SEC File No. 333-01161
SEC File No. 811-02047
As filed with the Securities and Exchange Commission
on April 30, 1997
_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 1 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 13 [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: 1-800-435-3191
Judith C. Keilp, Esq.
Counsel
MBL Life Assurance Corporation
520 Broad Street
Newark, New Jersey 07102-3111
(Name and Address of Agent for Service)
_________________________________________________________________
This amendment shall become effective on May 1, 1997, pursuant to
rule 485(b) under the Securities Act of 1933.
Pursuant to Rule 24f-2 under the Securities Act of 1933, the
Registrant has elected to register an indefinite amount of
securities. Pursuant to Rule 24f-2(b)(2), the Registrant was not
required to file a Rule 24f-2 Notice for its fiscal year ended
December 31, 1996, because it did not sell any securities
pursuant to such declaration during such fiscal year. (All
securities sold during such year were previously registered
pursuant to Rule 24e-2 under the Securities Act.)
Pursuant to Rule 24f-2(a)(2), the Registrant hereby elects to
terminate its declaration filed pursuant to Rule 24f-2(a)(1).
<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 Statement of Additional Information
Table of Contents
____________________________________________________________
<PAGE>
MBL Variable Contract Account-2
MBL Life Assurance Corporation
520 Broad Street, Newark, New Jersey 07102
May 1, 1997
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(a), 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 April 23,
1996, however, additional purchase payments are being accepted
from existing and new Participants under existing 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.
All Contracts, 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 21.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOT 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 May 1,
1997.
Page
SUMMARY OF GROUP VARIABLE
ANNUITY CONTRACTS
Fee Table 3
Eligible Contract Holders 4
Basic Provisions 4
Variable Accumulation Account 4
Variable Annuity 4
Assumption of Risks 5
Redemption and Death Benefit 5
ACCUMULATION UNIT VALUES 5
FINANCIAL STATEMENTS 6
PERFORMANCE RELATED INFORMATION 6
THE ACCOUNT
Organization 7
Legal Developments 7
Assets 8
Administration and Distribution 8
THE FUND 8
CHARGES AND EXPENSES
Premium Tax 9
Charges for Expense Risk, Mortality
Risk and Minimum Death Benefit 9
Investment Advisory Fee 9
Other Charges 9
ACCUMULATION ACCOUNT
Purchase Payments 9
Variable Accumulation Account 10
Transfers 10
Redemption 11
Death Benefit 12
ANNUITY
Annuity Commencement Date 12
Purchase of Annuity 12
Forms of Annuity 13
Annuity Payments 13
Variable Annuity Unit Value 14
GENERAL RIGHTS
Voting Rights 14
Confirmation of Transactions 14
Reports 15
457 Plan Participants 15
FEDERAL INCOME TAX STATUS
Introduction 15
Taxation of MBL Life 15
Tax Status of the Contract 16
Retirement Plans 16
Taxation of Distributions 17
Withholding 18
Possible Changes in Taxation 18
Other Tax Consequences 18
OTHER CONTRACT PROVISIONS
Beneficiary 19
Non-Assignability 19
Portability 19
Failure of Plan to Qualify 19
Discontinuance 19
Transfer to New Funding Agency 20
Changes in Contract 20
Other Changes 20
STATEMENT OF ADDITIONAL INFORMATION
Table of Contents 21
INDEX OF TERMS
The following terms are explained on the pages indicated.
Account 1
Accumulation Period 1
Annuity Commencement Date 12
Annuity Period 1
Beneficiary 19
Code 1
Companion Contract 1
Contract Holder 1
Contracts 1
First Priority 8
Fund 1
401(a) Plan 4, 17
403(b) Plan 4, 17
457 Plan 4, 17
IRA Plan 4, 17
MBL Life 1
Mutual Benefit Life 1
Net Purchase Payment 4
1940 Act 7
Participant 1
Qualified Plan 1
Rehabilitation Plan 1
SEC 1
Valuation Date 10
Variable Accumulation Account 4
Variable Accumulation Unit 10
Variable Annuity 4
Variable Annuity Unit 14
<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 0.44%
Other Expenses 0.39%
Total Fund Expenses 0.83%
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
$12 $38 $66 $145
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".)
________________________________________________
* There are no charges imposed upon redemption.
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(a) of the Code ("401(a) 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, 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:
<TABLE>
<CAPTION>
Accumulation Accumulation Number of
Unit Value- Unit Value- Units
Beginning End Outstanding
Year Ending of Period of Period End of Period
<S> <C> <C> <C>
December 31, 1996 $116.231 $144.176 287,783
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
</TABLE>
FINANCIAL STATEMENTS
The financial statements for the Account (as well as the
auditor's report thereon) may be found in the Account's 1996
Annual Report, which is incorporated by reference into the
Account's Statement of Additional Information. The Account will
furnish without charge an additional copy of the Annual Report
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. The only
Contract charges currently applicable is 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 31, 1996 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,
with the New Jersey Commissioner of Banking and Insurance as
Trustee, pursuant to the Rehabilitation Plan of Mutual Benefit
Life, MBL Life's former parent.
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 April 23, 1996. 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 confirmed by the Court in January
1994, 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. Pursuant to
a settlement agreement, an Order was issued on January 9, 1997
ending all Plan-related litigation, and awarding 30% of the value
of the Trust at its termination to eligible MBL Life
policyholders and 70% to the Class Four Creditors (as defined in
the Plan) of Mutual Benefit 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.
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.
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.
No assurance can be given that the Account or the Fund will
achieve is objective. 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.
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 necessary 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
certain states. If premium taxes are incurred by the 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 based on its
experience in administering the Contracts, to alter the
allocation of the charge between these items.
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.
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 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 401(a), 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 and any transfers from VCA-7 are
allocated to a Participant's Variable Accumulation Account 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 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. 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.
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 Contract,
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 as
required.
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 accumulate 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 one per 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").
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.
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. 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.
Death Benefit
If a Participant dies before the Annuity Commencement Date,
a death benefit is payable to the beneficiary. The death benefit
is equal to the greater of (1) the current value of the
Participant's Variable Accumulation Account (determined 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. The death benefit may be
paid in one of several ways. The beneficiary may instruct MBL
Life to pay the amount in a single sum. If the beneficiary is a
spouse of the participant, the Variable Accumulation Account may
be continued; however, no purchase payments may be made. [In
either case, the request must be in writing.]
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 no later that 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 Code precludes
distributions attributable to certain elective purchase payments
prior to attainment of age 59 1/2, separation from service,
disability or financial hardship, and prohibits the distribution
of income attributable to elective contributions in the case of
financial hardship. The preceding distribution requirement does
not apply to tax-deferred annuity account balances accrued before
January 1, 1987.
Five-percent owners continue to be subject to the rule that
distributions must begin by April 1 of the calendar year
following the year the individual attains 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.
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.
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.
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 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.
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. The quarterly statement for each
Participant will show 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.
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
MBL Life will furnish each Participant and Annuitant with an
annual and 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, except in the case of
certain governmental plans which are required to hold all
deferred amount and earnings thereon in trust for the exclusive
benefit of Participants and their beneficiaries. 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.
The Contract may be used on a non-tax qualified basis ("Non-
Qualified Contract") or 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's 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. Contract Holders 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 Holder, 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. Contract
Holders are responsible for determining that contributions,
distributions and other transactions with respect to the
Contracts satisfy applicable law. Contract Holders, 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, the participant, or
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, for non-governmental plans, 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.
