<PAGE>
SECURITIES AND EXCHANGE COMMISSION 33-84802
Washington, DC 20549
--------------------------
FORM S-1
POST-EFFECTIVE AMENDMENT NO. 2
Under
The Securities Act of 1933
--------------------------
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
-------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-1590850
------------------ ---------------------
(State or other jurisdiction of (I.R.S. Employer Number)
incorporation or organization)
63
-------------------------------
(Primary Standard Industrial Classification Code Number)
1295 State Street
Springfield, Massachusetts 01111
----------------------------------
(413)744-8441
(Address, including zip code, and
telephone number, including area
code, of registrant's principal executive offices)
Lawrence V. Burkett, Jr.
Executive Vice President General Counsel
Massachusetts Mutual Life Insurance Company
Springfield, MA 01111
(413) 744-6053
(Name, address and telephone number of agent for service of process)
---------------------------------------
Approximate date of commencement
of proposed sale to the public: May 1, 1996
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 of the Securities Act of 1933
check the following box. [X]
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<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
Cross Reference Sheet Pursuant to
Regulation S-K, Item 501(b)
Form S-1 Item Number and Caption Heading in Prospectus
------------------------------------------------------
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus Outside Front Cover Page
2. Inside Front and Outside
Back Pages of Prospectus Inside Front Cover
3. Summary Information,
Risk Factors and
Ratio of Earnings to
Fixed Charges Product Description,
Financial Statements
4. Use of Proceeds Investments by MassMutual
5. Determination of
Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution Distribution of Contracts
9. Description of Securities
to be Registered Product Description
10. Interests and Named
Experts and Counsel Not Applicable
11. Information with Respect
to the Registrant MassMutual-- Description of the Business;
Management's Discussion and Analysis;
Executive Officers and Directors;
Executive Compensation; Legal
Proceedings; Financial Statements
12. Disclosure of Commission
Position on Indemnification
or Securities Act
Liabilities Not Applicable
<PAGE>
PROSPECTUS
MAY 1, 1996
Massachusetts Mutual Life Insurance Company
Fixed Account with Market Value Adjustment
Offered through OppenheimerFunds LifeTrust Variable Annuity
This prospectus (the "Prospectus") describes Massachusetts Mutual Life Insurance
Company's ("MassMutual" or the "Company") Fixed Account (the "Fixed Account")
with Market Value Adjustment. The Fixed Account is available for use with
OppenheimerFunds LifeTrust Variable Annuity Contract (the "Contract") issued by
MassMutual. The Fixed Account constitutes an account to which a Contract Owner
may allocate purchase payments or Accumulated Value in accordance with the
Contract's transfer rules. (For a discussion of the transfer restrictions
applicable to the Contract, please consult page 10 of the Contract prospectus).
Since the Fixed Account is available only through the Contract, an investor
should carefully review the discussion of the Contract contained in that
prospectus. The focus of this Prospectus is limited to the Fixed Account's
operations and features.
MassMutual guarantees specified rates of interest for amounts allocated to the
Fixed Account for specified periods of time. The interest rate stipulated for a
particular period (the Guaranteed Rate) is an annual effective yield.
Additionally, although Guaranteed Rates will fluctuate, they will never go below
3%. MassMutual's assets, including amounts allocated to the Fixed Account are
available to meet the guarantees associated with the Fixed Account. These assets
are chargeable with liabilities arising out of other business of the Company.
Purchase payments and transfers of Accumulated Value may be made among the Fixed
Account and to the Divisions of Massachusetts Mutual Variable Annuity Separate
Account 3 (the "Separate Account").
Please note that amounts taken from the Fixed Account by partial or full
redemption, received from payment of a death benefit following the death of the
Contract Owner who is not the Annuitant, and transfers made prior to an
Expiration Date are subject to a Market Value Adjustment. Therefore, a Contract
Owner may experience a negative investment return.
The annuity benefits available under the Contract may be either fixed or
variable amounts or a combination of both. The Accumulated Value prior to
maturity and the amount of any variable annuity payments thereafter will vary
with the investment performance of the Divisions selected and the amounts
allocated to the Fixed Account.
The date of this Prospectus is May 1, 1996
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
THIS PROSPECTUS MUST BE ACCOMPANIED BY THE PROSPECTUSES OF MASSMUTUAL'S
OPPENHEIMERFUNDS LIFETRUST VARIABLE ANNUITY, MML SERIES INVESTMENT FUND, AND
OPPENHEIMER VARIABLE ACCOUNT FUNDS.
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
(413) 744-8441
<PAGE>
Table of Contents
Section
- -------
Glossary.................................................................... 3
I. Product Description................................................... 4
The Nature of the Contract and the MVA................................ 4
Availability of the Fixed Account..................................... 4
The Fixed Account and the Market Value Adjustment Feature............. 4
Market Value Adjustment............................................... 4
Accumulation Period of a Contract..................................... 5
Establishment of the Guaranteed Rate.................................. 5
The MVA's Applicability on Redemptions................................ 5
II. Investments by MassMutual............................................. 6
III. Distribution of Contracts............................................. 6
IV. Federal Taxation Discussion........................................... 6
V. Accounting Practices.................................................. 6
VI. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................. 7
Summary............................................................... 7
General............................................................... 7
Total Company - 1995 Results of Operations............................ 9
Total Company - 1994 Results of Operations............................ 12
Analysis of Results of Operations by Line of Business................. 15
Supplemental Statement of Financial Position.......................... 23
Liquidity and Capital Resources....................................... 24
Inflation............................................................. 25
Investments........................................................... 25
VII. MassMutual Description of the Business................................ 32
Individual Line of Business........................................... 33
Pension Management.................................................... 34
Life and Health Benefits Management................................... 34
Investment Management................................................. 34
Regulation............................................................ 34
VIII. Executive Officers and Directors...................................... 36
IX. Executive Compensation................................................ 42
X. Experts and Legal Proceedings......................................... 45
Experts............................................................... 45
XI. Selected Financial Data............................................... 45
Audited Financial Statements.......................................... 48
2
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Glossary
As used in this Prospectus, the following terms mean:
Accumulated Amount: For each amount credited to a Segment of the Fixed Account
the Accumulated Amount on any date is the amount credited to the Segment
accumulated to that date at the Guaranteed Rate for that amount.
Accumulated Value: The value of a Contract on or prior to the Maturity Date
equal to the Variable Value plus the Fixed Value.
Accumulation Period: The period prior to the Maturity Date, during the lifetime
of the Annuitant and Owner.
Accumulation Unit: A unit of measurement used in determining the value of
amounts credited to a Contract in a Division of the Separate Account on or prior
to the Maturity Date.
Annuitant: The person on whose life the Contract is issued.
Beneficiary: The person(s) or entity(ies) designated by the Contract Owner to
receive a death benefit under the Contract, if any, upon the death of the
Contract Owner or the Annuitant.
Cash Redemption Value: The value of a Contract which a Contract Owner will
receive if the Contract is redeemed, equal to Accumulated Value less
Administrative Charges, Sales Charges, premium taxes, and a Market Value
Adjustment, if any such charges are applicable.
Contract: The OppenheimerFunds LifeTrust Variable Annuity contract issued by
MassMutual.
Contract Owner(s): The owner (and in some instances the owners) of a Contract.
Contract Owners may include the Annuitant, an employer, a trust, or any entity
specified in an employee benefit plan.
Division(s): A sub-account of Massachusetts Mutual Variable Annuity Separate
Account 3, the assets of which consist of shares of a specified Fund of either
the MML Series Investment Fund or the Oppenheimer Variable Account Funds.
Expiration Date: The Date on which the Guarantee Period for an Accumulated
Amount ends.
Fixed Account: An account which pays interest at a Guaranteed Rate. If such
amounts are withdrawn prior to the end of the Guarantee Period, a Market Value
Adjustment will be made. Assets attributable to the Fixed Account are not
included in assets which are allocated to the Divisions of the Separate Account.
Fixed Value: On any date, the Fixed Value of the Contract is the sum of the
Accumulated Amounts credited to all Segments of the Fixed Account.
Funds: The separate series of shares of Oppenheimer Variable Account Funds and
MML Series Investment Fund, both of which are open-end, diversified management
investment companies, registered with the Securities and Exchange Commission, in
which the Divisions of the Separate Account invest.
Guarantee Period: The period for which interest accrues at the Guaranteed Rate
on an amount credited to a Segment. Guarantee Periods range in whole-year
periods from one to ten years.
Guaranteed Rate: The effective annual interest rate MassMutual uses to accrue
interest on an amount credited to a Segment as of a certain date. Guarantee
Rates are level for the entire Guarantee Period and are fixed at the time an
amount is credited to the Segment.
Market Value Adjustment ("MVA"): An adjustment made to the amount that the
Contract Owner will receive if money is taken from an Accumulated Amount prior
to the Expiration Date of its Guarantee Period.
Maturity Date: The date designated by the Contract Owner as of which Variable
Monthly Income payments (or, if elected, Fixed Income payments or a payment in
one sum) will begin. This date may be no later than the Annuitant's 90th
birthday (unless an earlier date is required by law.)
Purchase Payment: An amount paid to MassMutual by, or on behalf of, the
Annuitant.
Segment: All Guarantee Periods of a given length constitute a Segment.
Segments for all Guarantee Periods may not be available at one time.
Service Center: The office at which the administration of the Contract occurs.
Valuation Date: A valuation date is any date on which the net asset value of the
shares of the Funds is determined. Generally, this will be any date on which
the New York Stock Exchange (or its successor) is open for trading.
Valuation Period: The period of time from the end of one Valuation Date to the
end of the next Valuation Date.
Valuation Time: The time of the close of the New York Stock Exchange (or its
successor) (currently 4:00 p.m. New York time) on a Valuation Date. All actions
to be performed on a Valuation Date will be performed as of the Valuation Time.
Variable Monthly Income: A benefit providing for monthly payments that vary
with, and reflect the investment performance of, one or more Divisions of the
Separate Account.
Variable Value: On any date, the Variable Value of a Contract is the sum of the
values of the Accumulation Units credited to each Division of the Separate
Account. The value in each Division is equal to the Accumulation Unit Value
multiplied by the number of units in that Division You own.
You or Your refers to the Contract Owner.
3
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I. Product Description
The Nature of the Contract and the MVA
The investment option described in this Prospectus is a Fixed Account with
Market Value Adjustment ("MVA") available in conjunction with the Flexible
Premium Variable Annuity Contract (the "Contract") offered by Massachusetts
Mutual Life Insurance Company ("MassMutual"). The Contract is described in
greater detail in its prospectus. Investors should review the Contract
prospectus in conjunction with this prospectus before deciding whether to invest
in the Contract or allocate sums to the Fixed Account.
Allocations may be made to the Fixed Account either at the time a purchase
payment is made or by transferring monies held in an investment division of
MassMutual Variable Annuity Separate Account 3 (the "Separate Account") to the
Fixed Account. Allocations to a Guarantee Period (or Segment) must be for at
least $1,000. The Accumulated Value of the Fixed Account is not guaranteed
against the claims of the Company's creditors.
When an amount is allocated to the Fixed Account, a corresponding Guarantee
Period is selected. If the allocated amount remains in the Fixed Account until
the applicable Expiration Date, its value will be equal to the amount originally
allocated multiplied, on a annually compounded basis, by its Guaranteed Rate.
A Market Value Adjustment will be made if sums are withdrawn from the Fixed
Account prior to their Expiration Date.
As is also discussed in the Contract prospectus, the Contract provides for the
accumulation of values prior to maturity and for the distribution of annuity
benefits thereafter. Additionally, a death benefit is also available under the
Contract. The earnings on deposits allocated to the Fixed Account will have an
impact on the Contract's Accumulated Value, its Maturity Value, its Cash
Redemption Value and the death benefit.
Availability of the Fixed Account
The Fixed Account is not available in all states.
The Fixed Account and the Market Value Adjustment Feature
The Fixed Account is available during the Accumulation Period of the Contract.
(See, Accumulation Pay-in Period at page 9 of the Contract prospectus.) The
Fixed Account offers different Guarantee Periods, which provide the option of
earning interest at various Guaranteed Rates on all or a portion of Your
Accumulated Value. Please note that amounts credited to a Guarantee Period at
different times may have different Guaranteed Rates, Current Rates, and
Expiration Dates since MassMutual changes the Current and Guaranteed Rates
periodically.
You may allocate purchase payments or transfer all or a portion of Your
Accumulated Value to the Fixed Account. Amounts credited to the Fixed Account
will earn interest at the Guaranteed Rate applicable for the Guarantee Period
selected on the date the amounts are credited. The applicable Guaranteed Rate
does not change during the Guarantee Period. The Guaranteed Rate may never be
less than 3%.
Guarantee Periods may be available in periods of one to ten years. To the
extent permitted by law, we reserve the right at any time to offer Guarantee
Periods that differ from those available when Your Contract was issued. We also
reserve the right, at any time, to stop accepting purchase payments, transfers,
or renewals for a particular Guarantee Period. Since the specific Guarantee
Periods available may change periodically, please contact the Service Center to
determine the Guarantee Periods currently being offered.
Market Value Adjustment
Any withdrawal of Your Accumulated Amount will be subject to a Market Value
Adjustment ("MVA") unless the effective date of the withdrawal is within 30 days
prior to the end of a Guarantee Period. For this purpose, redemptions,
transfers, death benefits based on a Contract Owner's death (where the Contract
Owner and the Annuitant are different), and maturity amounts are treated as
withdrawals. The MVA is an adjustment that will be applied to the amount being
withdrawn which is subject to the MVA, after the deduction of any applicable
Administrative Charge and before the deduction of any applicable Sales Charge.
The MVA can be positive or negative. The amount being withdrawn after
application of the MVA can therefore be greater than or less than the amount
withdrawn before the application of the MVA.
An MVA will not be applied upon the payment of a Death Benefit following the
death of the Annuitant.
The MVA will reflect the relationship between the Current Rate (as defined
below) for the Accumulated Amount being withdrawn and the Guaranteed Rate. It
also reflects the time remaining in the applicable Guarantee Period. Generally,
if the Guaranteed Rate is lower than the applicable Current Rate, then the
application of the MVA will result in a lower payment upon withdrawal.
Similarly, if the Guaranteed Rate is higher than the applicable Current Rate,
the application of the MVA will result in a higher payment upon withdrawal.
The Market Value Adjustment which is applied to the amount being withdrawn is
determined by using the following formula:
[ ( 1 + i ) ] ]
MVA = Amount x [ ( ----- ) ](n/365 power) - 1 ]
[ ( 1 + j ) ] ]
where,
Amount is the amount being withdrawn from a given accumulated amount less any
applicable administrative charges.
i, is the Guaranteed Rate being credited to the Accumulated Amount subject to
the MVA; and
j, the "Current Rate," is the Guaranteed Rate, available as of the effective
date of the application of the MVA, for current allocations to the Segment with
a Guarantee Period equal to the time remaining to the Expiration Date for the
amount being withdrawn rounded to the next higher number of complete years; and
n, is the number of days remaining in the Guarantee Period of the amount subject
to the MVA.
4
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In the determination of "j," if the Company currently does not offer the
applicable Segment, we will determine "j" above by interpolation or
extrapolation of the Guaranteed Rate for the Guarantee Periods then available.
EXAMPLES
The following examples illustrate how the MVA operates on amounts held in a
particular Segment:
Example 1
$1,000 is applied on May 10, 1994, into a Segment with a 5 year Guarantee
Period. The Guaranteed Rate for amounts applied to the Segment on May 10, 1994,
is 6%. If the $1,000 is left in that Segment until May 10, 1999, it will
accumulate at a 6% effective annual rate of interest for the full 5 years to
$1,338.23.
If, however, the full amount is taken from the Segment as of May 10, 1998:
(1) The Guaranteed Rate applied on May 10, 1998 to amounts credited to a
1-year Segment is 4%; and
(2) The accumulated amount prior to the application of
MVA as of May 10, 1998 equals:
$1,000 x 1.06/4/ = $1,262.48
(3) The number of days remaining = 365 (n = 365), and
(4) The MVA equals $24.28, and is calculated according to the following
formula:
[ ( 1.06 ) ]
$24.28 = $1,262.48 x [ ( ---- )(365/365 power) - 1 ]
[ ( 1.04 ) ]
The market value for the purposes of surrender on May 10, 1998, of the amount
credited to the 5-year segment on May 10, 1994, is therefore equal to $1,286.76
($1,262.48 + $24.28).
Example 2
$1,000 is applied to a 7-year Segment on May 10, 1992, with a Guaranteed Rate of
5% and will accumulate to $1,407.10 if left in the Segment until May 10, 1999.
If, however, the full amount is taken from the Segment as of May 10, 1995:
(1) The Guaranteed Rate applied on May 10, 1995 to amounts credited to a
4-year Segment is 10%; and
(2) The accumulated amount prior to the application of
MVA as of May 10, 1995 equals:
$1,000 x 1.05/3/ = $1,157.63
(3) The period of time from May 10, 1995 to the end of the Guarantee
Period is 4 years or 1460 days
(n = 1460);
(4) The MVA equals $-196.56 and is calculated according to the following
formula:
[ ( 1.05 ) ]
$ = 196.56 = $1,157.63 x [ ( ---- )(1460/365 power) - 1 ]
[ ( 1.10 ) ]
The market value for purposes of surrender on May 10, 1995, of the amount
credited to the 7-year Segment on May 10, 1992, is therefore equal to $961.07
($1,157.63 - $196.56 = $961.07).
THE EXAMPLES SET FORTH ABOVE ARE HYPOTHETICAL AND ARE NOT INDICATIVE OF FUTURE
OR PAST PERFORMANCE.
Accumulation Period of a Contract
Variable annuities are designed to permit a Contract Owner to accumulate values
over a period of time. Generally, a Contract Owner will use such accumulated
values for long term needs such as retirement planning. Accordingly, in many
instances, amounts allocated to the Fixed Account will be subject to several
Guarantee Periods over the life of the Contract.
The end of a Guarantee Period for a specific amount credited to a Segment is
called its Expiration Date. At least 45 days, but not more than 75 days, before
the Expiration Date for an Accumulation Amount, we will inform You of the
Guaranteed Rates being offered and the Guarantee Periods available as of the
date of such notice. The Guaranteed Rates on the date of a renewal may be more
or less than the rates quoted in such notice.
The Guarantee Period normally "renews", and in the absence of instructions on
the Expiration Date, we begin crediting interest for a new Guarantee Period
lasting the same amount of time as the one just ended. The Accumulated Amount
then earns interest at the new Guaranteed Rate applicable at the time of
renewal. You may choose different Guarantee Periods from among those we are
then offering, or You may transfer all or a portion of the Accumulated Amount to
the Separate Account.
If Your Accumulated Amount's Segment is no longer available for new amounts
credited, or You choose a different Segment that is no longer available, we will
try to reach You so that You may make another choice.
If a choice is not made at this point, the Segment with the next shorter
Guarantee Period available will be used and if not available, the Segment with
the next longer Period will be used.
Establishment of the Guaranteed Rate
MassMutual will make the final determination concerning future Guarantee Rates
for future deposits, transfers or renewals. Although we cannot predict future
Guarantee Rates, such Guarantee Rates will never be less than three percent (3%)
per annum.
The MVA's Applicability on Redemptions
As noted above, an MVA will apply if a partial or full redemption of the
Contract is made prior to an Expiration Date. Where a redemption occurs, the
Accumulated Value of the Contract will be reduced by the amount surrendered from
the Fixed Account prior to any MVA.
The Cash Redemption Value may also be subject to Contingent Deferred Sales
Charges ("Sales Charges") under the Contract pursuant to the schedule which
follows:
5
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<TABLE>
<CAPTION>
Year Since Payment Sales Charge Assessed
<S> <C>
1st 7%
2nd 6%
3rd 5%
4th 4%
5th 3%
6th 2%
7th 1%
</TABLE>
We make this adjustment for Sales Charges since we make no deduction for Sales
Charges when a purchase payment is received. The amount of Sales Charges is
computed based on the date the particular payment is received into the Contract.
Purchase Payments received and redeemed after year 7 are not subject to Sales
Charges. Amounts in the Fixed Account, however, continue to be subject to a
Market Value Adjustment. For more information concerning the application of
Sales Charges, please consult the Contract prospectus.
Please note that certain charges are imposed against the Contract, including
mortality and expense risk and administrative charges. For a more detailed
explanation of applicable charges, please see the "Charges and Deductions"
sections of the Contract Prospectus.
II. Investments by MassMutual
Assets of MassMutual must be invested in accordance with the requirements
established by applicable state laws regarding the nature and quality of
investments that may be made by life insurance companies and the percentage of
their assets that may be committed to any particular type of investment. In
general, these laws permit investments, within specified limits and subject to
certain qualifications, in federal, state, and municipal obligations, corporate
bonds, preferred and common stocks, real estate mortgages, real estate and
certain other investments.
Proceeds from the Fixed Account will be deposited in a non-unitized segment of
MassMutual's general account organized as a Separate Account for accounting
purposes. Proceeds will be used to fund MassMutual's obligations under the
Contract and amounts not required to fund such obligations may accrue to
MassMutual as profit. Obligations under the Contract are also met through the
operation of the Divisions to which a Contract Owner has allocated Accumulated
Value. All assets of MassMutual would be available to meet the guarantees under
the Contracts.
In establishing Guaranteed Rates, MassMutual intends to take into account the
yields available on the instruments in which it intends to invest the proceeds
from the Contracts. MassMutual's investment strategy with respect to the
proceeds attributable to allocations made to the Fixed Account will generally be
to invest in investment-grade debt instruments having durations tending to match
the applicable Guarantee Periods.
III. Distribution of Contracts
Effective May 1, 1996, MML Distributors, LLC ("MML Distributors"), 1414 Main
Street, Springfield, MA 01144-1013, a wholly-owned subsidiary of MassMutual,
acts as the principal underwriter of the Contracts. Prior to May 1, 1996, MML
Investors Service, Inc. ("MMLISI"), also located at 1414 Main Street,
Springfield, MA 01144-1013, served as the principal underwriter of the
Contracts. Effective May 1, 1996, MMLISI serves as co-underwriter of the
Contracts. Both MML Distributors and MMLISI are registered as a broker-dealers
under the Securities Exchange Act of 1934 and are members of the National
Association of Securities Dealers, Inc. (the "NASD"). The maximum commission a
broker-dealer will receive for selling a Contract is 6.25%.
MML Distributors may enter into selling agreements with other broker-dealers
which are registered with the Securities and Exchange Commission and are members
of the NASD ("selling brokers"). The Contracts are sold through agents who are
licensed by state insurance officials or sell the Contracts. These agents are
also registered representatives of selling brokers or MMLISI. Contracts with the
Fixed Account are offered in a limited number of states where MassMutual has
received authority to write modified guarantee annuity business and the Fixed
Account and the Contracts have been approved.
Additionally, Contracts are offered through Oppenheimer's distribution network,
Oppenheimer Funds Distributor, Inc. ("OFDI"). OFDI, Massachusetts Mutual
Variable Annuity Separate Account 3, MassMutual and MML Distributors have
entered into an agreement pursuant to which OFDI has agreed to promote sales of
the product through wholesale distribution arrangements with broker-dealers.
Registered representatives of the particular broker-dealer, who are also
properly licensed to sell MassMutual products may make such sales.
IV. Federal Taxation Discussion
Please consult the Contract prospectus for a discussion of the tax status of the
Contract.
V. Accounting Practices
Statutory accounting practices differ from those applicable to publicly-held
stock life insurance companies ("stock life GAAP") in that statutory accounting
practices are primarily designed to reflect the ability of the insurer to
satisfy its obligations to policyholders, contract owners and beneficiaries,
whereas stock life GAAP is primarily oriented toward the allocation of revenues,
expenses and costs to financial reporting periods. For example, under statutory
accounting practices, premiums and deposits are taken into income when due and
commissions and other costs incurred in connection with acquiring new business
are charged to operations in the year incurred; under stock life GAAP, revenues,
excluding deposits, are recorded on an accrual basis as earned over the life of
a policy, and expenses and costs are accrued on a basis to match them against
appropriate revenues.
The Financial Accounting Standards Board, which has no role in establishing
regulatory accounting practices, issued Interpretation 40, Applicability of
Generally Accepted Accounting Principles to Mutual Life Insurance and Other
Enterprises, and Statement of Financial Accounting Standards No. 120, Accounting
and Reporting by Mutual Life Insurance Enterprises and by Insurance Enterprises
for Certain Long-Duration Participating Contracts. The American Institute of
Certified Public Accountants, which also has no role in
6
<PAGE>
establishing regulatory accounting practices, issued Statement of Position 95-1,
Accounting for Certain Insurance Activities of Mutual Life Insurance
Enterprises. These pronouncements will require mutual life insurance companies
to modify their financial statements in order to continue to be in accordance
with generally accepted accounting principles, effective for financial
statements issued in 1996 and prior periods presented. The manner in which
policy reserves, new business acquisition costs, asset valuations and the
related tax effects are recorded will change. Management has not determined the
impact of such changes on the Company's statements, but believes implementation
of these pronouncements will cause policyholders' contingency reserves to
increase.
