moreover, no attempt has
been made to consider any applicable state or other tax laws.
<PAGE>
The Contract may be purchased on a non-tax qualified basis ("Non-
Qualified Contract") or purchased and used in connection with certain
retirement arrangements entitled to special income tax treatment under
Section 401(a), 403(b), 408(b) or 457 of the Code ("Qualified
Contracts").
Taxation of MBL Life
MBL Life is taxed as a life insurance company under Part I of
Subchapter L of the Code. Since the Account is not an entity separate
from the Company, and its operation forms a part of the MBL Life, it
will not be taxed separately as a "regulated investment company" under
Subchapter M of the Code. Investment income and realized capital
gains are automatically applied to increase reserves under the
Contracts. Under existing federal income tax law, MBL Life believes
that the Account investment income and realized net capital gains
will not be taxed to the extent that such income and gains are applied
to increase the reserves under the Contracts.
Accordingly, MBL Life does not anticipate that it will incur any
federal income tax liability attributable to the Separate Account and,
therefore, MBL Life does not intend to make provisions for any such
taxes. However, if changes in the federal tax laws or interpretations
thereof result in MBL Life being taxed on income or gains attributable
to the Account, then MBL Life may impose a charge against the Account
(with respect to some or all Contracts) in order to set aside
provisions to pay such taxes.
Tax Status of the Contract
DIVERSIFICATION. Section 817(h) of the Code requires that with
respect to certain contracts, the investments of the Account must be
"adequately diversified", in accordance with Treasury Regulations in
order for those Contracts to qualify as annuity contracts under
federal tax law.
In certain circumstances, owners of variable annuity contracts
may be considered the owners, for federal income tax purposes, of the
assets of the separate accounts used to support their contracts. In
those circumstances, income and gains from the separate account assets
would be includible in the variable contract owner's gross income.
The IRS has stated in published rulings that a variable contract owner
will be considered the owner of separate account assets if the
contract owner possesses incidents of ownership in those assets, such
as the ability to exercise investment control over the assets. The
Treasury Department has also announced, in connection with the
issuance of regulations concerning diversification, that those
regulations "do not provide guidance concerning the circumstances in
which investor control for the investments of a segregated asset
account may cause the investor [i.e., the owner], rather than the
insurance company, to be treated as the owner of the assets in the
account". This announcement also stated that guidance would be issued
by way of regulations or rulings on the "extent to which
policyholders may direct their investments to particular Sub-Accounts
without being treated as owners of the underlying assets." As of the
date of this Prospectus, no guidance has been issued.
The ownership rights under the Contract are similar to, but
different in certain respects from those described by the IRS in
rulings in which it was determined that contract owners were not
owners of separate account assets. These differences could result in
an owner being treated as the owner of a pro rata portion of the
assets of the Account. In addition, MBL Life does not know what
standards will be set forth, if any, in the regulations or rulings
which the Treasury Department has stated it expects to issue. MBL
Life therefore reserves the right to modify the Contract as necessary
to attempt to prevent an owner from being considered the owner of a
pro rata share of the assets of the Account.
Retirement Plans
IN GENERAL. The Contract is designed for use with several types
of retirement plans. The tax rules applicable to participants and
beneficiaries in retirement plans vary according to the type of plan
and the terms and conditions of the plan. Special favorable tax
treatment may be available for certain types of contributions and
distributions. Adverse tax consequences may result from contributions
in excess of specified limits; distributions prior to age 59 1/2
(subject to certain exceptions); distributions that do not conform to
specified commencement and minimum distribution rules; aggregate
distributions in excess of a specified annual amount; and in other
specified circumstances. For example, a 10% penalty generally will be
imposed on the taxable amount of withdrawals prior to age 59 1/2,
subject to certain exceptions.
MBL Life makes no attempt to provide more than general
information about use of the Contracts with the various types of
retirement plans. Owners and participants under retirement plans as
well as annuitants and beneficiaries are cautioned that the rights of
any person to any benefits under Contracts may be subject to the terms
and conditions of the plans themselves, regardless of the terms and
conditions of the Contracts issued in connection with such a plan.
The ultimate effect of federal income taxes on the amounts held under
a Contract, on annuity payments, and on the economic benefit to the
Contract owner, the annuitant, or the beneficiary may depend on the
tax status of the individual concerned. Some retirement plans are
subject to distribution and other requirements that are not
incorporated in the administration of the Contracts. Owners are
responsible for determining that contributions, distributions and
other transactions with respect to the Contracts satisfy applicable
law. Owners, participants and beneficiaries should consult their
legal counsel and tax advisor regarding the use of the Contract under
the retirement plan.
CORPORATE PENSION AND PROFIT-SHARING AND H.R. 10 PLANS. Code
Section 401(a) permits employers to establish various types of
retirement plans for employees, and permits self-employed individuals
to establish retirement plans for themselves and their employees.
These retirement plans may permit the purchase of the contracts to
accumulate retirement savings under the plans. Adverse tax
consequences to the plan, to the participant or to both may result if
this Contract is assigned or transferred to any individual as a means
to provide benefit payments.
SECTION 403(B) PLANS. Under Code Section 403(b), payments made
by public school systems and certain tax exempt organizations to
purchase annuity contracts for their employees are excludible from the
gross income of the employee, subject to certain limitations.
However, these payments may be subject to FICA (Social Security) taxes
and state income taxes.
Code Section 403(b)(11) restricts the distribution under Code
Section 403(b) annuity contracts of: (1) elective contributions made
in years beginning after December 31, 1988; (2) earnings on those
contributions; and (3) earnings in such years on amounts held as of
the last year beginning before January 1, 1989. Distribution of those
amounts may only occur upon death of the employee, attainment of age
59 1/2, separation from service, disability, or financial hardship.
In addition, income attributable to elective contributions may not be
distributed in the case of hardship.
INDIVIDUAL RETIREMENT ANNUITIES AND SIMPLIFIED EMPLOYEE PENSION
PLANS. Sections 219 and 408 of the Code permit eligible individuals
to contribute to an individual retirement program known as an
Individual Retirement Annuity or Individual Retirement Account, each
hereinafter referred to as an "IRA". IRAs are subject to limitations
on the amount that may be contributed and deducted and the time when
distributions may commence. Also, distributions from certain other
types of qualified plans may be "rolled over" on a tax-deferred basis
into an IRA. Employers may establish Simplified Employee Pension
(SEP) Plans to provide IRA contributions on behalf of their employees.
The sale of a Contract for use with an IRA may be subject to special
disclosure requirements of the Internal Revenue Service. Purchasers
of a Contract for use with IRAs will be provided with supplemental
information required by the Internal Revenue Service or other
appropriate agency. Such purchasers will have the right to revoke
their purchase within seven days of the earlier of the establishment
of the IRA or their purchase.
DEFERRED COMPENSATION PLANS. Code Section 457 provides for
certain deferred compensation plans. These plans may be offered with
respect to service for state governments, local governments, political
subdivisions, agencies, instrumentalities and certain affiliates of
such entities, and tax exempt organizations. These plans are subject
to various restrictions on contributions and distributions. The plans
may permit participants to specify the form of investment for their
deferred compensation account. In general, all investments are owned
by the sponsoring employer and are subject to the claims of the
general creditors of the employer. Depending on the terms of the
particular plan, the employer may be entitled to draw on deferred
amounts for purposes unrelated to its Section 457 plan obligations.
In general, all amounts received under a Section 457 plan are taxable
and are subject to federal income tax withholding as wages.
RESTRICTIONS UNDER QUALIFIED CONTRACTS. Other restrictions with
respect to the election, commencement, or distribution of benefits may
apply under Qualified Contracts or under the terms of the plans in
respect of which Qualified Contracts are issued.
<PAGE>
Taxation of Distributions
Section 72 of the Code governs taxation of distributions from
Section 401, 403(b) and 408 retirement plans in general. For this
purpose, the assignment, pledge, or agreement to assign or pledge any
portion of the Account Value or any portion of an interest in the
retirement plan generally will be treated as a distribution. The
taxable portion of a distribution (in the form of a single sum payment
or an annuity) is taxable as ordinary income.
In the case of a withdrawal, a ratable portion of the amount
received is taxable, generally based on the ratio of the "investment
in the contract" to the individual's total accrued benefit under the
retirement plan. The "investment in the contract" generally equals
the amount of any non-deductible purchase payments paid by or on
behalf of any individual. For a Contract issued in connection with
retirement plans, the "investment in the contract" will most likely be
zero. Special tax rules may be available for certain withdrawals.
Although the tax consequences may vary depending on the annuity
payment elected under the Contract, in general, only the portion of
the annuity payment that represents the amount by which the Account
Value exceeds the "investment in the contract" will be taxed; after
the "investment in the contract" is recovered, the full amount of any
additional Annuity payments is taxable. For variable annuity payment,
the taxable portion is generally determined by an equation that
establishes a specific dollar amount of each payment that is not
taxed. The dollar amount is determined by dividing the "investment in
the contract" by the total number of expected periodic payments.
However, the entire distribution will be taxable once the recipient
has recovered the dollar amount of his or her "investment in the
contract". For Fixed Annuity payments, in general there is no tax on
the portion of each payment which represents the same ratio that the
"investment in the contract" bears to the total expected value of the
Annuity payments for the term of the payments; however, the remainder
of each Annuity payment is taxable. Once the "investment in the
contract" has been fully recovered, the full amount of any additional
Annuity payments is taxable. If Annuity payments cease as a result of
an Annuitant's death before full recovery of the "investment in the
contract", consult a competent tax advisor regarding deductibility of
the unrecovered amount.
Amounts may be distriawted from the Contract because of the death
of a retirement plan participant. Generally, such amounts are
includible in the income of the recipient as follows: (1) if
distributed in a lump sum, they are taxed in the same manner as a full
surrender as described above, or (2) if distributed under an Annuity
Option, they are taxed in the same manner as Annuity payments, as
described above.
<PAGE>
Withholding
Retirement distributions generally are subject to withholding for
the recipient's federal income tax liability at rates that vary
according to the type of distribution and the recipient's tax status.
Under certain circumstances, recipients generally are provided the
opportunity to elect not to have tax withheld from distributions.
Certain distributions from Section 401(a) plans and Section 403(b)
annuities are subject to mandatory federal income tax withholding.
Possible Changes in Taxation
In past years, legislation has been proposed that would have
adversely modified the federal taxation of certain annuities. For
example, one such proposal would have changed the tax treatment of
non-qualified annuities that did not have "substantial life
contingencies" by taxing income as it is credited to the annuity.
Although as of the date of this Prospectus Congress is not actively
considering any legislation regarding the taxation of annuities, there
is always the possibility that the tax treatment of annuities could
change by legislation or other means (such as IRS regulations, revenue
rulings, judicial decisions, etc.). Moreover, it is also possible
that any change could be retroactive (that is, effective prior to the
date of the change).
Other Tax Consequences
As noted above, the foregoing discussion of the federal income
tax consequences is not exhaustive and special rules are provided with
respect to other tax situations not discussed in this Prospectus.
Further, the federal income tax consequences discussed herein reflect
MBgwLife's understanding of the current law and the law may change.
Federal estate and gift tax consequences of ownership or receipt of
distributions under the Contract depend on the individual
circumstances of each Owner or recipient of a distribution. A
competent tax advisor should be consulted for further information.
OTHER CONTRACT PROVISIONS
Beneficiary
The Participant may select a beneficiary to receive any benefit
at death, and may change the beneficiary by proper written notice to
MBL Life.
Non-Assignability
To the extent permitted by law, the right to benefits or payments
under the Contract is neither assignable nor subject to the claim of
any creditor, except as may be allowed under 457 Plans.
Portability
A Participant under a 403(b) Plan who becomes employed by a new
employer which is eligible under Section 403(b) of the Code, may enter
into an annuity purchase agreement with the new employer, at no
additional charge, so that purchase payments will be continued under
the Contract by the new employer on behalf of the Participant, if the
Contract so provides and if MBL Life consents.
<PAGE>
Failure of Plan to Qualify
If a previously issued Qualified Plan fails to qualify under the
Code, MBL Life has the right, without prior notice to or consent of
the Contract Holder, to transfer any amounts held in Variable
Accumulation Accounts to the Companion Contract, and to convert any
amounts of variable annuity to a fixed annuity under the Companion
Contract on the basis of equivalence as of the date of transfer and
conversion. Thereafter, the Contract shall be considered terminated.
Proof of qualification may be required by MBL Life.
Discontinuance
Purchase payments under a Contract will no longer be accepted by
MBL Life when any of the following events occurs:
(1) The Contract Holder so notifies MBL Life in writing;
(2) MBL Life so notifies the Contract Holder in writing after an
investment adviser other than Markston (or an affiliate) is
selected for the Fund. Such a notice would be sent to all other
Contract Holders participating in the Account;
(3) After receipt of an amendment or modification of the Plan, MBL
Life gives the Contract Holder written notice that the effect of
the amendment, in MBL Life's judgment based on underwriting
principles then in effect, might be detrimental to MBL Life, and
the Contract Holder and MBL Life are unable to reach a mutual
agreement within 30 days after the written notice. If
discontinuance occurs for this reason, the amendment will not be
given effect under the Contract;
Effective with any such discontinuance, no further purchase
payment will be accepted by MBL Life under the Contract. However, MBL
Life will continue to maintain Participants' existing accumulation
accounts unless otherwise requested, as explained below under
"Transfer to New Funding Agency". Discontinuance of purchase payments
will have no effect on the rights of Annuitants.
Transfer to New Funding Agency
If MBL Life ceases to accept purchase payments, a Contract Holder
may designate a new funding agency to receive amounts to be
transferred in accordance with the following paragraphs.
With respect to a 403(b) Plan, or IRA Plan, each Participant has
the right to direct MBL Life, by proper written request to cancel his
or her accumulation account and transfer such dollar value to the new
funding agency, after deducting the administration charge. All such
transfers will be made in the aggregate and valued as of a single
transfer date, which will be 90 days after receipt by MBL Life of the
Contract Holder's notice.
With respect to a 401 or 457 Plan, the Contract Holder has the
right, with respect to all Participants, to direct MBL Life, by proper
written notice of the selection of a new funding agency, to cancel
each Participant's accumulation account and transfer such aggregate
dollar value to the new funding agency. The value of such accounts
will be determined as of the day MBL Life receives the Contract
Holder's notice at its Home Office, or any later transfer date
specified in the notice.
For any Plan, the aggregate transfer payment will be paid within
seven days after the transfer date.
Changes in Contract
MBL Life has the right, subject to compliance with the law as
currently applicable or subsequently changed, to give written notice
to the Contract Holder, at least six months in advance, of a change to
be effective on or after the fifth Contract anniversary in (1) the
tables of annuity rates, and (2) any of the charges specified in the
Contract. Participants will be informed of any such change.
Any such change which has an adverse effect on any Participant
will not apply to any amounts credited to accumulation accounts, or to
any annuities bought before the effective date of such change, except
that a change in the risk and death benefit charges may apply
uniformly to all Variable Accumulation Units, including those credited
before the effective date of the change (but not retroactively).
Because the tables of annuity rates remain in effect with respect to
purchase payments made before a change is effective, until such
purchase payments are applied on the Participant's Annuity
Commencement Date, this rate guarantee may extend many years into the
future.
The Contract may also be changed in any other respect at any time
by an agreement between the Contract Holder and MBL Life, but no such
change will be made without the consent of the persons entitled to
receive benefits under the Contract, unless (1) the change will have
no adverse effect on their rights with respect to the Variable
Accumulation Account balance already credited or annuities already
bought, or (2) the change is required to comply with a law or
governmental regulation or (3) the Plan is a 457 Plan. Such persons
will be informed of any such change which materially affects their
rights.
Other Changes
MBL Life reserves the right, subject to compliance with the law
as currently applicable or subsequently changed, (1) to substitute the
shares of any other registered investment company for the shares of
the Fund held by the Account, subject to prior approval by the SEC,
(2) to discontinue submitting certain matters for approval by persons
having voting rights under the Contracts, (3) to fund additional
classes of contracts through the Account, (4) to transfer assets,
determined by MBL Life to be assigned to the class of contracts to
which the Contracts belong from the Account to another separate
account by withdrawing the same percentage of each investment in the
Account, with appropriate adjustments to avoid odd lots and fractions,
and (5) to operate the Account as another form of registered
investment company or unregistered entity. Contract Holders will be
given prompt notice after any action which results in a change in the
composition of the Account's assets.