Taxation of Distributions
Section 72 of the Code governs taxation of distributions
from Section 401(a), 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 distributed 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. Other rules relating to
distribution at death apply to Qualified Contracts. You should
consult your legal counsel and tax advisor regarding these rules
and their impact on Qualified Contracts.
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 MBL Life'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.
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(a) 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.
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS Page
Services 1
Purchase and Pricing of Account Units 2
Annuity Payments 2
Calculation of Performance Data 4
Additional Information 5
Financial Statements 5
<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
May 1, 1997
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 May 1, 1997. 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 1-
800-435-3191.
TABLE OF CONTENTS
Cross Reference to
Page Section in Prospectus
General Information and The Variable Contract
History . . . . . . . . . . . 1 Account - Organization
Services . . . . . . . . . . . 1 The Variable Contract
Account - Administration
and Distribution
Purchase and Pricing of
Account Units . . . . . . . . 2 Accumulation Account
Annuity Payments . . . . . . . 2 Annuity
Calculation of Performance
Data . . . . . . . . . . . . 4 Performance-Related
Information
Additional Information . . . . 5 --
Financial Statements . . . . . 5 --
GENERAL INFORMATION AND HISTORY
The business history of MBL Variable Contract Account-2 (the
"Account") (previously known as Mutual Benefit Variable Contract
Account-2), and the Depositor, MBL Life Assurance Corporation
("MBL Life"), are described in the Account's prospectus.
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.
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 or after 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.
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.
Calculation of Performance Data
AVERAGE ANNUAL TOTAL RETURN
(Period Ended December 31, 1996)
1 Year 5 Year 10 Year
VCA-2 24.04% 17.03% 14.66%
S & P 500 22.95% 15.20% 15.26%
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 31, 1996 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".
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 1996
Annual Report.
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 the Annual Report 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 FINANCIAL STATEMENTS
As of December 31, 1996 and 1995
and for the years then ended
MBL LIFE ASSURANCE CORPORATION
INDEX
As of December 31, 1996 and 1995 and for the years then ended
Page(s)
Report of Independent Accountants 2-3
Statutory Financial Statements:
Statement of Admitted Assets, Liabilities and Surplus 4
Statement of Operations 5
Statement of Changes in Surplus 6
Statement of Cash Flows 7
Notes to Statutory Financial Statements 8-36
Supplemental Schedule:
Schedule of Assets and Liabilities for the year ended December 31, 1996 37-39
<PAGE>
Report of Independent Accountants
To the Board of Directors of
MBL Life Assurance Corporation:
We have audited the accompanying statutory statement of admitted assets,
liabilities and surplus of MBL LIFE ASSURANCE CORPORATION (the "Company")
as of December 31, 1996 and 1995 and the related statutory statements of
income, changes in surplus and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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.
As described more fully in Note 2 to the financial statements, the Company
prepared these financial statements using accounting practices prescribed or
permitted by the New Jersey Department of Banking and Insurance ("statutory
financial statements"), which practices differ from generally accepted
accounting principles ("GAAP"). The effects on the financial statements of
the variances between this basis of accounting and GAAP, which have not been
determined as of the date of this report, are presumed to be material.
In our report dated February 16, 1996, we disclaimed an opinion as to whether
the 1995 statutory financial statements, presented fairly, in all material
respects, the financial position of MBL Life Assurance Corporation as of
December 31, 1995, and the results of its operations, and its cash flows for
the year then ended in conformity with GAAP. As described in Note 2 to the
financial statements, auditor's reports on statutory financial statements for
the years ended on or after December 31, 1996, may no longer include a
disclaimer of opinion as to fair presentation in accordance with GAAP.
Accordingly, our present opinion on the 1995 financial statements, as
presented herein, is different from that expressed in our previous report.
In our opinion, because of the effects of the matter discussed in the second
preceding paragraph, the financial statements referred to above do not
present fairly, in conformity with GAAP, the financial position of MBL Life
Assurance Corporation as of December 31, 1996 and 1995, or the results of its
operations or its cash flows for the years then ended.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the admitted assets, liabilities and surplus of MBL
Life Assurance Corporation as of December 31, 1996 and 1995 and the results
of its operations and its cash flows for the years then ended on the basis of
accounting described in Note 2.
Our audits were conducted for the purpose of expressing an opinion on the
statutory financial statements taken as a whole. The Supplemental Schedule
of Assets and Liabilities for the year ended December 31, 1996 is presented
to comply with the NAIC's Annual Statement Instructions and is not a required
part of the basic statutory financial statements. Such information has been
subjected to the auditing procedures applied in the audits of the basic
statutory financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic statutory 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 and began operating under the terms and conditions
of the Third Amended Plan of Rehabilitation of 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 New Jersey
Department of Banking and Insurance, developed the Plan, which was based on
actuarial, valuation and other assumptions, and reflected 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 obligations. Further, as discussed in Note
14, the Superior Court of New Jersey entered an Order on January 9, 1997,
effecting certain amendments to the Plan. The appeal period to the Order was
open for 45 days from the date of the Order and ended on February 24, 1997.
COOPERS & LYBRAND L.L.P.
Parsippany, New Jersey
February 11, 1997, except for Note 14,
which is dated February 24, 1997.
MBL LIFE ASSURANCE CORPORATION
Statutory Statement of Admitted Assets, Liabilities and Surplus
As of December 31 1996 and 1995
(in thousands)
ADMITTED ASSETS: 1996 1995
Bonds $ 5,619,889 $ 4,025,613
Stocks:
Preferred 27 1,059
Common 162,123 246,307
------- -------
162,150 247,366
Mortgage loans on real estate 379,419 1,262,465
Real estate owned 208,291 352,093
Policy loans 4,877,528 4,961,122
Other invested assets 49,577 67,395
Short-term investments 30,785 41,154
Cash 11,089 8,372
---------- ----------
Cash and invested assets 11,338,728 10,965,580
---------- ----------
Investment income due and accrued 368,977 381,074
Federal income tax recoverable 10,547 13,192
Other assets 22,511 28,993
Separate account assets:
Industry Separate Account 2,221,408 2,160,347
Net equity in Special Purpose Asset Vehicle 140,009 378,047
Reaffirmed Separate Accounts 262,820 237,191
---------- ---------
Total Separate account assets 2,624,237 2,775,585
---------- ---------
Total admitted assets $ 14,365,000 $ 14,164,424
-------------- --------------
-------------- --------------
LIABILITIES AND SURPLUS: 1996 1995
Policy and contract liabilities:
Life and annuity reserves $ 10,925,068 $ 10,968,478
Accident and health reserves 119,332 107,866
Policyholders' funds left on deposit 131,292 137,257
Dividends payable in following year 8,034 6,563
Policy and contract claims 52,308 42,516
Other 47,811 39,314
---------- ----------
11,283,845 11,301,994
---------- ----------
General liabilities:
Expenses, commissions and taxes 24,518 17,854
Asset valuation reserve 93,295 151,300
Interest maintenance reserve 1,950 0
Other 187,239 172,570
------- -------
307,002 341,724
------- -------
Separate account liabilities:
Industry separate account 2,221,408 2,160,347
Reaffirmed separate accounts 251,846 228,160
--------- ---------
Total Separate account liabilities 2,473,254 2,388,507
--------- ---------
Total liabilities 14,064,101 14,032,225
---------- ----------
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 277,453 108,753
------- -------
300,901 132,201
Less treasury stock, at cost (7 shares) (2) (2)
------- -------
Total surplus 300,899 132,199
------- -------
Total liabilities and surplus $ 14,365,000 $ 14,164,424
---------- ----------
---------- ----------
The accompany notes are an integrall part of these statutory finanical
statements.