VI. Management's Discussion and Analysis of Financial Condition and Results of
Operations
Summary
MassMutual (or the "Company" or "Massachusetts Mutual" prior to the merger) is a
Massachusetts domiciled mutual life insurance company established in 1851. The
Company provides a broad product portfolio of individual life and disability
income protection insurance, individual annuities, pension products, investment
products and investment advisory services. The Company's principal lines of
business are: (i) Individual Line, which provides life insurance and investment
services to individuals; (ii) Pension Management, which provides group pension
investment products and administrative services, primarily to sponsors of tax
qualified retirement plans; (iii) Life and Health Benefits Management, which
provides group life and health insurance products and related services to
corporations and other institutions; and (iv) Investment Management, which
provides advisory services for the general investment account and separate
investment accounts, as well as various subsidiaries and affiliates, through its
own staff and those of its subsidiaries. The operating results of investment
management and other corporate operations are allocated to the other three
lines.
General
The information presented below should be read in conjunction with the audited
supplemental financial statements and other information included elsewhere in
this prospectus.
The Company's objective has been to balance financial strength, policyholders'
value and growth with emphasis on financial strength, which has resulted in the
Company's strong capital position and favorable financial ratings. The Company
has pursued this objective by emphasizing profitability through refined product
pricing, sophisticated asset/liability management, rigorous expense control,
prudent underwriting standards, the adoption of efforts to improve persistency
and retention levels and continued commitment to the high credit quality of its
general account investment portfolio. These efforts have produced strong
financial performance, with net gain from operations of $276 million and $238
million for the years ended December 31, 1995 and 1994, respectively. At
December 31, 1995, the Company had more than $50 billion in total assets, over
2,959,000 individual policyholders and more than $197 billion of direct
individual life insurance in force. In addition, the Company's total adjusted
capital as defined by the National Association of Insurance Commissioners (the
"NAIC") has grown to $3.6 billion at December 31, 1995, compared to $3.5 billion
and $3.3 billion at December 31, 1994 and 1993, as set forth below.
<TABLE>
<CAPTION>
December 31,
----------------------
1995 1994 1993
------ ------ ------
(in millions)
<S> <C> <C> <C>
Policyholders' Contingency
Reserves (Surplus) $2,601 $2,569 $2,470
Asset Valuation Reserves 585 479 440
One-half of the Apportioned
Dividend Liability 411 414 407
------ ------ ------
Total Adjusted Capital (1) $3,597 $3,462 $3,317
====== ====== ======
</TABLE>
(1) The Company adopted the NAIC's definition of total adjusted capital, as
required by 1996, of surplus plus Asset Valuation Reserve ("AVR") and one-
half of the apportioned dividend liability. AVR includes the AVR of wholly-
owned life insurance subsidiaries.
The Company's total adjusted capital was increased by the issuance of surplus
notes of $100 million at 7 1/2% and $250 million at 7 5/8% in 1994 and 1993,
respectively. The proceeds of the notes, less a $35 million reserve in 1994 and
a $25 million reserve in 1993 for contingencies associated with the issuance of
the notes, are recorded as a component of the Company's policyholders'
contingency reserves. The surplus note contingency reserves are included in
investment reserves. See "Policyholders' Contingency Reserves".
With regard to profitability, Management believes that net gain from operations,
rather than net income, is the most relevant measure of operating results for
the Company. Net gain from operations represents the excess of income derived
from the Company's lines of business over the costs of operating those lines
(after deducting taxes and policyholder dividends). Net income is net gain from
operations adjusted by any realized capital gains or losses (net of taxes).
Management's investment philosophy and practice do not emphasize capital gains
as a recurring source of income or capital and the Company does not manage its
investment portfolio to realize gains for non-economic purposes. The Company has
increased its total adjusted capital from the beginning of 1991 through the end
of 1995 by $1,239 million.
On March 1, 1996, the operations of the former Connecticut Mutual Life Insurance
Company ("Connecticut Mutual") was merged into the Company. Management believes
that the merger will be beneficial to Company, the insured and the policyholders
because, among other things: (i) the merger is expected to result in expense
savings over time through the consolidation of existing Company resources; (ii)
the distribution system of the Company is expected to be larger and, as a
consequence of the consolidation of existing field forces, more productive;
(iii) the expanded product portfolio is expected to reduce product development
expenses while increasing distribution opportunities; (iv) the larger investment
portfolio is expected to provide additional financial capacity and flexibility
with a relatively diverse asset base; and (v) the integration of Massachusetts
Mutual and Connecticut Mutual is expected to be accomplished in a timely and
efficient manner, enhancing the long-term vitality of the Company. There can be
no assurance, of course, that the benefits anticipated to arise out of the
merger will in fact be achieved.
This merger was accounted for under the pooling of interests method of
accounting, as prescribed by statutory accounting practices. The financial
information is not necessarily indicative of the results that would have been
recorded had
7
<PAGE>
the merger actually occurred on January 1, 1993, nor is it indicative of future
results. After the merger, future sales of new products will be predominantly
those developed by Massachusetts Mutual. Additionally, as part of the merger
plan, employee positions have been or will be eliminated over a three-year
period, predominantly through voluntary terminations. In 1995, charges for
employee separation and transaction expenses directly attributable to the merger
were $44 million for Massachusetts Mutual (the Company prior to the merger) and
$45 million, net of tax, for Connecticut Mutual. The expenses incurred by
Massachusetts Mutual were recorded in the statement of income and the expenses
incurred by Connecticut Mutual were recorded as a component of changes in
policyholders' contingency reserves, as permitted by each company's regulatory
authority. The Company estimates an additional $58 million of merger
restructuring costs will be incurred after the merger date.
It is believed that the Company will achieve operating cost savings through
consolidation of certain operations and the elimination of redundant costs. In
particular, the Company expects expense savings in 1996 and 1997 will more than
offset merger related costs, and the level of annual savings will continue to
grow in 1998 and beyond at the rate of inflation. The extent to which cost
savings will be achieved will be influenced by many factors, including economic
conditions, inflation and unanticipated changes in business activities.
Accordingly, there can be no assurance the benefits anticipated to arise out of
the merger will, in fact, be achieved.
These discussions will address activity for December 31, 1995 and prior and do
not extend through to the date of the merger. The supplemental financial
statements presented herein will become the historical financial data of the
Company after financial statements covering the date of the merger have been
issued, but do not include the adjustments that have been permitted by insurance
regulatory authorities to be made as of the date of the merger. On that date,
Policyholder reserves attributable to the disability income line of business
will be strengthened by approximately $67 million, real estate valuation
reserves will increase by approximately $50 million and the prepaid pension
asset will increase by approximately $39 million.
The costs of the merger include, among other things, severance costs,
transaction-related costs, advertising costs, changes in field force
compensation and costs arising out of the conversion of systems. Management
expects that the Company will achieve expense savings over time through
consolidation of certain operations and the elimination of redundant costs.
However, it is possible that, as is the case with any combination of large and
complex business organizations, unanticipated transitional issues may arise
following the merger which may result in additional short-term expenses for the
Company. These transitional issues may serve to delay the point at which
expenses savings surpass merger related expenses, and may have a short term
adverse impact on dividends that might otherwise be paid to policyholders.
Additionally, the merger may result in short-term business disruptions as a
result of personnel changes and consolidation in both the home office and the
field offices. Such disruptions could also serve to delay the timing of certain
cost savings and the related increases in policyholder benefits.
On January 5, 1996, Massachusetts Mutual signed a definitive agreement for the
sale of MassMutual Holding Company Two, Inc., a wholly-owned subsidiary, and its
subsidiaries, including MML Pension Insurance Company ("MML Pension"), which
comprises Massachusetts Mutual's group life and health business, to WellPoint
Health Networks, Inc. for $380 million, approximately two times the subsidiary's
book value. The closing of the sale is contingent upon approval by regulatory
authorities. Since the transaction is not expected to close until late in the
first quarter of 1996, management has not determined the final gain on the sale.
With regard to group life, accident and health ("GLA&H") business, Massachusetts
Mutual's 1995 gain from operations is only affected by the amount of dividends
it received from MML Pension. MML Pension's 1995 net gain from operations was
$44 million, of which $41 million was recorded by Massachusetts Mutual as
dividend income, a component of net investment income in its Supplemental
Statement of Income. The remaining $3 million was recognized by Massachusetts
Mutual as an unrealized capital gain in the Supplemental Statement of Changes in
Policyholders' Contingency Reserves.
To position the subsidiary for the possibility of a sale, Massachusetts Mutual
executed two reinsurance agreements with MML Pension at the end of 1994.
Through the first of these contracts, Massachusetts Mutual assumed all of the
single premium immediate annuity ("SPIA") business written by MML Pension
through either an assumption reinsurance provision or a coinsurance provision.
The second contract ceded Massachusetts Mutual's GLA&H business to MML Pension.
Additionally, a reinsurance agreement previously in place, ceding all of the
Individual Line's SPIA business to MML Pension, was terminated. These
agreements, collectively referred to as "Reinsurance with MML Pension", became
concurrently effective on December 31, 1994 and were accounted for as bulk
reinsurance transactions. Accordingly, (i) the GLA&H operating results were
ceded to and reflected in MML Pension in 1995 while in 1994 this business was
recorded only by Massachusetts Mutual; and (ii) the SPIA operating results were
assumed by and reflected in Massachusetts Mutual in 1995 while in 1994 this
business was only recorded by MML Pension.
During 1995, the Company's financial strength continued to be recognized by the
rating agencies. Since the announcement of the merger: Moody's Investors
Service, Inc. has reaffirmed the Company's Aa1 (Excellent) rating; Standard &
Poor's Corp. has reaffirmed the Company's AAA (Superior) claims-paying rating;
Duff & Phelps Credit Rating Co. has reaffirmed the AAA (Superior) rating and
A.M. Best Company, Inc. has continued to rate the Company as A++ (Superior).
Management believes that the Company will be financially stronger, more
efficient and more competitive than either company would have been as a separate
company. Based in part on the preliminary actions of the rating agencies,
management believes that the ratings of the Company will be substantially
equivalent to those of Massachusetts Mutual. However, each rating agency
independently assigns ratings based on its own separate review and takes into
account a variety of factors (which are subject to change) in making its
decision. Accordingly, there can be no assurance of the ratings that will be
afforded the Company in the future.
8
<PAGE>
TOTAL COMPANY - 1995 RESULTS
OF OPERATIONS
Prior to the merger, Massachusetts Mutual and Connecticut Mutual were operated
and managed independently. Therefore, with regard to discussion of the results
of operations, management believes that a separate discussion of Massachusetts
Mutual's and Connecticut Mutual's operations is the most relevant. The
following table sets forth the separate components of the Company's 1995
supplemental results of operations:
<TABLE>
<CAPTION>
Year Ended December 31, 1995
-------------------------------------------
(In Millions)
Massachusetts Connecticut Total
Mutual Mutual Company
-------------- ------------ -------------
<S> <C> <C> <C>
Income:
Premium income $4,266 $1,462 $5,728
Net investment and
other income 2,178 720 2,898
------ ------ ------
6,444 2,182 8,626
------ ------ ------
Benefits and expenses:
Policy benefits and
payments 3,869 1,283 5,152
Addition to
policyholders' reserves
and funds 1,032 173 1,205
Commissions and
operating expenses 543 292 835
State taxes, licenses
and fees 62 27 89
Merger restructuring costs 44 0 44
------ ------ ------
5,550 1,775 7,325
------ ------ ------
Net gain before federal
income taxes and
dividends 894 407 1,301
Federal income taxes 158 48 206
------ ------ ------
Net gain from operations
before dividends 736 359 1,095
Dividends to policyholders 521 298 819
------ ------ ------
Net gain from operations 215 61 276
Net realized capital loss (54) (32) (86)
------ ------ ------
Net income $ 161 $ 29 $ 190
====== ====== ======
</TABLE>
Massachusetts Mutual
Year Ended December 31, 1995
Compared to Year Ended December 31, 1994
The following table sets forth the components of Massachusetts Mutual's results
of operations:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1995 1994
---- ----
(In Millions)
<S> <C> <C>
Income:
Premium income $4,266 $4,590
Net investment and other income 2,178 2,111
------ ------
6,444 6,701
------ ------
Benefits and expenses:
Policy benefits and payments 3,869 4,169
Addition to policyholders'
reserves and funds 1,032 928
Commissions and operating expenses 543 637
State taxes, licenses and fees 62 75
Merger restructuring costs 44 0
------ ------
5,550 5,809
------ ------
Net gain before federal income
taxes and dividends 894 892
Federal income taxes 158 145
------ ------
Net gain from operations before
dividends 736 747
Dividends to policyholders 521 523
------ ------
Net gain from operations 215 224
Net realized capital loss (54) (135)
------ ------
Net income $ 161 $ 89
====== ======
</TABLE>
Net gain from operations in 1995 decreased by $9 million, or 4.0%, to $215
million from $224 million for 1994. This decrease was primarily the result of
$44 million of merger restructuring costs, partially offset by favorable
mortality and persistency, and continued expense control.
Premium income decreased by $324 million, or 7.1%, to $4,266 million for 1995
from $4,590 million for 1994. Much of this decrease is attributable to ceding
all GLA&H business to MML Pension, partially offset by an increase in deposit
fund premiums in the Pension Management line, which had higher than expected
sales of defined contribution contracts. All premiums from the Life and Health
Benefits Management line, amounting to $753 million, were ceded to MML Pension
in 1995 and were $733 million in 1994. Premium income from the Individual Line
for 1995 was relatively consistent with 1994, reflecting strong sales of
individual life insurance and annuities offset by a decrease in sales to large
corporate clients.
9
<PAGE>
Net investment and other income increased by $67 million, or 3.2%, to $2,178
million in 1995 compared to $2,111 million in 1994, resulting from an increase
in invested assets, a $41 million dividend received from MML Pension and a
slight increase in investment yields on the general account's investment
portfolio. The ratio of net investment income to mean invested assets increased
in 1995 to 7.9% from 7.7% in 1994. The increased investment expenses are the
result of the increase in real estate investments where gross investment income
is not recorded net of related expenses. The components of net investment
income are set forth below.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 1994
---- ----
(In Millions)
<S> <C> <C>
Gross investment income:
Bonds $1,510 $1,435
Common stocks 3 3
Mortgage loans 264 304
Real estate 219 207
Policy loans 223 195
Cash and short-term investments 103 94
Other investments 63 14
------ ------
Total gross investment income 2,385 2,252
Less investment expenses (201) (189)
Less surplus note interest expense (27) (23)
------ ------
Net investment income $2,157 $2,040
====== ======
</TABLE>
The increase in gross bond income is due to a 1.0% increase in the funds
invested in the bond portfolio and a 64 basis point improvement in bond yield.
Gross mortgage loan income decreased in 1995 reflecting the overall decrease in
commercial mortgage loans as these investments are repaid, prepaid or foreclosed
and transferred to real estate. The increase in gross investment income on real
estate properties is related to an improvement in the operating yields which
increased to 11.1% in 1995 from 9.8% in 1994. The increase in other investments
is due to a $41 million dividend received from MML Pension. Investment expenses
increased $12 million in 1995 to $201 million due primarily to depreciation and
other expenses related to the real estate portfolio.
Policy benefits and payments of $3,869 million in 1995 decreased $300 million,
or 7.2%, from $4,169 million in 1994. This decrease was due principally to
ceding all GLA&H business to MML Pension, which was $587 million during 1994,
partially offset by an increase in the lapses of participating pension business.
Additionally, individual annuity benefits and surrenders increased to $180
million in 1995 from $108 million in 1994. Individual life insurance continued
to experience better than expected mortality, which was 91% of expected claims
in 1995 and 88% in 1994. Surrender benefits for individual life insurance also
continues to be favorable as a result of the improved persistency of new and in-
force business. Management believes its continued focus on policyholder value
and service has contributed to this improvement in individual life persistency.
Addition to policyholders' reserves and funds increased by $104 million, or
11.2%, to $1,032 million in 1995 from $928 million in 1994. The increase was
primarily due to an increase in Pension Management's defined contribution
deposits. This increase was also partially due to an increase in individual
life insurance business resulting from higher sales, improved persistency and
lower than expected mortality experience.
Commissions and operating expenses of $543 million in 1995 decreased by $94
million, or 14.8%, compared to $637 million in 1994. This decrease was caused
by ceding $124 million in expenses and commissions related to the GLA&H business
to MML Pension, which was effective during 1995. Aside from the reinsurance
with MML Pension, commissions and expenses increased only 4.7% which reflects
management's continuing effort to control expenses. Commissions remained
relatively flat in spite of an increase in Individual Line and Pension
Management premiums. Pension Management sales, which do not generate
significant commissions, increased premiums by $293 million. Consequently,
commissions do not correlate to the change in total premium income. Rather,
increases in commissions are driven by the growth and changing product sales mix
for commission paying business (e.g., individual life and annuity products).
Federal income taxes increased to $158 million in 1995, a $13 million, or 9.0%,
increase from $145 million in 1994. This increase was primarily due to a higher
tax on Pension Management's gain from operations and a higher 1995 mutual
company equity add-on tax, partially offset by the allocation of taxes, on
GLA&H's gain from operations ceded, to MML Pension.
Dividends to policyholders decreased $2 million, or 0.4%, to $521 million in
1995 from $523 million in 1994, due to a generally lower dividend schedule
effective for payments on policy anniversaries in 1996, partially offset by
growth in the participating in-force business. The reduction in the dividend
schedule is due largely to the effect of a lower interest rate environment. The
new dividend schedule, approved by the Board of Directors in the fourth quarter
of 1995, is reflected in the Individual Line's 1995 gain from operations.
Net realized capital losses were $54 million for 1995 and $135 million for 1994,
an $81 million, or 60.0%, decrease, after the transfer to Interest Maintenance
Reserve ("IMR"). The IMR captures after-tax realized capital gains and losses
due to changes in interest rates for all types of fixed income investments. The
reduction in the net realized capital losses was due to the decrease in losses
from commercial mortgage loans. Net realized capital losses were comprised of
the following:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 1994
------ -------
(In Millions)
<S> <C> <C>
Bonds $ 169 $(110)
Common stocks 26 7
Mortgage loans (69) (129)
Real estate (27) (30)
Hedging instruments 58 (137)
Other investments 1 (5)
Federal and state taxes (82) 117
----- -----
Net realized capital gain (loss)
before transfer to IMR 76 (287)
Transfer to IMR (130) 152
----- -----
Net realized capital loss $ (54) $(135)
===== =====
</TABLE>
The high level of capital gains in 1995 was caused by bond sales and hedging
activity in a declining interest rate environment. In 1994, bond sales and
hedging activity produced a significant portion of gross realized losses in that
year's increasing interest rate environment. In 1995, net
10
<PAGE>
realized capital gains from the sales of bonds consisted of gross capital losses
of $61 million offset by $230 million in gross capital gains. All interest
related gains and losses were transferred to the IMR. The $130 million gain
transferred to the IMR for 1995 was comprised of $220 million of net realized
capital gains offset by $90 million in taxes. In 1994, the amounts transferred
to the IMR included $216 million of net realized capital losses offset by $64
million in tax benefits.
The losses from commercial mortgage loans decreased by $60 million in 1995 as
compared to 1994 due to a reduction in foreclosure activity during 1995 as the
commercial real estate market place continues to improve. In establishing the
1995 contribution to the Voluntary Investment Reserves ("VIR"), delays in
processing foreclosures were properly recognized. See "Investment Reserves".
As a result of the foregoing factors, net income increased by $72 million, or
80.9%, to $161 million for 1995 from $89 million for 1994.
Connecticut Mutual Year Ended December 31, 1995
Compared to Year Ended December 31, 1994
The following table sets forth the components of Connecticut Mutual's results of
operations:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 1994
---- ----
(In Millions)
<S> <C> <C>
Income:
Premium income $1,462 $1,587
Net investment and other income 720 692
------ ------
2,182 2,279
------ ------
Benefits and expenses:
Policy benefits and payments 1,283 1,281
Addition to policyholders' reserves
and funds 173 335
Commissions and operating expenses 292 321
State taxes, licenses and fees 27 31
------ ------
1,775 1,968
------ ------
Net gain before federal income
taxes and dividends 407 311
Federal income taxes 48 (5)
------ ------
Net gain from operations before
dividends 359 316
Dividends to policyholders 298 302
------ ------
Net gain from operations 61 14
Net realized capital loss (32) (29)
------ ------
Net income (loss) $ 29 $ (15)
====== ======
</TABLE>
Net gain from operations in 1995 increased by $47 million to $61 million from
$14 million for 1994. This increase was primarily the result of improved
morbidity experience and higher net investment income, which was partially
offset by an increase in federal income taxes.
Premium income decreased to $1,462 million for 1995 from $1,587 million for
1994. This $125 million, or 7.9%, decrease is attributable to a decrease in
first year and single premium and annuity premium. Individual life insurance
renewal premiums increased slightly as a result of continued favorable
persistency experience as evidenced by the premium based lapse ratio of 5.9% in
1995 compared to 5.7% in 1994.
Net investment and other income increased by $28 million, or 4.0%, to $720
million in 1995 compared to $692 million in 1994, resulting from an increase in
the general account investment portfolio and lower levels of underperforming
real estate assets, partially offset by the decrease in other income, from $45
million in 1994 to $40 million in 1995, due largely to the recapture of
intercompany reinsurance agreements in 1994. The net investment yield increased
20 basis points from 7.30% in 1994 to 7.50% in 1995 for the same reasons. The
components of net investment income are set forth below.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 1994
---- ----
(In Millions)
<S> <C> <C>
Gross investment income:
Bonds $ 463 $ 429
Common stocks 3 1
Mortgage loans 89 120
Real estate 68 74
Policy loans 120 106
Cash and short-term investments 4 2
Other investments 14 10
----- -----
Total gross investment income 761 742
Less investment expenses (68) (78)
Less interest on debt (13) (17)
----- -----
Net investment income $ 680 $ 647
===== =====
</TABLE>
The increase in gross bond income is due to the increase in the bond investment
portfolio, partially offset by the reduction in the average yields of these
investments. The lower yield is due to higher yielding securities maturing and
being replaced by securities with the lower yields of the current market place.
Gross mortgage loan income decreased in 1995 reflecting the overall decrease in
the investment in commercial mortgage loans as these investments are repaid,
prepaid or foreclosed and transferred to real estate.
Policy benefits and payments increased $2 million, or 0.2%, to $1,283 million in
1995 from $1,281 million in 1994. This was due to higher surrender benefits,
higher matured endowments and higher annuity benefits partially offset by lower
fund withdrawals (primarily related to the runoff of the Guaranteed Investments
Contract Business).
Addition to policyholders' reserves and funds decreased $162 million, or 48.4%,
from $335 million in 1994 to $173 million in 1995. The decrease is attributable
to reduced Pension Management premium income, a lower transfer to separate
accounts, a lower increase in life and accident and health insurance reserves
due to higher surrenders of corporate owned life insurance products, lower life
and annuity premium income, and the recapture of an intercompany reinsurance
agreement.
Commissions and operating expenses of $292 million in 1995 decreased by $29
million or 9.0% compared to $321 million in 1994. Commissions decreased $8
million to $98 million in 1995, due to slightly lower sales and a change in
sales mix. Expenses decreased $20 million from $216 million in 1994 to $196
million in 1995 primarily due to lower staffing levels.
11
<PAGE>
Federal income taxes increased $53 million from a credit of $5 million in 1994
to a $48 million expense in 1995. The increase is primarily due to higher
taxable income, and a higher 1995 mutual company add on tax.
Dividends to policyholders decreased $4 million, or 1.3%, from $302 million in
1994 to $298 million in 1995, as an overall lower dividend interest rate
effective for 1996 was partially offset by growth in participating business.
Net realized capital losses were $32 million for 1995 and $29 million for 1994,
a $3 million, or 10.3%, increase, after the transfer to the IMR. Net realized
capital losses were comprised of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 1994
---- ----
(In Millions)
<S> <C> <C>
Bonds $ 20 $ 15
Common stocks 6 1
Mortgage loans (19) (43)
Real estate (22) (22)
Hedging instruments (6) (3)
Other investments 2 10
Federal and state taxes (3) 10
----- -----
Net realized capital loss before
transfer to IMR (22) (32)
----- -----
Transfer to IMR (10) 3
----- -----
Net realized capital loss $ (32) $ (29)
===== =====
</TABLE>
Realized capital losses before transfer to the IMR was lower in 1995 than in
1994, primarily due to a 1994 bulk sale of commercial mortgage loans which did
not reoccur in 1995. Surplus was substantially unaffected by the real estate
sales as resulting realized losses were partially offset by the reversal of
valuation reserves recorded as unrealized losses in prior years. All interest
related gains and losses were transferred to the IMR during 1995 and 1994.
As a result of the foregoing factors, net income increased by $44 million to $29
million for 1995 from a $15 million loss in 1994.