<PAGE>
TABLE OF CONTENTS
STATEMENT OF ADDITIONAL INFORMATION
Page
Services . . . . . . . . . . . . . . . . . . . . 2
Purchase and Pricing of Account Units . . . . . . 2
Annuity Payments . . . . . . . . . . . . . . . . 3
Calculation of Performance Data . . . . . . . . . 5
Additional Information . . . . . . . . . . . . . 6
Financial Statements . . . . . . . . . . . . . . 6
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT-2
OFFERED BY
MBL LIFE ASSURANCE CORPORATION
520 Broad Street
Newark, New Jersey 07102-3111
1-800-435-3191
DISTRIBUTOR
FIRST PRIORITY INVESTMENT CORPORATION
520 Broad Street
Newark, New Jersey 07102-3111
1-800-559-5535
INVESTMENT ADVISER
Markston Investment Management
1 North Lexington Avenue
White Plains, New York 10601-1702
(914) 761-4700
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
NO PERSON IS AUTHORIZED TO MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
<PAGE>
. . . . . . . . . . . . . . . . .NO POSTAGE
. . . . . . . . . . . . . . . . .NECESSARY
. . . . . . . . . . . . . . . . .IF MAILED
. . . . . . . . . . . . . . . . .IN THE
. . . . . . . . . . . . . . . . .UNITED STATES
Business Reply Mail
First Class Permit No.
Newark, NJ
Postage will be paid by
MBL Life Assurance Corporation
Pension and Investment Products
MBL Life Assurance Corporation
520 Broad Street
Newark, New Jersey 07102-3111
Attn: MBL Variable Contract Account-2
-------------------------------------------------------
Please send the current Statement of Additional Information
for MBL Variable Contract Account-2 to:
_________________________________________________
Name
_________________________________________________
Street
_________________________________________________
City State Zip
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT-2
(Previously known as Mutual Benefit Variable Contract Account-2)
____________________________________________________________
CROSS REFERENCE SHEET
Cross reference sheet showing location in the Statement of
Additional Information of information required by the Items in Part
B of Form N-4.
HEADING IN STATEMENT OF
ITEM NUMBER ADDITIONAL INFORMATION
15 Cover Page
16 Table of Contents
17 General Information and
History
18 Services
19 Purchase and Pricing of
Account Units; Variable
Accumulation Unit Values
20 *
21 Performance-Related
Information
22 Annuity Payments; Variable
Annuity Unit Values
23 Financial Statements
____________________________________________________________
* Indicates inapplicable or negative.
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT-2
MBL Life Assurance Corporation
STATEMENT OF ADDITIONAL INFORMATION
, 1996
This Statement of Additional Information is not a prospectus
but has been incorporated by reference into, and should be read in
conjunction with, the Prospectus of MBL Variable Contract Account-2
dated , 1996. Terms not defined in this Statement of
Additional Information shall have the same meaning given to them in
the incorporated Prospectus. A copy of the Prospectus may be
obtained from Pension and Investment Products, MBL Life Assurance
Corporation, 520 Broad Street, Newark, New Jersey 07102-3111,
Attn: MBL VARIABLE CONTRACT ACCOUNT-2, telephone number (201) 481-
8564.
TABLE OF CONTENTS
CROSS REFERENCE TO
PAGE SECTION IN PROSPECTUS
General Information and The Variable Contract
History . . . . . . . . . . . 2 Account - Organization
Services . . . . . . . . . . . 2 The Variable Contract
Account - Administration
and Distribution
Purchase and Pricing of Account
Units . . . . . . . . . . . . . 2 Accumulation Account
Annuity Payments . . . . . . . 3 Annuity
Calculation of Performance
Data . . . . . . . . . . . . . 5 Performance-Related
Information
Additional Information . . . . 6 --
Financial Statements . . . . . 6 --
<PAGE>
GENERAL INFORMATION AND HISTORY
The business history of MBL Variable Contract Account-2 (the
"Account") (previously known as Mutual Benefit Variable Contract
Account-2), is described in its prospectus.
The Depositor, MBL Life Assurance Corporation ("MBL Life"), is
a stock life insurance company and the surviving entity in the
Rehabilitation of Mutual Benefit Life Insurance Company ("Mutual
Benefit Life").
On July 16, 1991, the Superior Court of New Jersey ("Court")
entered an Order ("Order") appointing the Insurance Commissioner of
the State of New Jersey as Rehabilitator of Mutual Benefit Life,
thereby granting the Rehabilitator immediate exclusive possession
and control of, and title to, the business and assets of Mutual
Benefit Life, including those of the Account. As a separate
account, the assets and liabilities of the Account were maintained
separate and apart from Mutual Benefit Life's other assets and
liabilities.
In view of the terms and conditions of the Order, on July 16,
1991, Mutual Benefit Life, on behalf of the Account, immediately
ceased acceptance of applications for new Contracts and additional
purchase payments under existing Contracts. This cessation of
additional purchase payments under existing Contracts continued
from July 16, 1991, until the effective date of the Account's
registration statement with the Securities and Exchange Commission
("SEC"). MBL Life will not issue new Contracts. Transfers from
VCA-2 to the Companion Contract were temporarily prohibited and
restrictions were imposed on withdrawals from the Companion
Contract during the Rehabilitation Period. Payments upon the death
of the Participant continued to be made to the beneficiaries.
In accordance with the Rehabilitation Plan of Mutual Benefit
Life, as approved by the Court on January 28, 1994, certain assets
and liabilities of Mutual Benefit Life were transferred to MBL Life
as of May 1, 1994. In addition, the assets and liabilities of the
Account were transferred to a new separate account of MBL Life.
SERVICES
All administrative services of the Account are provided by MBL
Life as described in the Prospectus under the caption "The Variable
Contract Account - Administration and Distribution", except for
sales services, which are provided by First Priority Investment
Corporation ("First Priority").
PURCHASE AND PRICING OF ACCOUNT UNITS
Net Purchase Payments are allocated to a Participant's
Variable Accumulation Account under the Contract and are applied to
purchase Variable Accumulation Units. The method of calculating
the Variable Accumulation Unit and the Net Investment Factor is
described in the Account's Prospectus under the caption "Variable
Accumulation Account", and is illustrated by the following
hypothetical example.
<PAGE>
Assume that July 1st and July 2nd of some year are both
Valuation Dates and that the value of a share of MBL Growth Fund,
Inc. (the "Fund") is $10.291111 on July 1st and $10.301112 on July
2nd, as of the time of the close of trading on the New York Stock
Exchange. Assume also that there are no dividends or other
distributions made by the Fund on July 2nd and that there is no
deduction for taxes. To determine the Variable Accumulation Unit
value for July 2nd, first find the ratio of $10.301112 to
$10.291111, which is 1.0009718. Then subtract from this ratio of
1.0009718 the factor .0000101 (the daily equivalent of the annual
deduction of 0.37%). The difference of 1.0009617 is the Net
Investment Factor for July 2nd. When multiplied by the Variable
Accumulation Unit value for July 1st, it yields the unit value for
July 2nd. For example, if the value for July 1st were $10.101111,
the value for July 2nd would be $10.110825, which would be rounded
to $10.111 for all purposes except in calculating the unit value
for July 3rd.
ANNUITY PAYMENTS
On a Participant's Retirement Date, the value of the Variable
Accumulation Account, less any applicable premium tax, may be
applied to purchase a variable annuity. The amount of the variable
annuity payment depends upon the number and value of the
Annuitant's Variable Annuity Units. The computation of the
Variable Annuity Unit value is described in the Account's
Prospectus under the caption "Variable Annuity Unit Value".
The first annuity payment is payable on the Annuitant's
Annuity Commencement Date under the Contract. The second and
subsequent annuity payments are payable monthly thereafter.
The amount of the first variable annuity payment depends on
the amount of funds used to buy the annuity and the applicable
annuity purchase rate. Such funds are equal to the Annuitant's
number of Variable Accumulation Units multiplied by the value of
such a Unit on the fourteenth day before his or her Annuity
Commencement Date, less any applicable premium tax. The purchase
rate is set out in a rate table in the Contract and depends on the
form of annuity selected, the age of the Annuitant and any
Contingent Annuitant, an assumed investment result and a mortality
assumption based on the 1951 Group Annuity Mortality Table for
Males.
The amount of the second and subsequent variable annuity
payments depends on the number and value of the Annuitant's
Variable Annuity Units. The number of Variable Annuity Units
credited to an Annuitant is determined by dividing the dollar
amount of the Annuitant's first variable annuity payment by the
value of a Variable Annuity Unit for the month of that payment.
This number of Variable Annuity Units remains constant. However,
since the Account invests in shares of the Fund, the dollar value
of a Variable Annuity Unit and hence the dollar amount of the
variable annuity payments varies up or down from month to month,
depending on the value of the securities held by the Fund. The
dollar amount of annuity payments will not be affected by mortality
experience or by an increase in expenses in excess of the charges
provided for in the Contracts.
<PAGE>
The computation of the first variable annuity payment, the
number of Variable Annuity Units, the Variable Annuity Unit value,
and the second variable annuity payment may be illustrated by the
following example.
Assume that a male participant, residing in a state where
there is no premium tax, elects to buy a variable annuity on his
65th birthday and selects a life annuity with 120 monthly payments
certain. Assume also that, 14 days before his Annuity Commencement
Date, the Participant's Variable Accumulation Account consists of
2,500.000 Variable Accumulation Units, and the Variable
Accumulation Unit Value for the fourteenth day before his Annuity
Commencement Date was $11.600.
The Participant's account has a value of 2,500.000 multiplied
by $11.600 or $29,000.00, for the purpose of buying his variable
annuity. The rate of first monthly payment of variable annuity in
this example is $6.50 per $1,000 applied, so that the first payment
is equal to 29.00000 multiplied by $6.50 or $188.50.
If the Variable Annuity Unit Value for the month when the
annuity is bought is $1.125, the number of Variable Annuity Units
to be credited to the Annuitant equals $188.50 divided by $1.125,
or 167.56 units. The dollar amount of each subsequent payment will
be equal to 167.56 multiplied by the Variable Annuity Unit Value
for the month in which the payment is due.
To determine the dollar amount of the second variable annuity
payment, assume that the ratio of the Variable Annuity Unit value
for the fourteenth day before the first day of the second month, to
the Variable Annuity Unit value for the fourteenth day before the
first day of the first month, is 1.003780. Then the Variable
Annuity Unit value for the second month is equal to the first
month's value of $1.125 multiplied by .997137 times 1.003780, which
is $1.125 multiplied by 1.000906, or $1.126. Therefore, the second
payment equals the number of Variable Annuity Units (167.56)
multiplied by the Variable Annuity Unit value ($1.126) or 188.67.
<PAGE>
Calculation of Performance Data
AVERAGE ANNUAL TOTAL RETURN
(Period Ended December 31, 1995)
1 Year 5 Year 10 Year
VCA-2 34.22% 16.90% 14.31%
S & P 500 37.53% 16.55% 14.86%
Average annual total return for the one-year, five-year and
ten-year periods shown above are calculated individually for each
period. A hypothetical initial payment of $1,000 is made to the
Account on the first day of each period. No further payments are
made. As of the date of this Statement of Additional Information,
the only Contract charge applied is the charge for MBL Life's
assumption of (1) expense risks (0.25% annually), and (2) mortality
risks and the provision of the minimum death benefit (0.12%
annually). Prior to January 1, 1989, a one-time Participant
enrollment fee (up to $15.00) and an annual administration charge
(up to $10.00 and up to $0.50 per purchase payment and transfer, or
2.00% of accumulation accounts, if greater) were deducted. These
charges, although no longer in effect, are included in the average
annual total return figures illustrated, for the years that such
charges were applicable. All distributions, if any, from the Fund
are assumed to be reinvested. Each Participant is assumed to redeem
the total value of his or her Variable Accumulation Account at the
end of each period shown above for cash, rather than electing to
apply the value to purchase an annuity.
The ending redeemable value is the Variable Accumulation
Account value at the end of each period, and is calculated by
multiplying the total number of units at the end of each period by
the net asset value on the last day of the period. Although
eliminated as of January 1, 1989 and no longer charged, the ending
redeemable value takes into account the annual deduction from the
Participant's Variable Accumulation Account of the $10.00
administration charge, for the years that such charges were
applicable.
The average annual total return quotations for the 1, 5, 10
year periods ended on December 29, 1995 are computed by finding the
average annual compounded rates of return over the 1, 5, and 10
year periods that would equate the initial amount invested to the
ending redeemable value.
The calculation does not take into account any sales charge
which would have been deducted from the purchase payment, if made
prior to January 1, 1989. The inclusion of the sales charge in the
calculation would have reduced the average annual total return
illustrated for each period. The sales charge, enrollment fee, and
administration charge provisions were deleted from all VCA-2
contracts, effective January 1, 1989. The fee and charges are no
longer levied.
The performance figures shown above are compared to
performance data for the Standard and Poor's 500 Stock Index ("S &
P 500"), which is described in the Account's prospectus under the
caption "Performance Related Information".
<PAGE>
ADDITIONAL INFORMATION
This Statement of Additional Information, and the Prospectus
to which it relates, omit some information contained in the
registration statement filed with the Securities and Exchange
Commission, Washington, D.C. Copies of such information may be
obtained from the Commission upon payment of the prescribed fees.
FINANCIAL STATEMENTS
The Account incorporates by reference into this Statement of
Additional Information its audited Financial Statements and the
Report of Independent Accountants thereon contained in the 1995
Audited Financial Statements.
The following financial statements relate to the financial
position and operations of MBL Life. As explained in the Account's
Prospectus, the value of a Contract Holder's interest under the
Contracts described herein is affected solely by the investment
results of the Account. The MBL Life financial statements should
be considered by Contract Holders only as bearing upon the ability
of MBL Life to meet its obligations under the Contract.
Copies of the Account's Financial Statements are mailed to
each Contract Holder semiannually. The Account's annual financial
statements are audited by a firm of independent accountants. The
firm of Coopers & Lybrand L.L.P. has been selected for the current
fiscal year. The Account will furnish, without charge, an
additional copy of these Audited Financial Statements upon request
made to: Pension and Investment Products, MBL Life Assurance
Corporation, 520 Broad Street, Newark, New Jersey 07102-3111, Attn:
MBL VARIABLE CONTRACT ACCOUNT-2, telephone number 1-800-435-3191.
MBL LIFE ASSURANCE CORPORATION
STATUTORY-BASIS FINANCIAL
STATEMENTS
As of December 31, 1995 and 1994
and for the years ended
<PAGE>
MBL LIFE ASSURANCE CORPORATION
INDEX
As of December 31, 1995 and 1994 and for the two years ended
December 31, 1995
Page(s)
Report of Independent Accountants 2-3
Statutory-Basis Financial Statements:
Balance Sheets 4
Statements of Operations 5
Statements of Changes in Capital and Surplus 6
Statements of Cash Flows 7
Notes to Statutory-Basis Financial Statements 8-34
Supplemental Schedule:
Schedule of Assets and Liabilities for the year ended
December 31, 1995 35-38
<PAGE>
[Coopers & Lybrand L.L.P. Letterhead]
Report of Independent Accountants
To the Board of Directors and Shareholders of
MBL Life Assurance Corporation:
We have audited the accompanying statutory-basis balance sheets
of MBL LIFE ASSURANCE CORPORATION (the "Company") (see Note 1)
as of December 31, 1995 and 1994 and the related statutory-basis
statements of operations, changes in capital and surplus and
cash flows for the years then ended. These statutory-basis
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on
these statutory-basis financial statements based on our audits.
We conducted our audits of the accompanying statutory-basis
financial statements in accordance with generally accepted
auditing standards; however, as discussed in the following
paragraph, we were not engaged to determine or audit the effects
of the variances between statutory accounting practices and
generally accepted accounting principles ("GAAP"). Generally
accepted auditing standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion on the accompanying
statutory-basis financial statements.