MBL LIFE ASSURANCE CORPORATION
Statutory Statement of Operations
For the years ended December 31, 1996 and 1995
(in thousands)
1996 1995
Premiums and annuity considerations $ 1,240,049 $ 1,778,079
Considerations for supplementary contracts 9,722 41,346
Investment income, net of investment expenses
of $116,611 and $115,056 930,697 958,376
Commissions and expense allowances on
reinsurance ceded, net of
reserve adjustment of $2,359 and $733 78 7,201
Amortization of interest maintenance reserve (783) (3,773)
Net (loss) from operations from Separate
Accounts statements (24,957) 0
Miscellaneous income 17,959 28,826
--------- ---------
Total revenue 2,172,765 2,810,055
--------- ---------
Benefits paid or provided:
Death benefits 249,906 221,878
Annuity benefits 36,403 36,762
Disability and A&H benefits 15,443 11,685
Surrender benefits 1,105,157 727,702
Increase (decrease) in policy and
contract liabilities (37,908) 572,287
Payments on supplementary contracts 25,280 75,398
Other benefits 6,947 7,066
--------- ---------
1,401,228 1,652,778
--------- ---------
Expenses:
Commissions on premiums and annuity
considerations 8,383 8,892
Commissions and expense allowances on
reinsurance assumed 72,924 86,433
General insurance expenses 60,023 44,653
Insurance taxes, licenses and fees 5,641 7,542
Increase in loading, net 193 2
Net transfers from Separate Accounts (110,005) (96,862)
Other expenses 19,593 4,432
--------- ---------
56,752 55,092
--------- ---------
Total benefits and expenses 1,457,980 1,707,870
--------- ---------
Income before dividends, taxes and net
realized capital losses 714,785 1,102,185
Dividends to policyholders (641,738) (895,833)
-------- ---------
Income after dividends and before taxes and
net realized capital losses 73,047 206,352
Federal income tax expense (14,967) (41,058)
------- --------
Income after dividends and taxes, before net
realized capital losses 58,080 165,294
------- --------
Net realized capital losses, net of tax
of $5,054 and $6,262 (27,224) (64,267)
------- -------
Net income $ 30,856 $ 101,027
----------- ---------
----------- ---------
The accompanying notes are an integral part of these statutory financial
statements.
MBL LIFE ASSURANCE CORPORATION
Statutory Statement of Changes in Surplus
For the years ended December 31, 1996 and 1995
(in thousands)
<TABLE>
<CAPTION>
Paid-in and
Common Contributed Unassigned Treasury Total
Stock Surplus Surplus Stock Surplus
<S> <C> <C> <C> <C> <C>
Balance, beginning of year -
January 1,1995 2,000 $ 21,448 $ 83,416 $ (2) $ 106,862
Net income 101,027 101,027
Change in net unrealized capital gains (52,545) (52,545)
Change in non-admitted assets 16,239 16,239
Change in asset valuation reserve (71,844) 10,906 (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
Net income 30,856 30,856
Change in net unrealized capital gains 82,972 82,972
Change in non-admitted assets 5,127 5,127
Change in asset valuation reserve 58,005 58,005
Change in net equity in Special
Purpose Asset Vehicle (after funds
transferred to the General Account
below) (208,874) (208,874)
Funds transferred to Industry
Separate Account (1,508) (1,508)
Funds received from Special
Purpose Asset Vehicle 210,116 210,116
Current year's Federal income tax
benefit not affecting operations (375) (375)
Other (7,619) (7,619)
----- ------ ------- ------- --------
Balance, end of year -
December 31, 1996 $ 2,000 $ 21,448 $ 277,453 $ (2) $ 300,899
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
MBL LIFE ASSURANCE CORPORATION
Statutory Statement of Cash Flows
For the years ended December 31, 1996 and 1995
(in thousands)
1996 1995
Cash flows from operating activities:
Premiums and annuity considerations $ 1,241,753 $ 1,776,725
Considerations for supplementary contracts 9,721 41,345
Net investment income 947,519 889,685
Miscellaneous income 18,484 36,945
Benefits paid to policyholders (2,072,304) (1,982,136)
Operating expenses paid (142,514) (141,117)
Federal income taxes paid (4,672) (37,034)
Transfer to Separate Accounts 110,704 96,774
Other cash provided 31,624 7,378
--------- --------
Net cash provided by operating activities 140,315 688,565
--------- -------
Cash flows from investing activities:
Proceeds from sales, maturities and repayments
of bonds and stocks 1,672,733 2,431,022
Proceeds from sales of real estate 237,219 119,706
Proceeds from sales and repayments of other
invested assets 40,262 9,421
Repayments of mortgage loans 915,133 406,524
Purchase of bonds and stocks (3,146,529) (3,119,292)
Purchase of real estate (15,118) (24,732)
Purchase of other invested assets (22,017) (1,214)
Funding of mortgage loans (93,929) (64,547)
Cash transferred from Special Purpose
Asset Vehicle 210,116 45,239
Tax on capital gains (7,618) (10,005)
Net decrease (increase) in policy loans 83,594 (452,112)
Other cash (used) (21,814) (37,642)
-------- --------
Net cash (used in) investing activities (147,968) (697,632)
-------- --------
Net decrease in cash (7,653) (9,067)
Cash and short-term investments, beginning
of year 49,526 58,593
------- --------
Cash and short-term investments, end of year $ 41,873 $ 49,526
------- --------
------- --------
The accompanying notes are an integral part of these statutory
financial statements.
MBL LIFE ASSURANCE CORPORATION
Notes to Statutory Financial Statements
December 31, 1996
1. Organization and Rehabilitation of Mutual Benefit Life Insurance Company
Organization
MBL Life Assurance Corporation ("MBL Life" or the "Company") 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 the Agreement of Assumption and
Reinsurance.
The accompanying statutory 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
entered 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 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 (see Note 14).
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 the Agreement of
Assumption and Reinsurance, 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 restructured and segregated into a
separate account (the "Industry Separate Account"). These liabilities were
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 financial statements. The residual value, if any, in
the Liquidating Trust after settlement of all liabilities, will be distributed
to MBL Life, the beneficiary of the Trust. The amount of any residual value
cannot currently be determined.
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).
In addition to the establishment of the entities discussed above, the Plan
also provided numerous other terms and conditions which affected policy-
holders, 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 Notes 13 and 15).
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.
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 (see Note 14).
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.
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.
2. Significant Accounting Policies
Basis of Presentation
The accompanying statutory financial statements have been prepared in
accordance with accounting practices prescribed or permitted by the New
Jersey Department of Banking and Insurance (the "Department") ("statutory
accounting practices"). Prescribed statutory accounting practices are those
practices included in 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 Department. In order to account for those transactions which were
uniquely related to the implementation of the Plan, MBL Life received written
approval from the Department for a number of accounting practices which
differed from or were ambiguous to the prescribed statutory accounting
practices. The effects on surplus related to those permitted accounting
practices have not been determined.
Statutory accounting practices differ from generally accepted accounting
principles ("GAAP"). The effects on the statutory financial statements of
the variances between statutory accounting practices and GAAP which have not
as yet been determined, are presumed to be material. The accompanying
statutory 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 GAAP for stock life insurance companies, applied in
preparing the statutory financial statements follow.
In December 1995, the American Institute of Certified Public Accountants
issued Statement of Position 95-9 which stated that, effective for audits of
statutory financial statements for years ended on or after December 31, 1996,
auditors should not issue reports on statutory financial statements as to
fair presentation in conformity with GAAP. Accordingly, the opinion expressed
by our independent accountants on the 1995 statutory financial statements as
to the conformity of those statements with GAAP is different from that
expressed in their previous report.