TOTAL COMPANY - 1994 RESULTS
OF OPERATIONS
Prior to the merger, Massachusetts Mutual and Connecticut Mutual were operated
and managed independently. Therefore, with regard to discussion of the results
of operations, management believes that a separate discussion of Massachusetts
Mutual's and Connecticut Mutual's operations is the most relevant. The
following table sets forth the separate components of the Company's 1994
supplemental results of operations:
<TABLE>
<CAPTION>
Year Ended December 31, 1994
--------------------------------------
(In Millions)
Massachusetts Connecticut Total
Mutual Mutual Company
-------------- ------------ --------
<S> <C> <C> <C>
Income:
Premium income $4,590 $1,587 $6,177
Net investment and
other income 2,111 692 2,803
------ ------ ------
6,701 2,279 8,980
------ ------ ------
Benefits and expenses:
Policy benefits and
payments 4,169 1,281 5,450
Addition to
policyholders' reserves
and funds 928 335 1,263
Commissions and
operating expenses 637 321 958
State taxes, licenses
and fees 75 31 106
------ ------ ------
5,809 1,968 7,777
------ ------ ------
Net gain before federal
income taxes and
dividends 892 311 1,203
Federal income taxes 145 (5) 140
------ ------ ------
Net gain from operations
before dividends 747 316 1,063
Dividends to policyholders 523 302 825
------ ------ ------
Net gain from operations 224 14 238
Net realized capital loss (135) (29) (164)
------ ------ ------
Net income (loss) $ 89 $ (15) $ 74
====== ====== ======
</TABLE>
Massachusetts Mutual
Year Ended December 31, 1994
Compared to Year Ended December 31, 1993
The following table sets forth the components of Massachusetts Mutual's results
of operations:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1994 1993
------ ------
(In Millions)
<S> <C> <C>
Income:
Premium income $4,590 $4,868
Net investment and other income 2,111 2,169
------ ------
6,701 7,037
------ ------
Benefits and expenses:
Policy benefits and payments 4,169 4,018
Addition to policyholders' reserves
and funds 928 1,422
Commissions and operating expenses 637 613
State taxes, licenses and fees 75 82
------ ------
5,809 6,135
------ ------
Net gain before federal income
taxes and dividends 892 902
Federal income taxes 145 165
------ ------
Net gain from operations before
dividends 747 737
Dividends to policyholders 523 527
------ ------
Net gain from operations 224 210
Net realized capital loss (135) (76)
------ ------
Net income $ 89 $ 134
====== ======
</TABLE>
12
<PAGE>
Net gain from operations in 1994 increased by $14 million, or 6.7%, to $224
million from $210 million for 1993. This increase was primarily the result of
favorable mortality and persistency, as well as continued expense control.
Premium income decreased by $278 million, or 5.7%, to $4,590 million for 1994
from $4,868 million for 1993. Much of this decrease is attributable to a
decline in deposit fund premiums in the Pension Management line which had lower
sales of participating guaranteed investment contracts. Premium income from the
Individual Line for 1994 was consistent with 1993, reflecting strong sales of
individual life insurance offset by a decrease in individual annuity sales.
While premiums from the Life and Health Benefits Management line remained
relatively flat in 1994 from 1993, premium equivalency, which places all funding
arrangements on an equal basis, was $2,302 million for 1994 as compared to
$2,063 million for 1993, an increase of 11.6%.
Net investment and other income decreased by $58 million, or 2.7%, to $2,111
million in 1994 compared to $2,169 million in 1993, resulting from a decline in
investment yields on the general account investment portfolio which was not
fully offset by an increase in invested assets. The ratio of net investment
income to mean invested assets declined in 1994 to 7.7% from 8.2% in 1993. The
drop in the portfolio yield is a result of maturing higher yielding securities
being replaced by investments with the lower yields of the current market place
and increased expenses attracted by the increase in real estate investments.
The components of net investment income are set forth below.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1994 1993
---- ----
(In Millions)
<S> <C> <C>
Gross investment income:
Bonds $1,435 $1,405
Common stocks 3 12
Mortgage loans 304 365
Real estate 207 181
Policy loans 195 188
Cash and short-term investments 94 93
Other investments 14 6
------ ------
Total gross investment income 2,252 2,250
Less investment expenses (189) (165)
Less surplus notes and other
interest expenses (23) (6)
------ ------
Net investment income $2,040 $2,079
====== ======
</TABLE>
The increase in gross bond income is due to the increase in the funds invested
in bond securities offset by the reduction in the average yields of these
investments as higher yielding securities mature and are replaced by securities
with the lower yields of the current market place. Gross mortgage loan income
decreased in 1994 reflecting the overall decrease in the investment in
commercial mortgage loans as these investments are repaid, prepaid or foreclosed
and transferred to real estate. The increase in gross investment income on real
estate properties is related to the growth in this asset from the foreclosure of
mortgage loans and an improvement in the operating yields which increased to
9.8% in 1994 from 9.3% in 1993. Investment expenses increased $24 million in
1994 to $189 million due primarily to additional taxes, depreciation and other
expenses related to the real estate portfolio.
Policy benefits and payments of $4,169 million in 1994 increased $151 million,
or 3.8% from $4,018 million in 1993. This increase was due principally to an
increase in the lapses of participating pension business. Additionally, in 1994
individual annuity surrenders increased $18 million and morbidity on the
disability income policies increased by $9 million, or 6.0%. Individual life
insurance continued to experience better than expected mortality, which was 88%
of expected claims in 1994 and 85% in 1993. Surrender benefits for this product
also continues to be favorable as a result of the improved persistency of new
and in-force business. Management believes its continued focus on policyholder
value and service has contributed to this improvement in individual life
persistency.
Addition to policyholders' reserves and funds decreased by $494 million, or
34.7%, to $928 million in 1994 from $1,422 million in 1993. The decrease was
primarily due to Pension Management's reserves decreasing from the release of
reserves from levels of participating pension business offset only in part by a
reserve increase from the lower than expected sales of participating guaranteed
investment contracts recorded in the Company's separate investment accounts.
This decrease was partially offset by an increase in individual life insurance
business resulting from higher sales, improved persistency and lower than
expected mortality experience.
Operating expenses for 1994 increased by $15 million, or 4.2%, compared to 1993.
Approximately $4 million of this increase is attributable to the increase in
staffing in the Life and Health Benefits Management field office service centers
to process the growth in business due primarily from the writing of business
acquired as a result of the Hartford transaction. (See "Life and Health
Benefits Management Operations".) The balance of the increase is modest growth
in expenses which reflects management's continuing effort to control expenses.
Commissions increased by $9 million for 1994 compared to 1993, primarily due to
increases in individual life insurance business and corresponding increases in
first year commission. Sales on participating guaranteed investment contracts,
which do not generate commissions, were $94 million during 1994 and $452 million
during 1993. Consequently, commissions do not correlate to the change in total
premium income. Rather, the increases track the growth and changing product
sales mix for commission paying business (e.g., individual life and annuities
and group life and health products).
Federal income taxes decreased by $20 million to $145 million in 1994, a 12.1%
decrease from $165 million in 1993. This decrease was primarily due to a lower
mutual company equity add-on tax. The tax on gain from operations was flat from
1993 to 1994.
Dividends to policyholders decreased $4 million, or 0.8%, to $523 million in
1994 from $527 million in 1993, due to a generally lower dividend schedule
effective for payments on policy anniversaries in 1995 offset by growth in the
in-force business. The new dividend schedule, approved by the Board of
Directors in the fourth quarter of 1994, is reflected in the Individual Line's
1994 gain from operations.
Net realized capital losses were $135 million for 1994 and $76 million for 1993,
a $59 million, or 77.6%, increase, after the transfer to IMR. Net realized
capital losses were comprised of the following:
13
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------
1994 1993
---- ----
(In Millions)
<S> <C> <C>
Bonds $(110) $ 183
Common stocks 7 66
Mortgage loans (129) (93)
Real estate (30) (50)
Hedging instruments (137) 112
Other investments (5) (1)
Federal and state taxes 117 (129)
----- -----
Net realized capital gain (loss)
before transfer to IMR (287) 88
Transfer to IMR 152 (164)
----- -----
Net realized capital loss $(135) $ (76)
===== =====
</TABLE>
The high level of capital losses in 1994 was caused by bond sales and hedging
activity in an increasing interest rate environment. In 1993, hedging activity
produced a significant portion of gross realized gains in a declining interest
rate environment. In 1994, net realized capital losses from the sales of bonds
consisted of gross capital losses of $189 million offset by $79 million in gross
capital gains. All interest related gains and losses were transferred to the IMR
during 1994. In 1993, 25% of interest related gains and losses from the sale of
U.S. government securities were excluded from the IMR and recognized
immediately. The $152 million transferred to the IMR for 1994 was comprised of
$216 million of net realized capital losses offset by $64 million in taxes
recoverable. In 1993, the amounts transferred to the IMR included $279 million
of net realized capital gains less $115 million in taxes.
The losses from commercial mortgage loans increased by $36 million in 1994 as
compared to 1993 due to the expected increase in completed foreclosure activity
during 1994. In establishing the 1993 contribution to the VIR, delays in
processing foreclosures were mitigated and properly recognized. In 1994
additional contributions were made to the VIR for future anticipated losses.
See "Investment Reserves".
As a result of the foregoing factors, net income declined by $45 million, or
33.6%, to $89 million for 1994 from $134 million for 1993.
Connecticut Mutual Year Ended December 31, 1994
Compared to Year Ended December 31, 1993
The following table sets forth the components of Connecticut Mutual's results of
operations:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1994 1993
---- ----
(In Millions)
<S> <C> <C>
Income:
Premium income $1,587 $1,540
Net investment and other income 692 717
------ ------
2,279 2,257
------ ------
Benefits and expenses:
Policy benefits and payments 1,281 1,635
Addition to policyholders' reserves
and funds 335 (131)
Commissions and operating expenses 321 340
State taxes, licenses and fees 31 33
------ ------
1,968 1,877
------ ------
Net gain before federal income
taxes and dividends 311 380
Federal income taxes (5) 47
------ ------
Net gain from operations before
dividends 316 333
Dividends to policyholders 302 291
------ ------
Net gain from operations 14 42
Net realized capital loss (29) (20)
------ ------
Net income (loss) $ (15) $ 22
====== ======
</TABLE>
Overall 1994 financial results compare unfavorably to 1993 as the Company
experienced poor morbidity experience and adverse reserve development in its
disability income product, as well as losses from its discontinued group
insurance operation. Net gain from operations decreased by $28 million, or
66.7%, from $42 million in 1993 to $14 million in 1994.
Premium income increased by $47 million, or 3.1% from $1,540 million in 1993.
This rise reflects a $27 million increase in insurance premiums and a $22
million increase in annuity deposits. Connecticut Mutual continued its excellent
record in individual life insurance persistency as the premium based lapse ratio
for individual life was 5.5% in 1993 and 5.7% in 1994.
Net investment and other income decreased 3.5% from $717 million in 1993 to $692
million in 1994. This increase was principally due to reinvestment of maturing
higher yielding securities being replaced by investments with the lower yields
of the current market place. The net investment yield decreased 58 basis points
from 7.83% in 1993 to 7.25% in 1994 for the same reason. The components of net
investment income are set forth below:
14
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1994 1993
---- ----
(In Millions)
<S> <C> <C>
Gross investment income:
Bonds $ 429 $ 425
Common stocks 1 1
Mortgage loans 120 155
Real estate 74 77
Policy loans 106 111
Cash and short-term investments 2 2
Other investments 10 21
----- -----
Total gross investment income 742 792
Less investment expenses (78) (80)
Less interest on debt (17) (17)
----- -----
Net investment income $ 647 $ 695
===== =====
</TABLE>
The $23 million increase in other income from $22 million in 1993 to $45 million
in 1994 was due largely to the recapture of intercompany reinsurance agreements.
In addition, financial services fee income increased by $2 million from $8
million in 1993 to $10 million in 1994, due to growth in assets under
management.
Policy benefits and payments decreased $354 million from $1,635 million in 1993
to $1,281 million in 1994, due to lower fund withdrawals in guaranteed
investment contracts partially offset by higher life and disability income
benefits.
Addition to policyholders' reserves and funds increased by $466 million to $335
million in 1994, primarily due to the runoff on the Guaranteed Investment
Contract business in 1993 and the recapture of an intercompany reinsurance
agreement in 1994.
Commissions and operating expenses of $321 million in 1994 decreased 5.6% from
$340 million in 1993. Commissions decreased $12 million from $119 million in
1993 to $107 million in 1994, due to the change in the product sales mix for
commission paying business. Expenses decreased by $7 million in 1994.
Federal income taxes decreased $20 million, or 12.1%, to $145 million in 1994
from $165 million in 1993. The decrease is primarily due to lower taxable income
and a lower mutual company equity add-on tax in 1995.
Dividends to policyholders increased by $11 million in 1994 to $302 million due
to a $4 million supplemental dividend in March 1994, and growth in the
participating block of business, partially offset by overall lower dividend
interest rates effective for 1995.
Net realized capital losses were $29 million for 1994 and $20 million for 1993,
after the transfer to IMR. The IMR captures after-tax realized capital gains
and losses due to changes in interest rates for all types of fixed income
investments. Net realized capital losses were comprised of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1994 1993
---- ----
(In Millions)
<S> <C> <C>
Bonds $ 15 $ 37
Common stocks 1 1
Mortgage loans (43) (24)
Real estate (22) 4
Hedging instruments (3) (4)
Other investments 10 4
Federal and state taxes 10 (13)
----- -----
Net realized capital gain (loss)
before transfer to IMR (32) 5
Transfer to IMR 3 (25)
----- -----
Net realized capital loss $ (29) $ (20)
===== =====
</TABLE>
Realized capital losses from sales of previously reserved-for real estate and a
$249 million bulk mortgage loan sale accounted for a substantial portion of the
$29 million net realized capital loss. Surplus was substantially unaffected by
the real estate sales as resulting realized losses were partially offset by the
reversal of valuation reserves recorded as unrealized losses in prior years.
All interest related gains and losses were transferred to the IMR during 1994.
In 1993, 25% of interest related gains and losses from the sale of U.S.
government securities were excluded from the IMR and recognized immediately.
As a result of the foregoing factors, net income declined by $37 million to a
$15 million loss for 1994 from a $22 million gain for 1993.
ANALYSIS OF RESULTS OF
OPERATIONS BY LINE OF BUSINESS
The following discussions of line of business results addresses the operations
of Massachusetts Mutual and Connecticut Mutual separately.
Massachusetts Mutual's Individual Life Operations
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------
1995 1994 1993
---- ---- ----
(In Millions, except average size
and number of policies)
<S> <C> <C> <C>
Income:
Premium income $ 2,666 $ 2,550 $ 2,579
Net investment and
other income 1,288 1,132 1,093
---------- ---------- ----------
3,954 3,682 3,672
---------- ---------- ----------
Benefits and expenses:
Policy benefits and
payments 1,175 1,026 981
Addition to
policyholders'
reserves and funds 1,405 1,398 1,450
Operating expenses
and commissions 489 465 448
State taxes, licenses
and fees 61 51 56
Merger
restructuring costs 28 0 0
---------- ---------- ----------
3,158 2,940 2,935
---------- ---------- ----------
</TABLE>
15
<PAGE>
<TABLE>
<S> <C> <C> <C>
Net gain before
federal income
taxes and dividends 796 742 737
Federal income
taxes 135 117 131
---------- ---------- ----------
Net gain from
operations before
dividends 661 625 606
Dividends to
policyholders 515 518 518
---------- ---------- ----------
Net gain from
operations $ 146 $ 107 $ 88
========== ========== ==========
Premium Income:
Whole Life $ 1,637 $ 1,550 $ 1,482
Term Life 121 114 109
Universal, Variable
& Corporate
Owned Life 184 280 269
Annuities 565 451 567
Disability Income 144 139 134
Other 15 16 18
---------- ---------- ----------
Total $ 2,666 $ 2,550 $ 2,579
========== ========== ==========
Life Insurance Sales -
Face Amount:
Whole Life $ 6,895 $ 7,021 $ 6,956
Term Life 7,101 6,912 7,008
Universal, Variable
& Corporate
Owned Life 790 1,181 985
---------- ---------- ----------
Total $ 14,786 $ 15,114 $ 14,949
========== ========== ==========
Life Insurance
In-Force Face
Amount:
Whole Life $ 75,656 $ 72,858 $ 68,796
Term Life 41,968 40,030 36,995
Universal, Variable
& Corporate
Owned Life 7,388 6,747 5,678
---------- ---------- ----------
Total $ 125,012 $ 119,635 $ 111,469
========== ========== ==========
Number of Policies
In-Force:
Whole Life 1,165,178 1,200,826 1,225,173
Term Life 172,416 174,691 157,797
Universal, Variable
& Corporate
Owned Life 34,303 33,524 31,530
Annuities 241,391 204,455 185,252
Disability Income 159,076 156,187 153,501
---------- ---------- ----------
Total 1,772,364 1,769,683 1,753,253
========== ========== ==========
Average Size of
New Policies Sold:
Whole Life $ 159,001 $ 136,914 $ 123,452
Term Life $ 324,600 $ 320,492 $ 296,413
Universal, Variable
& Corporate
Owned Life $ 282,971 $ 296,868 $ 262,335
</TABLE>
Massachusetts Mutual Individual Line,
Year Ended December 31, 1995
Compared to Year Ended December 31, 1994
Net gain from operations was $146 million for 1995, a 36.4% increase compared to
the $107 million gain in 1994, principally due to an increase in net investment
and other income, continued favorable mortality experience and low unit
expenses.
At the end of 1994, the Individual Line operations executed a reinsurance
agreement with MML Pension assuming all of the single premium immediate annuity
("SPIA") business written by MML Pension through either an assumption provision
or a coinsurance provision of the contract. Additionally, a reinsurance
agreement ceding all of the Individual Line's SPIA business to MML Pension was
terminated. The execution of the new agreement and the termination of the old
agreement both became effective at the end of business on December 31, 1994 and
were accounted for as a bulk reinsurance transaction. Following statutory
accounting rules for bulk reinsurance, these transfers did not impact 1994
operations, however, in 1995 all SPIA business was assumed by the Individual
Line. This activity was undertaken to remove the individual insurance business
from the subsidiary. See "Life and Health Benefits Management Operations".
Premium income increased to $2,666 million for 1995 from $2,550 million in 1994.
This 4.6% increase was the net result of a 25.3% increase in annuity premium and
a 5.6% increase in whole life premium, partially offset by a $96 million
decrease in corporate owned life premiums. Annuity premiums increased due to
the development of a new variable annuity product late in 1994, increasing sales
of other existing variable annuities and a $28 million increase in SPIA
premiums. In 1994, SPIA premiums were ceded to MML Pension. The increase in
whole life premiums corresponds with a 3.8% increase in the amount of insurance
in-force. Corporate owned life sales represent a small number of relatively
large policies, therefore it's not unusual for premiums to vary from year to
year.
Net investment and other income increased 13.8% to $1,288 million for 1995
compared to 1994. This increase resulted primarily from a 9.1% growth in the
Individual Line's invested assets and an increase in portfolio yield. During
1995, $11 million of net gains previously transferred to the IMR were amortized
into Individual Line's income. This compares to $37 million of net gains
amortized in 1994, reflecting the relatively short average life of Massachusetts
Mutual's hedging program.
Policy benefits and payments for 1995 increased to $1,175 million from $1,026
million in 1994, an increase of 14.5%, resulting from the growth of in-force
business. In 1995, individual annuity benefits and surrenders increased $72
million attributable to the increase in variable annuity business and the
assumption and retention of the SPIA business. Individual life insurance
continued to experience better than expected mortality, which was 91% of
expected claims in 1995 and 88% in 1994. Surrender experience for whole life
policies continues to be favorable for both new and in-force business.
Management believes its continued focus on policyholder value and service has
contributed to this improvement in persistency. Annuity surrenders increased as
a result of increased activity in the block of business.
Additions to policyholders' reserves and funds increased to $1,405 million in
1995 from $1,398 million in 1994, or 0.5%. This increase was due primarily to
the increase in annuity deposits and improved persistency of individual life
insurance products, partially offset by a decrease in sales of corporate owned
life policies.
16
<PAGE>
Operating expenses and commissions for 1995 increased 5.2%, resulting from
expenses associated with the production of new business. Operating expense
growth was nominal, reflecting management's continuing efforts to control
expenses. Commissions for 1995 remained relatively flat compared to 1994 in
spite of an increase in premium revenue. This results from an increase of
individual annuity premium revenue which has a lower commission rate than
individual life insurance. Therefore, the growth in commissions does not
correspond to the growth in premium revenue.
Federal income taxes increased to $135 million in 1995 from $117 million in
1994, primarily due to an increase in the mutual company add-on tax which was
$28 million for 1995 compared to $9 million for 1994. Taxes on gains from
operations remained relatively flat despite a 7.3% increase in net gain before
federal income taxes and dividends as the differences between book and taxable
income changed from the prior year. These tax differences include the timing of
the deductibility of acquisition costs, merger restructuring costs, amortization
of bond discounts, interest paid, dividends and other items.
Dividends to policyholders remained relatively flat at $515 million in 1995 as
compared to $518 million in 1994, reflecting a slight dividend schedule
reduction adopted by the Company's Board of Directors in October 1995 offset by
growth of the in-force business. The reduction was primarily driven by the
lowering of investment returns in the investment portfolio. (See investment
income discussion.)
Massachusetts Mutual Individual Line
Year Ended December 31, 1994
Compared to Year Ended December 31, 1993
Net gain from operations was $107 million for 1994, a 21.6% increase compared to
the $88 million gain in 1993, principally due to a reduction in federal income
taxes, an increase in net investment and other income, continued favorable
mortality experience and low unit expenses.
At the end of 1994, the Individual Line operations executed a reinsurance
agreement with MML Pension assuming all of the SPIA business written by MML
Pension through either an assumption provision or a coinsurance provision of the
contract. Additionally, a reinsurance agreement ceding all of the Individual
Line's SPIA business to MML Pension was terminated. The execution of the new
contract and the termination of the old agreement both became effective at the
end of business on December 31, 1994 and were accounted for as a bulk
reinsurance transaction. Accordingly, assets assumed under the new agreement
and returned from the cancelled agreement were transferred at fair value and the
corresponding liabilities were transferred at statutory carrying values.
Following statutory accounting rules for bulk reinsurance, these transfers did
not impact the Summary of Operations. The net effect of these transactions
increased the Individual Line's assets and liabilities by $262 million in 1994.
This activity was undertaken to remove all individual insurance business from
the subsidiary. See "Life and Health Benefits Management Operations".
Premium income decreased slightly to $2,550 million for 1994 from $2,579 million
in 1993. This decrease was the net result of an increase of $84 million in
premium income from individual life insurance business less a reduction in
annuity premium income which decreased 20.5% primarily due to a decline in
variable annuity sales. Disability income premiums increased by 3.7% during
1994.
Net investment and other income increased 3.6% for 1994 compared to 1993. This
modest increase resulted primarily from a 4.2% growth in the Individual Line's
invested assets (before the assumption of the MML Pension business on December
31, 1994), offset by a decline in portfolio yield. The increase in market
interest rates during 1994 triggered capital losses, net of tax of $129 million,
due primarily to Massachusetts Mutual's interest hedging program. These losses
were transferred to the IMR and will be amortized into income over the remaining
lives of the assets sold. During 1994, $37 million of net gains previously
transferred to the IMR were amortized into Individual Line's income. This
compares to $49 million of net gains amortized in 1993, reflecting the
relatively short average life of the hedging program.
Policy benefits and payments for 1994 increased to $1,026 million from $981
million in 1993, an increase of 4.6%, resulting from the growth of in-force
business and a $27 million increase in death claims where the favorable
mortality has declined from the extremely favorable experience in 1993. In
1994, individual annuity surrenders increased $18 million and morbidity on
disability income products increased by $9 million, or 6.0%. Individual life
insurance continued to experience better than expected mortality, which was 88%
of expected claims in 1994 and 85% in 1993. Surrender experience for this
product also continues to be favorable as a result of the improved persistency
of new and in-force business. Management believes its continued focus on
policyholder value and service has contributed to this improvement in
persistency.
Additions to policyholders' reserves and funds declined to $1,398 million in
1994 from $1,450 million in 1993, or 3.6%. This decrease was due primarily to
the decline in variable annuity deposits offset by higher sales as well as
improved persistency of individual life insurance products.
Operating expenses for 1994 increased 4.5% to $233 million, resulting from
production related expenses which is consistent with the growth in commissions
and reflects management's continuing efforts to control expenses.
Commissions for 1994 increased by 3.1% compared to 1993 in spite of a drop in
premium revenue. This results from an increase in premium income from
individual life products which incur a higher commission percentage, and a
decline of individual annuity premium revenue with a lower commission rate.
Federal income taxes decreased to $117 million in 1994 from $131 million in
1993, primarily due to a decrease in the mutual company equity add-on tax for
1993. The Individual Line's share of the mutual company equity add-on tax
during 1994 was $9 million compared to $29 million for 1993. The 1994 tax
expense reflected favorable adjustments to the add-on taxes paid in 1993 and
1992. The 1993 tax expense, on the other hand, reflected rate increases in both
the tax on gains as well as the mutual company equity add-on tax.