The Company presents its financial statements in conformity with
accounting practices prescribed or permitted by the Insurance
Department of the State of New Jersey. When statutory-basis
financial statements are presented for purposes other than
solely for filing with a regulatory agency, generally accepted
auditing standards require that an auditor's report on them
state whether they are presented in conformity with GAAP. The
accounting practices used by the Company vary from GAAP as
explained in Note 2, and the Company has not determined the
effects of these variances. Since the financial statements
referred to above do not purport to be a presentation in
conformity with GAAP, we are not in a position to express and do
not express an opinion on the financial statements referred to
above as to fair presentation of financial position, results of
operation, or cash flow in conformity with GAAP.
<PAGE>
In our opinion, the statutory-basis financial statements
referred to above present fairly, in all material respects, the
admitted assets, liabilities, and capital and surplus of MBL
Life Assurance Corporation as of December 31, 1995 and 1994 and
the results of its operations and its cash flows for the years
then ended in conformity with accounting practices prescribed or
permitted by the Insurance Department of the State of New Jersey.
Our audit was conducted for the purpose of expressing an opinion
on the statutory-basis financial statements taken as a whole.
The Supplemental Schedule of Assets and Liabilities for the year
ended December 31, 1995 is presented to comply with the NAIC's
Annual Statement Instructions and is not a required part of the
basic statutory-basis financial statements. Such information
has been subjected to the auditing procedures applied in the
audit of the basic statutory-basis financial statements and, in
our opinion, is fairly stated in all material respects in
relation to the basic statutory-basis financial statements taken
as a whole.
As discussed in Note 1, on May 1, 1994 the Company assumed
substantially all of the business, assets and liabilities, of
Mutual Benefit Life Insurance Company in Rehabilitation ("Mutual
Benefit Life") and began operating under the terms and
conditions of the Third Amended Plan of Rehabilitation of the
Mutual Benefit Life Insurance Company in Rehabilitation (the
"Plan"). As further discussed in Note 1, the Company's
management, in conjunction with representatives of the Insurance
Department of the State of New Jersey, developed the Plan, which
is based on actuarial, valuation and other assumptions and
reflects management's best estimates of: a) future operations;
b) the nature, timing and extent of policyholders' benefits; and
c) the timing and proceeds from the restructuring of assets to
fund the Company's obligation. Further as discussed in Note 13,
certain terms and conditions of the Plan have been appealed by
parties to the Plan, and litigation has been brought against
Mutual Benefit Life Insurance Company in Rehabilitation.
COOPERS & LYBRAND L.L.P.
Parsippany, New Jersey
February 16, 1996.
<PAGE>
MBL LIFE ASSURANCE CORPORATION
BALANCE SHEETS
(STATUTORY-BASIS)
As of December 31, 1995 and 1994
(in thousands)
ADMITTED ASSETS: 1995 1994
--------------- ---------------
Bonds $ 4,025,613 $ 3,402,171
Stocks:
Preferred 1,059 2,492
Common 246,307 106,568
--------------- ---------------
247,366 109,060
Mortgage loans on real estate 1,262,465 1,821,229
Real estate owned 352,093 330,432
Policy loans 4,961,122 4,509,009
Other invested assets 67,395 112,254
Short-term investments 41,154 56,187
Cash 8,372 2,406
--------------- ---------------
Cash and invested assets 10,965,580 10,342,748
--------------- ---------------
Investment income due and accrued 381,074 313,461
Federal income tax recoverable 13,192 7,618
Other assets 28,993 58,477
Separate account assets:
Industry Separate Account 2,160,347 2,151,117
Net equity in Special Purpose
Asset Vehicle 378,047 392,404
Reaffirmed Separate Accounts 237,191 200,350
--------------- ---------------
Total Separate account assets 2,775,585 2,743,871
--------------- ---------------
Total admitted assets $ 14,164,424 $ 13,466,175
The accompanying notes are an integral part of these statutory-basis
financial statements.
The above statutory-basis balance sheets do not purport to represent the
estimated fair value of the assets and liabilities presented.
<PAGE>
LIABILITIES, CAPITAL AND SURPLUS:
1995 1994
---------------- --------------
Policy and contract liabilities:
Life and annuity reserves $ 10,968,478 $ 10,394,824
Accident and health reserves 107,866 88,015
Policyholders' funds left on deposit 137,257 158,479
Dividends payable in following year 6,563 7,242
Policy and contract claims 42,516 48,841
Other 39,314 39,478
---------------- --------------
11,301,994 10,736,879
---------------- --------------
General liabilities:
Expenses, commissions and taxes 17,854 8,739
Asset valuation reserve 151,300 79,456
Other 172,570 189,447
---------------- --------------
341,724 277,642
---------------- --------------
Separate account liabilities:
Industry separate account 2,160,347 2,151,117
Reaffirmed separate accounts 228,160 193,675
---------------- --------------
Total Separate account liabilities 2,388,507 2,344,792
---------------- --------------
Total liabilities 14,032,225 13,359,313
---------------- --------------
Capital and surplus:
Common stock, par value $100 per share;
20,000 shares authorized and issued 2,000 2,000
Paid-in and contributed surplus 21,448 21,448
Unassigned surplus 108,753 83,416
---------------- --------------
132,201 106,864
Less treasury stock, at cost (7 shares) (2) (2)
---------------- --------------
Total capital and surplus 132,199 106,862
---------------- --------------
Total liabilities, capital and
surplus $ 14,164,424 $ 13,466,175
---------------- ---------------
The accompanying notes are an integral part of these statutory-basis
financial statements.
The above statutory-basis balance sheets do not purport to represent the
estimated fair value of the assets and liabilities presented.
<PAGE>
MBL LIFE ASSURANCE CORPORATION
STATEMENTS OF OPERATIONS (STATUTORY-BASIS)
For the years ended December 31, 1995 and 1994 (in thousands)
1995 1994
------------ --------------
Premium and annuity considerations $ 1,778,079 $ 1,003,824
Supplementary contracts 41,346 42,663
Commissions and expense allowances on
reinsurance ceded, net of reserve
adjustment of $733 and $1,178 7,201 1,303
Investment income, net of investment
expenses of $115,056 and $61,605 958,376 588,280
Amortization of interest maintenance reserve (3,773) (2,261)
Miscellaneous income 28,826 18,466
-------------- ---------------
Total revenue 2,810,055 1,652,275
-------------- ---------------
Benefits paid or provided:
Death benefits 221,878 141,204
Annuity benefits 36,762 28,773
Disability and A&H benefits 11,685 9,856
Surrender benefits 727,702 450,628
Increase in policy and contract reserves 572,287 456,521
Payments on supplementary contracts 75,398 22,262
Other benefits 7,066 2,744
------------- ---------------
1,652,778 1,111,988
------------- ---------------
Expenses:
Commissions 8,892 4,297
Commissions and expense allowance on
reinsurance assumed 86,433 65,585
General insurance expenses 44,653 25,928
Insurance taxes, licenses and fees 7,542 5,126
Increase in loading, net 2 (101)
Net transfer from Separate Accounts (96,862) (111,728)
Other expenses 4,432 11,549
-------------- ---------------
55,092 656
-------------- ---------------
Total benefits and expenses 1,707,870 1,112,644
-------------- ---------------
Income before dividends, taxes
and net realized capital losses 1,102,185 539,631
Dividends to policyholders (895,833) (422,810)
-------------- ---------------
Income after dividends and before taxes
and net realized capital losses 206,352 116,821
Federal income tax expense (41,058) (31,231)
-------------- ---------------
Income after dividends and taxes,
before net realized capital losses 165,294 85,590
-------------- ---------------
Net realized capital losses, net of tax of
$6,262 and $10,153 (64,267) (50,212)
-------------- ---------------
Net income $ 101,027 $ 35,378
-------------- ---------------
The accompanying notes are an integral part of these statutory-basis
financial statements.
<PAGE>
MBL LIFE ASSURANCE CORPORATION
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
(STATUTORY-BASIS)
For the years ended December 31, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
Paid-in and Total
Common Contributed Unassigned Treasury Capital and
Stock Surplus Surplus Stock Surplus
------ ----------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Balance, beginning of year -
January 1,1994 $ 2,000 $ 21,448 $ 31,687 $ (2) $ 55,133
Net surplus transferred from
Mutual Benefit Life (Note 1) 49,330 49,330
Net income 35,378 35,378
Net unrealized capital gains 57,421 57,421
Change in non-admitted assets (14,404) (14,404)
Change in asset valuation reserve (77,324) (77,324)
Change in net equity in Special
Purpose Asset Vehicle (22,476) (22,476)
Current year's Federal income tax
benefit not affecting operations 13,433 13,433
Payment on sale of Group Insurance
operations 5,180 5,180
Other 5,191 5,191
-------- --------- ---------- -------- -----------
Balance, end of year -
December 31, 1994 2,000 21,448 83,416 (2) 106,862
Net income 101,027 101,027
Net unrealized capital gains (52,545) (52,545)
Change in non-admitted assets 16,239 16,239
Change in asset valuation reserve (71,844) (71,844)
Change in net equity in Special
Purpose Asset Vehicle (after
funds transferred to the General
Account below) (14,356) (14,356)
Funds received from Special
Purpose Asset Vehicle 45,239 45,239
Current year's Federal income tax
benefit not affecting operations 2,693 2,693
Other (1,116) (1,116)
-------- --------- ---------- ------- -----------
Balance, end of year -
December 31, 1995 $ 2,000 $ 21,448 $ 108,753 $ (2) $ 132,199
-------- --------- ---------- ------- -----------
</TABLE>
The accompanying notes are an integral part of these statutory-basis
financial statement.
<PAGE>
MBL LIFE ASSURANCE CORPORATION
STATEMENTS OF CASH FLOWS
(STATUTORY-BASIS)
For the years ended December 31, 1995 and 1994
(in thousands)
1995 1994
------------ ------------
Cash flows from operations:
Premium and annuity deposits received $ 1,818,070 $ 1,045,697
Investment income received 889,685 527,886
Other operating income received 36,945 21,780
Benefits paid to policyholders (2,434,248) (1,528,470)
Operating expenses paid (141,117) (103,389)
Federal income taxes paid (37,034) (22,310)
Transfer to Separate Accounts 96,774 111,502
Policy and contract holder opt-outs - (103,704)
Other cash provided 7,378 22,615
------------ ------------
Net cash provided (used) in operations 236,453 (28,393)
------------ ------------
Cash flows from investing activities:
Proceeds from sales, maturities and
repayments of bonds and stocks 2,431,022 2,007,882
Proceeds from sales of real estate 119,706 20,140
Proceeds from sales and repayments
of other invested assets 9,421 14,059
Repayments of mortgage loans 406,524 122,755
Purchase of bonds and stocks (3,119,292) (2,258,753)
Purchase of real estate (24,732) (20,038)
Purchase of other invested assets (1,214) (2,858)
Funding of mortgage loans (64,547) (46,410)
Cash transferred to Industry Separate Account - (59,820)
Cash transferred from Special Purpose
Asset Vehicle 45,239 -
Tax on capital gains (10,005) (4,564)
Other cash provided (used) (37,642) 49,386
------------ -------------
Net cash used in investing activities (245,520) (178,221)
Cash and short-term investments transferred
from Mutual Benefit Life - 260,700
------------ -------------
Net increase (decrease) in cash (9,067) 54,086
Cash and short-term investments,
beginning of year 58,593 4,507
------------ -------------
Cash and short-term investments,
end of year $ 49,526 $ 58,593
------------ -------------
The accompanying notes are an integral part of these statutory-basis
financial statements.
<PAGE>
MBL LIFE ASSURANCE CORPORATION
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
December 31, 1995
1. ORGANIZATION AND REHABILITATION OF MUTUAL BENEFIT LIFE
INSURANCE COMPANY
ORGANIZATION
MBL Life Assurance Corporation ("MBL Life") is a New Jersey domiciled
stock life insurance company licensed in each of the fifty states and
the District of Columbia. Prior to May 1, 1994, MBL Life was a wholly
owned subsidiary of The Mutual Benefit Life Insurance Company in
Rehabilitation ("Mutual Benefit Life"). As discussed below,
substantially all of the assets and liabilities of Mutual Benefit Life
were transferred to MBL Life as of May 1, 1994 under the terms of an
Assumption Reinsurance Agreement.
The accompanying statutory-basis financial statements reflect the
statutory financial position of MBL Life after giving effect to the
transfer of such items as discussed below.
REHABILITATION OF MUTUAL BENEFIT LIFE
On July 16, 1991, the Superior Court of New Jersey (the "Court")
entered an Order (the "Order") appointing the New Jersey Insurance
Commissioner (the "Commissioner") as the Rehabilitator of Mutual
Benefit Life.
The Commissioner was empowered by the Order to take such steps as
deemed appropriate to remove the cause and conditions that made
rehabilitation necessary. The initial Plan of Rehabilitation was
filed with the Court on August 3, 1992. On January 15, 1993, the
Commissioner filed the First Amended Plan of Rehabilitation (the
"Plan") with the Court. On August 12, 1993, the Court approved the
Plan with certain modifications. Subsequently, two amendments to the
Plan were filed and on November 10, 1993, the Court issued an Order of
Confirmation provided certain further modifications to the Plan were
made. The Court entered an order approving the modified plan on
January 28, 1994 which provided for the implementation of the Plan on
April 29, 1994 (the effective date of which is deemed to be May 1,
1994, the "Plan Implementation Date"), to extend through December 31,
1999. The Plan, which is subject to certain appeals (see Note 13), is
based on actuarial, valuation and other assumptions and reflects
management's best estimates of: a) future operations; b) the nature,
timing and extent of policyholders' benefits; and c) the timing and
proceeds from the restructuring of assets to fund the Company's
obligation. In view of the operating environment and circumstances
under which the Company operates, there is significant uncertainty
inherent in the assumptions made by management, and as such, the
actual results may differ materially from management's estimates.
<PAGE>
Under the terms of the Plan, the assets and liabilities of Mutual
Benefit Life were allocated to a number of distinct legal entities as
described below:
A majority of Mutual Benefit Life's insurance and annuity
contracts were restructured and transferred to MBL Life under the
terms of an Assumption and Reinsurance Agreement, along with
certain other liabilities and assets necessary to fund such
liabilities. The individual insurance and annuity contracts
which were restructured according to the Plan were guaranteed as
to account values and stated interest rates by various State
Insurance Guaranty Associations, collectively referred to as the
Participating Guaranty Associations.
Group annuity contract liabilities deemed not to be covered by
the Participating Guaranty Associations were segregated into a
separate account (the "Industry Separate Account"). These
liabilities were restructured and guaranteed by a consortium of
insurance companies (the "Industry Reinsurers").
Assets and liabilities which were not transferred to one of the
above entities are held in a liquidating trust, of which the
Commissioner is the sole Trustee. These assets and liabilities
are not included in the accompanying statutory-basis financial
statements.
The assets not retained in the liquidating trust were allocated to MBL
Life's General Account ("General Account") and the Industry Separate
Account in proportion to the liabilities assumed by each entity. This
allocation generally resulted in the assuming entities receiving
assets with similar characteristics and proportionate estimated fair
values. In addition, the General Account and the Industry Separate
Account each received a proportionate share of a Special Purpose Asset
Vehicle (the "SPAV") separate account. The SPAV was created under the
terms of the Plan and includes assets which could not be allocated
between the two entities in their entirety because of their large size
or other special characteristics (see Note 4).
A summary of the assets and liabilities assumed by MBL Life as of
April 29, 1994, the date of the transfer, is as follows (in
thousands):
Assets:
From General Account $ 10,778,985
From Industry Separate Account 2,102,310
----------------
$ 12,881,295
----------------
Liabilities:
From General Account $ 10,729,655
From Industry Separate Account 2,102,310
----------------
$ 12,831,965
----------------
Capital and surplus:
From General Account $ 49,330
----------------
<PAGE>
In addition to the establishment of the entities discussed above, the
Plan also provided numerous other terms and conditions which affected
policyholders, contractholders, creditors and other parties. The more
significant of these terms and conditions include:
A majority of policyholder liabilities were restructured based
upon estimates of the value and expected yield of the assets
owned by Mutual Benefit Life at the time the Plan was submitted
to the Court. Such restructuring generally resulted in the value
of such liabilities as of July 16, 1991 being retained, however,
future interest rates were tied to expected asset yields with
only minimum interest rates guaranteed. In addition,
restrictions were placed on policyholder accessibility of
guaranteed values including the imposition of early withdrawal
charges through December 31, 1999, the end of the Rehabilitation
Period (see Note 12).