Certain prior year amounts have been reclassified to conform with current
year presentation.
Carrying Amounts of Assets and Liabilities
Under the Company's permitted accounting practices, 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.
In addition, liabilities, other than those retained in the Liquidating Trust
and 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.
Investments
Bonds and Stocks
Bonds qualifying for amortization based upon their classification by the 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.
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
Under the Company's permitted accounting practices, all commercial mortgage
loans are carried at the lower of their individual unpaid principal balance
or discounted net recoverable amount based upon ten year cash flows plus an
eleventh year reversion at estimated sales value.
In addition, the Company established a portfolio carrying value reserve for
its mortgage loan portfolio in light of the inherent credit risks associated
with such a portfolio. The mortgage portfolio reserve was approximately 2-4%
of the mortgage portfolio's statutory carrying value at December 31, 1996.
The total valuation reserve established by the Company approximates those
which would be required under GAAP.
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 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. Under GAAP, foreclosed properties are
recorded at the estimated fair value of the property at the date of
foreclosure and are depreciated from the date of foreclosure until such time
as the Company determines that the property will be sold and has commenced
marketing efforts. At such time, the property is carried at the lower of
depreciated value or estimated fair value based on discounted cash flow
analysis.
Policy Loans
Policy loans are stated at current unpaid principal balances and are not in
excess of cash surrender values.
Other Invested Assets
Other invested assets consist primarily of investments in joint ventures and
partnerships. Real estate joint ventures 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, 13 and
14). 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, 1995 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 Other 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, 1996 and 1995 the net
amounts due to the Industry Separate Account approximate $18 million and $12
million, respectively.
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 Account's 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, 1996 and 1995 for the General Account was
calculated using the prescribed formula. Under the Company's permitted
accounting practices, 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, 1996 (including the General Account's proportionate
share of assets held in the SPAV).
The IMR as of December 31, 1996 and 1995 was calculated, using the prescribed
formula, based upon the interest rate related gains and losses of the General
Account (including its proportionate share of such gains and losses in the
SPAV). 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 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.
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 "non-admitted" and are not included in the
statutory balance sheets. Under GAAP, these assets would be included in the
balance sheet, net of applicable depreciation, amortization and valuation
reserves.
Policy and contract reserves
Reserves for restructured life insurance policies (universal life plans) and
reaffirmed contracts amounted to $10.9 billion at December 31, 1996 and 1995
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 $2.3 billion
and $2.4 billion for 1996 and 1995, respectively. Under the Company's
permitted accounting practices, these reserves are carried at 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 1994 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.
Reserves for Corporate Owned Life Insurance ("COLI") policies amounted to
$5.1 billion at December 31, 1996 and 1995. 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 are equal to contract value.<PAGE>
Reserves for annuity
contracts in the General Account amounted to approximately $3.4 billion at
December 31, 1996 and 1995. For those annuity contracts which were
restructured pursuant to the Plan, reserves are based on crediting rates of
5.1% in 1996 and 1995. Under the Company's permitted accounting practices,
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 11.0%. 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 $44.4 million and
$46.7 million at December 31, 1996 and 1995, respectively and consisted
primarily of $26.7 million and $29.0 million in each year for individual
supplementary contracts involving life contingencies (SCILC). The individual
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%. Under GAAP, individual SCILC reserves are calculated using the
Company's actual experience assuming the same interest rates.
Reserves relating to guaranteed investment contracts and other deposit-type
contracts amounted to $33.0 million and $36.3 million at December 31, 1996
and 1995, respectively. These reserves are equal to contract values.
Reserves for individual and group accident and health policies amounted to
$119.3 million and $107.9 million at December 31, 1996 and 1995, respectively,
and are comprised as follows:
Active life reserves for individual accident and health contracts, amounting
to $ 34.1 million and $32.9 million at December 31, 1996 and 1995,
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%. Under GAAP, such
reserves would be accrued as GAAP premium is recognized.
Reserves for individual disabled lives, $83.1 million and $73.3 million at
December 31, 1996 and 1995, 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.
Reserves for group accident and health contracts amounting to $2.1 million
and $1.6 million at December 31, 1996 and 1995, respectively, are based upon
the Company's actual experience assuming an interest rate of 6%.
Reserves for annuity contracts in the Industry Separate Account amounted to
approximately $2.0 billion at December 31, 1996 and 1995. Reserves for those
annuity contracts which were restructured pursuant to the Plan are based on
crediting rates of 6.25% and 3.55% in 1996 and 1995, respectively. Under the
Company's permitted accounting practices, 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 applicable valuation rate. Under GAAP, reserves for
these annuity contracts are generally equal to fund balance.
Pension, Post-retirement and Post-employment Benefits
The Company has several employee benefit plans in effect that provide for
pension, post-retirement and post-employment benefits (see Note 9).
MBL Life recognizes defined benefit pension plan costs based on the annual
amounts contributed to the plan. Under GAAP, pension costs are accounted for
in accordance with SFAS No. 87, Employers' Accounting for Pensions.
MBL Life accounts for the costs of its retirees' post-retirement healthcare
and life insurance benefits plans using the statutory method which accrues
for retirees and fully eligible employees only. 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.
The Company provides certain post-employment benefits which are expensed as
incurred and other benefits that are provided for currently. Under GAAP,
post-employment benefits are accounted for in accordance with SFAS No. 112,
Employers' Accounting for Postemployment Benefits.
General Other Liabilities
Without giving regard to the validity of the claims or the Settlement
Agreement with the Class Four Creditors (see Note 15), the statutory balance
sheet at December 31, 1996 and 1995 includes an amount then estimated to
equal 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.
Industry Separate Account
Pursuant to the terms of the Plan of Operations of the Industry Separate
Account, as approved by the Department, 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.
Under the Company's permitted accounting practices, the Industry Separate
Account assets are reflected in the December 31, 1996 and 1995 statutory
balance sheet with all other separate account assets. The Industry Separate
Account liabilities are included with all other separate account liabilities
on the statutory 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.
Special Purpose Asset Vehicle
Under the Company's permitted accounting practices, the General Account's net
equity in the Special Purpose Asset Vehicle is reflected in the December 31,
1996 and 1995 statutory assets with all other separate account assets. Funds
transferred from the SPAV ($210 million) 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
are 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 and IMR, as
necessary (see Note 4). The General Account's proportionate share of the net
gain or loss from operations of the SPAV are included in the accompanying
statutory statement of operations for 1996 and in the accompanying statutory
statement of changes in surplus for 1995.
Reaffirmed Separate Accounts
Assets held in separate accounts which were reaffirmed pursuant to the terms
of the Plan are carried at market value. They are reflected in the December
31, 1996 and 1995 statutory 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 accompanying statutory balance sheet.
These liabilities are considered to be reported at estimated fair value.
The net gain or loss from operations of the Reaffirmed Separate Accounts are
included in the accompanying statutory statement of operations for 1996 and
in the accompanying statutory statement of changes in surplus for 1995.
The Reaffirmed Separate accounts are pooled investment funds in which
investment income and gains or losses accrue directly to account participants.
The assets of these accounts are segregated from and are not subject to the
claims which may arise out of any other business of MBL Life. The underlying
investment risks are assumed by the account participants.
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.
Revenue Recognition
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. 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
statement of operations and are determined using the specific identification
method.
Income Taxes
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 between the tax and book basis of assets and
liabilities. Under GAAP, such a provision would be made.