Dividends to policyholders remained flat in 1994 compared to 1993, as a 7%
aggregate dividend schedule reduction adopted by the Board of Directors in
October 1994 was offset by growth of the in-force business. The reduction was
17
<PAGE>
primarily driven by the lower investment returns in investment portfolio. See
investment income discussion.
Connecticut Mutual's
Individual Line Operations
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1995 1994 1993
---- ---- ----
(In Millions, except average size
and number of policies)
<S> <C> <C> <C>
Income:
Premium income $ 1,259 $ 1,328 $ 1,303
Net investment and
other income 679 649 632
---------- ---------- ----------
1,938 1,977 1,935
---------- ---------- ----------
Benefits and expenses:
Policy benefits and
payments 853 802 765
Addition to
policyholders'
reserves and funds 363 507 411
Operating expenses
and commissions 277 303 324
State taxes, licenses
and fees 26 30 33
---------- ---------- ----------
1,519 1,642 1,533
---------- ---------- ----------
Net gain before
federal income taxes
and dividends 419 335 402
Federal income
taxes 53 6 55
---------- ---------- ----------
Net gain from
operations before
dividends 366 329 347
Dividends to
policyholders 298 302 291
---------- ---------- ----------
Net gain from
operations $ 68 $ 27 $ 56
========== ========== ==========
Premium Income: (1)
Whole and term
life $ 870 $ 876 $ 881
Universal, Variable
& Corporate
Owned Life 172 190 169
Annuities 110 154 154
Disability Income 101 99 70
Other 6 9 29
---------- ---------- ----------
Total $ 1,259 $ 1,328 $ 1,303
========== ========== ==========
Life Insurance Sales - Face Amount: (2)
Whole and term
life $ 2,441 $ 4,626 $ 6,111
Universal, Variable
& Corporate
Owned Life 2,469 2,182 1,930
---------- ---------- ----------
Total $ 4,910 $ 6,808 $ 8,041
========== ========== ==========
Life Insurance In-Force Face Amount: (2)
Whole and term
life $ 49,546 $ 52,169 $ 52,268
Universal, Variable
& Corporate
Owned Life 23,240 21,705 20,197
---------- ---------- ----------
Total $ 72,786 $ 73,874 $ 72,465
========== ========== ==========
Number of Policies In Force: (2)
Whole and term
life 881,377 928,088 967,920
Universal, Variable
& Corporate
Owned Life 113,164 109,330 107,089
Annuities 52,332 48,272 48,397
Disability Income 140,586 143,144 139,924
---------- ---------- ----------
Total 1,187,459 1,228,834 1,263,330
========== ========== ==========
Average Face Value of a New Policy Sold: (2)
Whole and term
life $ 189,678 $ 211,365 $ 209,966
Universal, Variable
& Corporate
Owned Life $ 244,303 $ 328,509 $ 238,706
</TABLE>
(1) Includes group life, accident and health premiums of $4 million, $9 million
and $29 million in 1995, 1994 and 1993, respectively.
(2) Excludes group life, accident and health.
Connecticut Mutual Individual Line
Year Ended December 31, 1995
Compared to Year Ended December 31, 1994
Net gain from operations was $68 million for 1995, a 151.9% increase compared to
the $27 million gain in 1994, principally due to an increase in net investment
and other income, improved morbidity experience and lower unit expenses.
Premium income decreased to $1,259 million for 1995 from $1,328 million in 1994.
This 5.2% decrease was primarily attributable to lower sales of variable
annuity, universal and corporate owned life insurance products. Life insurance
renewal premiums increased by $8 million over 1994, due to the continued
favorable premium based lapse ratio of 5.9%.
Net investment and other income increased by 4.6% for 1995 compared to 1994,
resulting from a larger asset base and lower levels of underperforming real
estate assets.
Policy benefits and payments for 1995 increased to $853 million from $802
million in 1994, an increase of 6.4%. Surrender benefits, annuity benefits and
disability benefits increased by $52 million, $14 million and $8 million,
respectively. The 1995 mortality experience improved over 1994 and resulted in
lower death claims of $12 million. A $12 million reinsurance initial payment
included in 1994 did not reoccur in 1995.
Addition to policyholders' reserves and funds decreased to $363 million in 1995
from $507 million in 1994, or 28.4%, due to higher surrenders of corporate owned
life insurance products, lower premium income and transfers to separate
accounts, and the recapture of an intercompany reinsurance agreement in 1994.
Operating expenses and commissions for 1995 decreased by $26 million or 8.6%
compared to 1994. Commissions decreased $8 million to $95 million in 1995 due
to lower sales and a change in the sales mix. Operating expenses decreased $18
million from $202 million in 1994 to $185 million in 1995, primarily due to
lower staffing levels and increased expense allocations to subsidiaries.
Federal income taxes increased from $6 million in 1994 to $53 million in 1995.
This increase is due to significantly higher taxable income and a higher equity
add on tax in 1995.
Dividends to policyholders decreased $4 million from $302 million in 1994 to
$298 million in 1995, as an overall lower
18
<PAGE>
dividend interest rate effective for 1996 was partially offset by growth in
participating business.
Connecticut Mutual Individual Line
Year Ended December 31, 1994
Compared to Year Ended December 31, 1993
Net gain from operations was $27 million for 1994, a 51.8% decrease compared to
the $56 million gain in 1993. The decrease in operating gain is primarily
attributable to poor morbidity experience and adverse reserve development in
disability income products.
Premium income increased by $25 million or 1.9% from $1,303 million in 1993 to
$1,328 million in 1994. This rise reflects higher sales of corporate owned life
insurance, partially offset by lower group life insurance premiums.
Net investment income and other income increased by $17 million, or 2.7%, to
$649 million in 1994 from $632 million in 1993. Net investment income was $614
million and $625 million in 1994 and 1993, respectively. The $11 million
decline in net investment income is principally attributable to reinvestment of
cash flows at lower interest rates. Other income increased $27 million from $8
million in 1993 to $35 million in 1994. This increase was largely due to the
recapture of intercompany reinsurance with GroupAmerica in 1994.
Policy benefits and payments increased by $37 million, or 4.8%, from $765
million in 1993 to $802 million in 1994, due to increases of $25 million in
disability benefits and $37 million in life and annuity benefits offset by a
decrease in initial reinsurance payments of $25 million related to disability
income products.
Additions to policyholders' reserves and funds increased by $96 million, or
23.4%, to $507 million in 1994, due primarily to the recapture of an
intercompany reinsurance agreement in 1994.
Commissions and operating expenses of $303 million in 1994 decreased 6.5% from
$324 million in 1993. Commissions decreased $12 million from $115 million in
1993 to $103 million in 1994, due to the composition of sales. Operating
expenses decreased by $7 million.
Federal income taxes decreased by $49 million, due to lower equity add-on tax,
along with significantly lower taxable income in 1994.
Dividends to policyholders increased by $11 million in 1994 to $302 million in
1995 due to a $4 million supplemental dividend in March 1994, and growth in the
participating block of business, partially offset by lower dividend interest
rates effective for 1995.
Massachusetts Mutual's
Pension Management Operations
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------
1995 1994 1993
-------- -------- -------
(In Millions)
<S> <C> <C> <C>
Income:
Premium income $1,600 $1,307 $1,541
Net investment
and other income 863 924 1,027
------ ------ ------
2,463 2,231 2,568
------ ------ ------
Benefits and expenses:
Policy benefits and
payments 2,694 2,556 2,443
Addition to
policyholders'
reserves and funds (373) (464) (23)
Operating expenses
and commissions 54 59 57
State taxes, licenses
and fees (3) 3 1
Merger
restructuring costs 8 0 0
------ ------ ------
2,380 2,154 2,478
------ ------ ------
Net gain before
federal income taxes
and dividends 83 77 90
Federal income
taxes 12 (2) 3
------ ------ ------
Net gain from
operations before
dividends 71 79 87
Dividends to
policyholders 6 5 9
------ ------ ------
Net gain from
operations $ 65 $ 74 $ 78
====== ====== ======
Premium Income
Flexinvest $ 352 $ 292 $ 278
Superflex 696 507 413
Interest Guarantee 112 116 139
Participating
Guaranteed 125 132 378
Separate Accounts 145 164 167
Defined Benefit 55 72 81
GIC and Single
Premium Annuity
Contracts 2 7 54
Governmental
separate accounts 67 10 27
Other 46 7 4
------ ------ ------
Total $1,600 $1,307 $1,541
====== ====== ======
Written Sales
Flexinvest $ 146 $ 120 $ 96
Superflex 257 257 165
Interest Guarantee
Investment Contracts 37 24 38
Participating
Guaranteed 643 94 452
Separate Accounts 140 182 170
Defined Benefit 7 9 4
GIC and Single
Premium Annuity
Contracts 0 0 5
Governmental
separate accounts 45 42 9
Other 26 0 0
------ ------ ------
Total $1,301 $ 728 $ 939
====== ====== ======
</TABLE>
Massachusetts Mutual Pension Management
Year Ended December 31, 1995
Compared to Year Ended December 31, 1994
Net gain from operations for 1995 decreased to $65 million from $74 million for
1994. This decline was due to an increase in federal income taxes from a $2
million tax benefit in 1994
19
<PAGE>
to a $12 million expense in 1995 and an $8 million corporate allocation of
merger restructuring costs.
Premium income for 1995 increased to $1,600 million, or 22.4%, from $1,307
million for 1994, primarily due to a $249 million increase in defined
contribution premium income.
Net investment and other income decreased $61 million, or 6.6%, to $863 million
for 1995 from $924 million for 1994, due to a 6.6% decrease in the line's
invested assets, resulting from the scheduled maturities of non-participating
guaranteed investment contracts.
Policy benefits and payments increased $138 million, or 5.4%, to $2,694 million
for 1995 from $2,556 million for 1994, primarily due to an increase in the
lapses of participating business.
Policyholders' reserves and funds were reduced by $373 million at December 31,
1995 compared to a $464 million reduction at December 31, 1994, as a result of
increases in policy benefits as discussed above, partially offset by increases
in premiums.
Operating expenses and commissions decreased by $5 million, or 8.5%, to $54
million for 1995 from $59 million for 1994. Reduced general expenses,
reflecting Management's commitment to rigorous expense control, were partially
offset by increased commissions.
Federal income taxes increased to $12 million in 1995 from a tax benefit of $2
million in 1994. This increase was due to an $11 million increase in operating
gain taxes, caused by higher operating gains and lower losses on market value
cash outs, and a $3 million increase in Pension Management's portion of the
mutual company add-on tax.
Massachusetts Mutual Pension Management
Year Ended December 31, 1994
Compared to Year Ended December 31, 1993
Net gain from operations for 1994 decreased to $74 million from $78 million for
1993. This decline was primarily due to a decrease in statutorily mandated
reserves that improved 1993 operations more than 1994.
Premium income for 1994 decreased to $1,307 million, or 15.2%, from $1,541
million for 1993, reflecting a significant decline in sales of participating
separate account guaranteed investment contracts which were $94 million in 1994
compared to $452 million in 1993. The decline in the sales of participating
separate account guaranteed investment contracts was somewhat offset in 1994 by
a $92 million increase in sales of defined contribution contracts.
Net investment and other income decreased $103 million, or 10.0%, to $924
million for 1994 from $1,027 million for 1993, due to a 7.5% decrease in the
line's invested assets and by a decline in portfolio's average yield as maturing
higher yielding securities are replaced with securities yielding lower current
rates.
Policy benefits and payments increased $113 million, or 4.6%, to $2,556 million
for 1994 from $2,443 million for 1993, primarily due to an increase in the
lapses of participating business.
Policyholders' reserves and funds were reduced by $464 million at December 31,
1994 compared to a $23 million reduction at December 31, 1993, as the result of
a decrease in premium income and the increase in policy benefits and payments
discussed above.
Operating expenses increased by $1 million, or 1.9%, to $55 million for 1994
from $54 million for 1993. Reduced production related costs offset by general
cost increases were key contributors to this modest increase.
Connecticut Mutual's
Pension Management Operations
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------
1995 1994 1993
------- -------- --------
(In Millions)
<S> <C> <C> <C>
Income:
Premium income $ 203 $ 259 $ 237
Net investment
and other income 41 43 85
----- ----- -----
244 302 322
----- ----- -----
Benefits and expenses:
Policy benefits and
payments 430 479 870
Addition to
policyholders'
reserves and funds (190) (172) (542)
Operating expenses
and commissions 15 18 16
State taxes, licenses
and fees 1 1 0
----- ----- -----
256 326 344
----- ----- -----
Net loss before
federal income taxes
and dividends (12) (24) (22)
Federal income
taxes (benefit) (5) (11) (8)
----- ----- -----
Net loss from
operations before
dividends (7) (13) (14)
Dividends to
policyholders 0 0 0
----- ----- -----
Net loss from
operations $ (7) $ (13) $ (14)
===== ===== =====
Premium Income
Separate Accounts $ 140 $ 170 $ 154
Guaranteed pension
investment funds 43 62 66
Guaranteed investment
contracts 20 27 17
----- ----- -----
Total $ 203 $ 259 $ 237
===== ===== =====
</TABLE>
Connecticut Mutual Pension Management
Year Ended December 31, 1995
Compared to Year Ended December 31, 1994
Net loss from operations for 1995 decreased to $7 million from $13 million for
1994. This decline was primarily due to improved average yield on invested
assets and lower operating expenses.
Premium income for 1995 decreased to $203 million, or 21.6%, from $259 million
for 1994, primarily due to lower separate account and guaranteed pension
investment fund deposits.
Net investment and other income decreased $2 million, or 4.7%, to $41 million
for 1995 from $43 million for 1994. Net investment income decreased by $4
million reflecting a 23.6% decrease in the line's invested assets, offset by an
20
<PAGE>
improvement in the portfolio yield, due to the replacement of under performing
mortgages and foreclosed real estate with bonds.
Policy benefits and payments decreased $49 million, or 10.2%, to $430 million
for 1995 from $479 million for 1994, primarily due to a $127 million decrease in
guaranteed investment contract surrenders, partially offset by an increase of
$78 million in separate account and guaranteed pension investments funds
surrenders.
Policyholders' reserves and funds were reduced by $190 million at December 31,
1995 compared to a $172 million reduction at December 31, 1994, as a result of
decreases in policy benefits as discussed above, and decreases in premiums.
Operating expenses and commissions decreased by $3 million to $15 million for
1995 from $18 million for 1994. Operating expenses declined primarily due to
lower staffing levels.
Federal income tax benefits decreased by $6 million, due to a significantly
lower taxable loss in 1995 versus 1994.
Connecticut Mutual Pension Management
Year Ended December 31, 1994
Compared to Year Ended December 31, 1993
Net loss from operations for 1994 decreased to $13 million from $14 million for
1993. This decline was primarily due to increased operating expenses and lower
portfolio yields.
Premium income for 1994 increased to $259 million, or 9.3%, from $237 million
for 1993, reflecting an increase in guaranteed investment contracts and separate
account deposits of $26 million, partially offset by a $4 million decline in
guaranteed pension investment fund deposits.
Net investment and other income decreased $42 million, or 49.4%, to $43 million
for 1994 from $85 million for 1993, due to a 33.5% decrease in the line's
invested assets and by a decline in portfolio's average yield as maturing higher
yielding securities were replaced with securities yielding lower current rates.
Policy benefits and payments decreased $391 million, or 44.9%, to $479 million
for 1994 from $870 million for 1993, primarily due to a $411 million decrease in
guaranteed investment contract surrenders partially offset by an increase of $20
million in separate account and guaranteed pension investment fund surrenders.
Policyholders' reserves and funds were reduced by $172 million at December 31,
1994 compared to a $542 million reduction at December 31, 1993, as the result of
an increase in premium income and the decrease in policy benefits and payments
discussed above.
Operating expenses increased by $2 million to $18 million for 1994 from $16
million for 1993. Reduced production related costs offset by general cost
increases were key contributors to this increase.
MassMutual's Life and Health Benefits
Management Operations
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1995 1994 1993
------ ------ -----
(In Millions)
<S> <C> <C> <C>
Income:
Premium income (1) $ 733 $ 748
Net investment and
other income 27 55 49
----- ----- -----
27 788 797
----- ----- -----
Benefits and expenses:
Policy benefits and
payments 587 594
Addition to
policyholders'
reserves and funds (6) (5)
Operating expenses
and commissions 113 108
State taxes, licenses
and fees 4 21 25
Merger
restructuring costs 8 0 0
----- ----- -----
12 715 722
----- ----- -----
Net gain before
federal income taxes
and dividends 15 73 75
Federal income
taxes 11 30 30
----- ----- -----
Net gain from
operations before
dividends 4 43 45
Dividends to
policyholders 0 0 0
----- ----- -----
Net gain from
operations $ 4 $ 43 $ 45
===== ===== =====
</TABLE>
(1) Excludes premium equivalents
Massachusetts Mutual Life and Health Benefits Management
Year Ended December 31, 1995
Compared to Year Ended December 31, 1994
On January 5, 1996, Massachusetts Mutual signed a definitive agreement for the
sale of MassMutual Holding Company Two, Inc. a wholly owned subsidiary, and its
subsidiaries, including MML Pension Insurance Company to WellPoint Health
Networks, Inc. As discussed below, MML Pension comprises Massachusetts Mutual's
group life and health business. The transaction is expected to close late
during the first quarter of 1996, at which time the Company will exit the group
life and health business.
21
<PAGE>
To position the subsidiary for the possibility of a sale, the Life and Health
Benefits Management line ("L&HBM") executed a reinsurance agreement with MML
Pension ceding assets and liabilities from the line's group life, accident and
health ("GLA&H") business to MML Pension at the end of 1994. The contract
became effective at the end of business on December 31, 1994 and was accounted
for as a bulk reinsurance transaction during 1994. Following statutory
accounting rules for bulk reinsurance, these transfers did not impact 1994
operations. However, in 1995, these contracts resulted in all GLA&H insurance
activity being ceded to MML Pension.
L&HBM's 1995 net gain from operations is only affected by it's share of
corporate allocations. MML Pension's net gain from operations was $44 million,
of which $41 million was recorded as dividend income, a component of net
investment income in the Supplemental Statement of Income in the corporate
segment. The remaining $3 million was recognized as an unrealized capital gain
in the Supplemental Statement of Changes in Policyholders' Contingency Reserves.
The results recorded in the corporate segment, which invests all of the
Company's surplus, are allocated to the three product lines in proportion to the
surplus contributed by each product line. L&HBM's portion of the 1995 MML
Pension dividend was $9 million.
As a result of the Reinsurance with MML Pension, there were no net premiums,
policy benefits and payments and addition to policyholder's reserves. The
remaining 1995 net operating activity, which includes net investment income;
state taxes, licenses and fees and merger restructuring costs, represents
allocated corporate expenses and other operations which were not part of the
reinsurance agreement with MML Pension.
Federal income taxes decreased to $11 million in 1995 from $30 million in 1994.
This decrease is primarily due to the allocation of taxes, on GLA&H's gain from
operations, to MML Pension, partially offset by a $2 million increase in L&HBM's
portion of the mutual company add-on tax.
The following discussion focuses on direct premium, prior to reinsurance with
MML Pension.
Direct premium income was relatively stable, increasing to $753 million for 1995
from $733 million for 1994. Premium income has remained relatively flat in
recent years, reflecting the continued preference of clients for alternative
funding arrangements, such as Administrative Services Only ("ASO") and Minimum
Premium Plans ("MPP"). Clients who purchase the ASO product self-insure and pay
an administrative fee to the Company. Clients who purchase MPP contracts pay a
reduced premium to the Company in exchange for direct employer funding of a
portion of plan benefits, while the majority of business is fully insured. The
Company expects the trends toward alternative funding among its clients to
continue.
Premium equivalency is an industry standard for measurement of group health
business. For purposes of premium equivalency, fees received from alternative
funding clients exclusive of indemnity premiums are converted to equivalent in-
force amounts as if under full indemnity coverage. Premiums for conventionally
insured clients remain unchanged. This conversion places all funding
arrangements on a comparable basis regardless of the approach elected by any
employer group. At December 31, 1995 direct premium and direct premium
equivalents were estimated at $2,287 million as compared to $2,302 million at
December 31, 1994.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 1994
----------- -----------
(In Millions)
<S> <C> <C>
Conventionally Insured (1) $ 627 $ 672
Minimum Premium Plans (2) 506 507
Administrative Services Only (2) 1,154 1,123
------ ------
Total $2,287 $2,302
====== ======
Medical Lives (in thousands) 531 525
====== ======
</TABLE>
(1) Premium
(2) Premium and premium equivalents
Massachusetts Mutual Life and Health Benefits Management
Year Ended December 31, 1994
Compared to Year Ended December 31, 1993
Net gain from operations for 1994 decreased to $43 million from $45 million for
1993, due to the cost related to acquiring a block of business from The Hartford
Life Insurance Company ("The Hartford").
At the end of 1994, L&HBM executed a reinsurance agreement with MML Pension
ceding assets and liabilities from the line's group life, accident and health
business to MML Pension. The contract became effective at the end of business
on December 31, 1994 and was accounted for as a bulk reinsurance transaction.
Accordingly, assets were transferred at fair value and liabilities were
transferred at statutory carrying value. Following statutory accounting rules
for bulk reinsurance, these transfers did not impact operations. The effect of
this transaction decreased the L&HBM's assets and liabilities by $437 million in
1994. This transaction was executed to position MML Pension as an accident and
health insurance company to more easily respond to opportunities for forming
alliances with other health care entities, but may include considerations of the
sale or partial sale of the subsidiary. In the future, the Company intends to
issue all of its group life, accident and health business directly through MML
Pension.
Premium income was relatively stable, decreasing to $733 million for 1994 from
$748 million for 1993. Premium income has remained relatively flat in recent
years, reflecting the continued preference of clients for alternative funding
arrangements, such as ASO and MPP. The Company expects the trends toward
alternative funding among its clients to continue.
At December 31, 1994 premium and premium equivalents were estimated at $2,302
million as compared to $2,063 million at December 31, 1993.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1994 1993
----------- -----------
(In Millions)
<S> <C> <C>
Conventionally Insured (1) $ 672 $ 706
Minimum Premium Plans (2) 507 431
Administrative Services Only (2) 1,123 926
------ ------
Total $2,302 $2,063
====== ======
Medical Lives (in thousands) 525 470
====== ======
</TABLE>
(1) Premium
(2) Premium and premium equivalents
Most of this increase was from the acquisition of medical and dental business
previously underwritten by The Hartford. In
22
<PAGE>
December 1993, the Company entered into an agreement with The Hartford which
granted the Company an arrangement for quoting on The Hartford's group medical
and dental contracts. In exchange for administrative and marketing support from
The Hartford's employees, The Hartford received fees for business written by the
Company.
Net investment and other income increased 12.2% to $55 million for 1994 from $49
million for 1993. Much of this increase is attributable to the increased level
of cost containment fees collected on administrative contracts. Net investment
income also increased as this product line increased its allocated share of
earnings from contingency reserves.
Policy benefits and payments and additions to policyholders' reserves and funds
in the aggregate were $581 million for 1994, a reduction of 1.4% compared to
$589 million for 1993, due to a reduction in fully insured plans. This is also
a result of client's continued preference for alternative funding arrangements.
Under these arrangements, benefits are paid from the client's own bank account
and are not recorded on the Company's financial statements.
Operating expenses increased to $87 million for 1994 from $83 million for 1993
as a result of the increased staffing in the field office service center and
other costs related to acquiring the block of business from The Hartford. These
costs include fees paid to The Hartford and additional staffing needed to
service this business.
Commissions, which are paid on premiums and premium equivalents, increased 4.0%
to $26 million for 1994 from $25 million for 1993 due to increased premium
equivalency discussed above.
SUPPLEMENTAL STATEMENT OF
FINANCIAL POSITION
The discussions on the Supplemental Statement of Financial Position and the
discussions that follow address the combined balances presented in the
Supplemental Financial Statements. Where appropriate, significant changes in
the former Massachusetts Mutual or former Connecticut Mutual portfolios will be
noted.
Assets
<TABLE>
<CAPTION>
December 31,
---------------
1995 1994
---- ----
(In Millions)
<S> <C> <C>
Bonds $23,625 $23,298
Common stocks 416 246
Mortgage loans 3,872 4,066
Real estate 1,610 1,783
Other investments 1,490 1,218
Policy loans 4,518 4,260
Cash and short-term investments 2,343 2,255
Investment and insurance amounts
receivable 1,059 1,070
Separate investment account
assets 11,310 8,531
Other assets 175 153
------- -------
Total assets $50,418 $46,880
======= =======
</TABLE>
Total assets increased by $3,538 million, or 7.5%, to $50,418 million at
December 31, 1995 from $46,880 million at year-end 1994. Much of this increase
was due to continued growth in the Company's separate investment accounts, in
which assets increased by $2,779 million, or 32.6%, from 1994 to $11,310 million
in 1995. Invested assets in the Company's general investment account increased
in 1995 by $748 million, or 2.0%, to $37,874 million from $37,126 million in
1994.