The Plan provided an option allowing Mutual Benefit Life
policyholders, annuitants and pension contract participants to
withdraw ("opt-out") their account values prior to the Plan
closing at substantial discounts from such values. Approximately
$103.7 million was paid to policyholders, annuitants and pension
contract participants who elected to opt-out as of May 1, 1994.
The Plan provided policyholders whose contracts were originally
issued by MBL Life with an option to withdraw, without penalty,
their current account values. Actual withdrawals amounted to
$8.3 million and are reflected in the accompanying December 31,
1994 statutory-basis financial statements.
Pursuant to the terms of the Plan, the ownership of the stock of
MBL Life was transferred to a Trust, of which the Commissioner is
the sole Trustee. The beneficiaries of this Trust consist of the
holders of general unsecured claims as defined in the Plan.
Further, 80% of any excess surplus at the end of the
Rehabilitation Period, as defined in the Plan, will revert to the
holders of general unsecured claims (see Note 13).
Separate account contract liabilities, and related assets, which
existed prior to the Plan implementation date, were considered
"reaffirmed contracts" pursuant to the terms of the Plan and were
not affected by the implementation of the Plan. These contracts
consist primarily of individual and group variable annuities.
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying statutory-basis financial statements have been
prepared in accordance with accounting practices prescribed or
permitted by the Insurance Department of the State of New Jersey
("statutory accounting practices"). Prescribed statutory accounting
practices include a variety of publications of The National
Association of Insurance Commissioners ("NAIC"), as well as state
laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not
so prescribed that have been approved by the Insurance Department of
the State of New Jersey. In order to account for those transactions
which were uniquely related to the implementation of the Plan, MBL
Life received written approval from the Insurance Department of the
State of New Jersey for a number of accounting practices which
differed from or were ambiguous to the prescribed statutory accounting
practices.
Statutory accounting practices differ from generally accepted
accounting principles. The effects on the statutory-basis financial
statements of the variances between statutory accounting practices and
generally accepted accounting principles, although not reasonably
determinable, are presumed to be material. The accompanying
statutory-basis financial statements do not purport to represent the
estimated fair value of the information presented therein.
Significant accounting policies, permitted statutory accounting
practices and the manner that such policies and practices differ from
generally accepted accounting principles for stock life insurance
companies ("GAAP"), as applicable, applied in preparing the
statutory-basis financial statements follow.
CARRYING AMOUNTS OF ASSETS AND LIABILITIES
The carrying amount of assets transferred to MBL Life from Mutual
Benefit Life pursuant to the Plan are based upon the carrying amounts
of such assets as reflected in Mutual Benefit Life's accounting
records immediately prior to the transfer.
Liabilities, other than Policy and Contractholder Reserves
restructured pursuant to the Plan, were transferred at historical
carrying amounts of such liabilities as reflected in Mutual Benefit
Life's accounting records prior to the transfer.
BONDS AND STOCKS
Bonds qualifying for amortization based upon their classification by
the National Association of Insurance Commissioners ("NAIC")
Securities Valuation Office ("SVO") are stated at amortized cost; all
other bonds are stated at values prescribed by the SVO. Under GAAP,
only those bonds classified by MBL Life as held-to-maturity would be
carried at amortized cost. Bonds classified as available for sale or
trading would be carried at their estimated fair value. Unaffiliated
preferred stocks in good standing are carried at cost. Unaffiliated
preferred stocks not in good standing are stated at the lower of cost
or estimated fair value; unaffiliated common
stocks are carried at estimated fair value. Under GAAP, unaffiliated
preferred and common stock would be carried at estimated fair value.
<PAGE>
Investments in subsidiaries are stated at MBL Life's equity in the
subsidiaries' net assets and are included in stocks. Under GAAP, the
assets and liabilities and revenues and expenses of the majority owned
subsidiaries would be consolidated with those of MBL Life.
Short-term investments generally maturing within one year, are carried
at amortized cost which approximates estimated fair value.
Realized gains or losses from the sale of bonds and stocks are
determined on the basis of specific identification.
MORTGAGE LOANS ON REAL ESTATE
Performing mortgage loans are stated at their unpaid principal
balance, adjusted for amortization of any premium or discount.
Non-performing commercial mortgage loans and modified and restructured
commercial mortgage loans which are not in the process of foreclosure
are carried at the lower of their aggregate unpaid principal balance
or undiscounted net recoverable amount based upon ten year cash flows
plus an eleventh year reversion at estimated sales value.
Non-performing commercial mortgage loans which are in the process of
foreclosure are carried at the lower of their aggregate unpaid
principal balance or estimated fair value of the underlying collateral
determined using discounted cash flow analysis based upon ten year
cash flows plus an eleventh year reversion at estimated sales value
using discount rates commensurate with the risk of the loan.
Under GAAP prior to December 15, 1994, certain loans would qualify as
in-substance foreclosures and be included in real estate owned,
carried at the lower of the estimated fair value of the properties
less estimated costs to sell or the recorded investment in the related
loan at the date of foreclosure (loan cost). A loan is in
in-substance foreclosure if (1) the borrower has little or no equity
in the collateral; (2) proceeds for repayment of the loan can be
expected to come only from the collateral; and (3) the borrower has
effectively abandoned control of the collateral or it is doubtful that
the borrower will be able to rebuild equity in the collateral or
otherwise repay the loan in the foreseeable future.
Further, under GAAP, a reserve would be established based on
management's estimate, and maintained at a level considered adequate
to reflect the risk of loss in the overall loan portfolio, including
performing mortgages, based on circumstances, including appraisals of
collateral securing specific loans, known or anticipated at each
reporting date.
In May 1993, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 114, Accounting by Creditors for Impairment of a Loan which
is effective for fiscal years beginning after December 15, 1994. SFAS
No. 114 requires that impaired loans be measured on the basis of the
present value of expected future cash flows discounted at the loan's
effective interest rate, the loan's observable market price or the
fair value of the collateral if the loan is collateral dependent.
<PAGE>
In October 1994, the FASB issued SFAS No. 118 Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosures, which
is also effective for fiscal years beginning after December 15, 1994.
SFAS No. 118 amends the provisions of SFAS No. 114 regarding the
recognition of interest income on impaired loans, allowing companies
to substantially use the methods of income recognition presently in effect.
REAL ESTATE OWNED
Home office real estate is stated at depreciated cost with
depreciation calculated using the straight-line basis. Real estate
acquired in satisfaction of debt, which is presumed to be held for
sale, is valued at the lower of the recorded investment in the loan
(property cost) or estimated fair value based upon discounted cash
flow analyses at the date of foreclosure. Subsequent to its initial
valuation, such real estate is stated at the lower of depreciated cost
or estimated fair value by establishing a valuation allowance for any
differences between estimated fair value and depreciated cost where
the estimated fair value is lower.
POLICY LOANS
Policy loans are stated at unpaid principal balances and are not in
excess of cash surrender values.
OTHER INVESTED ASSETS
Investments in real estate joint ventures, included in other invested
assets, are reported based on the equity method of accounting.
Certain Mutual Benefit Life industrial revenue bond guarantees on Real
Estate Joint Venture indebtedness were not carried over to MBL Life
because MBL Life is not a party to such guarantees. Pursuant to the
terms and conditions of the Plan, these guarantees were not assumed by
MBL Life (see Notes 12 and 13). Negative carrying values of the
equity in these joint ventures resulting from the industrial revenue
bond guarantees as reflected in Mutual Benefit Life's books prior to
May 1, 1994 were reversed.
Investments in non-real estate partnerships are generally carried at
cost, adjusted for any unrealized gains or losses attributable to
partnership investments for which quoted market values are available.
OTHER ASSETS AND LIABILITIES
The accompanying statutory financial statements contain amounts due to
and due from the Industry Separate Account for transactions handled by
the General Account on its behalf. As of December 31, 1995 the net
amounts due to the Industry Separate Account approximate $12 million.
As of December 31, 1994 the net amounts due from the Industry Separate
Account amounted to approximately $32 million.
INVESTMENT VALUATION RESERVES
Mandatory reserves have been established for general account
investments in accordance with guidelines prescribed by insurance
regulatory authorities. Such reserves consist of an Asset Valuation
Reserve (AVR) for all General Account invested assets (including the
general accounts proportionate share of the invested assets held in
the SPAV), and an Interest Maintenance Reserve (IMR), which defers
General Account realized capital gains and losses (including the
General Account's proportionate share of realized gains and losses
incurred by the SPAV) (net of tax) attributable to interest rate
fluctuations on fixed income investments and recognizes them over the
estimated remaining duration of the investments sold.
The AVR as of December 31, 1995 and 1994 for the General Account was
calculated using the prescribed formula. The opening balance utilized
in calculating the 1994 contribution was that of MBL Life's December
31, 1993 AVR which was adjusted, to the extent possible, for the
appropriate realized and unrealized gains and losses incurred in the
General Account (including the General Account's proportionate share
of appropriate realized and unrealized gains and losses in the SPAV)
subsequent to May 1, 1994 and by MBL Life prior to May 1, 1994. The
current year's contribution to the AVR was based on General Account
assets at December 31, 1995 (including the General Account's
proportionate share of assets held in the SPAV).
The IMR as of December 31, 1995 and 1994 was calculated, using the
prescribed formula, based upon the interest rate related gains and
losses of MBL Life through the effective date of the Plan and those of
the General Account (including its proportionate share of such gains
and losses in the SPAV) for the period subsequent to the effective
date of the Plan. The December 31, 1995 IMR amounted to a negative
$2.7 million, and according to prescribed statutory accounting
practices, was treated as a "Disallowed Interest Maintenance Reserve"
asset and non-admitted in the accompanying statutory-based financial
statements.
Under GAAP, AVR and IMR reserves are not established. MBL Life also
established voluntary investment valuation reserves for certain
General Account invested assets. Changes to the AVR and voluntary
investment reserve will be reported as direct additions to or
deductions from surplus. Transfers to the IMR will be deducted from
realized capital gains.
POLICY AND CONTRACT RESERVES
Reserves for restructured life insurance policies (universal life
plans) and reaffirmed contracts amounted to $10.9 and $10.4 billion at
December 31, 1995 and 1994, respectively and are comprised as follows:
Policyholder Reserves for Mutual Benefit Life traditional and
adjustable life policies that have been restructured as Universal
Life Insurance policies pursuant to the terms and conditions of
the Plan, amounted to $2.4 billion and $2.6 billion for 1995 and
1994, respectively. These reserves are computed under the
Commissioners' Reserve Valuation Method, using the Commissioners'
1980 Standard Ordinary Mortality Table and the 1995 valuation
interest rate of 5.35%, provided however that the reserve held
shall not be less than the account value (without reduction for
moratorium charge), plus any unearned cost of insurance charge,
plus an excess interest reserve based on any future guaranteed
interest in excess of the 1995 valuation rate. The basis for the
opening July 16, 1991 (restructured date) restructured account
value for restructured policies was the statutory life insurance
reserve on Mutual Benefit Life's accounting records for such
policies. Under GAAP, life insurance reserves for universal life
plans are equal to policy account or contract values.
<PAGE>
Reserves for Corporate Owned Life Insurance ("COLI") policies
amounted to $5.1 billion and $4.4 billion at December 31, 1995
and 1994, respectively. Reserves for such policies are
generally computed under the Commissioners' Reserve Valuation
Method, using the Commissioner's 1980 Standard Ordinary Mortality
Table for individual policies and the Commissioner's 1958
Standard Ordinary Mortality Table for group policies, and
assuming interest rates ranging from 4.5% to 6.0%. Under GAAP,
such reserves would be accrued as GAAP premium is recognized,
representing the present value of future benefits to be paid to
policyholders, less the present value of future net premiums. In
addition, under GAAP, mortality assumptions are based on actual
company experience rather than prescribed mortality tables.
Reserves for annuity contracts in the General and Industry
Separate Accounts amounted to approximately $3.4 billion and $2.0
billion, respectively at both December 31, 1995 and 1994. For
those annuity contracts which were restructured pursuant to the
Plan, reserves are based on crediting rates of 5.1% for annuity
contracts in the general account in 1995 and 1994 and 3.55% and
3.5% for those annuity contracts allocated to the Industry
Separate Account in 1995 and 1994, respectively. Such rates were
adjusted at December 31, 1995, based on the investment results of
the respective Account's assets to 5.1% and 5.25%, respectively.
Pursuant to the terms and conditions of the Plan, reserves for
such contracts are generally equal to contract fund balances
(without reduction for moratorium charges), plus an excess
interest reserve based on any future guaranteed interest in
excess of the applicable valuation rate. For those contracts not
restructured pursuant to the Plan, reserves are based on
crediting rates ranging from 2.25% to 11%. Under GAAP, reserves
for annuity contracts are generally equal to contract fund
balances.
Policyholder reserves for Mutual Benefit Life policies that were
reaffirmed, pursuant to the terms of the Plan amounted to
approximately $38.5 million and $40.5 million at December 31,
1995 and 1994, respectively and consisted primarily of $29.0
million and $30.3 million in each year for supplementary
contracts involving life contingencies (SCILC). The SCILC
reserves are calculated using the 1971 and 1983 Individual
Annuity Mortality Tables and Annuitants' 1949 Table, assuming
interest rates of 3.5% to 8.75%.
Active life reserves for accident and health contracts, amounting
to $32.9 million and $30.8 million at December 31, 1995 and 1994,
respectively, include unearned premium reserves computed on a pro
rata basis and additional reserves based on the 1964
Commissioners' Disability Table, combined with the 1958 and 1980
Commissioner's Standard Ordinary Mortality Tables at interest
rates ranging from 3.5% to 4.5%. Reserves for disabled lives,
$75.0 million and $57.2 million at December 31, 1995 and 1994,
respectively, are calculated principally using the 1964
Commissioners' Disability Table at 3.5% interest and the 1985
Commissioners' Individual Disability Table A at 5% interest.
Under GAAP, such reserves would be accrued as GAAP premium is
recognized, representing the present value of future benefits to
be paid to policyholders, less the present value of future net
premiums.
<PAGE>
GENERAL OTHER LIABILITIES
Without giving regard to the validity of the claims, the
statutory-basis balance sheet at December 31, 1995 and 1994 includes
an amount equal to the potential liability of MBL Life of certain
Class 1 claims as established by the Order of the Superior Court.
Under GAAP, the inclusion of these liabilities would be determined by
the applicable requirements of SFAS No. 5, Accounting for
Contingencies.
NON-ADMITTED ASSETS
Certain assets, principally furniture and equipment, leasehold
improvements, prepaid pension costs, certain due and accrued interest
on delinquent mortgage loans, accident and health insurance premiums
past due and agents' debit balances are designated as "nonadmitted"
and are not included in the statutory-basis balance sheets. Under
GAAP, these assets would be included in the balance sheet, net of
applicable depreciation, amortization and valuation reserves.
INDUSTRY SEPARATE ACCOUNT
Pursuant to the terms of the Plan of Operations of the Industry
Separate Account, as approved by the Insurance Department of the State
of New Jersey, a liability has been established within the Industry
Separate Account representing the excess of the carrying value of the
assets of the Industry Separate Account over its liabilities. A
receivable from the Industry Reinsurers will be established if
statutory liabilities exceed statutory assets of the account in the
future. This amount will be adjusted throughout the Rehabilitation
Period with final payments being made in accordance with the
Participation and Reinsurance Agreement which is part of the Plan.
The Industry Separate Account assets are reflected in the December 31,
1995 and 1994 statutory-basis balance sheet with all other separate
account assets. The Industry Separate Account liabilities are
included with all other separate account liabilities on the
statutory-basis balance sheet. The accounting practices of the
Industry Separate Account are the same as corresponding accounting
practices of the General Account; however, the Industry Separate
Account has not established an AVR or IMR reserve.