Statement of Cash Flows
The statement of cash flows is 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 statutory
accounting practices requires management to make estimates and assumptions
which affect the reporting of assets and liabilities and disclosure of
contingent liabilities as of the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates. Appropriate disclosures
regarding the use of estimates have been made throughout these statutory
financial statements.
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, 1996 and 1995, MBL Life's investment in the net
equity of such unconsolidated subsidiaries, including those carried in the
SPAV, amounted to approximately $14 million and $10 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 and venture capital, including those transferred to the Industry
Separate Account and the SPAV, was approximately $149 and $280 million at
December 31, 1996 and 1995, 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 SPAV, was approximately $78 and $87 million at December 31, 1996 and
1995, respectively. The real estate joint ventures are 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 was
approximately 33% and 30% of the SPAV assets at December 31, 1996 and 1995,
respectively. In addition, residential mortgage loans with a carrying value
of approximately 20% and 13% of the SPAV assets at December 31, 1996 and
1995, respectively, were issued to purchasers of units in this largest
project.
As a result of participating in certain leveraged buyout transactions, MBL
Life had 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 million at December 31, 1995. The aforementioned assets
were included with the large and/or illiquid assets which were transferred to
the SPAV. During 1996, the home improvement retailer filed for bankruptcy
protection under Chapter 11, which resulted in MBL Life's investment being
written off. Also during 1996, the Company sold its investment in the
children's clothing operation. The net gain to the SPAV during 1996 relating
to these two assets was $19.8 million.
The Company monitors and adjusts the carrying value of the SPAV assets based
upon the disposition plan of the individual assets in the SPAV.
<PAGE>
4. Investments
Net investment income for the years ended December 31, 1996 and 1995
were derived from the following sources (in thousands):
1996 1995
Bonds $ 330,670 $ 274,482
Stocks:
Preferred 4 63
Common 6,664 5,894
Mortgage loans on real estate 82,499 141,445
Real estate owned 104,172 115,356
Policy loans 513,114 525,483
Other invested assets 3,048 2,551
Short term investments 2,914 4,334
Other 4,223 3,824
--------- ---------
Total investment income 1,047,308 1,073,432
Investment expenses (116,611) (115,056)
--------- ---------
Net investment income $ 930,697 $ 958,376
--------- ---------
--------- ---------
Bonds
The amortized cost, gross unrealized gains and losses and NAIC market
values of bonds by category, as of December 31, 1996 and 1995, are
shown below (in thousands).
<TABLE>
<CAPTION>
December 31, 1996 NAIC
Amortized Gross Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. Government agencies $ 511,384 $ 514 $ 83 $ 511,815
Foreign governments 99,617 2,384 - 102,001
Corporate securities 4,705,137 21,673 533 4,726,277
Mortgage-backed securities 303,751 - - 303,751
--------- ------ ----- ---------
Total $5,619,889 $24,571 $ 616 $5,643,844
--------- ------ ----- ---------
--------- ------ ----- ---------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995 NAIC
Amortized Gross Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
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
--------- ------ ----- ---------
--------- ------ ----- ---------
</TABLE>
The amortized cost and NAIC market value of bonds, at December 31, 1996,
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, 1996 (in thousands)
Amortized Cost NAIC Market Value
Due in one year or less $ 333,654 $ 335,282
Due after one year through five years 4,917,947 4,939,275
Due after five years through ten years 63,601 64,600
Due after ten years 936 936
--------- ---------
5,316,138 5,340,093
Mortgage-backed securities 303,751 303,751
--------- ---------
Total $ 5,619,889 $ 5,643,844
--------- ---------
--------- ---------
Proceeds from sales of investments in debt securities during 1996 and 1995
were $1.3 billion and $2.3 billion, respectively. Gross gains of $11.7 and
$22.1 million and gross losses of $6.4 million and $10.2 million were
realized on those sales in 1996 and 1995, respectively.
Stocks
The statement values, which also represent fair values, and the cost of
preferred and common stocks as of December 31, 1996 and 1995, are shown
below (in thousands):
<TABLE>
<CAPTION>
December 31,
1996 1995
NAIC NAIC
Statement Statement
Cost Value Cost Value
<S> <C> <C> <C> <C>
Preferred stocks:
Industrial and miscellaneous $ 27 $ 27 $ 1,382 $ 1,059
------ ------ ------- ------
Common stocks:
Public Utilities 990 3,208 1,517 3,954
Banks, thrifts and insurance companies 610 2,904 550 1,758
Industrial and miscellaneous 111,867 141,813 207,200 230,953
Unconsolidated subsidiaries 12,524 14,198 17,014 9,642
------- ------- ------- -------
125,991 162,123 226,281 246,307
------- ------- ------- -------
Total stocks $126,018 $162,150 $ 227,663 $ 247,366
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
Gross unrealized investment gains on preferred and common stocks totaled
$43.7 million and $34.3 million and gross unrealized investment losses
totaled $781,000 and $1.9 million at December 31, 1996 and 1995,
respectively.
Proceeds from sales of preferred and common stocks during 1996 and 1995 were
$398.8 million and $158.2 million, respectively. Gross gains of $21.1
million and $7.5 million and gross losses of $1.7 million and $2.0 million
were realized on those sales in 1996 and 1995, respectively.
Mortgage Loans on Real Estate
As of December 31, 1996 and 1995, the carrying value of mortgage loan
investments in the General Account was $379.4 million and $1.3 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 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 at December 31, 1996 and 1995 were:
Concentration %
December 31,
1996 1995
State
California 12% 12%
Florida 12% 8%
Texas 10% <5%
Georgia 10% <5%
Michigan 7% 11%
Virginia 7% <5%
Pennsylvania 5% <5%
District of Columbia 5% <5%
New Jersey <5% 8%
North Carolina <5% 6%
Iowa <5% 5%
The remaining carrying value is geographically disbursed throughout the
country with no individual state concentration exceeding 5%.
<PAGE>
As of December 31, 1996 and 1995, the underlying collateral of the mortgage
loan investments as a percentage of total mortgages were diversified as
follows:
1996 1995
Office buildings 34% 37%
Retail 14% 11%
Apartment buildings 30% 13%
Agricultural - 20%
Industrial 11% 9%
Other 11% 10%
--- ---
100% 100%
--- ---
--- ---
During 1996, the General Account sold in four separate transactions,
mortgage loans with a principal balance of approximately $635 million which
Mutual Benefit Life had originated, including $40 million held in the
Industry Separate Account. These transactions resulted in a pre-tax loss to
the General Account of $39.6 million and a pre-tax gain of $.3 million to the
Industry Separate Account for 1996.
A securitization of commercial mortgage loans with a principal balance of
approximately $128 million was completed effective May 21, 1996. These
mortgage loans were sold to a depositor under an agreement which contained
certain recourse and cure provisions. The General Account would be required
to repurchase individual mortgage loans based on the discovery of a material
defect in a Trustee Mortgage File not cured within 90 days or a material
breach of any of the representations, warranties or covenants of seller with
respect to the mortgage loans, and indemnify the depositor and the under-
writer for securities law violations based upon an untrue statement of
material fact or omission of a material fact by MBL Life in connection with
certain information in the prospectus and certain materials delivered to the
depositor in relation to the transaction.
The second transaction was a bulk sale of commercial mortgage loans with a
principal balance of approximately $119 million sold effective in June 1996.
These mortgage loans were sold to investors under an agreement which
contained certain recourse or cure provisions. The General Account would be
required to repurchase individual mortgage loans in the event of a material
breach of a representation or warranty with respect to an asset.