In the general investment account, the Company continues to invest in publicly
traded and privately placed bonds and short-term securities, investments which
continues the strength and liquidity of its investment portfolio. Bonds and
short-term securities in NAIC categories 1 and 2 were 61.2% of general
investment account assets in 1995, as compared to 61.7% in 1994. The percentage
of general investment account assets representing bonds and short-term
investments in NAIC categories 3 through 6 increased in 1995 to 4.9% from 4.8%
in 1994. The net increase in common stock reflects the market appreciation of
this portfolio, as well as additional investments made by Connecticut Mutual's
investment staff. Mortgage loans and real estate decreased $367 million due to
mortgage loan paydowns and real estate sales. The percentage of general account
assets representing mortgage loans and real estate decreased to 14.0% in 1995
from 15.3% in 1994. See "Investments" section for further information relating
to invested assets in the Company's general investment account.
The increase in policy loans is primarily attributable to loans being issued on
the Individual Line's large corporate owned life policies and a 6.1% growth in
ordinary life loans which reflects the growth in the policies in-force.
Liabilities
Total liabilities increased in 1995 by $3,506 million, or 7.9%, to $47,817
million from $44,311 million in 1994. As with assets, most of this growth
occurred in the separate investment accounts, which increased $2,780 million, or
32.6%, to $11,310 million in 1995. See "Investments" for a discussion of
investment reserves.
Policyholders' reserves and funds increased by $598 million, or 1.8%, from
$32,295 million in 1994 to $32,893 million in 1995. The increase for the year
was attributable primarily to increases in individual life and individual
annuity reserves and reserves for single premium immediate annuities assumed
from MML Pension offset by decreases in the liability for non-participating
guaranteed investment contracts.
The Company utilizes sophisticated asset/liability analysis techniques in order
to set the investment policy for each liability class and test the adequacy of
the projected cash flow provided by assets to meet all of its future
policyholder and other obligations. These studies are performed using stress
tests regarding future credit and other asset losses, market interest rate
fluctuations, claim losses and other consideration. The result is a complete
picture of the adequacy of reserves, capital and underlying assets. See
liquidity section for further discussions on this issue.
Policyholders' Contingency Reserves
Policyholders' contingency reserves were $2,601 million at December 31, 1995, an
increase of $32 million, or 1.2%, from December 31, 1994. This increase was
composed of (i) 1995 net income of $190 million, (ii) $89 million from
unrealized capital gains, (iii) a decrease of $76 million due to the change in
AVR and VIR, (iv) a decrease of $108 million from reserve
23
<PAGE>
strengthening for disability income products, (v) a $45 million charge for
merger restructuring costs and (vi) a decrease of $18 million due to other
changes.
Certain state regulations require a portion of policyholders' contingency
reserves to be designated for the benefit of group life insurance, group annuity
and separate account policyholders. Such designated surplus funds totaled $38
million in 1995, $36 million in 1994 and $35 million in 1993, resulting in
unassigned policyholders' contingency reserves of $2,563 million in 1995, $2,533
million in 1994 and $2,435 million in 1993 (increases of 1.2% in 1995 and 4.0%
in 1994).
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Net cash provided by operating activities was $827 million, $909 million and
$773 million for the years ended 1995, 1994 and 1993, respectively.
The Company has structured its investment portfolio to ensure a strong liquidity
position in order to permit timely payment of policy and contract benefits
without requiring an untimely sale of assets. The Company manages its liquidity
position by matching its exposure to cash demands with adequate sources of cash
and other liquid assets. Major industry rating services have consistently cited
the Company's liquidity position as a significant strength.
The Company's principal sources of liquidity are cash flow and holdings of cash,
near cash and other readily marketable assets. The primary cash flow sources
are investment income and principal repayments on invested assets, life
insurance premiums, annuity considerations and deposits. Historically, the
Company has consistently experienced net positive cash flow from operations,
including $827 million for the period ending December 31, 1995 and $909 million
and $773 million, 1994 and 1993, respectively.
The Company's liquid assets include substantial Treasury holdings, short-term
money market investments, stocks and marketable long-term fixed income
securities. Cash and short-term investments totaled $2,343 million at December
31, 1995. The market value of other highly liquid securities, including NAIC
Category 1 and 2 publicly traded bonds, and the common stock portfolio exceeded
$12 billion at December 31, 1995.
The liquidity position of the Company is proactively managed on an ongoing basis
to meet cash needs while minimizing adverse impacts on investment returns. A
variety of scenarios are analyzed modelling potential demands on liquidity,
taking into account the provisions of the Company's policies and contracts in-
force, the Company's cash flow position and the volume of cash and readily
marketable securities in the Company's portfolio.
The Company also employs sophisticated quantitative asset/liability cash flow
management techniques to optimize and control the investment return and
liquidity for each portfolio, taking into account the distinguishing liability
characteristics of each portfolio.
A primary liquidity concern for the Company is the risk of early contractholder
and policyholder withdrawal. The three most affected products are individual
life insurance and individual deferred annuities offered by the Individual Line
and the participating products offered by the Pension Management line. Personal
life insurance policies are less susceptible to withdrawal than annuity
contracts because annuities are primarily used as investment vehicles, while
personal life policies are used to fulfill longer term financial planning needs.
A substantial part of the Company's individual life insurance exposure is
focused on a well-seasoned, mature block of business. The Company closely
evaluates and manages its liquidity risk by, for example, seeking to include
provisions limiting withdrawal rights from general account institutional pension
products (generally group annuities, including guaranteed investment contracts
and certain deposit liabilities) sold to plan sponsors.
The Company's exposure to early withdrawal under the Pension Management and
Individual Line annuity businesses as of the dates indicated can be described as
follows:
Withdrawal Characteristics of Annuity Actuarial Reserves
and Deposit Fund Liabilities
<TABLE>
<CAPTION>
December 31,
----------------------------
1995 1994
-------------- ------------
% of % of
Amount Total Amount Total
------ ----- ------ -----
($ In Millions)
<S> <C> <C> <C> <C>
Subject to discretionary
withdrawal with
adjustment:
With market value
adjustment $ 5,298 28.6% $ 5,463 25.0%
At market value 2,177 11.8 6,218 28.6
At book value less
surrender charge 2,078 11.2 338 1.6
------- ----- ------- -----
Subtotal 9,553 51.6 12,019 55.2
Subject to discretionary
withdrawal without
adjustment:
At book value
(minimal or no
charge or
adjustment) 2,864 15.4 2,994 13.7
Not subject to
discretionary
withdrawal 6,106 33.0 6,757 31.1
------- ----- ------- -----
Total annuity actuarial
reserves and deposit
fund liabilities (gross) 18,523 100.0% 21,770 100.0%
Less reinsurance (13) (13)
------- -------
Total annuity actuarial
reserves and deposit
fund liabilities $18,510 $21,757
======= =======
</TABLE>
Based on its ongoing monitoring and analysis of its liquidity sources and
demands, the Company believes that it is in a strong liquidity position.
Capital Resources
As of December 31, 1995, the Company's total adjusted capital as defined by the
NAIC was $3,597 million. The NAIC has developed the "Risk Based Capital"
("RBC") model to compare the total adjusted capital with a standard designed to
reflect the Company's risk profile. Although the Company believes that there is
no single appropriate means of measuring risk-based capital needs, it feels that
the NAIC approach to
24
<PAGE>
RBC measurement is reasonable, and will manage its capital position with
significant attention to maintaining adequate total adjusted capital relative to
RBC. The Company's total adjusted capital was well in excess of all RBC
standards at December 31, 1995 and 1994. Management believes that the Company
enjoys a strong capital position in light of the risks to which it is subject
and that it is well-positioned to meet policyholder and other obligations.
INFLATION
The Company's operating expenses are affected by inflation. A large portion of
the Company's operating expenses consist of salaries which are subject to wage
increases, at least partially affected by the rate of inflation. The Company's
continuing efforts to control expenses may reduce the impact of inflation on
operating expenses.
Inflation also has an indirect effect on the Company. To the extent that the
government's economic policy to control the level of inflation results in
changes in interest rates, the Company's new sales of insurance products and
investment income are affected. Changes in the level of interest rates also
have an effect on interest spreads, as investment earnings are reinvested.
INVESTMENTS
At December 31, 1995, the Company had $37,874 million of invested assets in its
general investment account. The portfolio of invested assets is managed to
support the liabilities of the lines of business in light of yield, liquidity
and diversification considerations. The general investment account portfolio
does not include the Company's separate investment account assets.
The following table sets forth the Company's invested assets in the general
investment account and gross investment yield thereon (after deducting real
estate operating expenses and taxes) as of the dates indicated.
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------------------------
1995 1994 1993
--------------------------- -------------------------- ----------------------
Carrying % of Carrying % of Carrying % of
Value Total Yield Value Total Yield Value Total Yield
----- ----- ----- ----- ----- ----- ----- ----- -----
($ In Millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bonds $23,625 62.4% 8.8% $23,298 62.8% 8.6% $21,956 59.9% 9.3%
Common stocks 416 1.1 1.8 246 0.7 1.8 191 0.5 0.5
Mortgage loans 3,872 10.2 9.3 4,066 11.0 9.4 5,368 14.6 9.3
Real estate - Investment 1,503 4.0 10.9 1,674 4.5 10.2 1,653 4.5 9.8
Real estate - Other 107 0.3 N/A 109 0.3 N/A 126 0.3 N/A
Policy loans 4,518 11.9 8.1 4,260 11.5 7.5 4,059 11.1 7.9
Cash and short-term
investments 2,343 6.2 4.8 2,255 6.0 4.3 2,254 6.2 4.2
Other investments 1,490 3.9 5.9 1,218 3.2 2.1 1,077 2.9 2.5
Total investments $37,874 100.0% 8.4% $37,126 100.0% 8.1% $36,684 100.0% 8.6%
</TABLE>
The yield on total investments before indirect expenses was 8.4%, 8.1% and 8.6%
for the years ended December 31, 1995, 1994 and 1993, respectively. If
remaining investment expenses including depreciation on real estate investments
were deducted, net yields would be 7.9%, 7.5% and 8.1%, respectively. The yield
on each investment category before federal income taxes is calculated as: (a)
gross investment income (which for real estate deducts operating expenses and
real estate taxes) divided by (b) the average carrying value, which does not
include investment reserves.
The Company carries its investments in accordance with methods and values
prescribed by the NAIC and adopted by state insurance authorities. Generally,
bonds are valued at amortized cost, preferred stocks in good standing are valued
at cost, and common stocks are shown at fair value. Mortgage loans are valued
at principal less impairments and unamortized discount. Real estate is valued
at cost less accumulated depreciation, impairments, and mortgage encumbrances.
Depreciation on investment real estate is calculated using the straight-line
and constant yield methods. Policy loans are carried at the outstanding loan
balance less amounts unsecured by the cash surrender value of the policy.
Short-term investments are stated at amortized cost which approximates fair
value. Other investments primarily consist of joint ventures, other forms of
partnerships and the common stocks of unconsolidated subsidiaries, which are
valued using the equity method.
Bonds
The following table provides certain information regarding the maturity
distribution of bonds (excluding short-term securities):
<TABLE>
<CAPTION>
Bond Maturities
December 31,
----------------------------------
1995 1994
----------------- ---------------
Carrying % of Carrying % of
Value Total Value Total
---------- ----- -------- -----
($ In Millions)
<S> <C> <C> <C> <C>
Due in one year
or less $ 2,579 10.9% $ 2,729 11.7%
Due after one year
through five years 3,626 15.3 4,442 19.1
Due after five years
through ten years 5,356 22.7 5,644 24.2
Due after ten years 3,858 16.3 3,732 16.0
Mortgage-backed
securities(1) 8,206 34.8 6,751 29.0
------- ----- ------- -----
$23,625 100.0% $23,298 100.0%
======= ===== ======= =====
</TABLE>
(1) Including securities guaranteed by the U.S. Government.
25
<PAGE>
The maturities of portfolio bonds are considered by the Company to be
sufficiently diversified and are carefully monitored and managed in light of the
Company's liquidity needs. See "Liquidity and Capital Resources."
Bonds consist of publicly traded and privately placed debt securities. At
December 31, 1995 and 1994, publicly traded bonds comprised 52.7% of the bond
portfolio and privately placed bonds comprised the remainder. Substantially all
of the publicly traded and privately placed bonds held by the Company are
evaluated by the NAIC's Securities Valuation Office ("SVO"), which assigns
securities to one of six NAIC investment credit categories, with Category 1
securities being the highest quality and Category 6 securities being the lowest
quality. Categories 1 and 2 are investment grade, Category 3 is medium quality
and Categories 4, 5 and 6 are non-investment grade. The remainder of the
securities which have not as yet received NAIC ratings are rated under an
internal system which the Company believes to be equivalent to that used by the
SVO.
The table below sets forth, as of the dates indicated, the NAIC ratings for the
Company's bond portfolio (including short-term securities) and the equivalent
public rating agency designations. The bond portfolio consists primarily of
high grade securities. At December 31, 1995 and 1994, 92.5% and 92.7%,
respectively, of the portfolio was invested in NAIC Categories 1 and 2
securities.
<TABLE>
<CAPTION>
Bond Credit Quality
(includes short-term securities)
December 31,
-----------------------------
1995 1994
----------- -----------
($ In Millions)
NAIC
Bond Rating Agency Carrying % of Carrying % of
Rating Equivalent Designation Value Total Value Total
- -------- ---------------------- -------- ------ -------- ------
<S> <C> <C> <C> <C> <C>
1 Aaa/Aa/A $16,750 64.7% $17,255 67.6%
2 Baa 7,196 27.8 6,396 25.1
3 Ba 1,261 4.9 1,319 5.2
4 B 577 2.2 452 1.8
5 Caa and lower 51 0.2 45 0.2
6 In or near default 36 0.2 32 0.1
------- ----- ------- -----
Total $25,871 100.0% $25,499 100.0%
======= ===== ======= =====
</TABLE>
The Company invests a significant portion of its investment funds in high
quality publicly traded bonds in order to maintain and manage liquidity and
reduce the risk of default in the portfolio. As of December 31, 1995, 96.9% of
the publicly traded bonds were rated as NAIC Categories 1 and 2, as illustrated
by the following chart.
Publicly Traded Bond Credit Quality
(includes short-term securities)
<TABLE>
<CAPTION>
December 31,
-----------------------------
1995 1994
----------- -----------
($ In Millions)
NAIC
Bond Rating Agency Carrying % of Carrying % of
Rating Equivalent Designation Value Total Value Total
- -------- ---------------------- -------- ------ -------- ------
<S> <C> <C> <C> <C> <C>
1 Aaa/Aa/A $11,843 80.9% $12,050 83.2%
2 Baa 2,340 16.0 2,013 13.9
3 Ba 278 1.9 268 1.9
4 B 181 1.2 135 0.9
5 Caa and lower 4 0.0 8 0.1
6 In or near default 0 0.0 3 0.0
------- ----- ------- -----
Total $14,646 100.0% $14,477 100.0%
======= ===== ======= =====
</TABLE>
The Company utilizes its investments in the privately placed bond portfolio to
enhance the value of the overall portfolio, increase diversification and obtain
higher yields than are possible with comparable quality public market
securities. To control risk, the Company relies upon broader access to
management information, strengthened negotiated protective covenants, call
protection features, and a higher level of collateralization. The strength of
the privately placed bond portfolio is demonstrated by the predominance of NAIC
Categories 1 and 2 securities.
26
<PAGE>
Privately Placed Bond Credit Quality
<TABLE>
<CAPTION>
December 31,
-----------------------------
1995 1994
----------- -----------
($ In Millions)
NAIC
Bond Rating Agency Carrying % of Carrying % of
Rating Equivalent Designation Value Total Value Total
- -------- ---------------------- -------- ------ -------- ------
<S> <C> <C> <C> <C> <C>
1 Aaa/Aa/A $ 4,907 43.7% $ 5,205 47.2%
2 Baa 4,856 43.3 4,383 39.8
3 Ba 983 8.8 1,051 9.5
4 B 396 3.5 317 2.9
5 Caa and lower 47 0.4 37 0.3
6 In or near default 36 0.3 29 0.3
------- ----- ------- -----
Total $11,225 100.0% $11,022 100.0%
======= ===== ======= =====
</TABLE>
Included in the privately placed bond portfolio are residential mortgage
securities which totalled $1.8 billion and $2.0 billion at December 31, 1995 and
1994, respectively, or 16.1% and 18.2%, respectively, of the portfolio. The
residential mortgage securities segment of the privately placed bond portfolio
has provided the Company with quality investments and excellent loss/risk
experience. As of December 31, 1995, this entire segment was rated as NAIC
Categories 1 and 2. The Company imposes rigorous investment standards with
respect to these securities, including governmental agency guarantees, seasoned
pools and discount pricing as protection against prepayment. The Company tracks
problem loans individually and monitors its services closely. As a result,
delinquency rates for these securities were .86% as of December 31, 1995, as
compared with the national average of 2.35%, according to the Mortgage Bankers
Survey of delinquencies.
As of December 31, 1995 and 1994, mortgage-backed securities in the bond
portfolio consisted of $2.7 billion and $2.6 billion, respectively of GNMA, FNMA
and FHLMC mortgage-backed pass-through securities, and $2.6 billion and $3.0
billion, respectively, of government agency-backed collateralized mortgage
obligations.
The following table sets forth by industry category the carrying value and
percent of total of the bond portfolio, including short-term securities, as of
December 31, 1995.
Bond Portfolio By Industry
<TABLE>
<CAPTION>
December 31, 1995
-----------------
Public /(1)/ Private Total
--------------- --------------- ---------------
Carrying % of Carrying % of Carrying % of
Industry Category Value Total Value Total Value Total
-------- ----- -------- ----- -------- -----
($ In Millions)
<S> <C> <C> <C> <C> <C> <C>
Collateralized /(2)/ $ 6,430 43.9% $ 2,261 20.1% $ 8,691 33.6%
U. S. Government 3,117 21.3 130 1.2 3,247 12.6
Finance 1,014 6.9 1,215 10.8 2,229 8.6
Utilities 1,318 9.0 718 6.4 2,036 7.9
Producer Goods 285 1.9 1,263 11.2 1,548 6.0
Consumer Goods 595 4.1 942 8.4 1,537 5.9
Natural Resources 629 4.3 866 7.7 1,495 5.8
Media 209 1.4 571 5.1 780 3.0
Other Services 190 1.3 533 4.7 723 2.8
Retail 98 0.7 623 5.5 721 2.8
Transportation 102 0.7 515 4.6 617 2.4
Aerospace 90 0.6 211 1.9 301 1.2
Health Care 78 0.5 186 1.7 264 1.0
Others 491 3.4 1,191 10.7 1,682 6.4
------- ----- ------- ----- ------- -----
Total $14,646 100.0% $11,225 100.0% $25,871 100.0%
======= ===== ======= ===== ======= =====
</TABLE>
(1) Includes short-term securities.
(2) These bonds are collateralized by mortgages backed by FNMA, GNMA or FHLMC
and include collateralized mortgage obligations and pass-through
securities. These amounts also include asset backed securities such as
credit card, automobile and residential mortgage securities.
The estimated fair value of bonds is based upon quoted market prices for
actively traded securities. The Company subscribes to commercial pricing
services that provide estimated fair values of fixed income securities that are
not actively traded. Estimated fair values for privately placed bonds are
generally determined by applying interest spreads based on quality and asset
type to the appropriate duration on the Treasury yield curve.
The tables below set forth the carrying value, gross unrealized gains and
losses, net unrealized gains and losses and estimated fair value of the bond
portfolio (excluding short-term securities) at December 31, 1995, and 1994.
27
<PAGE>
<TABLE>
<CAPTION>
December 31, 1995
----------------------------------------
Gross Gross Net Estimated
Carrying Unrealized Unrealized Unrealized Fair
Value Gains Losses Gain (Loss) Value
---------- ---------- ---------- ----------- ---------
($ In Millions)
<S> <C> <C> <C> <C> <C>
U.S. Treasury Securities
and Obligations of U.S.
Government Corporations
and Agencies $ 9,391 $ 837 $ 43 $ 794 $10,185
Debt Securities issued by
Foreign Governments 262 28 0 28 290
Mortgage-backed securities 3,265 177 10 167 3,432
State and local governments 106 15 0 15 121
Industrial securities 9,031 763 58 705 9,736
Utilities 1,418 152 3 149 1,567
Affiliates 152 4 1 3 155
------- ------ ---- ------ -------
$23,625 $1,976 $115 $1,861 $25,486
======= ====== ==== ====== =======
<CAPTION>
December 31, 1994
----------------------------------------
Gross Gross Net Estimated
Carrying Unrealized Unrealized Unrealized Fair
Value Gains Losses Gain (Loss) Value
---------- ---------- ---------- ----------- ---------
($ In Millions)
<S> <C> <C> <C> <C> <C>
U.S. Treasury Securities
and Obligations of U.S.
Government Corporations
and Agencies $ 7,362 $154 $ 388 $(234) $ 7,128
Debt Securities issued by
Foreign Governments 125 2 8 (6) 119
Mortgage-backed securities 3,411 56 177 (121) 3,290
State and local governments 138 5 6 (1) 137
Industrial securities 10,991 230 436 (206) 10,785
Utilities 1,147 72 31 41 1,188
Affiliates 124 10 8 2 126
------- ---- ------ ----- -------
$23,298 $529 $1,054 $(525) $22,773
======= ==== ====== ===== =======
</TABLE>
Mortgage Loans
All mortgage loans are fixed rate commercial mortgages on completed, income
producing properties.
The following table provides certain information regarding the maturity
distribution of commercial mortgage loans:
Mortgage Loan Maturities
<TABLE>
<CAPTION>
December 31, 1995
-----------------
Carrying % of
Value Total
----- -----
($ In Millions)
<S> <C> <C>
Due in one year or less $ 697 18.0%
Due after one year
through five years 1,607 41.5%
Due after five years
through ten years 1,048 27.1%
Due after ten years 520 13.4
------ -----
Total $3,872 100.0%
====== =====
</TABLE>
At December 31, 1995, 89.4% of the mortgage loan portfolio consisted of bullet
loans (loans that do not fully amortize over their term). Scheduled bullet
maturities at December 31, 1995 of $674 million, $350 million, $319 million and
$395 million in 1996, 1997, 1998 and 1999 represent 17.4%, 9.0%, 8.2% and 10.2%
respectively, of the mortgage loan portfolio.
The Company had $785 million of bullet loans scheduled to mature during 1995 of
which $395 million, or 50.3%, were paid in full at maturity, $233 million, or
29.7%, were refinanced, $9 million, or 1.1%, were restructured, $97 million, or
12.4%, were foreclosed, and the remaining $51 million, or 6.5%, are in the
process of foreclosure, forbearance or in bankruptcy.
During 1995 and 1994, all renewed bullet loans were performing assets prior to
renewal and all loan renewals reflected market conditions. Past experience with
regard to bullet maturities, however, is not necessarily indicative of future
results.
The maturities of commercial mortgage loans are considered by the Company to be
sufficiently diversified and are carefully monitored and managed in light of the
Company's liquidity needs. See "Liquidity and Capital Resources."
The mortgage loan portfolio comprised 10.2% and 11.0% of the Company's
investments at December 31, 1995 and 1994, respectively. The mortgage loan
average investment yield was 9.3% and 9.4% for the years ending December 31,
1995 and 1994, respectively.
28
<PAGE>
Total gross investment income on mortgage loans for the year ended December 31,
1995 was $353 million, a 16.7% decrease from $424 million for 1994. The
decreases in 1995 and 1994 were due to a 4.8% and 24.3% decline, respectively in
the asset base. In 1994, Connecticut Mutual sold $249 million of urban
commercial mortgage loans to an unrelated party, resulting in an after tax loss
of $19 million, of which $12 million was deferred in the IMR. Net realized
capital losses for the years ended December 31, 1995 and 1994 were $88 million
and $172 million, respectively.
The following tables set forth by property type the carrying value of mortgage
loan balances as a percentage of the portfolio as of the dates indicated:
Mortgage Loans by
Property Type
<TABLE>
<CAPTION>
December 31
--------------------------------
1995 1994
---------------- ----------------
Carrying % of Carrying % of
Value Total Value Total
-------- ----- -------- -----
($ In Millions)
<S> <C> <C> <C> <C>
Office $1,272 32.9% $1,242 33.3%
Retail 1,073 27.7 983 26.3
Industrial & Other 532 13.7 567 15.2
Apartments 528 13.6 474 12.7
Hotels & Motels 431 11.1 432 11.6
Commercial Pools 36 1.0 34 0.9
------ ----- ------ -----
$3,872 100.0% $3,732 100.0%
====== ===== ====== =====
</TABLE>
Mortgage Loans by
Geographic Distribution
<TABLE>
<CAPTION>
December 31
--------------------------------
1995 1994
---------------- ----------------
Carrying % of Carrying % of
Value Total Value Total
-------- ----- -------- -----
($ In Millions)
<S> <C> <C> <C> <C>
West $ 965 25.0% $1,025 25.2%
Northeast 779 20.1 772 19.0
Mid-Atlantic 689 17.8 733 18.0
Southeast 548 14.1 555 13.7
Midwest 485 12.5 593 14.6
Southwest 406 10.5 388 9.5
------ ----- ------ -----
$3,872 100.0% $4,066 100.0%
====== ===== ====== =====
</TABLE>
Real Estate
The real estate portfolio includes real estate properties originally acquired as
investments and foreclosed real estate properties. The equity real estate
portfolio consists of office, retail, apartment, hotel and warehouse properties
primarily owned directly by the Company. At December 31, 1995, office
properties constituted the largest component of the portfolio, representing
40.2% of the aggregate carrying value.