REAFFIRMED SEPARATE ACCOUNTS
Assets held in the separate accounts which were reaffirmed pursuant to
the terms of the Plan are carried at market value. They are reflected
in the December 31, 1995 and 1994 statutory-basis balance sheet with
all other separate account assets. The liabilities of each of these
separate accounts are reported at participants' corresponding equity
in the accounts and shown with all other separate account liabilities
in the December 31, 1995 and 1994 statutory-basis balance sheet.
These liabilities are considered to be reported at estimated fair
value.
<PAGE>
SPECIAL PURPOSE ASSET VEHICLE
The General Account's net equity in the Special Purpose Asset Vehicle
is reflected in the December 31, 1995 and 1994 statutory-basis balance
sheet with all other separate account assets. Funds transferred from
the SPAV ($45,239) represent the General Account's proportionate share
of the distribution of cash flows from the assets maintained in the
SPAV. The accounting practices for this separate account will be
generally the same as the corresponding practices for the General
Account. The General Account's proportionate share of the assets in
this separate account are included in the calculation of the general
account's AVR (see Note 4).
ACQUISITION COSTS
In accordance with statutory accounting practices, commissions and
other costs incurred in acquiring new business are charged to
operations as incurred. Under GAAP, acquisition costs would be
deferred and amortized over the estimated duration of the underlying
policies or contracts. However, since MBL Life assumed the assets and
liabilities of Mutual Benefit Life pursuant to an Assumption
Reinsurance Agreement, and MBL Life did not incur any acquisition
costs, deferral and amortization of any costs would not be applicable.
REVENUE RECOGNITION
The Statement of Operations for the year ended December 31, 1994
includes the results of the business assumed from Mutual Benefit Life
from May 1, 1994 and does not include the four months of operations of
Mutual Benefit Life prior to implementation of the Plan.
Premium revenues are recognized when due during the premium paying
period of the contract. Premiums are credited to account funds and
the cost of insurance is charged against account values and reflected
as premium income. Under GAAP, premiums are recognized as earned over
the life of the contract.
Net realized investment gains and losses, less applicable income taxes
and amounts resulting from changes in interest rates which have been
deferred and charged or credited to the IMR are reported in the
accompanying statutory-basis statement of operations and are
determined using the specific identification method.
STATEMENTS OF CASH FLOWS
The statements of cash flows are presented in accordance with
guidelines established by the NAIC rather than in accordance with
GAAP. For purposes of the statements of cash flows, MBL Life
considers all highly liquid investments with a maturity of one year or
less to be short-term investments.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles prescribed or permitted by the Insurance Department of the
State of New Jersey requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. Appropriate disclosures regarding the use of estimates
have been made throughout these statutory financial statements.
<PAGE>
3. UNCONSOLIDATED SUBSIDIARIES AND OTHER AFFILIATES
MBL Life's subsidiary operations primarily include real estate
investment management, brokerage activities and other investment
management and advisory services. At December 31, 1995 and 1994, MBL
Life's investment in the net equity of such unconsolidated
subsidiaries, including those carried in the Special Purpose Asset
Vehicle, amounted to approximately $10 million and $80 million,
respectively. MBL Life incurs charges on behalf of its subsidiaries
which are reimbursed pursuant to agreements for shared use of
property, personnel and facilities.
MBL Life's net equity in joint ventures and other partnerships,
principally real estate, including those transferred to the Industry
Separate Account and the Special Purpose Asset Vehicle, was
approximately $280 and $383 million at December 31, 1995 and 1994,
respectively. MBL Life has outstanding mortgage loans with several of
its real estate joint ventures. The carrying value of such mortgages,
including those transferred to the Industry Separate Account and the
Special Purpose Asset Vehicle, was approximately $87 and $140 million
at December 31, 1995 and 1994, respectively. The real estate joint
ventures, mostly residential in nature, consisting of either apartment
projects or developmental residential type condominiums are primarily
located in the southeastern United States. The carrying value of MBL
Life's investment in the largest project (Fisher Island), which is
located in South Florida, was approximately $157 million and $199
million at December 31, 1995 and 1994, respectively. In addition,
residential mortgage loans with a carrying value of approximately $59
and $65 million, respectively, were issued to purchasers of units in
this development.
Furthermore, as a result of participating in certain leveraged buyout
transactions, MBL Life has a controlling interest in a home
improvement retailer located in the northwestern United States and a
significant investment in an integrated manufacturer and distributor
of children's clothing. The carrying value of MBL Life's investment in
these two noninsurance subsidiaries was approximately $82 and $102
million at December 31, 1995 and 1994, respectively. The
aforementioned assets were included with the large and/or illiquid
assets which were transferred to the Special Purpose Asset Vehicle
separate account.
<PAGE>
4. INVESTMENTS
Net investment income for the years ended December 31, 1995 and
1994 were derived from the following sources (in thousands):
1995 1994
------------- -------------
Bonds $ 274,482 $ 162,862
Stocks:
Preferred 63 96
Common 5,894 1,932
Mortgage loans on
real estate 141,445 114,453
Real estate owned 115,356 61,063
Policy loans 525,483 302,345
Other invested assets 2,551 1,968
Short term investments 4,334 3,739
Other 3,824 1,427
-------------- -------------
Total investment income 1,073,432 649,885
Investment expenses (115,056) (61,605)
-------------- -------------
Net investment income $ 958,376 $ 588,280
-------------- -------------
BONDS
The carrying values, gross unrealized gains and losses and NAIC market
values of bonds by category, as of December 31, 1995 and 1994, are shown
below.
December 31, 1995
(in thousands) NAIC
Carrying Gross Unrealized Market
Value Gains Losses Value
------------- ------------------- -----------
U.S. Treasury securities
and obligations of U.S.
Government agencies $ 45,449 $ 278 $ 477 $ 45,250
Foreign governments 143,581 5,863 - 149,444
Corporate securities 3,546,374 58,623 657 3,604,340
Mortgage-backed
securities 290,209 - - 290,209
----------- -------- ------ ------------
Total $ 4,025,613 $ 64,764 $ 1,134 $ 4,089,243
----------- -------- ------ ------------
<PAGE>
<TABLE>
<CAPTION>
December 31, 1994
(in thousands) NAIC
Carrying Gross Unrealized Market
Value Gains Losses Value
------------- -------- --------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities
and obligations of U.S.
Government agencies $ 513,536 $ - $ 17,797 $ 495,739
Foreign governments 91,058 - 1,887 89,171
Corporate securities 2,500,384 22,103 31,589 2,490,898
Mortgage-backed securities 297,193 - - 297,193
------------- -------- --------- -----------
Total $ 3,402,171 $ 22,103 $ 51,273 $ 3,373,001
------------- -------- --------- -----------
</TABLE>
The carrying value and NAIC market value of bonds, at December 31, 1995,
respectively, by contractual maturity are shown below. Bonds not due at a
single maturity date have been included in the table in the year of final
maturity. Expected maturities may differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without prepayment penalties.
December 31, 1995
(in thousands)
Carrying NAIC
Value Market Value
------------- ------------
Due in one year or less $ 223,738 $ 225,243
Due after one year through five
years 3,452,445 3,511,305
Due after five years through ten years 57,604 60,869
Due after ten years 1,617 1,617
------------- ------------
3,735,404 3,799,034
Mortgage-backed securities 290,209 290,209
------------- ------------
Total $ 4,025,613 $ 4,089,243
------------- ------------
Proceeds from sales of investments in debt securities during 1995 and 1994
were $2.3 billion and $1.8 billion, respectively. Gross gains of $22.1 and
$2.4 million and gross losses of $10.2 million and $30.9 million were
realized on those sales in 1995 and 1994, respectively.
MORTGAGE LOANS ON REAL ESTATE
As of December 31, 1995 and 1994, the carrying value of mortgage loan
investments in the general account was $1.3 billion and $1.8 billion,
respectively. The carrying value is at admitted asset value, therefore the
effects of any valuation allowances, either individually or in the
aggregate, have been reflected in the accompanying statutory-basis
financial statements. Mortgage loans are collateralized by properties
located throughout the United States. The states with the highest
concentrations as a percentage of carrying value were California 12%, New
Jersey 8%, Michigan 11%, Florida 8%, North Carolina 6% and Iowa 5%. The
remaining carrying value is geographically disbursed throughout the country
with no individual state concentration exceeding 5%.
<PAGE>
As of December 31, 1995, the underlying collateral of the mortgage loan
investments as a percentage of total mortgages were diversified as follows:
Office buildings - 37%
Retail - 11%
Apartment buildings - 13%
Agricultural - 20%
Industrial - 9%
Other - 10%
-----
100%
-----
During 1995 the Industry Separate Account sold in two separate transactions
mortgage loans with a principal balance of approximately $192 million that
Mutual Benefit Life had originated.
A Securitization of mortgage loans with a principal balance of
approximately $109 million was sold effective November 28, 1995. These
mortgage loans were sold to a depositor under an agreement which contained
certain recourse or cure provisions. The Industry Separate Account would
be required to repurchase the mortgage loan based on the following:
discovery of a material defect in a Trustee Mortgage File not cured within
90 days; or a breach of any of the representations, warranties or covenants
of seller with respect to the mortgage loans.
The second transaction was a bulk sale of mortgage loans with a principal
balance of approximately $83 million sold effective December 20, 1995.
These mortgage loans were sold to an investor under an agreement which
contained certain recourse or cure provisions. The Industry Separate
Account would be required to repurchase the mortgage loan in the event of a
material breach of a representation or warranty with respect to an asset,
which breach materially and adversely affects the value of such asset.
The sale of these mortgage loans was the full responsibility of the
Industry Separate Account and as such MBL Life and the General Account have
no future potential for monetary involvement or support.
POLICY LOANS
Policy loans consist of outstanding loans issued to holders of COLI
contracts and universal life contracts. Interest charged on the COLI loans
is adjustable and determined periodically based on published market
interest rates. The carrying value of the COLI loans was approximately $4.5
billion and $4.0 billion as of December 31, 1995 and 1994, respectively.
The carrying value of universal life policy loans as of December 31, 1995
and 1994 was approximately $452 million and $542 million, respectively.
<PAGE>
ASSETS ON DEPOSIT
As of December 31, 1995 and 1994, MBL Life had securities with a carrying
value of $5.3 and $6.0 million, respectively on deposit with regulatory
agencies. The securities on deposit are reflected in the accompanying
statutory-basis balance sheets as follows:
December 31,
1995 1994
----------------- -----------------
Bonds $ 3.5 million $ 2.5 million
SPAV 1.8 million 3.5 million
SPECIAL PURPOSE ASSET VEHICLE
The following is a summary of the carrying values of the net assets
originally transferred to the Special Purpose Asset Vehicle (in thousands):
December 31,
1995 1994
------------ ------------
Bonds $ 55,878 $ 83,140
Stocks:
Preferred 46,371 42,671
Common 126,195 116,260
Mortgage loans on real estate 67,991 19,738
Real estate owned 2,443 12,400
Other invested assets:
Investment in Fisher Island 157,118 199,318
Other real estate joint ventures 36,168 39,087
Investment income due and accrued 1,434 2,114
Other assets 22,938 22,424
Liabilities (91) (1,094)
------------- -------------
$ 516,445 $ 536,058
------------- -------------
Net equity of SPAV:
Included in General Account $ 378,047 $ 392,404
Included in Industry
Separate Account 138,398 143,654
------------- -------------
$ 516,445 $ 536,058
------------- -------------
5. INVESTMENT CONTRACT LIABILITIES
Investment contracts represent policies or contracts that do not
incorporate significant insurance risk. Included in reserves
for life and annuity contracts are amounts classified as investment
contracts. The carrying value of such investment contracts was
approximately $3.1 billion as of December 31, 1995 and 1994, respectively.
Policyholder funds left on deposit, which are classified as investment
contracts, had a carrying value of approximately $135 million and $156
million as of December 31, 1995 and 1994, respectively.
<PAGE>
6. FAIR VALUE INFORMATION
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
Disclosures about Fair Value of Financial Instruments. The estimated fair
value amounts of financial instruments included herein have been determined
by MBL Life using market information available as of December 31, 1995 and
1994 and appropriate valuation methodologies. However, considerable
judgment is necessarily required to interpret market data to develop the
estimates of fair value for financial instruments for which there are no
available market value quotations.
The estimates presented herein are not necessarily indicative of the
amounts MBL Life could realize in a market exchange. The use of different
market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.
The following table discloses the fair value of financial instruments. For
financial instruments not discussed below the carrying amount is a
reasonable estimate of fair value.
December 31, 1995
(in thousands)
Carrying Estimated
Value Fair Value
-------------- -------------
Assets:
Bonds $ 4,025,613 $ 4,192,158
Stocks 247,366 247,071
Mortgage loans on real estate 1,262,465 1,205,867
Policy loans 4,961,122 4,961,122
Short-term investments 41,154 41,154
Cash 8,372 8,372
Other assets 28,993 28,993
Financial instruments included in
SPAV (General Account's Share) 216,996 211,539
Liabilities:
Investment contracts:
Life and annuity contracts 3,081,459 2,868,582
Policyholder funds left on deposit 135,063 139,046
Policy and contract claims 42,516 42,516
Dividends payable in following year 6,563 6,563
Other liabilities:
Policy and contract 39,314 39,223
General 172,570 171,574
<PAGE>
December 31, 1994
(in thousands)
Carrying Estimated
Value Fair Value
-------------- -------------
Assets:
Bonds $ 3,402,171 $ 3,316,273
Stocks 109,060 108,085
Mortgage loans on real estate 1,821,229 1,633,293
Policy loans 4,509,009 4,509,009
Short-term investments 56,187 56,187
Cash 2,406 2,406
Other assets 58,477 58,477
Financial instruments included in
SPAV (General Account's Share) 191,649 178,605
Liabilities:
Investment contracts:
Life and annuity contracts 3,062,179 2,685,727
Policyholder funds left on deposit 155,917 161,709
Policy and contract claims 48,841 48,841
Dividends payable in following year 7,242 7,242
Other liabilities:
Policy and contract 39,478 39,325
General 189,447 187,835
The General Account's share of the net equity in the estimated fair value
of the Special Purpose Asset Vehicle includes only those financial
instruments, namely bonds, stocks and mortgage loans on real estate, that
qualify for disclosure under SFAS No. 107.
BONDS
For debt securities that are publicly traded, estimated fair value was
obtained from an independent market pricing service. Publicly traded
securities represented approximately 95% of the carrying value and
estimated fair value of the total debt securities as of December 31, 1995.
For all other debt securities, estimated fair value was determined by
management based on interest rates, maturity, credit quality and average
life.
STOCKS
The estimated fair value for unaffiliated common stocks was determined on
the basis of values provided by the SVO. Estimated fair value of
affiliated common stock was determined on the basis of MBL Life's equity in
the subsidiary's net assets, after adjusting the subsidiary's financial
instruments to an estimated fair value in a manner consistent with that of
MBL Life. For publicly traded preferred stocks, estimated fair value was
obtained from an independent market pricing service. For all other
preferred stock, estimated fair value was determined by management based on
such factors as interest rates, credit quality, conversion options and
dividend paying status.
<PAGE>
MORTGAGE LOANS ON REAL ESTATE
The fair values of mortgage loans on real estate were estimated based on
expected discounted cash flows with the interest rates being adjusted for
credit risk. The estimated fair value presented is not necessarily
indicative of the amounts MBL Life could realize in a market exchange.
POLICY LOANS
All policy loans carried on MBL Life's books involve some combination of
variable loan rate and liability adjustment factor to directly recognize
the presence of policy loans. These factors work to increase or decrease
interest credited to policy account values in a way that is tied to the
actual policy loan interest charged. These loans, therefore, are
determined to have a fair value equal to the face value of the policy loans.
INVESTMENT CONTRACT LIABILITIES
The fair values for liabilities of investment contracts included in
reserves for life and annuity contracts are estimated using discounted
projected cash flows, based on interest rates which would be offered at
December 31, 1995 for similar contracts with maturities consistent with
those remaining for the contracts being valued.
The fair values for liabilities of investment contracts included in
policyholder funds left on deposit are estimated using discounted projected
cash flows, based on interest rates being offered at December 31, 1995 for
similar contracts with maturities consistent with those remaining for the
contracts being valued.