The third transaction was a portfolio sale of residential mortgage loans with
a principal balance of approximately $28 million, including $7 million held
in the Industry Separate Account sold effective November 20, 1996. These
mortgage loans were sold to an investor under an agreement which contained
certain recourse or cure provisions. The General Account or Industry
Separate Account would be required to repurchase individual mortgage loans
in the event of a material breach of a representation or warranty with
respect to an asset.
The fourth transaction was a sale of the Company's farm mortgage loan
portfolio with a principal balance of approximately $360 million, including
$33 million held in the Industry Separate Account sold effective December 10,
1996. These mortgage loans were sold to an investor under an agreement which
contained certain recourse or cure provisions. The General Account or
Industry Separate Account would be required to repurchase individual mortgage
loans in the event of a material breach of a representation or warranty with
respect to an asset.
The sale of the mortgage loans held in the Industry Separate Account in 1996
was the full responsibility of the Industry Separate Account. The General
Account has no future potential for monetary investment or support.
During 1995 the Industry Separate Account sold, in two separate transactions,
a securitization and a bulk sale, mortgage loans with a principal balance of
approximately $192 million that Mutual Benefit Life had originated. These
transactions resulted in a pre-tax loss of $98.9 million to the Industry
Separate Account for 1995.
The 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 individual mortgage loans 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 bulk sale of mortgage loans with a principal balance of approximately $83
million was 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
individual mortgage loans 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 in 1995 was the full responsibility of the
Industry Separate Account. The General Account has no future potential for
monetary investment 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
as of December 31, 1996 and 1995. The carrying value of universal life policy
loans as of December 31, 1996 and 1995 was approximately $396 million and
$452 million, respectively.
Assets on Deposit
As of December 31, 1996 and 1995, MBL Life had securities with a carrying
value of $5.5 and $5.3 million, respectively on deposit with regulatory
agencies. The securities on deposit are reflected in the accompanying
statutory balance sheets as follows:
December 31,
1996 1995
Bonds $ 3.4 million $ 3.5 million
SPAV 2.1 million 1.8 million
Special Purpose Asset Vehicle
The following is a summary of the carrying values of the net assets in the
SPAV (in thousands):
December 31,
1996 1995
Bonds $ 17,559 $ 55,878
Stocks:
Preferred 1,500 46,371
Common 31,025 126,195
Mortgage loans on real estate 38,951 67,991
Real estate owned 215 2,443
Other invested assets 88,969 193,286
Investment income due and accrued 264 1,434
Other assets 12,782 22,938
Liabilities - (91)
-------- ----------
$ 191,265 $ 516,445
-------- ----------
-------- ----------
Net equity of SPAV:
Included in General Account $ 140,009 $ 378,047
Included in Industry Separate Account 51,256 138,398
-------- ----------
$ 191,265 $ 516,445
-------- ----------
-------- ----------
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, 1996 and 1995.
Policyholder funds left on deposit, which are classified as investment
contracts, had a carrying value of approximately $129 million and $135
million as of December 31, 1996 and 1995, respectively.
6. Fair Value Information
The estimated fair value amounts of financial instruments included herein
have been determined by MBL Life using market information available as of
December 31, 1996 and 1995 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.
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
(in thousands) (in thousands)
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
<S> <C> <C> <C> <C>
Assets:
Bonds $ 5,619,889 $ 5,670,809 $ 4,025,613 $ 4,192,158
Stocks 162,150 162,154 247,366 247,071
Mortgage loans on real estate 379,419 380,821 1,262,465 1,205,867
Financial instruments included in
SPAV (General Account's Share) 65,175 68,950 216,996 211,539
Liabilities:
Investment contracts:
Life and annuity contracts 3,082,098 2,913,511 3,081,459 2,868,582
Policyholder funds left on deposit 129,352 127,767 135,063 139,046
Other liabilities:
Policy and contract 47,811 47,738 39,314 39,223
General 187,239 185,718 172,570 171,574
</TABLE>
The General Account's share of the net equity in the estimated fair value of
the SPAV 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 98% of the carrying value and estimated
fair value of the total debt securities as of December 31, 1996. 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.
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 both
reserves for life and annuity contracts and policyholder funds left on
deposit are estimated using discounted projected cash flows, based on
interest rates which would be offered at December 31, 1996 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.
7. Reinsurance Transactions
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.
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 reinsure 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 at December 31, 1996 and 1995.
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 $142.9 million and $149.3 million at
December 31, 1996 and 1995, respectively, for life, health and annuity
reserve credits taken on $1.2 billion and $1.3 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.
<PAGE>
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.
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.
As of December 31, 1996, 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 for those years 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, 1996 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.
<PAGE>
The funded status of the qualified defined benefit pension plans at January
1, 1996, the date of the most recent valuation, and the accumulated benefit
obligation and plan assets at January 1, 1996 are as follows (in thousands):
January 1, 1996
Actuarial present value of obligations:
Vested $ 65,824
Non-vested 6,030
--------
Accumulated benefit obligation $ 71,854
--------
--------
Plan assets available for benefits $ 125,568
--------
--------
The prepaid pension cost is a non-admitted asset and is not included in the
accompanying statutory statement of assets, liabilities and surplus. Due to
the funded position of the pension plans, no contributions were required to
be made in 1996.
The weighted average discount rate used in determining the actuarial present
value of the accumulated benefit obligation was 8.0% for 1995. 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.
As of December 3l, 1996, 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 $12.8 million and $10.5 million at
December 31, 1996 and 1995, respectively, to cover estimated future funding
requirements of the non-qualified excess benefit plans.
Post-Retirement Benefits Other Than Pensions
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, 1996 and 1995 was $18.1 million and $20.5 million, respectively.
<PAGE>
Net periodic post-retirement benefits cost includes the following
(in thousands):
1996
Accrued post-retirement benefit cost at January 1 $ 10,014
-------
Service cost 571
Interest cost 9,938
Amortization of unrecognized transition obligation 2,465
Net amortization and deferral 140
-------
Total expense for the year 13,114
Expected benefits paid during the year (1,528)
-------
Accrued post-retirement benefit cost at December 31 $ 21,600
-------
-------
The following represents the unfunded accumulated post-retirement benefit
obligation as determined by the plan's actuaries (in thousands):
1996
Retirees $ 39,032
Other fully eligible plan participants 46
-------
Accumulated post-retirement benefit obligation 39,078
Unrecognized net gain 606
Unrecognized transition obligation (18,084)
-------
Accrued post-retirement benefit cost $ 21,600
-------
-------
The weighted average discount rate used in determining the current year
accumulated benefit obligation was 7.25%. The health care cost trend rate
was 8.5% graded to 5.0% over eight years for pre-age 65 claims and 8.0%
graded to 5.0% over eight years for post-age 65 claims.
Post-employment Benefits
The Company has certain post-employment benefits provided to former or
inactive employees who are not retirees. These benefits are for uninsured
expenses that include long and short-term disability medical and life
insurance continuation. The provision for these benefits at December 31,
1996 and 1995 and the incremental expense are insignificant.
<PAGE>
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 three years. MBL Life
contributed approximately $1.2 million and $1.1 million in 1996 and 1995,
respectively, which is reflected in the accompanying statutory statements of
operations.
Early Retirement Plan
In October 1996, MBL Life announced its plan to reduce future operating
expenses through a reduction in the Company's workforce. Such reduction was
accomplished by a special voluntary early retirement program affecting 121
eligible employees. This was supplemented by an involuntary staff reduction
of 59 employees. This staff reduction will be completed by June 30, 1997.