The following table illustrates the diversity of the equity real estate
portfolio by region and by property category.
Equity Real Estate by
Property Type
<TABLE>
<CAPTION>
December 31
--------------------------------
1995 1994
---------------- ----------------
Carrying % of Carrying % of
Value Total Value Total
-------- ----- -------- -----
($ In Millions)
<S> <C> <C> <C> <C>
Office $ 604 40.2% $ 723 43.2%
Hotels & Motels 352 23.4 317 18.9
Retail 277 18.4 323 19.3
Apartments 150 10.0 180 10.8
Industrial and Other 120 8.0 131 7.8
------ ----- ------ -----
Total $1,503 100.0% $1,674 100.0%
====== ===== ====== =====
</TABLE>
<TABLE>
<CAPTION>
Equity Real Estate by
Geographic Distribution
December 31
--------------------------------
1995 1994
---------------- ----------------
Carrying % of Carrying % of
Value Total Value Total
-------- ----- -------- -----
($ In Millions)
<S> <C> <C> <C> <C>
Southeast $ 424 28.2% $ 533 31.8%
Mid-Atlantic 270 18.0 259 15.5
Midwest 263 17.4 231 13.8
Northeast 239 16.0 278 16.6
West 187 12.4 213 12.7
Southwest 120 8.0 160 9.6
------ ----- ------ -----
Total $1,503 100.0% $1,674 100.0%
====== ===== ====== =====
</TABLE>
The Company has been active in the investment real estate market since the
1960's. At the close of 1995, the Company's real estate portfolio consisted of
180 commercial properties with a statement value of $1.5 billion. The portfolio
is primarily unleveraged with only $3 million in third party non-recourse debt
outstanding. All of these properties are income producing. There are no
development transactions.
Real estate produced gross investment income of $287 million for the years ended
December 31, 1995, and $281 million for the year ended December 31, 1994. Net
capital losses from sales transactions and impairments were $49 million and $52
million, respectively, for such periods.
Foreclosed Real Estate is accounted for when acquired at the lower of the
property's market value or the loan balance, with write-downs at the point of
foreclosure being based on appraisals. All real estate investments are revalued
annually as described below, and write-downs are taken if the revaluation
indicates a permanent impairment of value. Foreclosed properties are managed to
optimize value and then either sold or transferred to the Investment Real Estate
portfolio. Foreclosed real estate had a carrying value, net of write-downs, of
$280 million and $456 million at December 31, 1995 and 1994 respectively.
Individual property valuations are reviewed by management on a regular basis.
Real estate valuations are first established at the Company's regional offices
by the asset managers using the ARGUS (TM) software valuation program to project
income on a lease-by-lease basis. Budgeted expenses, leasing assumptions and
capital expenditures are also reflected. The valuations are then reviewed by
the appraisal section of the Company's Real Estate Investment Division for
technical accuracy, methodology and the appropriateness of the assumed
29
<PAGE>
rates of return. The valuations are prepared on an interim basis between the
months of February and September, with a final valuation prepared for the end of
the year. Additionally, in 1995 a sample of properties were also valued by
independent appraisers.
Properties acquired by foreclosure or deed in lieu of foreclosure are
transferred to investment real estate when the following qualifications have
been met: (i) the property has been owned or monitored by the Company for
sufficient time to allow proper evaluation (including the pendency of
foreclosure procedures, receivership or redemption); (ii) the property has
generated an annual net operating income equal to at least 7% of the current
book value for the most recent six month period (12 months for hotels); and
(iii) there are no unusual circumstances which would have substantial negative
impact on the value of the property or the stability of the income stream (e.g.,
environmental problems, major tenant vacancies over a short-term or structural
building deficiencies, etc.)
At December 31, 1995, the Company had VIR of $30 million in respect of
properties held for sale.
See "Investment Reserves."
Portfolio Surveillance and Under-performing Investments
Bonds
The Company reviews all bonds on a regular basis utilizing the following
criteria: (i) material declines in revenues or margins, (ii) significant
uncertainty regarding the issuer's industry, (iii) debt service coverage or cash
flow ratios that fall below industry-specific thresholds, (iv) violation of
financial covenants, (v) trading of public securities at a substantial discount
due to specific credit concerns and (vi) other subjective factors that relate to
the issuer. The bond portfolio is actively reviewed to estimate the likelihood
and amount of financial defaults or write-downs in the portfolio and to make
timely decisions as to the potential sale or renegotiation of terms of specific
investments.
As defined by the NAIC, under-performing bonds are those whose deferral of
interest and/or principal payments are deemed to be caused by the inability of
the obligor to make such payments as called for in the bond contract.
The Company does not accrue interest income on bonds delinquent more than 90
days or when management believes the collection of interest is uncertain.
Interest not accrued on bonds totaled $16 million and $14 million for the years
ended December 31, 1995 and 1994, respectively.
The carrying values of NAIC Category 5 and 6 bonds, as of the indicated dates,
were as follows:
NAIC Category 5 and 6 Bonds
Carrying Value
<TABLE>
<CAPTION>
December 31,
------------
1995 1994
----- -----
(In Millions)
<S> <C> <C>
Performing:
Public $ 4 $ 8
Private 46 37
----- -----
Total 50 45
----- -----
Under-performing:
Public 0 3
Private 37 29
----- -----
Total 37 32
----- -----
Total $ 87 $ 77
===== =====
</TABLE>
As a result of the Company's conservative monitoring process, an internal watch
list is generated which includes certain properties which would not be
classified as under-performing under the SVO credit rating system. At December
31, 1995, bonds of issuers having a carrying value of $529 million (2.2% of the
total bond portfolio) had been placed on the internal watch list, which is
comprised of $1 million NAIC Category 1, $162 million NAIC Category 2, $100
million NAIC Category 3, $221 million NAIC Category 4 and $45 million NAIC
Category 5.
Mortgage Loans
The Company actively monitors and manages its mortgage loan portfolio and also
directly services the portfolio. Company personnel perform or review all
aspects of loan origination and portfolio management, including lease analysis,
property transfer analysis, economic and financial reviews, tenant analysis and
oversight of default and bankruptcy proceedings. All properties are revalued
each year and reinspected either each year or every other year based on internal
quality ratings. The Company uses the following criteria to determine whether a
current or potential problem exists: (i) borrower bankruptcies, (ii) major
tenant bankruptcies, (iii) requests for restructuring, (iv) delinquent tax
payments, (v) late payments, (vi) loan-to-value or debt service coverage
deficiencies and (vii) overall vacancy levels.
Restructured mortgage loans are loans for which current payment terms have been
modified to less than current market rates and which are currently performing in
accordance with such modified terms. Loans on which maturities have been
extended but on which current payments are being made at or above market
interest rates are not classified as restructured loans.
The carrying values of current and potential problem mortgage loans as of the
dates indicated were as follows:
30
<PAGE>
Current and Potential Problem Mortgage Loans
<TABLE>
<CAPTION>
December 31,
------------
1995 1994
---- ----
(In Millions)
<S> <C> <C>
Restructured $412 $525
In Process of Foreclosure 51 76
In Default 30 62
Actively Managed 134 274
---- ----
Total $627 $937
==== ====
</TABLE>
AVR contains a commercial mortgage loan component which totaled $60 million at
the end of 1995. In addition, at December 31, 1995, the Company maintained a
separate voluntary commercial mortgage loan investment reserve of $45 million
for properties in the process of foreclosure and for other specific anticipated
losses. See "Investment Reserves."
The Company does not accrue interest income on mortgage loans which are
delinquent more than 90 days or when management believes the collection of
interest is uncertain. Interest not accrued on mortgage loans totaled $11
million and $21 million for the years ended December 31, 1995 and 1994,
respectively.
The following tables set forth current and potential problem mortgage loans by
property category and geographic region as of December 31, 1995:
Mortgage Loan Distribution By Property Type
<TABLE>
<CAPTION>
December 31, 1995
--------------------------------
Problem % of
Total Loan Loan Total Loan
Amount Amount Amount
---------- ------- -----------
($ In Millions)
<S> <C> <C> <C>
Office $1,272 $293 23.0%
Retail 1,073 117 10.9
Industrial & Other 532 63 11.8
Apartments 528 92 17.4
Hotels & Motels 431 48 11.1
Commercial Pools 36 14 38.9
------ ---- ----
Total $3,872 $627 16.2%
====== ==== ====
</TABLE>
Mortgage Loan Distribution By Region
<TABLE>
<CAPTION>
December 31, 1995
--------------------------------
Problem % of
Total Loan Loan Total Loan
Amount Amount Amount
---------- ------- -----------
($ In Millions)
<S> <C> <C> <C>
West $ 965 $124 12.8%
Northeast 779 215 27.5
Mid-Atlantic 689 122 17.7
Southeast 548 52 9.5
Midwest 485 82 16.9
Southwest 406 32 7.9
------ ---- ----
Total $3,872 $627 16.2%
====== ==== ====
</TABLE>
Write-downs and Allowances
When the Company determines that it is probable that the net realizable value of
an asset is less than the carrying value of such asset, appropriate write-downs
or allowances are established and recorded in accordance with statutory
practice. Certain assets from the former Connecticut Mutual portfolio have
individual allowances netted against their carrying value. These allowances are
considered write downs not investment reserves.
In the case of bonds, the net realizable value is determined in accordance with
principles established by the SVO using criteria such as the net worth and
capital structure of the borrower, the value of the collateral, the presence of
additional credit support and the Company's evaluation of the borrower's ability
to compete in a relevant market.
In the case of real estate and commercial mortgage loans, borrower and property-
specific assessments are also made.
Investment Reserves
In compliance with regulatory requirements, the Company maintains the AVR. The
AVR stabilizes policyholders' contingency reserves against non-interest rate
related fluctuations in the value of stocks, bonds, mortgage loans and real
estate investments. Voluntary investment reserves ("VIR"), which are not
mandated by regulation, are maintained by Massachusetts Mutual in anticipation
of future losses on specific commercial mortgage loans and real estate holdings,
particularly commercial mortgage loans in the process of foreclosure.
The Company's total investment reserves at December 31, 1995 were $677 million,
an 11.0% increase from December 31, 1994, consisting of AVR of $567 million and
investment reserves of $110 million, comprised of $75 million of VIR and $35
million for a special reserve related to the surplus notes issued during 1993
and 1994. The increase in the AVR and investment reserves reflect increases in
the bond, stock, mortgage loan and real estate categories.
The following table presents the change in total investment reserves for the
years 1995 and 1994:
31
<PAGE>
TOTAL INVESTMENT RESERVES
<TABLE>
<CAPTION>
Bonds, Preferred Special
Stocks and Investment
Short-term Mortgage Other Reserve for
Investments Loans Real Estate Investments Surplus Notes Total
----------- ----- ----------- ----------- ------------ -----
(In Millions)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 (5) $ 169 $ 177 $ 96 $ 96 $ 25 $ 563
Reserve contributions (1) 39 90 22 9 10 170
Transfers among categories (14) 14 3 (3) 0 0
Net realized capital gains (losses) (2) (12) (110) (41) 7 0 (156)
Unrealized capital gains (losses) (3) 26 (3) 3 (2) 0 24
----- ----- ----- ----- ----- -----
Net change to Policyholders'
Contingency Reserves (4) 39 (9) (13) 11 10 38
----- ----- ----- ----- ----- -----
Balance at December 31, 1994(5) $ 208 $ 168 $ 83 $ 107 $ 35 $ 601
----- ----- ----- ----- ----- -----
Reserve contributions (1) 44 11 27 5 0 87
Transfers among categories (2) 2 27 (27) 0 0
Net realized capital gains (losses) (2) (1) (70) (42) 18 0 (95)
Unrealized capital gains (losses) (3) (39) (6) (2) 131 0 84
----- ----- ----- ----- ----- -----
Net change to Policyholders'
Contingency Reserves (4) 2 (63) 10 127 0 76
----- ----- ----- ----- ----- -----
Balance at December 31, 1995(5) $ 210 $ 105 $ 93 $ 234 $ 35 $ 677
===== ===== ===== ===== ===== =====
</TABLE>
(1) Amounts represent contributions calculated on a statutory formula plus
amounts deemed necessary by the Company. Represents the net impact on
Policyholders' Contingency Reserves for investment gains and losses not
related to changes in interest rates.
(2) These amounts offset realized capital gains, net of tax, that have been
recorded as a component of net income. Amounts include realized capital
gains and losses, net of tax, on sales not related to interest fluctuations,
repayments of mortgage loans at a discount, mortgage loan foreclosures and
real estate permanent write-downs.
(3) These amounts offset unrealized capital gains, recorded as a change in
Policyholders' Contingency Reserves (Surplus). Amounts include unrealized
losses due to market value reductions of securities with a NAIC quality
rating of 6 and net changes in the undistributed earnings of subsidiaries.
(4) Amounts represent the reserve contribution (note 1) less amounts already
recorded (notes 2 and 3). This net change in reserves is recorded as a
charge to Policyholders' Contingency Reserves.
(5) The balance is comprised of the Asset Valuation Reserves and Investment
reserves which are recorded separately as liabilities on the statement of
financial position as follows:
<TABLE>
<CAPTION>
Assets
Valuation Investment
Reserves Reserves Total (6)
-------- -------- ---------
(In Millions)
<S> <C> <C> <C>
Balance at December 31, 1993 $432 $131 $563
Balance at December 31, 1994 $470 $131 $601
Balance at December 31, 1995 $567 $110 $677
</TABLE>
(6) The Asset Valuation Reserve is a component of Total Adjusted Capital, while
the Investment Reserve is excluded from Total Adjusted Capital, according
to the NAIC definition.
VII. MassMutual - Description of the Business
Massachusetts Mutual Life Insurance Company (the "Company") is a mutual life
insurance company organized as a Massachusetts corporation which was originally
chartered in 1851. As a mutual life insurance company, the Company has no
shareholders. The Company's primary business is ordinary life insurance. The
Company also provides, directly or though its subsidiaries, a wide range of
annuity and disability products, and pension and pension-related products and
services, as well as investment services to individuals, and corporations and
other institutions in all 50 states of the United States, and the District of
Columbia. The Company is also licensed to transact business in Puerto Rico, and
six provinces of Canada, but has no export sales. Effective February 29, 1996,
Connecticut Mutual Life Insurance Company merged into the Company. As a result
of the merger, the Company has statutory assets in excess of $50 billion and
total assets under management in excess of $100 billion.
The Company's principal lines of business are (i) Individual Line of Business,
which provides life insurance including variable and universal life insurance,
annuities and disability insurance to individuals and small businesses; (ii)
Pension Management, which provides group pension investment products and
administrative services, primarily to sponsors of tax qualified retirement
plans; (iii) MassMutual Investment Management Group, which provides advisory
services for the Company's general investment account and separate investment
accounts, as well as for various closed-end and open-end investment companies
and external institutional clients, through its own staff
32
<PAGE>
and those of Oppenheimer Fund, Inc. ("Oppenheimer"), in which the Company
indirectly owns a controlling interest, and Concert Capital Management, Inc.
("Concert Capital"), which is also indirectly owned by the Company. The Company
acquired a controlling interest in the institutional money manager David L.
Babson & Co., Inc. ("Babson") in 1995 and created a holding company to own
Babson and Concert. In 1996, Concert consolidated some of its operations with
Babson. In 1994, the Company established Cornerstone Real Estate Advisers, Inc.
("Cornerstone"), an indirectly wholly-owned subsidiary which manages the real
estate properties owned by the Company. A description of the business done by
each line of business appears below. The table appearing at the end of Section
VII sets forth financial data for each of the three insurance lines of business
for the periods indicated.
The direction and operations of the Company's three lines of business are guided
by a statement of corporate vision. The Company's operations are managed so as
to maintain a financially strong and efficient enterprise for the benefit of
policyholders. The Company's long-term objectives are to maintain corporate
financial strength, enhance policyholder value, and generate and sustain growth.
INDIVIDUAL LINE OF BUSINESS
The Company's Individual Line of Business ("Individual Line") operations
provide a wide range of individual insurance and investment products and
financial management services through its network of general agents, agents and
affiliated distributors. The Contracts are administered by the Individual Line.
The principal individual insurance products offered by the Company's Individual
Line operations include whole life, variable universal life and term insurance,
individual annuities and individual disability income insurance contracts. The
majority of these products allow riders that provide such benefits as waiver of
premium, accidental death benefits, paid-up additions to insurance coverage and
accelerated death benefits.
Register variable contracts, mutual funds, including Oppenheimer Funds with
investment trusts and other investment products are distributed through MML
Investors Services, Inc. ("MML Investors Services"), a registered broker/dealer
that is indirectly wholly-owned by the Company. MML Distributors, LLC, also an
indirectly wholly-owned, registered broker/dealer subsidiary of the Company acts
as the principal underwriter for many of the Company's registered annuity and
insurance products.
Product Pricing and Management
The pricing of individual products is designed to produce surplus sufficient to
generate a level of capital consistent with the Company's financial strength
objectives. Long-term value to policyholders is achieved by competitively
managing performance in the key financial fundamentals for each individual
product, including investment returns, expenses, persistency, mortality and
morbidity (the incidence and duration of sickness or injury). The pricing of
most products over time reflects actual experience subject to minimum
guarantees. For whole life products, the actual experience is reflected in
dividends that are, in effect, returns resulting from more favorable interest,
mortality, expense and persistency experiences than those reflected in the
premium. For other products, the actual experience is reflected in interest,
mortality and/or expense rates.
Principal Markets, Marketing and Distribution
Sales of the Company's Individual Line products are primarily targeted to three
markets: upper income individuals ages 35 and over; moderate income individuals
under age 35; professionals, business owners, principles and partners. Over 90%
of Individual Line's life insurance premium sales are made in these target
markets.
The Company sells its Individual Line products nationwide primarily through
approximately 100 general agents who contract with more than 5,000 full-time
career agents. In 1995, 85% of Individual Line's premiums were generated by
policies sold by the Company's career agents. The balance was sold by other
producers, including independent brokers, who contract with the general agents,
and consultants. The Company began to issue in 1994, the Oppenheimer LifeTrust
Variable Annuity for marketing and distribution by the Oppenheimer distribution
system of registered representatives in addition to the Company's career agents.
Underwriting
All underwriting is centralized at the Company's home office. The risk
assessment process is carefully balanced to ensure an evaluation of relative
risks consistent with the issuance of new business and competitive product
performance. The Company utilizes a computerized system in the process of
reviewing and approving applications for life insurance. This system affords
the Company substantial savings in underwriting time and cost, and lends
consistency to the underwriting process.
Competition
The life insurance industry is highly competitive. There are more than 1,800
life insurance companies in the United States, many of which offer individual
insurance products similar to those marketed by the Individual Line. In
addition to competition within the industry, insurers are increasingly facing
competition from non-traditional sources in the financial services business,
including mutual funds, banks, securities brokerage houses and other financial
services entities, many of which provide alternative investment and savings
vehicles for consumers. Legislative initiatives proposed at the federal level
would, if enacted, reorder the financial services industry, thereby changing the
environment in which the Company competes.
Competition for large life insurance sales usually includes fewer than 50
financially strong companies such as the Company. Clients' advisors,
consultants, attorneys and accountants are often involved in the selling process
for these large cases. There is substantial competition for smaller cases due
to the large number of companies and agents in these markets nationwide.
The Company's management believes its financial strength, agent skill and
historical product performance provide competitive advantages for the individual
products it offers in these markets. The Company has received the highest
ratings from A.M. Best Company, Inc. (A++), Standard & Poor's Corporation (AAA),
and Duff & Phelps Credit Rating Company (AAA), as well as a rating of Aa1 by
Moody's Investors Service, Inc. (the highest in its "excellent" category). In
late 1995 and early 1996, all four of these agencies conducted thorough reviews
of MassMutual's ratings in light of the Connecticut Mutual merger. In all four
cases, the 1995 ratings for the Company were reaffirmed. The Company is one of
only three companies that has ranked in
33
<PAGE>
the top 10 companies in each of the last 18 years in A.M. Best's Annual
Statistical Study-20 Year Dividend Comparisons. The study is based upon actual
dividends paid over the last 20 years and measures whole life policyholder value
using net surrender cost adjusted for interest.
Currently, more insurance companies, banks and mutual fund companies are
entering the annuity business. The Company competes in this market by using
multiple distribution channels, enhancing its customer service orientation, and
offering desired product features. In 1994, the Company made a key strategic
move in continuing to adapt to this changing market by offering the Oppenheimer
LifeTrust Variable Annuity to be sold through the Oppenheimer distribution
system and by the Company's career agents.
In the disability income market, competitor strategies are diverging due to poor
financial results. The Company may be better positioned than some competitors
to succeed in this market as a result of the ability of its distribution system
to integrate sales of disability income insurance into total financial planning.
PENSION MANAGEMENT
Through its Pension Management ("PM") operations, the Company markets a complete
line of group pension investment products and administrative services, primarily
to sponsors of tax qualified retirement plans. The Company offers a variety of
guaranteed and non-guaranteed investment accumulation products and ancillary
services to both defined benefit and defined contribution plans.
Principal Markets, Marketing and Distribution
The Company markets to both defined benefit and defined contribution plans. The
Company's goal in the pension marketplace is to maintain its existing block of
defined benefit business, acquire existing business, and to take advantage of
new business opportunities in the defined contribution market. The Company
focuses on small and medium-size businesses, and currently administers over
2,500 full-service plans serving in excess of 260,000 employees.
The Company's pension products are sold through 30 pension field employees
("representatives") in 17 offices located in major cities in the United States.
The representatives distribute products through the Company's agents, brokers
(primarily agents of other companies) and consultants.
Competition
The Company's PM's operations, with $14 billion in assets, is the 12th largest
asset manager among insurance companies participating in the qualified pension
plan marketplace and is among the top 50 pension asset managers in terms of
assets under management. In recent years, the Company has faced increased
competition in the pension product and services market as a result of the
dissolution of traditional industry boundaries and the entrance of mutual funds
and other non-traditional pension management entities which have significant
name recognition and retail servicing capabilities. The increased diversity in
providers of pension products and services, and the increasing number of
companies entering the market are anticipated to increase price and investment
performance pressures. The Company's diverse product line, which includes
mutual funds, flexibility in servicing levels, and use of technology in
maintaining business are expected to enhance the Company's position as an
experienced pension management entity. The pension marketplace itself may be
poised for expansion due to increased attention focused on retirement planning
and savings.
LIFE AND HEALTH BENEFITS MANAGEMENT
The Company entered into a definitive agreement on January 5, 1996 to sell its
Life and Health Benefits Management business to Wellpoint Health Networks, Inc.
for a purchase price of approximately $380 million, subject to certain
adjustments. The sale was completed on March 31, 1996.
INVESTMENT MANAGEMENT
The Company's Investment Management Group operations ("IM") provide investment
management services for the Company's general investment account and separate
investment accounts, two closed-end investment companies, four open-end
investment companies, a collateralized bond obligation company, pension funds,
endowments, and various subsidiaries. These advisory services are currently
performed by the Company, Babson Concert Capital and Oppenheimer. Cornerstone
manages the real estate properties owned by the Company.
The Company's investment management services focus on supporting the liabilities
of the lines of business in light of yield, liquidity and diversification
considerations. The General Investment Account ("GIA"), which backs most of the
Company's participating and nonparticipating insurance and pension products, is
divided into a number of several portfolios, each of which is structured to meet
the obligations of its particular liabilities. The goal of asset/liability
management for the GIA is to optimize and control, particularly in volatile
financial markets, the investment return and liquidity of a portfolio given the
unique set of liabilities it supports. The Company utilizes a wide array of
investment instruments to carry out its portfolio management activities. The
investment strategies for the separate investment accounts are generally aimed
at maximizing the total rate of return against an agreed upon market benchmark.
REGULATION
The Company is licensed to transact its insurance business in, and is subject to
regulation and supervision by all 50 states of the United States, the District
of Columbia, Puerto Rico and six provinces of Canada. The Company's insurance
subsidiaries are licensed, regulated and supervised in all jurisdictions where
they conduct an insurance business. The extent of such regulation varies, but
most jurisdictions have laws and regulations requiring the licensing of insurers
and their agents and setting standards of solvency and business conduct to be
maintained by licensed insurance companies, and may regulate withdrawal from
certain markets. In addition, statutes and regulations usually require the
approval of policy forms and, for certain lines of insurance, the approval of
rates. Such statutes and regulations also prescribe the permitted types and
concentration of investments. The Company is also subject to regulation of its
accounting methodologies and practices and the Company and each of its insurance
subsidiaries are required to file detailed annual financial statements with
supervisory agencies in each of the jurisdictions in which it does business.