INDUSTRY SEPARATE ACCOUNT
As indicated in Note 1, the purpose of the Industry Separate Account is to
segregate those assets which are supporting the liabilities being
guaranteed by the Industry Reinsurers. For purposes of the disclosure
requirements of SFAS No. 107, the carrying value and estimated fair
value of the financial instruments in the Industry Separate Account have
been determined to be equivalent since the Industry Reinsurers would be
required to support any adjustment in the estimated fair value of the
assets to the extent such support is necessary to cover the liabilities. To
the extent the estimated fair value of the assets exceeds the estimated
fair value of the liabilities at the end of the Rehabilitation Period, as
defined in the Plan, such excess would be paid out in accordance with the
terms of the Participation and Reinsurance Agreement, which is part of the
Plan.
<PAGE>
7. REINSURANCE TRANSACTIONS
MBL Life has entered into a joint venture with another insurer to operate
MBL Life's COLI business. The joint venture agreement calls for assumption
of individual COLI policies as of November 4, 1992 and group COLI policies
as of August 2, 1994 by the other insurer with MBL Life retaining an 80%
interest in future profits and losses of that business. The agreements
also gave MBL Life the option to assume a specified percentage of new COLI
business issued by the other insurer. COLI policy reserves and contract
liabilities, including dividends to be paid in the following year, amounted
to $5.1 billion and $4.4 billion at December 31, 1995 and 1994,
respectively.
In addition, MBL Life has reinsured certain of its life, health, and
annuity contracts with other insurance companies under various agreements.
The financial statements are shown net of reinsurance. Policy and contract
liabilities have been reduced by $149.3 million and $175.1 million at
December 31, 1995 and 1994, respectively, for life, health and annuity
reserve credits taken on $1.3 billion and $1.6 billion of in-force life
reinsurance ceded. Under GAAP, assets would include amounts for reinsurance
recoverable, and policy and contract liabilities would not be reduced for
reserve credits.
MBL Life has direct liability to the policy or contract holder on policies
ceded and would be responsible for payment if the reinsurer is unable to
meet its obligation under the reinsurance agreements.
8. FEDERAL INCOME TAXES
For tax periods through May 1, 1994, MBL Life filed a consolidated Federal
income tax return with Mutual Benefit Life. Tax allocations between MBL
Life and Mutual Benefit Life through May 1, 1994 were based on an agreement
which provides, among other things, that in the event MBL Life has a tax
gain (loss) from operations for any year, it would pay to (receive from)
Mutual Benefit Life an amount equal to the corresponding increase
(reduction) in the consolidated tax liability. For tax periods subsequent
to May 1, 1994, MBL Life files as a stand alone company. MBL Life entered
into a tax allocation agreement with the Industry Reinsurers which
provides, among other things, that in the event the Industry Separate
Account has a tax gain (loss) for any year, it shall pay to (receive from)
the General Account an amount equal to the corresponding increase
(reduction) in MBL Life's overall tax liability.
The provision for Federal income taxes is based on net gain from operations
after adjusting for certain income and expense items, principally
differences in statutory and tax reserves, accrual of discount on bonds and
specified policy acquisition expenses. In accordance with statutory
accounting practices, no provision has been made for deferred income taxes,
to account for the tax effects of temporary differences. Under GAAP, such a
provision would be made.
MBL Life requested and received a private letter ruling from the Internal
Revenue Service stating that the transfer of assets pursuant to the terms
of the Plan qualified as a tax free reorganization under the Internal
Revenue Code.
<PAGE>
As of December 31, 1995, MBL Life had reached agreement on its federal tax
liability with the Internal Revenue Service for all years through 1993. In
the opinion of management, MBL Life has established adequate reserves to
provide for the payment of any additional taxes which might result from
settlement of possible deficiencies for years subsequent to 1993.
Under pre-1984 life insurance company income tax laws, a portion of current
"gain from operations" of MBL Life is not subject to current taxation but
is accumulated, for tax purposes, in a memorandum account designated as
"policyholders' surplus". The aggregate accumulation in this account at
December 31, 1995 was approximately $8 million. Subject to certain
limitations, "policyholders' surplus" is not taxed until distributed or the
insurance company no longer qualifies to be taxed as a life insurance
company. Taxes have not been provided on amounts included in this
memorandum account since MBL Life contemplates no action or events that
would create such a tax.
9. EMPLOYEE BENEFIT PLANS
PENSION PLANS
In accordance with the terms of the Plan, MBL Life assumed the sponsorship
of Mutual Benefit Life's defined benefit pension plans covering all
eligible employees, soliciting agents and agency office employees of MBL
Life and certain of its subsidiaries. MBL Life is also the administrator of
these plans. Retirement benefits are based on years of credited service
and final average earnings history. MBL Life recognizes defined benefit
pension plan costs based on amounts contributed to the plan.
The funded status of the qualified defined benefit pension plans at January
1, 1995, the date of the most recent valuation, and the accumulated benefit
obligation and plan assets at January 1, 1995 are as follows:
January 1, 1995
(in thousands)
-------------
Actuarial present value of obligations:
Vested $ 62,855
Non-vested 3,985
-------------
Accumulated benefit obligation $ 66,840
-------------
Plan assets available for benefits $ 94,316
-------------
The prepaid pension cost is a non-admitted asset and is not included in the
accompanying statutory-basis balance sheet. Due to the funded position of
the pension plans, no contributions were required to be made in 1995.
The weighted average discount rate used in determining the actuarial
present value of the accumulated benefit obligation was 7.25% for 1994.
During 1994, annuities amounting to $43.1 million were purchased, out of
plan assets, from Mutual Benefit Life (the former sponsor of the plans) to
satisfy future benefit obligations. These annuities were transferred to
MBL Life as part of the implementation of the Plan.
<PAGE>
As of December 31, 1995, the pension plan's assets are principally
comprised of investments in U.S. Government securities and long-term and
short-term corporate obligations.
MBL Life has established a liability of $10.0 million and $9.8 million at
December 31, 1995 and 1994, respectively, to cover estimated future funding
requirements of a non-qualified excess benefit plan.
Under GAAP, pension costs are accounted for in accordance with SFAS No. 87,
Employers' Accounting for Pensions.
SAVINGS AND INVESTMENT PLANS
MBL Life sponsors savings and investment plans available for substantially
all employees and qualifying agents under which MBL Life matches a portion
of their contributions which vest ratably over five years. MBL Life
contributed approximately $1.1 million and $628,000 in 1995 and 1994,
respectively, which is reflected in the accompanying statutory-basis
statements of operations.
OTHER POST-RETIREMENT BENEFITS
In addition to pension benefits, MBL Life provides certain health care and
life insurance benefits ("post-retirement benefits") for retired employees.
Substantially all employees may become eligible for these benefits if they
reach retirement age while working for MBL Life. Life insurance benefits
are generally set at a fixed amount.
In 1993, Mutual Benefit Life changed its method of accounting for the costs
of its retirees benefit plans to the accrual method, and elected to
amortize its transition obligation for retirees and fully eligible or
vested employees over 20 years. The unamortized portion of the transition
obligation as of December 31, 1995 and 1994 was $20.5 million and $21.7
million, respectively. The accrued obligation for such post-retirement
benefits included in the liabilities in the accompanying statutory-basis
financial statements is $10.0 million and $7.9 million at December 31, 1995
and 1994, respectively. The discount rate used in determining the current
year accumulated post-retirement benefit obligation was 8.25% and the
health care cost trend rate was 9.0% graded to 5% over nine years.
Under GAAP, the post-retirement liability would include an accrual for
current employees who are not currently eligible to receive post-retirement
benefits, but are expected to become eligible for these benefits, in
addition to retirees and fully eligible or vested employees.
<PAGE>
10. CAPITAL AND SURPLUS
While not prohibited by the Plan, it is currently not anticipated that any
future earnings of MBL Life will be distributed to the stockholder prior to
the end of the Rehabilitation Period, as defined in the Plan. The amount
of dividends which the Company may pay to the stockholder without the prior
approval of the Commissioner is subject to restrictions relating to profits
on participating policies and contracts and to a requirement that the
Company maintain a statutory surplus equal to 105% of required risk based
capital. Under New Jersey Insurance Law, MBL Life must maintain minimum
statutory capital and surplus of $7,650,000.
The NAIC has developed risk-based capital formulas to be applied to all
insurance companies. These formulas calculate a minimum required statutory
net worth, based on the underwriting, investment and other business risks
inherent in an individual company's operations. Any insurance company
which does not meet threshold risk-based capital levels ultimately will be
subject to regulatory proceedings. MBL Life did not meet its minimum
risk-based capital levels as of December 31, 1995 and 1994. As
discussed in Note 1, MBL Life is currently operating under the Third
Amended Plan of Rehabilitation of the Mutual Benefit Life Insurance Company
in Rehabilitation. The Plan sets forth MBL Life's strategy to restore its
risk-based capital to required statutory levels.
11. LEASES
MBL Life does not have any material operating or capital lease obligations.
12. OTHER COMMITMENTS AND CONTINGENCIES
GUARANTEES
MBL Life has entered into certain arrangements in the course of its
business which, under certain circumstances, may impose financial
obligations upon MBL Life.
In connection with an initial public offering of an affiliate which
occurred in November 1994, MBL Life has undertaken to indemnify the
underwriters of the offering. No payments have been made under this
arrangement and it is the opinion of management that any payments required
pursuant to this arrangement would not likely have a material adverse
effect on MBL Life's assets and liabilities.
Pursuant to the terms and conditions of the Plan, certain Mutual Benefit
Life industrial revenue bond guarantees on real estate joint venture
indebtedness were not assumed by MBL Life (see Note 13).
WARRANT SHARES
Pursuant to the terms of the Plan, MBL Life granted to the Participating
Guaranty Associations and the Industry Reinsurers, in exchange for nominal
value, a nontransferable warrant to purchase an interest in MBL Life's
issued and outstanding shares, which interests together shall constitute a
20% interest. The warrants shall be exercisable for one year commencing on
the first day following the end of the Rehabilitation Period, as defined in
the Plan, at a formula price as set forth in the warrant to be determined
at the exercise date.
<PAGE>
LITIGATION
MBL Life is involved in litigation arising in the ordinary course of
business or as may be related to the rehabilitation proceedings involving
its former parent, Mutual Benefit Life (see Note 13).
LINES OF CREDIT
As of December 31, 1995 and 1994, MBL Life had no lines of credit.
REHABILITATION PLAN EVENTS
Pursuant to the terms of the Plan, the Commissioner, prior to July 1996,
shall determine whether, in her opinion, the General Account has sufficient
liquidity and has performed adequately to allow Restructured Contract
Holders to make withdrawals prior to the end of the Rehabilitation Period
with a reduction or elimination of the early withdrawal charges (i.e.
moratorium charges). Any such determination would require approval by both
the Participating Guaranty Associations and the Industry Reinsurers. The
impact on the financial statements of a change or elimination of the early
withdrawal charges cannot be determined at this time, however, any lifting
of or gradual reduction in moratorium charges may increase the Company's
vulnerability to surrenders.
In accordance with the terms and conditions under which the Life Insurance
Company Guaranty Corporation of New York (the "Corporation") agreed to
become a Participating Guaranty Association under the Plan, the Corporation
has agreed to provide to each New York covered policyholder, no later than
July 16, 1996, the following enhancement to the Plan. The Corporation will
assure payment of the full non-loaned account balance without the
application of any early withdrawal charges, to any New York covered
policyholder who elects to receive the full amount of their non-loaned
account balance on or after July 16, 1996 and who (a) submits an affidavit
stating that the funds will not be transferred to other insurance policies
or rolled over to other tax-qualified vehicles, or (b) is eligible to elect
retirement benefits from MBL Life pursuant to the terms of the Plan, and
submits an affidavit stating that the funds will be used in their entirety
to purchase a life annuity (with no cash value to the annuitant) from
another insurance company. The Corporation has the option to either absorb
the moratorium charges or substitute itself as the policyholder. The
ultimate impact of this enhancement cannot be determined.
The Company has begun a study with regard to possibly excelerating the
timing of the changes in the invested asset mix of the General Account as
outlined in the Plan. The Company is evaluating a possible "bulk sale" of
mortgage loans during 1996 from the General Account. The eventual impact
on the statutory financial statements, should the transaction be approved,
has not yet been determined.
<PAGE>
13. REHABILITATION PLAN APPEALS
Several appeals have been filed by parties to the Plan challenging the
constitutionality of the application of the New Jersey Life and Health
Insurers Rehabilitation and Liquidation Law to the Mutual Benefit Life
Rehabilitation, as well as the order of priority imposed upon claimants
under the Plan. In general, the appellants: (1) assert that general
unsecured creditors are entitled to parity of treatment with policyholders;
(2) requested reclassification of certain claims as policyholder claims
rather than general unsecured claims; and (3) challenge the crediting of
interest to policyholders during certain periods subsequent to the
commencement of the Rehabilitation. Should the general unsecured creditors
achieve parity of treatment with policyholders or should the challenge to
crediting of interest be successful upon appeal, certain Plan provisions
including those provisions governing restructured policyholder account
values and contract interest rates will be awarded as may be necessary.
Any such amendments are likely to reduce restructured policyholder account
values (life and annuity reserves) and contract interest rates while
increasing general unsecured liabilities. The general unsecured claims
involved, after adjustment to a basis which would establish parity of
treatment with policyholders, are estimated to be approximately $705
million. However, there are multiple scenarios which could result that are
too numerous and complex to predict at this time. Should the appellants be
successful on the reclassification issue, the amount of industrial revenue
bond guarantee claims which MBL Life would be required to assume would be
approximately $44 million, after adjusting to a basis which would establish
parity of treatment with policyholders. The outcome of the appeals cannot
be reasonably predicted at this time. The Commissioner will vigorously
defend against the appeals. Further, the Commissioner has appealed certain
of the Court's modifications to the Plan. The modifications of the Court
include: (1) a change to the beneficiaries of the stock trust from holders
of restructured policyholder contracts in the general account to the
unsecured creditors (and to give the unsecured creditors a right to approve
a sale of MBL Life stock or assets); (2) the elimination of the possibility
that holders of restructured policyholder contracts in the general account
would receive a bonus crediting rate at the end of the Rehabilitation
Period in the event MBL Life has assets in excess of minimum risk based
capital requirements for insurance companies; and (3) the requirement that
MBL Life distribute to the unsecured creditors at the end of the
Rehabilitation Period any assets in excess of 105% of its risk based
capital requirement. If the Commissioner's appeals are unsuccessful, the
Plan as originally modified by the Court will prevail. If the
Commissioner's appeals are successful, no modifications to the accompanying
statutory-basis financial statements as of December 31, 1995, other than
certain disclosures, would be required.
<PAGE>
MBL LIFE ASSURANCE CORPORATION
SUPPLEMENTAL SCHEDULE OF ASSETS AND LIABILITIES
For the year ended December 31, 1995
The following is a summary of certain financial data included in
other exhibits and schedules of the 1995 Statutory Annual
Statement subjected to audit procedures by independent auditors
and utilized by actuaries in the determination of reserves.