The estimated cost of this program amounted to approximately $18 million
pre-tax and included amounts for enhanced pension benefits, post-retirement
benefits and severance. These costs have been reflected in the accompanying
1996 statutory statement of operations.
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 stockholders prior to
the end of the Rehabilitation Period, as defined in the Plan. The amount of
dividends which the Company may pay to the stockholders 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 met its minimum risk-based capital
level as of December 31, 1996.
<PAGE>
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.
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. No value was assigned to these warrants upon issuance.
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 Notes 14 and 15).
Lines of Credit
As of December 31, 1996 and 1995, MBL Life had no lines of credit.
13. Rehabilitation Plan Events during 1996
Pursuant to the terms of the Plan, the Commissioner, prior to July 1996, was
to determine whether, in her opinion, the General Account had 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 have required approval by both the
Participating Guaranty Associations and the Industry Reinsurers. The
Commissioner decided not to reduce or eliminate the early withdrawal charge
and as part of the Settlement Agreement (see Note 14), the moratorium
charges as defined in the Plan will remain in effect for the duration of the
Rehabilitation Period.
In accordance with the terms and conditions under which the Life Insurance
Company Guaranty Corporation of New York (the "LICGCNY") agreed to become a
Participating Guaranty Association under the Plan, the LICGCNY has agreed to
provide to each New York covered policyholder, no later than July 16, 1996,
the following enhancement to the Plan. The LICGCNY 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 LICGCNY had the
option to either absorb the moratorium charges or substitute itself as the
policyholder. As of December 31, 1996, $22 million of surrenders pursuant
to the terms of the New York enhancement have been processed by the Company.
New York policyholders were paid out their full account value, less policy
loans, upon request and the LICGCNY immediately reimbursed MBL Life for any
moritorium charges that would normally have been charged against the
policyholders' account value. The LICGCNY is also reimbursing MBL Life for
the net account values paid out as of each year end and the LICGCNY will be
"refunded" these monies plus normal interest credited at the end of the
Rehabilitation period. A substitute liability amounting to $13.8 million
representing these amounts due to the LICGCNY has been included in the
accompanying statutory financial statements.
14. Rehabilitation Plan Appeals and Subsequent Event
Several appeals had 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) asserted that general
unsecured creditors were entitled to parity of treatment with policyholders;
(2) requested reclassification of certain claims as policyholder claims
rather than general unsecured claims; and (3) challenged the crediting of
interest to policyholders during certain periods subsequent to the
commencement of the Rehabilitation.
<PAGE>
Further, the Commissioner had appealed certain of the Court's modifications
to the Plan. The modifications of the Court included: (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) a 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.
On January 9, 1997 the Superior Court of New Jersey entered an order
approving a Settlement Agreement between the Company and the Class Four
Creditors ("Settlement Agreement") as identified in the Plan. The key
elements of the Settlement Agreement are:
The appeals, cross appeals, and other related litigation, including
challenges to interest crediting rates filed in connection with the approval
of the Plan of Rehabilitation, will be dismissed.
Interest rates credited to restructured General Account insurance liabilities
each year for 1996 through 1999 will be fixed at the rates in effect in 1996.
Those rates ranged from 4.35% to 5.35%.
Policyholder guarantees, the length of the Rehabilitation Period, and the
current schedule of moratorium charges remain in effect and unchanged.
Class Four Creditors and eligible policyholders who remain with the Company
after the end of 1999 will share in the future value of the Company. The
sharing will be based on a ratio of 70% to the Class Four Creditors and 30%
to eligible policyholders, if MBL Life meets its capital growth projections
(although the policyholder share may be reduced if it does not meet its
capital growth projections).
As an incentive to stay with the Company, eligible policyholders will earn
the right to share in future value in four stages over three and one-half
years, beginning January 1, 2000.
The account values of Industry Separate Account contracts will be paid in
full immediately on or about December 31, 1999. The option to delay payouts
or to pay out account values in five installments, as defined in the Plan,
will be eliminated. In return for the certainty of full access on December
31, 1999, Industry Separate Account contractholders will waive their right
to dispute their eligibility for guaranty association coverage.
After a 45 day appeal period ending February 24, 1997, the Settlement
Agreement became final and non-appealable. The Settlement Agreement is not
expected to have a significant impact on the financial position of the
Company.
MBL LIFE ASSURANCE CORPORATION
Supplemental Schedule of Assets and Liabilities
The following is a summary of certain financial data included in other
exhibits and schedules of the 1996 Statutory Annual Statement subjected to
audit procedures by our independent auditors and utilized by our actuaries
in the determination of reserves.
Investment Income Earned:
U.S. Government bonds $ 9,211,525
Other bonds (unaffiliated) 321,458,103
Bonds of affiliates 0
Preferred stocks (unaffiliated) 3,921
Preferred stocks of affiliates 0
Common stocks (unaffiliated) 5,777,023
Common stocks of affiliates 887,197
Mortgages loans 82,498,746
Real estate 104,172,363
Premium notes, policy loans and liens 513,114,438
Collateral loans 0
Cash on hand and on deposit 99,006
Short-term investments 2,913,893
Other invested assets 3,048,051
Derivative Instruments 0
Aggregate write-ins for investment income 4,123,813
----------------
Gross investment income $ 1,047,308,079
----------------
----------------
Real Estate Owned - Book Value less Encumbrances 208,290,633
Mortgage Loans - Book Value:
Farm mortgages $ 0
Residential mortgages 0
Commercial mortgages 406,938,361
----------------
Total mortgages loans $ 406,938,361
----------------
----------------
Mortgage Loans By Standing - Book Value:
Good standing 218,530,639
Good standing with restructured terms 142,719,009
Interest overdue more than three months, not
in foreclosure 45,688,713
Foreclosure in process 0
Other Long-term Assets - Statement Value -
Other Invested Assets 49,577,417
Collateral Loans 0
Bonds and Stocks of Parents, Subsidiaries
and Affiliates - Book Value:
Bonds 0
Preferred Stocks 0
Common Stocks 45,430,425
Bonds and Short-term Investments by Class and Maturity:
Bonds by Maturity - Statement Value
Due within one year less $ 488,133,230
Over 1 year through 5 years 5,114,804,527
Over 5 years through 10 years 36,934,377
Over 10 years through 20 years 10,800,698
Over 20 years 1,120
----------------
Total by Maturity $ 5,650,673,952
----------------
----------------
Bonds by Class - Statement Value
Class 1 $ 4,727,508,096
Class 2 886,071,871
Class 3 14,901,602
Class 4 20,455,434
Class 5 1,736,949
Class 6 0
----------------
Total by Class $ 5,650,673,952
----------------
----------------
Total Bonds Publicly Traded 5,528,260,376
Total Bonds Privately Placed 122,413,577
Preferred Stocks - Statement Value 27,246
Common Stocks - Market Value 162,123,446
Short-term Investments - Book Value 30,784,747
Options, Caps and Floors Owned - Statement Value 0
Options, Caps and Floors Written and In-force
- Statement Value 0
Collar, Swap and Forward Agreements Open
- Statement Value 0
Futures Contracts Open - Current Price 0
Cash on Deposit 11,074,456
Life Insurance In Force: (000's omitted)
Industrial 0
Ordinary 46,238,294
Credit Life 0
Group Life 633,650
Amount of Accidental Death Insurance In
Force Under (000's omitted)
Ordinary Policies 433,235
Life Insurance Policies with Disability Provisions
In Force (000's omitted):
Industrial 0
Ordinary 2,561,821
Credit Life 0
Group Life 0
Supplementary Contracts In Force:
Ordinary - Not Involving Life Contingencies
Amount on Deposit 80,008,026
Income Payable 5,486,000
Ordinary - Involving Life Contingencies
Income Payable 4,154,646
Group - Not Involving Life Contingencies
Amount of Deposit 18,759,200
Income Payable 5,945,477
Group - Involving Life Contingencies
Income Payable 976,000
Annuities:
Ordinary
Immediate - Amount of Income Payable 345,270
Deferred - Fully Paid Account Balance 7,113,024
Deferred - Not Fully Paid - Account Balance 113,217,267
Group
Amount of Income Payable 34,442,616
Fully Paid Account Balance 4,986,983
Not Fully Paid - Account Balance 3,051,536,600
Accident and Health Insurance - Premiums In Force:
Ordinary 12,839,032
Group 0
Credit 0
Deposit Funds and Dividend Accumulations:
Deposit Funds - Account Balance 33,041,450
Dividend Accumulation - Account Balance 1,939,688
Claim Payments 1996:
Group Accident and Health year - ended December 31, 1996
1996 216,736
1995 0
1994 and prior 620,141
Other Accident & Health
1996 833,277
1995 2,698,845
1994 and prior 8,763,710
Other coverages that use developmental methods to
calculate claims reserves
1996 0
1995 0
1994 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 Annual
Report dated December 31, 1996, as filed with the Commission
under the Investment Company Act of 1940 on February 26, 1997
(Accession No. 0000912057-97-006829):
MBL Variable Contract Account-2:
Report of Independent Accountants.