Each of their operations and accounts
34
<PAGE>
is also subject to examination by such agencies at regular intervals.
Massachusetts insurance law requires the Company, as a domestic mutual life
insurance company, to maintain at least $1.6 million in statutory surplus but
limits the amount of surplus that the Company may accumulate. Additionally,
insurance regulators of other states have the discretionary authority, in
connection with the continual licensing of the Company and each of its insurance
subsidiaries, to limit or prohibit new issuances of business to policyholders
when, in their judgment, they determine that such insurer is not maintaining
minimum statutory surplus or capital or if the further transaction of business
will be hazardous to its policyholders.
The Company is subject to guaranty fund assessments in all states in which it
does business. The guaranty associations are organized to pay contractual
obligations under insurance policies issued by impaired or insolvent insurers.
The Company is also subject to risk-based capital ("RBC") requirements
promulgated by the National Association of Insurance Commissioners, and expected
to be adopted by Massachusetts in 1996. The RBC Model Act will give state
insurance commissioners explicit regulatory authority to require various actions
by, or take various actions against, insurance companies whose total adjusted
capital does not meet the RBC standards.
In addition to regulation of its insurance business, the Company is subject to
various types of to federal and state laws and regulations affecting the
conduct, taxation and other aspects of their businesses. The Company and
certain of its subsidiaries, and certain policies and contracts offered by them
are subject to various levels of regulation under the federal securities laws
administered by the Securities and Exchange Commission. Also, as owners and
operators of real property, the Company is subject to extensive federal, state
and local environmental laws and regulations. Finally, when the Company and
its insurance subsidiaries act as fiduciaries for employee benefit plans
governed by the Employee Retirement Income Security Act of 1974 ("ERISA"), they
are subject to regulation by the United States Department of Labor.
In 1993, the United States Supreme Court issued its opinion in John Hancock
Mutual Life Insurance Co. v. Harris Trust and Savings Bank, holding that certain
contractholder funds held by John Hancock Mutual Life Insurance Company in its
general investment account under a participating group annuity contract were
"plan assets" and therefore subject to ERISA's fiduciary provisions. The
Department of Labor is currently considering a number of requests for exemptive
relief and interpretive advice submitted by the American Council of Life
Insurance on behalf of the insurance industry as a result of that opinion. The
Company is unable at this time to determine with any certainty the effect of the
opinion on its general account contracts and operations. The Department has
granted a class exemption from ERISA's prohibited transaction provisions which
applies to external investments made with general account assets.
The Company's management believes it is in compliance in all material respects
with all applicable regulations.
PROPERTIES
The Company owns seven buildings located in Springfield, Massachusetts on
approximately 88.64 acres, comprising its home office complex and occupies all
of the approximately 1.2 million square feet of space in such buildings. The
Company believes that such owned and leased properties are suitable and adequate
for its business operations.
35
<PAGE>
This table sets forth financial data for each of three insurance lines of
business for the periods indicated.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
(in millions) YEARS ENDED DECEMBER 31,
===================================================================================================
Other Data: 1995 1994 1993 1992 1991
===================================================================================================
<S> <C> <C> <C> <C> <C>
Premium Income:
Individual Line $ 3,925 $ 3,878 $ 3,882 $ 3,546 $ 3,088
Pension Management 1,803 1,566 1,778 2,054 1,877
Life & Health Benefits
Management 0 733 748 754 755
------- ------- ------- ------- -------
Total premium income $ 5,728 $ 6,177 $ 6,408 $ 6,354 $ 5,720
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------
Net Investment and Other
Income:
Individual Line $ 1,967 $ 1,781 $ 1,725 $ 1,629 $ 1,702
Pension Management 904 967 1,112 1,225 1,334
Life & Health Benefits
Management 27 55 49 44 47
------- ------- ------- ------- -------
Total net investment and
other income $ 2,898 $ 2,803 $ 2,886 $ 2,898 $ 3,083
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------
Net Gain From Operations:
Individual Line $ 214 $ 134 $ 143 $ 134 $ 114
Pension Management 58 61 64 47 59
Life & Health Benefits
Management 4 43 45 49 47
------- ------- ------- ------- -------
Total net gain from operations $ 276 $ 238 $ 252 $ 230 $ 220
======= ======= ======= ======= =======
- ---------------------------------------------------------------------------------------------------
Total Assets (at period end):
Individual Line $33,204 $30,278 $28,216 $24,936 $22,894
Pension Management 16,595 16,060 16,710 16,619 16,801
Life & Health Benefits
Management 619 542 908 773 707
------- ------- ------- ------- -------
Total assets $50,418 $46,880 $45,834 $42,328 $40,402
======= ======= ======= ======= =======
===================================================================================================
</TABLE>
VIII. Executive Officers and Directors
Directors
Roger G. Ackerman
Director and Member, Auditing and Human Resources Committees; President and
Chief Operating Officer, Corning Incorporated, (manufacturer of specialty
materials, communication equipment and consumer products), One Riverfront
Plaza, Corning, New York; Director (since 1993), Dow Corning Corporation
(producer of silicone products), 2200 West Salzburg Road, Midland, Michigan;
Director, The Pittson Company (mining and marketing of coal for electric
utility and steel industries) One Pickwick Plaza, Greenwich, Connecticut.
James R. Birle
Director, Chairman, Dividend Policy Committee and Member, Investment Committee;
President and Founder (since 1994), Resolute Partners, Incorporated (private
merchant bank), 2 Greenwich Plaza, Suite 100, Greenwich Connecticut; General
Partner (1988-1994), The Blackstone Group; Co-Chairman and Chief Executive
Officer, Wickes Companies, Inc. (diversified manufacturer and distributor),
3340 Ocean Park Boulevard, Santa Monica, California; Director: Drexel
Industries, Inc., Connecticut Health and Education Facilities Authority, and
Transparency International; Trustee, Villanova University and The Sea Research
Foundation; Director (1991-1996), Connecticut Mutual Life Insurance Company,
140 Garden Street, Hartford, Connecticut.
Frank C. Carlucci, III
Director and Member, Board Affairs and Dividend Policy Committee Chairman
(since 1993), Vice Chairman (1989-1993), The Carlyle Group (merchant banking
corporation), 1001 Pennsylvania Avenue, N.W., Washington, D.C.; Director:
Ashland Inc. (producer of petroleum products), 1000 Ashland Drive, Russell,
Kentucky; BDM International, Inc. (professional and technical services to
public and private sector), 7915 Jones Branch Drive, McLean, Virginia; Bell
Atlantic Corporation (telecommunications), 1717 Arch Street, Philadelphia,
Pennsylvania; CB Commercial Real Estate Group, Inc. (real estate broker
36
<PAGE>
subsidiary of Carlyle Holding Corporation), 533 Fremont Avenue, Los Angeles,
California; East New York Savings Bank; General Dynamics Corporation
(manufacturer of military equipment), 3190 Fairview Park Drive, Falls Church,
Virginia; Kaman Corporation (diversified manufacturer), 1332 Blue Hills Avenue,
Bloomfield, Connecticut; Neurogen Corporation; Northern Telecom Ltd. (digital
telecommunications systems), 2920 Matheson Boulevard East, Mississauga,
Ontario, Canada; The Quaker Oats Company (manufacturer of food products), 321
North Clark Street, Chicago, Illinois; The Rand Corporation; Sun Resorts Ltd.,
N.V.; Westinghouse Electric Corporation (electronic systems, electric power
generating equipment and broadcasting), 11 Stanwix Street, Pittsburgh,
Pennsylvania; Director (1989-1996), Connecticut Mutual Life Insurance Company,
140 Garden Street, Hartford, Connecticut.
Gene Q. Chao
Director and Member, Auditing and Dividend Policy Committees Chairman and Chief
Executive Officer (since 1991), Computer Projections, Inc. 733 S.W. Vista
Avenue, Portland, Oregon; Chairman and Chief Executive Officer (1990), American
Leadership Forum (non-profit leadership and community building organization);
Director (1990-1996), Connecticut Mutual Life Insurance Company, 140 Garden
Street, Hartford, Connecticut.
Patricia Diaz Dennis
Director and Member Auditing and Human Resources Committee Senior Vice
President and Assistant General Counsel (since 1995), SBC Communications Inc.
(telecommunications), 175 East Houston, San Antonio, Texas; Special Counsel -
Communication Law Matters (1993-1995), Sullivan & Cromwell (law firm), 1701
Pennsylvania Avenue, N.W., Washington, D.C.; Assistant Secretary of State for
Human Rights an Humanitarian Affairs (1992-1993), U.S. Department of State,
Washington, D.C.; Trustee (since 1995), Federal Communications Bar Association
Foundation; Trustee (since 1993), Radio and Television News Directors
Foundation; Director (since 1993), National Public Radio; Director (since
1991), Reading Is Fundamental; Director (since 1989), Foundation for Women's
Resources; Trustee (since 1991), Tomas Rivera Center; Director (1995-1996),
Connecticut Mutual Life Insurance Company, 140 Garden Street, Hartford,
Connecticut.
Anthony Downs
Director and Member, Dividend Policy and Investment Committees Senior Fellow,
The Brookings Institution (non-profit policy research center), 1775
Massachusetts Avenue, N.W., Washington, D.C.; Director: The Pittway Corporation
(publications and security equipment), 200 South Wacker Drive, Suite 700,
Chicago, Illinois; National Housing Partnerships Foundation (non-profit
organization to own and manage rental housing), 1225 Eye Street, N.W.,
Washington, D.C.; Bedford Properties, Inc. (real estate investment trust), 3658
Mt. Diable Boulevard, Lafayette, California; General Growth Properties, Inc.
(real estate investment trust), 215 Keo Way, Des Moines, Iowa; NAACP Legal and
Educational Defense Fund, Inc. (civil rights organization), 99 Hudson Street,
New York, New York; Consultant, Aetna Realty Investors (real estate
investments), 242 Trumbull Street, Hartford, Connecticut; and Salomon Brothers
Inc (investment banking), 7 World Trade Center, New York, New York; Trustee:
Urban Institute (public policy research organization), 2100 M Street, N.W.,
Washington, D.C. and Urban Land Institute (educational and research
organization) 625 Indiana Avenue, N.W., Washington, D.C.
James L. Dunlap
Director and Member, Human Resources and Board Affairs Committees Senior Vice
President of Texaco, Inc. (producer of petroleum products), 2000 Westchester
Avenue, White Plains, New York and President (1987-1994), Texaco USA, 1111
Bagby, Houston, Texas.
William B. Ellis
Director and Member, Auditing and Investment Committees Senior Fellow (since
1995) Yale University School of Forestry and Environmental Studies, New Haven,
Connecticut; Chairman (1983-1995) and Chief Executive Officer (1983-1993),
Northeast Utilities (electric utility), 107 Selden Street, Berlin, Connecticut;
Director (since 1991), The Hartford Steam Boiler Inspection and Insurance
Company (property and casualty insurer), One State Street, Hartford,
Connecticut; Director (since 1996), Advest Group, Inc. (financial services
holding company), 280 Trumbull Street, Hartford, Connecticut; Director (since
1995), Catalytica Combustion Systems, Inc.; Director, The National Museum of
National History of the Smithsonian Institution, Washington, D.C.; Director
(1985-1996), Connecticut Mutual Life Insurance Company, 140 Garden Street,
Hartford, Connecticut.
Robert M. Furek
Director and Member, Dividend Policy and Investment Committees President and
Chief Executive Officer, Heublein, Inc. (beverage distributor), 450 Columbus
Boulevard, Hartford, Connecticut; Director, The Dexter Corporation (producer of
specialty chemicals and papers), One Elm Street, Windsor Locks, Connecticut;
Corporator, Hartford Hospital and The Bushnell Memorial, Hartford, Connecticut;
Trustee, Colby College, Mayflower Hill Drive, Waterville Maine; Director (1990-
1996), Connecticut Mutual Life Insurance Company, 140 Garden Street, Hartford,
Connecticut.
Charles K. Gifford
Director and Member, Investment and Auditing Committees Chairman and Chief
Executive Officer (since 1995) and President, The First National Bank of Boston
and Bank of Boston Corporation (bank holding company), 100 Federal Street,
Boston, Massachusetts; Director, Member of Audit Committee, Boston Edison Co.
(public utility electric company), 800 Boylston Street, Boston, Massachusetts.
William N. Griggs
Director, Chairman, Auditing Committee and Member, Investment Committee
Managing Director, Griggs &
37
<PAGE>
Santow Inc. (business consultants) 75 Wall Street, New York, New York;
Director, T/SF Communications, Inc. (diversified publishing and communications
company), Tulsa, Oklahoma, Trustee (1983-1991), MassMutual Integrity Funds
(open-end investment company advised by MassMutual).
James G. Harlow, Jr.
Director and Member, Auditing and Board Affairs Committee Chairman, Chief
Executive Officer (since 1995), and President (1973-1995), Oklahoma Gas and
Electric Company (electric utility), Corporate Tower, 101 N. Robinson, Oklahoma
City, Oklahoma; Director, Fleming Companies (wholesale food distributors), 6301
Waterford Boulevard, Oklahoma City, Oklahoma; Director (since 1994), Associated
Electric & Gas Insurance Services Limited, Harborside Financial Center, 700
Plaza Two, Jersey City, New Jersey.
George B. Harvey
Director, Chairman, Human Resources Committee and Member, Board Affairs
Committee Chairman, President and Chief Executive Officer, Pitney Bowes, Inc.
(office machines manufacturer), One Elmcroft Road, Stamford, Connecticut;
Director: Merrill Lynch & Co., Inc. (financial services holding company), 250
Vesey Avenue, World Financial Center, North Tower, New York, New York; The
McGraw Hill Companies (multimedia publishing and information services), 1221
Avenue of the Americas, New York, New York; Stamford Hospital, Stamford,
Connecticut; Pfizer, Inc. (pharmaceutical and health-care products), 235 East
42nd Street, New York, New York; The Catalyst; Member, Board of Overseers,
Wharton School of Finance, University of Pennsylvania; Director (1989-1996),
Connecticut Mutual Life Insurance Company, 140 Garden Street, Hartford,
Connecticut.
Barbara B. Hauptfuhrer
Director, Member Board Affairs and Investment Committees Director and Member,
Compensation, Nominating and Audit Committees, The Vanguard Group of Investment
Companies including among others the following funds: Vanguard/Windsor Fund,
Vanguard/Wellington Fund, Vanguard/Morgan Growth Fund, Vanguard/Wellesley
Income Fund, Vanguard/Gemini Fund, Vanguard/Explorer Fund, Vanguard Municipal
Bond Fund, Vanguard Fixed Income Securities Fund, Vanguard Index Trust,
Vanguard World Fund, Vanguard/Star Fund, Vanguard Ginnie Mae Fund,
Vanguard/Primecap Fund, Vanguard Convertible Securities Fund, Vanguard
Quantitative Fund, Vanguard/Trustees Commingled Equity Fund, Vanguard/Trustees
Commingled Fund-International, Vanguard Money Market Trust, Vanguard/Windsor
II, Vanguard Asset Allocation Fund and Vanguard Equity Income Fund (principal
offices, Drummers Lane, Valley Forge, Pennsylvania); Director, Chairman of
Retirement Benefits Committee and Pension Fund Investment Review - USA and
Canada and Member, Audit, Finance and Executive Committees, The Great Atlantic
and Pacific Tea Company, Inc. (operator of retail food stores), 2 Paragon
Drive, Montvale, New Jersey; Director, Chairman of Nominating Committee and
Member, Compensation Committee, Knight-Ridder, Inc. (publisher of daily
newspapers and operator of cable television and business information systems),
One Herald Plaza, Miami, Florida; Director and Member, Compensation Committee,
Raytheon Company (electronics manufacturer), 141 Spring Street, Lexington,
Massachusetts; Director and Member, Executive Committee and Chairman, Human
Resources and Independent Directors Committees, Alco Standard Corp.
(diversified office products and paper distributor), 825 Duportail Road, Valley
Forge, Pennsylvania.
Sheldon B. Lubar
Director, Chairman, Board Affairs Committee and Member, Investment Committee
Chairman, Lubar & Co. Incorporated (investment management and advisory company)
777 East Wisconsin Avenue, Milwaukee, Wisconsin; Chairman and Director, The
Christiana Companies, Inc. (real estate development); Director: Firstar Bank,
Firstar Corporation (bank holding company), SLX Energy, Inc. (oil and gas
exploration); Member, Advisory Committee, Venture Capital Fund, L.P. (principal
offices, 777 East Wisconsin Avenue, Milwaukee, Wisconsin); Director: Grey Wolf
Drilling Co. (contract oil and gas drilling), 2000 Post Oak Boulevard, Houston,
Texas; Marshall Erdman and Associates, Inc. (design, engineering, and
construction firm), 5117 University Avenue, Madison, Wisconsin; MGIC Investment
Corporation (investment company), MGIC Plaza, 111 E. Kilbourn Avenue,
Milwaukee, Wisconsin; Director (since 1995), Energy Ventures, Inc., 5 Post Oak
Park, Houston, Texas; Director (since 1993), Ameritech, Inc. (regional holding
company for telephone companies), 30 South Wacker Drive, Chicago, Illinois;
Director (1989-1995), Prideco, Inc. (drill collar manufacturer), 6039 Thomas
Road, Houston, Texas; Director (1989-1994), Schwitzer, Inc. (holding company
for engine parts manufacturers), P.O. Box 15075, Asheville, North Carolina; and
Briggs & Stratton (small engine manufacturer) 3300 North 124th Street,
Milwaukee, Wisconsin; Director (1986-1991), Square D Company (manufacturer of
electrical equipment and electronics products), Executive Plaza, Palatine,
Illinois and Milwaukee Insurance Group, Inc., 809 W. Michigan Street,
Milwaukee, Wisconsin; Director (1987-1991), Lubar Management, Inc. (investment
company) 777 East Wisconsin Avenue, Milwaukee, Wisconsin.
William B. Marx, Jr.
Director and Member, Dividend Policy and Board Affairs Committees Senior
Executive Vice President (since 1995), Lucent Technologies, Inc. (public
telecommunications systems and software), 600 Mountain Road, Murray Hill, New
Jersey; Executive Vice President and Chief Executive Officer, Multimedia
Products Group (1994-1995) and Network Systems Group (1993-1994), AT&T (global
communications and network computing company), 295 North Maple Avenue, Basking
Ridge, New Jersey; Group Executive and President (1989-1993), AT&T Network
Systems (manufacturer and marketer of network telecommunications equipment),
475 South Street, Morristown, New Jersey; Member (since 1996), Advisory
Council, Graduate School of Business, Stanford University, Stanford,
California.
38
<PAGE>
John F. Maypole
Director and Member, Board Affairs and Human Resources Committee Managing
Partner, Peach State Real Estate Holding Company (real estate investment
company), P.O. Box 1223, Toccoa, Georgia; Consultant to institutional
investors; Co-owner of family businesses (including Maypole Chevrolet-Geo, Inc.
and South Georgia Car Rentals, Inc.); Director, Chairman, Finance Committee and
Member, Executive Committee and Human Resources Committee on Directors, Bell
Atlantic Corporation (telecommunications), 1717 Arch Street, Philadelphia,
Pennsylvania; Director and Chairman, Compensation Committee, Briggs Industries,
Inc. (plumbing fixtures), 4350 W. Cypress Street, Tampa, Florida; Director,
Chairman, Audit Committee and Member, Compensation Committee, Blodgett
Corporation; Director, Chairman, Products Committee and Member, Compensation
and Audit Committee, Igloo Corporation (portable coolers), 1001 W. Sam Houston
Parkway North, Houston, Texas; Director and Member, Senior Management
Committee, Dan River, Inc. (textile manufacturer), 2291 Memorial Drive,
Danville, Virginia; Director, Davies, Turner & Company; Director (1989-1996),
Connecticut Mutual Life Insurance Company, 140 Garden Street, Hartford,
Connecticut.
Donald F. McCullough
Director and Member, Dividend Policy and Auditing Committees Retired (since
1988); former Chairman and Chief Executive Officer, Collins & Aikman Corp.
(manufacturer of textile products) 210 Madison Avenue, New York, New York;
Director: Bankers Trust New York Corp. (bank holding company) and Bankers Trust
Company (principal offices, 280 Park Avenue, New York, New York); Melville
Corporation (specialty retailer), One Theall Road, Rye, New York.
John J. Pajak
Vice Chairman, Director and Member, Dividend Policy and Investment Committees
Vice Chairman, Director and Chief Administrative Officer (since 1996),
Executive Vice President (1987-1996) of MassMutual; Director (since 1994):
MassMutual Holding Company and MassMutual Holding Company Two, Inc. (wholly-
owned holding company subsidiaries of MassMutual); MassMutual Holding Company
Two MSC, Inc. (wholly-owned holding company subsidiary of MassMutual Holding
Company Two, Inc.); and Mirus Insurance Company (formerly MML Pension Insurance
Company, a wholly-owned insurance subsidiary of MassMutual Holding Company Two
MSC, Inc.) (principal offices, 1295 State Street, Springfield, Massachusetts);
Director (since 1995), National Capital Health Plan, Inc. (health maintenance
organization), Washington, D.C.
Barbara S. Preiskel
Director and Member, Auditing and Human Resources Committees Attorney-at-Law,
60 East 42nd Street, New York, New York; Director: Textron, Inc. (diversified
manufacturing company), 40 Westminster Street, Providence, Rhode Island;
General Electric Company (diversified manufacturer electrical products), 3135
Easton Turnpike, Fairfield, Connecticut; The Washington Post Company (publisher
of daily newspaper), Washington, D.C.; American Stores Company (operator of
supermarkets and drugstores), 709 East South Temple, Salt Lake City, Utah.
David E. Sams, Jr.
President, Chief Operating Officer, Director and Member, Board Affairs,
Dividend Policy and Investment Committee President, Chief Operating Officer and
Director (since 1996) of MassMutual, 1295 State Street, Springfield,
Massachusetts; Chairman (1994-1996), President and Chief Executive Officer
(1993-1996), Connecticut Mutual Life Insurance Company, 140 Garden Street,
Hartford, Connecticut; President and Chief Executive Officer-Agency Group
(1987-1993), Providian Corporation (formerly Capital Holding Corporation, a
holding company for insurance companies), Louisville, Kentucky; Director (since
1995), Health Insurance of Vermont, Inc. and Kentucky Medical Insurance
Company; Director (1995), United States Chamber of Commerce; Corporator, Saint
Francis Hospital and Medical Center, Hartford, Connecticut.
Thomas B. Wheeler
Chairman, Chief Executive Officer, Chairman, Investment Committee and Member,
Dividend Policy and Board Affairs Committees Chairman (since 1996), Chief
Executive Officer (since 1988), and President (1987-1996) of MassMutual;
Chairman and Chief Executive Officer (since 1995), DLB Acquisition Corporation
(holding company for investment advisers); Chairman of the Board of Directors
(since 1994), Mirus Insurance Company (formerly MML Pension Insurance Company,
a wholly-owned insurance subsidiary of MassMutual Holding Company Two MSC,
Inc.) (principal offices, 1295 State Street, Springfield, Massachusetts);
Director, The First National Bank of Boston and Bank of Boston Corporation
(bank holding company), 100 Federal Street, Boston, Massachusetts and
Massachusetts Capital Resources Company, 545 Boylston Street, Boston,
Massachusetts; Chairman and Director, Oppenheimer Acquisition Corp. (parent of
Oppenheimer Management Corporation, an investment management company), Two
World Trade Center, New York, New York; Director (since 1993), Textron, Inc.
(diversified manufacturing company), 40 Westminster Street, Providence, Rhode
Island; Chairman of the Board of Directors (1992-1995), Concert Capital
Management, Inc. (wholly-owned investment advisory subsidiary of MassMutual
Holding Company), One Memorial Drive, Cambridge, Massachusetts.
Alfred M. Zeien
Director and Member Board Affairs and Human Resources Committees Chairman and
Chief Executive Officer, The Gillette Company (manufacturer of personal care
products), Prudential Tower Building, Boston, Massachusetts; Director: Polaroid
Corporation (manufacturer of photographic products), 549 Technology Square,
Cambridge, Massachusetts; Repligen Corporation (biotechnology), One Kendall
Square, Cambridge, Massachusetts; Bank of Boston Corporation (bank holding
company), 100 Federal Street, Boston, Massachusetts; and Raytheon Corporation
(electronics manufacturer), 141 Spring Street,
39
<PAGE>
Lexington, Massachusetts; Trustee, University Hospital of Boston,
Massachusetts; Trustee (since 1994), Marine Biology Laboratory and Woods Hole
Oceanographic Institute, Woods Hole, Massachusetts.