Investment Income Earned:
Government bonds $ 32,980,530
Other bonds (unaffiliated) 241,502,270
Bonds of affiliates 0
Preferred stocks (unaffiliated) 63,688
Preferred stocks of affiliates 0
Common stocks (unaffiliated) 5,269,987
Common stocks of affiliates 623,559
Mortgages loans 141,444,724
Real estate 115,356,083
Premium notes, policy loans and liens 525,482,561
Collateral loans 0
Cash on hand and on deposit 0
Short-term investments 4,334,350
Other invested assets 2,551,048
Derivative Instruments 0
Aggregate write-ins for investment income 3,823,853
Gross investment income $ 1,073,432,653
Real Estate Owned - Book Value less Encumbrances 352,092,546
Mortgage Loans - Book Value:
Farm mortgages $ 275,050,877
Residential mortgages 25,851,458
Commercial mortgages 1,055,118,933
Total mortgages loans $ 1,356,021,268
Mortgage Loans By Standing - Book Value:
Good standing 745,709,932
Good standing with restructured terms 448,172,562
Interest overdue more than three months,
not in foreclosure 54,357,924
Foreclosure in process 107,780,850
Other Long-term Assets - Statement Value -
Other Invested Assets 67,395,445
Collateral Loans 0
Bonds and Stocks of Parents, Subsidiaries
and Affiliates - Book Value:
Bonds 0
Preferred Stocks 0
Common Stocks 30,889,409
<PAGE>
Bonds and Short-term Investments by Class
and Maturity:
Bonds by Maturity - Statement Value
Due within one year less $ 276,841,784
Over 1 year through 5 years 3,488,095,755
Over 5 years through 10 years 257,550,908
Over 10 years through 20 years 27,461,378
Over 20 years 16,817,561
Total by Maturity $ 4,066,767,386
Bonds by Class - Statement Value
Class 1 $ 3,316,952,103
Class 2 685,414,814
Class 3 41,007,301
Class 4 19,922,020
Class 5 3,471,148
Class 6 0
Total by Class $ 4,066,767,386
Total Bonds Publicly Traded 3,859,139,581
Total Bonds Privately Placed 207,627,805
Preferred Stocks - Statement Value 1,059,256
Common Stocks - Market Value 246,306,937
Short-term Investments - Book Value 41,154,356
Financial Options Owned - Statement Value 0
Financial Options Written and
In-force -Statement Value 0
Financial Futures Contracts Open - Current Price 0
Cash on Deposit 8,311,339
Life Insurance In Force: (000's omitted)
Industrial 0
Ordinary 48,597,579
Credit Life 0
Group Life 619,814
Amount of Accidental Death Insurance In
Force Under (000's omitted)
Ordinary Policies 480,824
Life Insurance Policies with Disability
Provisions In Force (000's omitted):
Industrial 0
Ordinary 3,193,123
Credit Life 0
Group Life 0
Supplementary Contracts In Force:
Ordinary - Not Involving Life Contingencies
Amount on Deposit 79,525,431
Income Payable 5,429,412
Ordinary - Involving Life Contingencies
Income Payable 4,426,854
Group - Not Involving Life Contingencies
Amount of Deposit 22,012,502
Income Payable 7,187,098
Group - Involving Life Contingencies
Income Payable 976,000
Annuities:
Ordinary
Immediate - Amount of Income Payable 359,474
Deferred - Fully Paid Account Balance 8,709,278
Deferred - Not Fully Paid -
Account Balance 113,981,078
Group
Amount of Income Payable 34,944,843
Fully Paid Account Balance 4,871,315
Not Fully Paid - Account Balance 3,048,393,892
Accident and Health Insurance - Premiums In Force:
Ordinary 12,614,472
Group 0
Credit 0
Deposit Funds and Dividend Accumulations:
Deposit Funds - Account Balance 36,315,473
Dividend Accumulation - Account Balance 59,885
Claim Payments 1995:
Group Accident and Health year -
ended December 31, 1995
1995 0
1994 0
1993 and prior 888,021
Other Accident & Health
1995 960,132
1994 2,334,535
1993 and prior 8,171,858
Other coverages that use developmental methods to calculate
claims reserves
1995 0
1994 0
1993 and prior 0
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT-2
formerly known as
MUTUAL BENEFIT VARIABLE CONTRACT ACCOUNT-2
_________________________________________________________________
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements
The following Financial Statements are incorporated into Part B of
this Registration Statement by reference from the Audited Financial
Statements dated December 31, 1995, as filed with the Commission
under the Investment Company Act of 1940 on March 7, 1996
(Accession No. 0000912057-96-003912):
MBL Variable Contract Account-2:
Report of Independent Accountants.
Statement of Assets and Liabilities, December 31, 1995.
Statement of Operations (year ended December 31, 1995).
Statement of Changes in Net Assets (two years ended December
31, 1995).
The following Financial Statements are filed pursuant to Item 23 of
Part B of this Registration Statement:
MBL Life Assurance Corporation:
Report of Independent Accountants.
Balance Sheet as of December 31, 1995.
Statement of Operations (year ended December 31, 1995).
Statement of Changes in Capital and Surplus
(year ended December 31, 1995).
Statement of Cash Flows (year ended December 31, 1995).
(b) Exhibits*
(1)(A) Resolution of the Board of Directors of The Mutual Benefit
Life Insurance Company establishing Mutual Benefit Variable
Contract Account-2, incorporated by reference to earlier
filing on March 20, 1970, SEC File No. 811-2047, Exhibit
#A(1) of Form N-8B-2 Registration Statement of Registrant.
(B) Resolution of the Board of Directors of MBL Life Assurance
Corporation establishing MBL Variable Contract Account-2,
incorporated by reference to earlier filing on April 29,
1994, SEC File Nos. 2-36664 and 811-2047, Exhibit #(1)(B) to
Post-Effective Amendment No. 41 of Form N-4 Registration
Statement.
(2) Not Applicable.
(3)(A) Variable Annuity Supervision Agreement dated January 5,
incorporated by reference to earlier filing on January 6,
1971, SEC File No. 811-2047, Exhibit #(3)(a) to Post-
Effective Amendment No. 1 of Form N-8B-2 Registration
Statement.
(B) Form of Variable Contract Agreement For Enrollees,
incorporated by reference to earlier filing on January 6,
1971, SEC File No. 811-2047, Exhibit #(3)(b) to Post-
Effective Amendment No. 1 of Form N-8B-2 Registration
Statement.
(4)(A) Form of Group Tax Deferred Annuity Contract.
(B) Form of Group Tax Deferred Annuity Contract.
Both (A) and (B) incorporated by reference to earlier filing
on March 2, 1987, SEC File No. 2-3664, Exhibit #(4)(a) and
(4)(b) to Post-Effective Amendment No. 33 of Form N-4
Registration Statement.
(C) Form of Group Tax Deferred Annuity Contract.
(D) Form of Group Variable Annuity Contract.
Both (C) and (D) incorporated by reference to earlier filing
on March 3, 1988, SEC File No. 2-36664, Exhibit #(4)(c) and
(4)(d) to Post-Effective Amendment No. 35 of Form N-4
Registration Statement.
(E) Form of Endorsement to Contracts in (4)(A), (4)(B), (4)(C)
and (4)(D).
(F) Form of Amendment to Group Variable Annuity Contracts in
(4)(A), (4)(B), (4)(C) and (4)(D) above, adding the
restrictions on redemption imposed by Section 403(b)(11) of
the Internal Revenue Code of 1986, as amended. Both (E) and
(F) incorporated by reference to earlier filing on April 28,
1989, SEC File No. 2-36664, Exhibit #(4)(e) and (4)(f) to
Post-Effective Amendment No. 37 of Form N-4 Registration
Statement.
(G) Form of Group Tax Deferred Variable Annuity Contract,
Deposit Administration, Individual Allocation.
(H) Form of Group Annuity Deposit Administration Individual
Allocation Companion to VCA-2. Both (G) and (H) incorporated
by reference to earlier filing on April 28, 1989, SEC File
No. 2-36664, Exhibit #(4)(g) and (4)(h) to Post-Effective
Amendment No. 37 of Form N-4 Registration Statement.
(I) Form of Assumption Certificate (CRT-AC1 and CRT-AA2C),
incorporated by reference to filing of Mutual Benefit
Variable Contract Account-7 on April 29, 1994, SEC File Nos.
2-86722 and 811-3853, Exhibit (6)(H) and (6)(I),
respectively, to Post-Effective Amendment No. 12 of Form N-3
Registration Statement.
(J) Form of Certificate of Participation (CRT-TDAO),
incorporated by reference to filing of Mutual Benefit
Variable Contract Account-7 on April 29, 1994, SEC File Nos.
2-86722 and 811-3853, Exhibit (6)(J) to Post-Effective
Amendment No. 12 of Form N-3 Registration Statement.
(K) Form of Contract GVA-VCA2, incorporated by reference to
earlier filing on April 29, 1994, SEC File Nos. 2-36664 and
811-3853, Exhibit #(4)(K) to Post-Effective Amendment No. 41
of Form N-4 Registration Statement.
(5)(A) Form of Application used with Contracts under IRC Section
403(b), incorporated by reference to earlier filing on May
1, 1991, SEC File No. 2-36664, Exhibit #(5)(A) to Post-
Effective Amendment No. 40 of Form N-4 Registration
Statement.
(B) Form of Application used with Contracts under IRC Section
408, incorporated by reference to earlier filing on March 2,
1987, SEC File No. 2-36664, Exhibit #(5)(b) to Post-
Effective Amendment No. 33 of Form N-4 Registration
Statement.
(C) Form of Acknowledgement of Statutory TDA Withdrawal
Restrictions, incorporated by reference to earlier filing on
April 28, 1989, SEC File No. 2-36664, Exhibit #(5)(c) to
Post-Effective Amendment No. 37 of Form N-4 Registration
Statement.
(6)(A) Charter, as amended, of The Mutual Benefit Life Insurance
Company.
(B) By-Laws, as amended, of The Mutual Benefit Life Insurance
Company. Both (6)(A) and (6)(B) incorporated by reference to
earlier filing on May 1, 1991, SEC File No. 2-36664, Exhibit
# (6)(A) and (6)(B), respectively, to Post-Effective
Amendment No. 40 of Form N-4 Registration Statement.
(C) Second Amended and Restated Articles of Redomestication and
Incorporation of MBL Life Assurance Corporation,
incorporated by reference to filing of Mutual Benefit
Variable Contract Account-7 on April 29, 1994, SEC File Nos.
2-86722 and 811-3853, Exhibit (8)(C) to Post-Effective
Amendment No. 12 of Form N-3 Registration Statement.
(D) Draft By-Laws of MBL Life Assurance Corporation,
incorporated by reference to filing of Mutual Benefit
Variable Contract Account-7 on April 29, 1994, SEC File Nos.
2-86722 and 811-3853, Exhibit (8)(D) to Post-Effective
Amendment No. 12 of Form N-3 Registration Statement.
(7) Not applicable.
(8) Not applicable.
(9) Opinion of Frank D. Casciano, General Counsel, MBL Life
Assurance Corporation.
(10) Consent of Coopers & Lybrand L.L.P., Independent
Accountants.
(11) Not applicable.
(12) Not applicable.
(13) Schedules for computation of each performance quotation.
(i) One-Year Performance.
(ii) Five-Year Performance.
(iii) Ten-Year Performance.
(14) Not applicable.
(15) Mutual Benefit Fund et al. No-Action Letter, dated October
27, 1993, incorporated by reference to filing of Mutual
Benefit Variable Contract Account-7 on April 29, 1994, SEC
File Nos. 2-86722 and 811-3853, Exhibit (19) to Post-
Effective Amendment No. 12 of Form N-3 Registration
Statement.
(16) Mutual Benefit Life Insurance Company Information Statement
Plan of Rehabilitation and Related Documents, including the
Confirmation Order, dated January 28, 1994, incorporated by
reference to filing of Mutual Benefit Variable Contract
Account-7 on April 29, 1994, SEC File Nos. 2-86722 and 811-
3853, Exhibit (20) to Post-Effective Amendment No. 12 of
Form N-3 Registration Statement.
(17) Powers of Attorney.
(A) Powers of Attornery, incorporated by reference to
earlier filing on February 22, 1996, SEC File No. 333-01161,
Exhibit (17) to Registration Statement of Form N-3.
(B) Powers of Attorney filed herewith.
________________________________________
* Page numbers inserted in manually signed copy only.
<PAGE>
Item 25. Directors and Officers of MBL Life Assurance Corporation.
As of May 1, 1994, the assets and liabilities of the
Account was transferred to a new separate account of MBL
Life Assurance Corporation ("MBL Life"), pursuant to the
Rehabilitation Plan of Mutual Benefit Life, as approved
by the Court on January 28, 1994. MBL Life is managed by
a Board of Directors. The Directors of MBL Life, their
principal business addresses and their positions and
offices with MBL Life, are as follows:
Name and Principal Position and Offices
Business Address with Depositor
Alan J. Bowers Director, President
MBL Life Assurance and Chief Executive
Corporation Officer
520 Broad Street
Newark, NJ 07102
Elizabeth E. Randall Director, Chairman
20 W. State Street of the Board
CN-325
Trenton, NJ 08625
Sheldon Brooks Director
The Prudential Asset
Management Company, Inc.
71 Hanover Road
Florham Park, NJ 07932
Donald Bryan Director
20 W. State Street
CN-325
Trenton, NJ 08625
Harry D. Garber Director
76 Mulberry Avenue
Garden City, NY 11530
John C. Kerr, Jr. Director
20 W. State Street
CN-325
Trenton, NJ 08625
Richard W. Klipstein Director
National Organization
of Life and Health Insurance
Guaranty Association
13873 Park Center Road
Herndon, VA 22071
Anita Kartalopoulos Director
20 W. State Street
CN-325
Trenton, NJ 08625
<PAGE>
Felix Schirripa Director
The Metropolitan Life
Insurance Company
One Madison Avenue
New York, NY 10010-3690
_____________________________________
Officers (Other than Directors) of MBL Life
whose activities relate to the Account are
listed below.
Frank D. Casciano Executive Vice President,
General Counsel and
Secretary
Robert T. Budwick Executive Vice President -
Chief Investment Officer
Kenneth A. Watson Executive Vice President
and Chief Financial
Officer
Kathleen M. Koerber Executive Vice President-
Chief Operating Officer
Kenneth K. Schaefer Second Vice President
and Treasurer
Walter A. Appel Vice President,
Securities Investment
David A. James Senior Vice President,
Securities Investment
Albert W. Leier Vice President
and Controller
William G. Clark Senior Vice President,
Pension and Investment
Products
All of these Officers maintain a principal business
address at 520 Broad Street, Newark, New Jersey 07102.
Prior to May 1, 1994, each officer named above maintained
a similar position and/or title with Mutual Benefit Life.
<PAGE>
Item 26. Persons Controlled by or Under Common Control with
the Depositor or Registrant.
MBL Variable Contract Account-2 was formerly a separate
account of Mutual Benefit Life. As described above and
in accordance with the Rehabilitation Plan of Mutual
Benefit Life, the assets and liabilities of Mutual
Benefit Variable Contract Account-2 were transferred to
a separate account of MBL Life.
The Account is a separate account of MBL Life, a stock
life insurance company organized under the laws of New
Jersey. The voting stock of MBL Life was transferred to
a Stock Trust established by the Plan appointing the New
Jersey Commissioner of Insurance as Trustee through the
end of the Rehabilitation Period, scheduled to terminate
December 31, 1999.
No person, other than the Trustee, has the direct or
indirect power to control MBL Life except insofar as he
or she may have such power by virtue of his or her
capacity as a director.
As of May 1, 1995, those persons under common control
with the Depositor (MBL Life) are illustrated on the
following page. The following information relates to
that chart.
All corporations are organized under the laws of New
Jersey except where a different state is indicated.
The principal business of certain of the Depositor's
affiliates are as follows:
MBLLAC Holding Corporation is a holding company; First
Priority Investment Corporation is a registered
investment adviser and broker/dealer; Metro IRB, Inc.,
Fisher Island Corporation, Pelican Apartment Properties,
Inc. and Metro JV, Inc. act as general partners in joint
ventures; Mutual Benefit Marketing Group, Inc. markets
insurance products; EHC Companies, Inc. is a holding
company for Ernst Home Centers, Infotech Corp.,
Extraspace Inc., and EDC, Inc., a home and garden chain,
a data service provider, specialty retail stores, and a
warehousing operation, respectively; and NWD Investment
Company is a holding company for WD Holdings, Inc., a
distribution company; Fisher Island Mortgage Corporation
acts as mortgage originator and holder for residential
loans. Markston Investment Management, a registered
investment adviser, is a partnership owned 51 percent by
MBL Sales Corporation; Hawaiian Macadamia Company, Inc.,
a processing company; Tong Yang Benefit Life Insurance
Company, a foreign insurance company; Outlet
Communications Inc., a holding company for Outlet
Broadcasting Inc., a broadcasting company; International
Corporate Marketing Group, an insurance broker.
[The following page contains an organizational diagram of the
direct and indirect subsidiaries of MBL Life and the mutual funds
sponsored by MBL Life. The diagram indicates the state of
incorporation for each entity and the percentage of voting
securities controlled by MBL Life.]