Statement of Assets and Liabilities, December 31, 1996.
Statement of Operations (year ended December 31, 1996).
Statement of Changes in Net Assets (two years ended December
31, 1996).
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, 1996.
Statement of Operations (year ended December 31, 1996).
Statement of Changes in Capital and Surplus
(year ended December 31, 1996).
Statement of Cash Flows (year ended December 31, 1996).
(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, incorporated by reference to
earlier filings on April 5, 1997, SEC File No. 333-01161,
Exhibit (17) to Registration Statement of Form N-3.
(C) Powers of Attorney filed herewith.
________________________________________
* Page numbers inserted in manually signed copy only.
<PAGE>
Item 25. Directors and Officers of MBL Life Assurance
Corporation.
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
Janine J. Akey Director
20 W. State Street
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
Thomas P. Gallager 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
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 -
Chief Financial Officer
Kathleen M. Koerber Executive Vice President -
Chief Operating Officer
Kenneth K. Schaefer Second Vice President
and Treasurer
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.
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. 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, and
named MBL Variable Contract Account-2 (the "Account").
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 Banking and Insurance as Trustee
through the end of the Rehabilitation Period, scheduled
to terminate not later than December 31, 1999.
Pursuant to a settlement agreement, an Order was issued
on January 9, 1997 ending all Plan-related litigation,
and awarding 30% of the value of the Trust at its
termination to eligible MBL Life policyholders, and 70%
to the Class Four Creditors (as defined in the Plan) of
Mutual Benefit Life.
As of April 1, 1997,
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; MAP Advisors, Inc. is a registered
investment adviser; 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 is inactive. 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; 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.
Item 27. Number of Contract Owners.
As of March 31, 1997 - 112
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.
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
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.
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.
(f) MBL Life Assurance Corporation ("MBL Life") hereby
represents that the fees and charges deducted under the
annuity contracts decribed in the Account's prospectus, in
the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks
assumed by MBL Life.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment
Act of 1940, the Registrant has caused this Post-Effective
Amendment to the Registration Statement to be signed on its
behalf, in the City of Newark, and State of New Jersey, on the
29th day of April, 1997
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 Post-
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 29, 1997
Alan J. Bowers Director, President
KENNETH A. WATSON Chief Financial Officer April 29, 1997
Kenneth A. Watson
ALBERT W. LEIER Chief Accounting Officer April 29, 1997
Albert W. Leier
Directors:
Elizabeth E. Randall **
Sheldon Brooks *
Donald Bryan *
Harry D. Garber *
John Kerr *
Richard W. Klipstein *
Felix Schirripa *
Janine J. Akey **
Thomas Gallgher
By: FRANK D. CASCIANO Date: April 29, 1997
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.
<PAGE>
Exhibit (9)
[MBL Life Assurance Corporation Letterhead]
April 23, 1997
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 originally
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 and control of, and title to, the
business and assets of Mutual Benefit Life, including
those of the Variable Contract Account.
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 are the
property of MBL Life and are 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 MBL Life. MBL Life maintains 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 Banking and 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
have been duly authorized and each of the Contracts
(including any Units when duly credited thereunder)
constitutes a validly issued and binding obligation of MBL
Life in accordance with the terms of such Contracts.
Individuals having an interest under a Contract are
subject only to the deductions, charges and fees set forth
in the Prospectus included in the Registration Statement,
including any Amendments thereto.
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
<PAGE>
Exhibit (10)
[Coopers & Lybrand L.L.P. Letterhead]
CONSENT OF INDEPENDENT ACCOUNTANTS
________________
We consent to the incorporation by reference in this Post-
Effective Amendment No. 1 to the Registration Statement of MBL
Variable Contract Account-2 on Form N-4 (File No. 333-01161) of
our report dated February 10, 1997, on our audit of the financial
statements of MBL Variable Contract Account-2 and the inclusion
of our report dated February 11, 1997, except for Note 14, which
is dated February 24, 1997, on our audit of the financial
statements of MBL Life Assurance Corporation.
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 28, 1997
<PAGE>
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 12/31/96 Value Charge Value
8.604 $144.176 $1,240 $0 $1,240
TOTAL RETURN FORMULA:
P (1 = T) to the power of n = ERV
$1,000.00 (1 + 24.04%) to the power of 1 = 1,240
Where: P = a hypothetical initial payment (of $1,000) invested
on 12/31/96.
T = average annual total return assuming reinvestment
of dividends and capital gains distributions.
n = A number of years
ERV = ending redeemable value
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
15.228 $ 75.010 1,142 0 1,142
15.228 85.055 1,295 0 1,295
15.228 86.596 1,319 0 1,319
15.228 116.231 1,770 0 1,770
15.228 144.176 2,196 0 2,196
TOTAL RETURN FORMULA:
P (1 = T) to the power of n = ERV
$1,000.00 (1 + 17.03%) to the power of 5 = 2,196
Where: P = a hypothetical initial payment (of $1,000) invested
on 12/31/91.
T = average annual total return assuming reinvestment
of dividends and capital gains distributions.
n = A number of years
ERV = ending redeemable value
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
27.760 34.625 961 10 951
27.466 44.032 1,210 10 1,200
27.244 56.416 1,537 0 1,537
27.244 53.234 1,450 0 1,450
27.244 65.668 1,789 0 1,789
27.244 75.010 2,044 0 2,044
27.244 85.055 2,317 0 2,317
27.244 86.596 2,359 0 2,359
27.244 116.231 3,167 0 3,167
27.244 144.176 3,928 0 3,928
TOTAL RETURN FORMULA:
P (1 = T) to the power of n = ERV
$1,000.00 (1 + 14.66%) to the power of 10 = 3,928
Where: P = a hypothetical initial payment (of $1,000) invested
on 12/31/86.
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.
<PAGE>
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
ELIZABETH E. RANDALL Director April 24, 1997
Elizabeth E. Randall
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
JANINE J. AKEY Director April 24, 1997
Janine J. Akey