MAP-Equity Fund, MBL Growth Fund, Inc. and MAP-Government
Fund, Inc. are investment companies as defined by the
Investment Company Act of 1940. Registrant does not own
any controlling interest in any of the Funds. First
Priority Investment Corporation ("First Priority"), a
wholly-owned indirect subsidiary of Depositor, serves as
distributor for the shares of both MAP-Equity Fund and
MBL Growth Fund, Inc. Markston Investment Management, a
partnership between Markston International, Inc. and MBL
Sales Corporation, serves as investment adviser to MAP-
Equity Fund and MBL Growth Fund, Inc. Shares of MBL
Growth Fund, Inc. may be purchased only by insurance
company separate accounts which are registered under the
Investment Company Act of 1940. First Priority also
serves as distributor and investment adviser for MAP-
Government Fund, Inc. The Funds file separate financial
statements. Ernst Home Centers, Inc. and First Priority
file independent financial statements with the Securities
and Exchange Commission.
Item 27. Number of Contract Owners.
As of January 2, 1996 - 65
Item 28. Indemnification.
To the extent permitted by law of the State of New Jersey
and subject to all applicable requirements thereof, MBL
Life has undertaken to indemnify each of its directors
and officers who is made or threatened to be made a party
to any action or proceeding, whether civil or criminal,
by reason of the fact that he, his testate or intestate,
is or was a director or officer of MBL Life.
Insofar as indemnification for liability arising under
the Act may be permitted to Directors and Officers
pursuant to the foregoing provisions, or otherwise, MBL
Life has been advised that in the opinion of the
Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act, and is
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by MBL Life of expenses incurred or paid by a
Director or Officer in the successful defense of any
action, suit or proceeding) is asserted by such Director
or Officer in connection with the securities being
registered, MBL Life will, unless if in the opinion of
its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is
against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
Notwithstanding any agreement or document to the
contrary, MBL Life undertakes not to indemnify any
Director or Officer for any liability, the
indemnification of which has been determined to be
prohibited under the Federal securities laws.
<PAGE>
Item 29. Principal Underwriter.
(a) First Priority, is the Account's principal underwriter.
First Priority will also serve as principal underwriter
for the following registered investment companies:
MAP-Equity Fund, MBL Growth Fund, Inc., and MAP-
Government Fund, Inc., as well as MBL Variable Contract
Account-7, a separate account of MBL Life.
First Priority will serve as the investment adviser to
MAP-Government Fund, Inc. and MBL Variable Contract
Account-7.
(b) Information regarding First Priority's officers and
directors:
Name and Principal Positions and Offices
Business Address* with First Priority
William G. Clark Director, President
Frank D. Casciano Director, Vice President
and General Counsel
Robert T. Budwick Director, Vice President
and Chief Investment
Officer
Alan J. Bowers Director
Eugene J. Ciarkowski Director
Kathleen M. Koerber Director
Albert W. Leier Director, Vice President
and Treasurer
Judith C. Keilp Vice President
and Secretary
Christopher S. Auda Vice President,
Operations
James Switlyk Second Vice President
Marketing Support
Roger A. Vellekamp Assistant Secretary
* All of these Officers and Directors maintain a principal
business address at 520 Broad Street, Newark, New Jersey 07102.
(c) Not applicable.
<PAGE>
Item 30. Location of Accounts and Records.
All accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act
of 1940 and the rules thereunder are maintained at the
offices of the Depositor, 520 Broad Street, Newark, New
Jersey 07102.
Item 31. Management Services.
Other than as set forth under the caption
"Administration" in the Prospectus constituting Part A of
this Registration Statement, and under "Services" in the
Statement of Additional Information constituting Part B,
the Account is not a party to any management-related
service contract.
Item 32. Undertakings.
(a) Registrant undertakes to file a post-effective amendment
to its Securities Act of 1933 Registration Statement as
frequently as is necessary to ensure that the audited
financial statements in the registration statement are
never more than 16 months old for so long as payments
under the variable annuity contracts may be accepted.
(b) Registrant undertakes to include either (1) as part of
any application to purchase a contract offered by the
Prospectus, a space that an applicant can check to
request a Statement of Additional Information, or (2) a
post card or similar written communication affixed to or
included in the Prospectus that the applicant can remove
to send for a Statement of Additional Information, or (3)
the entire text of the Statement of Additional
Information within the Prospectus.
(c) Registrant undertakes to deliver any Statement of
Additional Information and any financial statements
required to be made available under this form promptly
upon written or oral request.
(d) Registrant undertakes to rely upon American Council of
Life Insurance (Ref. No. IP-6-88, pub. avail. November
28, 1988) (the "Letter"), which permits restrictions on
cash distributions to Participants in retirement plans
meeting the requirements of Section 403(b) of the
Internal Revenue Code of 1986, and represents that the
following provisions of the Letter have been complied
with:
(1) That Registrant has included appropriate disclosure
regarding the redemption restrictions imposed by Section
403(b)(11) in this Registration Statement, including the
Prospectus;
(2) That Registrant has included appropriate disclosure
regarding the redemption restrictions imposed by Section
403(b)(11) in all sales literature used in connection
with the offer of the Contract;
(3) That the Account's Distributor has instructed sales
representatives, who solicit Participants to purchase the
Contract, specifically to bring the redemption
restrictions imposed by Section 403(b)(11) to the
attention of potential Participants;
(4) That Registrant has obtained from each Participant
purchasing a Section 403(b) Contract, prior to or at the
time of purchase, a signed statement acknowledging the
Participant's understanding of: (a) the restrictions on
redemption imposed by Section 403(b)(11), and (b) the
investment alternatives available under the employer's
Section 403(b) arrangement to which the Participant may
elect to transfer his or her Contract value.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment
Act of 1940, the Registrant has caused this Pre-Effective Amendment
to the Registration Statement to be signed on its behalf, in the
City of Newark, and State of New Jersey, on the 3rd day of April,
1996
MBL VARIABLE CONTRACT ACCOUNT-2
(Registrant)
By: JUDITH C. KEILP
Judith C. Keilp, Counsel
MBL Life Assurance Corporation
By: MBL LIFE ASSURANCE CORPORATION
(Depositor)
By: FRANK D. CASCIANO
Frank D. Casciano
Executive Vice President,
General Counsel and Secretary
As required by the Securities Act of 1933, this Pre-Effective
Amendment to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
ALAN J. BOWERS Chief Executive Officer April 3, 1996
Alan J. Bowers Director, President
KENNETH A. WATSON Chief Financial Officer April 3, 1996
Kenneth A. Watson
ALBERT W. LEIER Chief Accounting Officer April 3, 1996
Albert W. Leier
Directors:
Elizabeth E. Randall
Sheldon Brooks *
Donald Bryan *
Harry D. Garber *
Anita Kartalopoulos **
John Kerr *
Richard W. Klipstein *
Felix Schirripa *
By: FRANK D. CASCIANO Date: April 3, 1996
Frank D. Casciano
Attorney-in-Fact
* Executed by Frank D. Casciano, Attorney-in-Fact, on behalf of
those indicated pursuant to the Powers of Attorney.
** Executed by Frank D. Casciano, Attorney-in-Fact, on behalf of
those indicated pursuant to the Powers of Attorney, filed
herewith.
<PAGE>
EXHIBIT INDEX
Exhibit*
(9) Opinion of Frank D. Casciano, General Counsel, MBL Life
Assurance Corporation.
(10) Consent of Coopers & Lybrand L.L.P., Independent
Accountants.
(13) Schedules for computation of each performance
quotation.
(i) One-Year Performance.
(ii) Five-Year Performance.
(iii) Ten-Year Performance.
(17) Powers of Attorney.
* Page numbers inserted in manually signed copy only.
Exhibit (9)
[MBL Life Assurance Corporation Letterhead]
April 1, 1996
MBL Life Assurance Corporation
520 Broad Street
Newark, NJ 07102-3111
Gentlemen:
This opinion is furnished in connection with the Registration
Statement, File No. 333-01161 of MBL Variable Contract Account-2
(the "Variable Contract Account") under the Securities Act of 1933,
as amended (the "Act"), relating to units of interest ("Units") in
the Variable Contract Account under Group Tax-Qualified and Non-
Qualified Variable Annuity Contracts (the "Contracts") assumed by
MBL Life Assurance Corporation ("MBL Life"). The Contracts are
designed to provide retirement payments and other benefits for
persons covered under plans qualified for Federal income tax
advantages under Section 401, 403, 408 or 457 of the Internal
Revenue Code of 1986, as amended, and for persons covered under
payroll deduction and other non-qualified plans. The securities
are offered in the manner described in the Registration Statement.
I have examined or caused to be examined all relevant corporate
records of MBL Life and such laws as I consider appropriate as a
basis for the opinion hereinafter expressed. On the basis of such
examination, it is my opinion that:
1. MBL Life is a corporation duly organized and validly
existing under the laws of the State of New Jersey.
2. The Variable Contract Account was established pursuant to
a resolution of the Board of Directors of The Mutual
Benefit Life Insurance Company ("Mutual Benefit Life") and
in accordance with the provisions of New Jersey Insurance
Law.
On July 16, 1991, the Superior Court of New Jersey entered
an Order appointing the Insurance Commissioner of the
State of New Jersey as Rehabilitator of Mutual Benefit
Life, thereby granting the Rehabilitator immediate
exclusive possession ad control of, and title to, the
business and assets of Mutual Benefit Life, including
those of the Variable Contract Account.
<PAGE>
Pursuant to the terms and conditions of the Plan of
Rehabilitation submitted by the Insurance Commissioner and
approved by the Superior Court, and pursuant to a
resolution of the Board of Directors of MBL Life, the
assets and liabilities of the Variable Contract Account
were transferred by Mutual Benefit Life to a separate
account of MBL Life.
3. The assets of the Variable Contract Account will be the
property of MBL Life and will be held separately from all
other assets of MBL Life. Under New Jersey law, any
income, gains and losses, whether realized or not, from
the Variable Contract Account's investment operations must
be credited to or charged against the Variable Contract
Account without regard to any other income, gains or
losses of Mutual Benefit Life. MBL Life will maintain the
assets of the Variable Contract Account in an amount at
least equal to the amount required for MBL Life to meet
its obligations under the Contracts, as determined at
least once each year. Annuity payments, when based on the
investment experience of the Variable Contract Account,
will vary with the performance of the Variable Contract
Account.
4. The New Jersey Insurance Law provides that to the extent
provided in the applicable contract or contracts, assets
held in a Variable Contract Account shall not be
chargeable with liabilities arising out of any other
business of an insurance company, but makes no explicit
provision as to whether or not the assets of a Variable
Contract Account are as a matter of law absolutely
insulated from the claims of other policyholders or
creditors of the insurance company. Accordingly, no
representation can be made that, in all possible
contingencies, the assets held in the Variable Contract
Account cannot, as a matter of law, be subject to such
claims. However, it is my opinion that any such claims
could be made only upon insolvency of MBL Life, in which
event equitable principles would be applied by the
Commissioner of Insurance of New Jersey or by a court
dealing with any resulting liquidation or rehabilitation
of MBL Life under New Jersey Insurance Law and should
afford appropriate protection to Contract Holders
participating in the Variable Contract Account.
5. When executed, the Contracts, as amended, and the Units
will have been duly authorized and each of the Contracts
(including any Units when duly credited thereunder) will
constitute a validly issued and binding obligation of MBL
Life in accordance with the terms of such Contracts.
Individuals having an interest under a Contract will be
subject only to the deductions, charges and fees set forth
in the Prospectus included in the Registration Statement,
including any Amendments thereto.
<PAGE>
6. The discussion of tax matters set forth in the Prospectus
included in the Registration Statement is an accurate
summary of the effect of applicable Federal income tax
laws, but no representation is made that such discussion
is exhaustive or that it purports to cover all situations.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
MBL LIFE ASSURANCE CORPORATION
By: FRANK D. CASCIANO
Frank D. Casciano
Executive Vice President and
General Counsel, and Secretary
Exhibit (10)
[Coopers & Lybrand L.L.P. Letterhead]
CONSENT OF INDEPENDENT ACCOUNTANTS
________________
We consent to the (a) incorporation by reference of our report
dated February 16, 1996 on the financial statements of MBL Variable
Contract Account-2, and (b) the inclusions of our report dated
February 16, 1996 on the financial statements of MBL Life Assurance
Corporation appearing in Pre-Effective Amendment No. 1 to the
Registration Statement (Form N-4) of MBL Variable Contract Account-
2 to be filed with the Securities and Exchange Commission under the
provisions of the Securities Act of 1933 and the Investment Company
Act of 1940, as amended.
We also consent to the reference of our firm under the caption
"Financial Statements" in the Statement of Additional Information.
COOPERS & LYBRAND L.L.P.
Parsippany, New Jersey
April 5, 1996
Item 24, Exhibit (b)(13)(i)
SCHEDULE OF COMPUTATION FOR PERFORMANCE QUOTATIONS
One-Year Period
Initial Enrollment Net
Payment - Fee = Purchase
Payments
$1,000 $0 $1,000
_______________________________________________________________________
Number of Unit Value Gross Annual Ending
Units x at = Surrender - Administration = Redemption
Purchased 12/31/95 Value Charge Value
11.548 $116.231 $1,342 $0 $1,342
TOTAL RETURN FORMULA:
P (1 = T) to the power of n = ERV
$1,000.00 (1 + 34.22%) to the power of 1 = 1,342
Where: P = a hypothetical initial payment (of $1,000) invested
on 6/30/94.
T = average annual total return assuming reinvestment
of dividends and capital gains distributions.
n = A number of years
ERV = ending redeemable value
<PAGE>
Item 24, Exhibit (b)(13)(ii)
SCHEDULE OF COMPUTATION FOR PERFORMANCE QUOTATIONS
Five-Year Period
Initial Enrollment Net
Payment - Fee = Purchase
Payment
$1,000 $0 $1,000
______________________________________________________________________
Number Unit Value Gross Annual Ending
of Units x at end of = Surrender - Administration = Redemption
Owned each year Value Charge Value
18.785 $65.668 $1,234 $0 $1,234
18.785 75.010 1,409 0 1,409
18.785 85.055 1,598 0 1,598
18.785 86.596 1,627 0 1,627
18.785 116.231 2,183 0 2,183
TOTAL RETURN FORMULA:
P (1 = T) to the power of n = ERV
$1,000.00 (1 + 16.90%) to the power of 5 = 2,183
Where: P = a hypothetical initial payment (of $1,000) invested
on 12/31/90.
T = average annual total return assuming reinvestment
of dividends and capital gains distributions.
n = A number of years
ERV = ending redeemable value
<PAGE>
Item 24, Exhibit (b)(13)(iii)
SCHEDULE OF COMPUTATION FOR PERFORMANCE QUOTATIONS
Ten-Year Period
Initial Enrollment Net Purchase
Payment - Fee = Payment
$1,000 $15 $985
_______________________________________________________________________
Number Unit Value Gross Annual Ending
of Units x at end = Surrender - Administration = Redemption
Owned of each year Value Charge* Value
33.567 $35.483 $1,191 $10 $1,181
33.284 34.625 1,153 10 1,143
33.011 44.032 1,453 10 1,443
32.772 56.416 1,849 0 1,849
32.772 53.234 1,744 0 1,744
32.772 65.668 2,152 0 2,152
32.772 75.010 2,458 0 2,458
32.772 85.055 2,787 0 2,787
32.772 86.596 2,838 0 2,838
32.772 116.231 3,809 0 3,809
TOTAL RETURN FORMULA:
P (1 = T) to the power of n = ERV
$1,000.00 (1 + 14.31%) to the power of 10 = 3,809
Where: P = a hypothetical initial payment (of $1,000) invested
on 12/31/85.
T = average annual total return assuming reinvestment
of dividends and capital gains distributions.
n = A number of years
ERV = ending redeemable value
* Represents an annual administration charge of $10.
For purposes of this example, the annual administration charge is computed
by reference to the actual aggregate annual administration charges as a
percentage of total assets held under the Contracts. The administration
charge was eliminated on January 1, 1989.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints Alan J. Bowers,
Frank D. Casciano, Kathleen M. Koerber, and Kenneth A. Watson, his
true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign the Registration
Statement and any and all amendments to the Registration Statement
for MBL Variable Contract Account-2 and to file the same, with all
exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Signature Title Date
ANITA KARTALOPOULOS Director March 29, 1996
Anita Kartalopoulos