Executive Officers (Other than Directors)
Lawrence V. Burkett, Jr., Executive Vice President
and General Counsel
Executive Vice President and General Counsel (since 1993), Senior Vice
President and Deputy General Counsel (1992-1993), and Senior Vice President and
Associate General Counsel (1988-1992) of MassMutual; Director (since 1993),
MassMutual Holding Company and Director (since 1994), MassMutual Holding
Company Two, Inc. (wholly-owned holding company subsidiaries of MassMutual);
Director (since 1994): MassMutual Holding Company Two MSC, Inc. (wholly-owned
holding company subsidiary of MassMutual Holding Company Two, Inc.) and Mirus
Insurance Company (formerly MML Pension Insurance Company, a wholly-owned
insurance subsidiary of MassMutual Holding Company Two MSC, Inc.) (principal
offices, 1295 State Street, Springfield, Massachusetts); Director (since 1994),
Cornerstone Real Estate Advisers, Inc. (wholly-owned real estate investment
adviser subsidiary of MassMutual Holding Company), 1500 Main Street, Suite
1400, Springfield, Massachusetts; Director (since 1993), Sargasso Mutual
Insurance Co., Ltd., Victoria Hall, Victoria Street, Hamilton, Bermuda;
MassMutual of Ireland, Ltd. (wholly-owned subsidiary of MassMutual Holding
Company Two MSC, Inc. to provide group insurance claim services), IDA
Industrial Estate, Tipperary Town, Ireland; Chairman (since 1994), Director
(since 1993), MML Reinsurance (Bermuda) Ltd. (wholly-owned property and
casualty reinsurance subsidiary of MassMutual Holding Company) and Director
(since 1995), MassMutual International (Bermuda) Ltd. (wholly-owned subsidiary
of MassMutual Holding Company that distributes variable insurance products in
overseas markets) (principal offices, 41 Cedar Avenue, Hamilton, Bermuda).
John B. Davies, Executive Vice President
Executive Vice President (since 1994), Associate Executive Vice President
(1993-1994), General Agent (1982-1993) of MassMutual, 1295 State Street,
Springfield, Massachusetts; Director (since 1994), MML Investors Services,
Inc. (wholly-owned broker-dealer subsidiary of MassMutual Holding Company), MML
Insurance Agency, Inc. (wholly-owned subsidiary of MML Investors Services,
Inc.), MML Insurance Agency of Ohio, Inc. (subsidiary of MML Insurance Agency,
Inc.) and Director (since 1995), MML Insurance Agency of Nevada, Inc.
(subsidiary of MML Insurance Agency, Inc.) (principal offices, 1414 Main
Street, Springfield, Massachusetts); Director (since 1994), Cornerstone Real
Estate Advisers, Inc. (wholly-owned real estate investment adviser subsidiary
of MassMutual Holding Company), 1500 Main Street, Suite 1400, Springfield,
Massachusetts; Director (since 1994), Life Underwriter Training Council, 7625
Wisconsin Avenue, Bethseda, Maryland.
Daniel J. Fitzgerald, Executive Vice President,
Corporate Financial Operations
Executive Vice President, Corporate Financial Operations (since 1994), Senior
Vice President (1991-1994) of MassMutual; Vice President (since 1994), Director
(since 1993), MassMutual Holding Company; and Vice President and Director
(since 1994), MassMutual Holding Company Two, Inc. (wholly-owned holding
company subsidiaries of MassMutual); Vice President and Director (since 1994):
MassMutual Holding Company Two MSC, Inc. (wholly-owned holding company
subsidiary of MassMutual Holding Company Two, Inc.); Director (since 1994),
Mirus Insurance Company (formerly MML Pension Insurance Company, a wholly-owned
insurance subsidiary of MassMutual Holding Company Two MSC, Inc.); MML Bay
State Life Insurance Company (wholly-owned insurance subsidiary of MassMutual);
MML Realty Management Corporation (wholly-owned real estate management
subsidiary of MassMutual Holding Company); Director (since 1995), DLB
Acquisition Corporation (holding company for investment advisers); Director
(1994-1995), MML Real Estate Corporation (wholly-owned real estate management
subsidiary of MassMutual Holding Company) (principal offices, 1295 State
Street, Springfield, Massachusetts); Director (since 1994), Concert Capital
Management, Inc. (wholly-owned investment advisory subsidiary of MassMutual
Holding Company), One Memorial Drive, Cambridge, Massachusetts; Director and
Member, Compensation Committee (since 1994), Cornerstone Real Estate Advisers,
Inc., 1500 Main Street, Suite 1400, Springfield, Massachusetts; Director, and
Member, Audit and Compensation Committees (since 1994), MML Investors Services,
Inc. (wholly-owned broker dealer subsidiary of MassMutual Holding Company) and
Director (1992-1993), MML Insurance Agency, Inc. (wholly-owned subsidiary of
MML Investors Services, Inc.) (principal offices, 1414 Main Street,
Springfield, Massachusetts) Director (since 1994), MassMutual of Ireland, Ltd.
(wholly-owned subsidiary of MassMutual Holding Company Two MSC, Inc. to provide
group insurance claim services), IDA Industrial Estate, Tipperary Town,
Ireland.
Lawrence L. Grypp, Executive Vice President
Executive Vice President of MassMutual; Director (since 1995), DLB Acquisition
Corporation (holding company for investment advisers) (principal offices, 1295
State Street, Springfield, Massachusetts); Chairman and Member Executive and
Compensation Committees, MML Investors Services, Inc. (wholly-owned broker-
dealer subsidiary of MassMutual Holding Company) and Director (1991-1993), MML
Insurance Agency (wholly-owned insurance subsidiary of MML Investors Services,
Inc.) (principal offices, 1414 Main Street, Springfield, Massachusetts);
Director, Oppenheimer Acquisition Corp. (parent of Oppenheimer Management
Corporation, an investment management company), Two World Trade Center, New
York, New York: Director (since 1993), Concert Capital Management, Inc.
(wholly-owned investment advisory subsidiary of Mass-
40
<PAGE>
Mutual Holding Company), One Memorial Drive, Cambridge, Massachusetts; Trustee,
The American College, Bryn Mawr, Pennsylvania.
James E. Miller, Executive Vice President
Executive Vice President of MassMutual; President, Director and Chief Executive
Officer (since 1994), Mirus Insurance Company (formerly MML Pension Insurance
Company, a wholly-owned insurance subsidiary of MassMutual Holding Company Two
MSC, Inc.) (principal offices, 1295 State Street, Springfield, Massachusetts);
Chairman (since 1994) and Director, MassMutual of Ireland Ltd. (wholly-owned
subsidiary of MassMutual Holding Company Two MSC, Inc. to provide group
insurance claim services), IDA Industrial Estate, Tipperary Town, Ireland;
Director (since 1995), National Capital Health Plan, Inc. (health maintenance
organization), Washington, D.C.; Director: Benefit Panel Services, 888 South
Figueroa Street, Los Angeles, California; and National Capital Preferred
Provider Organization, 7979 Old Georgetown Road, Bethesda, Maryland; Director
(since 1994), Sloan's Lake Management Corp. (preferred provider organization),
1355 South Colorado Boulevard, Denver, Colorado; Vice President and Treasurer,
Dental Learning Systems, New York, New York; Director (1990-1994), The Ethix
Corporation, 12655 Southwest Center, Suite 180, Beaverton, Oregon.
John M. Naughton, Executive Vice President
Executive Vice President of MassMutual; Trustee and Member, Investment Pricing
Committee (since 1994), MassMutual Institutional Funds (open-end investment
company); Director (since 1995), DLB Acquisition Corporation (holding company
for investment advisers) (principal offices, 1295 State Street, Springfield,
Massachusetts); Chairman (since 1995) and Trustee, Springfield Institution for
Savings, 1441 Main Street, Springfield, Massachusetts; Trustee, BayState Health
Systems, 759 Chestnut Street, Springfield, Massachusetts; and American
International College, 1000 State Street, Springfield, Massachusetts; Director,
Oppenheimer Acquisition Corp. (parent of Oppenheimer Management Corporation, an
investment management company), Two World Trade Center, New York, New York;
Director (since 1993), Association of Private Pension and Welfare Plans;
Trustee (since 1994), University of Massachusetts, Amherst, Massachusetts;
Director (1992-1995), Concert Capital Management, Inc. (wholly-owned investment
advisory subsidiary of MassMutual Holding Company), One Memorial Drive,
Cambridge, Massachusetts and Colebrook Group (commercial real estate management
and development), 1441 Main Street, Springfield, Massachusetts.
Gary E. Wendlandt, Executive Vice President
and Chief Investment Officer
Chief Investment Officer (since 1993), Executive Vice President (since 1992)
Senior Vice president (1983-1992) of MassMutual; Chairman (since 1995), Trustee
(since 1986) and President (1983-1995), MassMutual Corporate Investors and
Chairman (since 1995), Trustee (since 1988) and President (1988-1995),
MassMutual Participation Investors (closed-end investment companies); Chairman
(since 1995), Vice Chairman and Trustee (1993-1995) and President (1988-1993),
MML Series Investment Fund (open-end investment company); Chairman, Chief
Executive Officer and Member, Investment Pricing Committee (since 1994),
MassMutual Institutional Funds (open-end investment company); Chairman and
Chief Executive Officer (since 1994), President (since 1993) and Director,
MassMutual Holding Company (wholly-owned holding company subsidiary of
MassMutual); Chairman, President and Chief Executive Officer (since 1994),
MassMutual Holding Company Two, Inc. (wholly-owned holding company subsidiary
of MassMutual); Chairman and President (since 1994), Chief Executive officer
(since 1995), MassMutual Holding Company Two MSC, Inc. (wholly-owned holding
company subsidiary of MassMutual Holding Company Two, Inc.); Chairman (since
1994) and Director (since 1993), MML Realty Management Corporation (wholly-
owned real estate management subsidiary of MassMutual Holding Company);
President and Director (since 1995), DLB Acquisition Corporation (holding
company for investment advisers); Chairman (1994-1995) and Director (1993-
1995), MML Real Estate Corporation (wholly-owned real estate management
subsidiary of MassMutual Holding Company) (principal offices, 1295 State
Street, Springfield, Massachusetts); Chairman, Chief Executive Officer and
Member Executive and Compensation Committees (since 1994) and Member, Audit
Committee (since 1995), Cornerstone Real Estate Advisers, Inc., 1500 Main
Street, Springfield, Massachusetts; President and Chief Executive Officer
(since 1994) and Director, Concert Capital Management, Inc. One Memorial Drive,
Cambridge, Massachusetts; Director, Oppenheimer Acquisition Corporation (parent
of Oppenheimer Management Corporation, an investment management company), Two
World Trade Center, New York, New York; Supervisory Director,
MassMutual/Carlson CBO N.V. (collateralized bond fund), 6 John Gorsiraweg, P.O.
Box 3889, Willemstad, Curacao, Netherlands Antilles; Director, Merrill Lynch
Derivative Products, Inc., World Financial Center, North Tower, New York, New
York; Director (since 1994), MassMutual Corporate Value Partners Limited
(investor in debt and equity securities) and MassMutual Corporate Value Limited
(parent of MassMutual Corporate Value Partners Limited) (principal offices, c/o
BankAmerica Trust and Banking Corporation, Box 1096, George Town, Grand Cayman,
Cayman Islands, British West Indies); Director (since 1995), Mass Seguros de
Vida, S.A., Huerfanos No.770, Santiago, Chile; President and Director (since
1995), MassMutual International (Bermuda) Ltd. (wholly-owned subsidiary of
MassMutual Holding Company that distributes variable insurance products in
overseas markets), 41 Cedar Avenue, Hamilton, Bermuda.
41
<PAGE>
IX. Executive Compensation
The compensation that the Chief Executive Officer and the most highly
compensated executive officers (receiving compensation in excess of $100,000)
other than the Chief Executive Officer, is summarized in the tables below. The
footnotes that follow explain the nature of the compensation in greater detail.
<TABLE>
<CAPTION>
==================================================================================================================================
SUMMARY COMPENSATION TABLE
==================================================================================================================================
Annual Compensation Long-term Compensation /(2)/
==================================================================================================================================
Other Restricted All
Annual Stock Options LTIP Other
Name and Principal Position Salary /(1)/ Bonus Compensation Awards SARs (#) Payouts($) Compensation/(3)/
<S> <C> <C> <C> <C> <C> <C> <C>
Fiscal Year 1995
- ----------------
Wheeler, Thomas B - President & CEO $800,000 $468,200 $0 N/A N/A N/A $628,323
Wendlandt, Gary E. - Exec. Vice President $381,833 $237,500 $0 N/A N/A N/A $206,974
Pajak, John J. - Exec. Vice President $326,300 $149,000 $0 N/A N/A N/A $337,788
Naughton, John M. - Exec. Vice President $289,400 $131,500 $0 N/A N/A N/A $299,697
Miller, James E. - Exec. Vice President $281,817 $140,000 $0 N/A N/A N/A $219,411
==================================================================================================================================
Fiscal Year 1994
- ----------------
Wheeler, Thomas B - President & CEO $765,000 $538,000 $0 N/A N/A N/A $509,015
Wendlandt, Gary E. - Exec. Vice President $339,942 $233,700 $0 N/A N/A N/A $161,310
Pajak, John J. - Exec. Vice President $310,850 $179,800 $0 N/A N/A N/A $219,400
Naughton, John M. - Exec. Vice President $278,475 $149,600 $0 N/A N/A N/A $188,753
Miller, James E. - Exec. Vice President $273,150 $148,200 $0 N/A N/A N/A $127,582
Fiscal Year 1993
- ----------------
Wheeler, Thomas B - President & CEO $745,000 $369,850 $0 N/A N/A N/A $211,837
Wendlandt, Gary E. - Exec. Vice President $279,508 $108,200 $0 N/A N/A N/A $ 70,432
Pajak, John J. - Exec. Vice President $289,425 $122,600 $0 N/A N/A N/A $131,098
Naughton, John M. - Exec. Vice President $267,975 $ 86,200 $0 N/A N/A N/A $105,354
Miller, James E. - Exec. Vice President $266,250 $108,600 $0 N/A N/A N/A $ 73,015
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Footnotes:
- ----------
/(1)/ Salary dollars reflect base compensation paid during the fiscal year.
/(2)/ Long-term Incentive Plan - For more information, please see the "Long-term
Incentive Plans - Awards in Last Fiscal Year" Table and attached description.
/(3)/ All Other Compensation -Includes 1993 and 1994 Long-term Incentive Plan
accruals, Company contributions made to qualified and nonqualified defined
contribution plans, accrued qualified and nonqualified pension benefit,
Regular Split Dollar (and Executive Split Dollar if applicable) Life
Insurance excess cash values due executive officer after reimbursement of
Company-paid premiums (all Regular Split Dollar values based on 1995
dividend schedule), taxable value of fringe benefits, and Executive
Deferred Retirement Plan Company contributions.
================================================================================
42
<PAGE>
Long-Term Incentive Plan
MassMutual offers a Long Term Incentive Plan to all of its executive officers.
The Chief Executive Officer and the four most highly compensated officers
participate in this Plan.
Compensation received under the Long Term Incentive Plan is determined by a
number of individual and Company performance measures. Specifically, corporate
results in the areas of financial strength, growth and policyholder value are
compared against the performance in these categories by the top ten mutual life
insurance companies (as determined by asset size). Relative performance against
this measure is used to determine the level of payout under the Long Term
Incentive Plan.
Target performance results will provide a payout equal to 100% of the individual
target. Threshold and maximum performance results will yield payouts of 50% and
150% of the individual target, respectively.
The applicable measurement period will be for a term of three years. Each
payout will be based on relative corporate performance (as compared with the top
ten mutual companies) measured at the end of the three year cycle. Individual
targets will be assigned to each participant through a competitive review and
payouts will be based on a year-end salary average for each overlapping three
year cycle.
Set forth below is the compensation received under the Long Term Incentive Plan.
<TABLE>
<CAPTION>
====================================================================================================================================
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR /(1)/
====================================================================================================================================
Estimated Future Payouts Under
Non-stock Price-Based Plans /(3)/
====================================================================================================================================
Number of Performance or
Shares, Other Period Until
Units, or Other Maturation of Payout Threshold Target Maximum
Name Rights (#) /(2)/ ($) ($) ($)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Wheeler, Thomas B - President & CEO N/A 1993 - 1995 Perf. Year $231,000 $462,000 $693,000
Wendlandt, Gary E. - Exec. Vice President N/A " " $ 88,100 $176,100 $264,200
Pajak, John J. - Exec. Vice President N/A " " $ 77,500 $155,000 $232,500
Naughton, John M. - Exec. Vice President N/A " " $ 70,400 $140,700 $211,100
Miller, James E. - Exec. Vice President N/A " " $ 69,300 $138,600 $207,900
</TABLE>
Footnotes:
- ----------
/(1)/ Long-term Incentive Plan was incorporated in 1993 with first payment to be
made in 1996.
/(2)/ Each "cycle" includes a three-year performance period (first cycle = 1993
through 1995).
/(3)/ Target performance results will provide a payout equal to 100% of the
individual target. Threshold and maximum performance results will yield
payouts of 50% and 150% of the individual target, respectively.
================================================================================
43
<PAGE>
The following table show the estimated annual pension benefits payable to a
covered participant at normal retirement age under the final pay formula
contained in the MassMutual Defined Benefit Retirement Plan. The Retirement Plan
is a qualified defined benefit plan.
<TABLE>
<CAPTION>
====================================================================================================================================
Pension Plan Table - Annual Age 62 Benefit /(1)/
====================================================================================================================================
Years of Service (3)
====================================================================================================================================
Average Annual
Remuneration (2) 15 20 25 30 35
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
$125,000 $ 33,180 $ 44,240 $ 55,300 $ 59,988 $ 64,675
$150,000 $ 40,680 $ 54,240 $ 67,800 $ 73,425 $ 79,050
$175,000 $ 48,180 $ 64,240 $ 80,300 $ 86,863 $ 93,425
$200,000 $ 55,680 $ 74,240 $ 92,800 $100,300 $107,800
$225,000 $ 63,180 $ 84,240 $105,300 $113,738 $122,175
$250,000 $ 70,680 $ 94,240 $117,800 $127,175 $136,550
$300,000 $ 85,680 $114,240 $142,800 $154,050 $165,300
$400,000 $115,680 $154,240 $192,800 $207,800 $222,800
$500,000 $145,680 $194,240 $242,800 $261,550 $280,300
$800,000 $235,680 $314,240 $392,800 $422,800 $452,800
</TABLE>
/(1)/ Table assumes active associate retires from active employment.
MassMutual's Pension Plan credits participants with 100% of their accrued
retirement benefit at age 60.
/(2)/ Average compensation is based on average monthly salary during the highest
60 consecutive months of the participant's 120 months prior to retirement
(or termination).
/(3)/ Actual pension formula includes the following three factors:
- Benefit Percentages - 1 /2/3/% for each year of Benefit Service earned
prior to a participant's Pension Date in 1974, 2% for every year earned
after 1974, up to a maximum of 25 years, and /3/4/% for each year
earned in excess of 25 years after 1974.
- Average Monthly Compensation - (see above).
- Social Security Reduction (Offset) - A Social Security offset is applied
to the Pension benefit by multiplying 2% for each year of Vesting
Service earned after 1974 up to a maximum of 25 years, times the amount
of estimated Primary Social Security income related to those years in
which a participant earned Benefit Services..
Table assumes all years of service are beyond 1974 and Primary Social Security
income is equal to $1,200 per month.
================================================================================
44
<PAGE>
Compensation of Directors
Directors of MassMutual, other than the Chief Executive Officer, are paid an
annual retainer of $25,000 for serving on the MassMutual Board of Directors.
Directors also receive a per meeting fee of $1,200 for each meeting of the Board
attended. Generally, six meetings of the Board of Directors are held each year.
Directors also serve on various committees including the Auditing, Board
Affairs, Dividend Policy, Human Resources, and Investment Committees. A member
of a committee, other than the Investment Committee, receives an annual retainer
of $2,500 for such service; the chairperson of a committee receives a retainer
of $3,500. Additionally, members of committees, other than the Investment
Committee, receive a fee of $750 for each committee meeting attended; the per-
meeting fees for chairing the Committees are $1,300 for Auditing, $900 for Board
Affairs, $900 for Dividend Policy, and $1,200 for Human Resources.
A member of the Investment Committee receives an annual retainer of $5,000 and a
per-meeting fee of $1,000: the chairman of the Investment Committee is Thomas B.
Wheeler, who receives no compensation for serving in this capacity.
X. Experts and Legal Proceedings
The Company is a defendant in actions arising out of its insurance and
investment operations and is from time to time involved as a party in various
governmental and administrative proceedings. The Company does not believe that
any liability which may result from these actions is likely to have a material
adverse effect on the financial position of the Company.
The life insurance industry in recent years has faced increasing exposure to
litigation in which multimillion dollar jury awards of punitive and compensatory
damages have occurred. While the Company cannot predict the outcome of pending
or future litigation with certainty, it does not believe that pending litigation
will have a material impact on the Company's financial position, results of
operations or liquidity.
Experts
The audited supplemental financial statements of Massachusetts Mutual Life
Insurance Company as of December 31, 1995 and 1994 and for each of the three
years in the period ended December 31, 1995 included in this prospectus have
been so included in reliance on the reports, which give retroactive effect to
the merger of Massachusetts Mutual Life Insurance Company and Connecticut Mutual
Life Insurance Company, and which include an explanatory paragraph relating to
the pending sale of a wholly-owned insurance subsidiary, of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of that firm as experts
in accounting and auditing.
XI. Selected Financial Data
The supplemental financial statements and other financial information included
in this prospectus have been prepared in conformity with accounting practices of
the National Association of Insurance Commissioners and the accounting practices
prescribed or permitted by the Division of Insurance of the Commonwealth of
Massachusetts and the Department of Insurance of the state of Connecticut
("statutory accounting practices"), which are currently considered to be in
accordance with generally accepted accounting principles ("GAAP") for mutual
life insurance companies. The Financial Accounting Standards Board, which has
no role in establishing regulatory accounting practices, issued Interpretation
40, Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises, and Statement of Financial Accounting Standards
No. 120, Accounting and Reporting by Mutual Life Insurance Enterprises and by
Insurance Enterprises for Certain Long-Duration Participating Contracts. The
American Institute of Certified Public Accountants, which also has no role in
establishing regulatory accounting practices, issued Statement of Position 95-1,
Accounting for Certain Insurance Activities of Mutual Life Insurance
Enterprises. These pronouncements will require mutual life insurance companies
to modify their financial statements in order to continue to be in accordance
with generally accepted accounting principles, effective for 1996 financial
statements. The manner in which policy reserves, new business acquisition
costs, asset valuations and the related tax effects are recorded will change.
Management has not determined the impact of such changes on the Company's
statements, but believes implementation of these pronouncements will cause
policyholders' contingency reserves to increase. In addition, the financial
statements of life insurance companies filed with regulatory authorities are not
consolidated, investments in subsidiaries are shown at net equity value, and
dividends paid by subsidiaries to the parent life insurance company are included
in such company's net investment income. The financial statements included in
this prospectus have been prepared on the basis as filed with regulatory
authorities.
The following summary financial information as of December 31, 1995 and 1994 and
for each of the three years in the period ended December 31, 1995 has been
derived from the supplemental financial statements of the Company, which have
been audited by Coopers & Lybrand L.L.P., independent certified public
accountants. The summary financial information for the other periods presented
is derived from the separate audited financial Statements of Massachusetts
Mutual Life Insurance Company and Connecticut Mutual Life Insurance Company,
prior to the merger. On March 1, 1996, the operations of the former Connecticut
Mutual Life Insurance Company ("Connecticut Mutual") was merged into the
45
<PAGE>
Company. For the purposes of this presentation, the summary financial
information gives retroactive effect as if the merger had occurred on January 1,
1991 in conformity with the practices of the National Association of Insurance
Commissioners and the accounting practices prescribed or permitted by the
Division of Insurance of the Commonwealth of Massachusetts and the Department of
Insurance of the State of Connecticut. This merger was accounted for under the
pooling of interests method of accounting, as prescribed by statutory accounting
practices. The summary financial information is not necessarily indicative of
the results that would have been recorded had the merger actually occurred on
January 1, 1991, nor is it indicative of future results. After the merger,
future sales of new products will be predominantly those developed by
MassMutual. Additionally, as part of the merger plan, employee positions have
been or will be eliminated over a three-year period, predominantly through
voluntary terminations.
The selected financial data does not extend through to the date of the merger;
however, it will become the historical financial data of the Company after
financial statements covering the date of the merger have been issued, but do
not include the adjustments that have been permitted by insurance regulatory
authorities to be made as of the date of the merger.
It is believed the Company will achieve operating cost savings through
consolidation of certain operations and the elimination of redundant costs. In
particular, the Company expects expense savings in 1996 and 1997 will more than
offset merger costs, and the level of annual savings will continue to grow in
1998 and beyond at the rate of inflation. The extent to which cost savings will
be achieved will be influenced by many factors, including economic conditions,
inflation and unanticipated changes in business activities. Accordingly, there
can be no assurance the benefits anticipated to arise out of the merger will, in
fact, be achieved.
The information presented below should be read in conjunction with the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", the audited supplemental financial statements and other information
included elsewhere in this prospectus.
46
<PAGE>
Massachusetts Mutual Life Insurance Company
Supplemental Selected Financial Data
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
(In Millions)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Income:
Premium income $ 5,728 $ 6,177 $ 6,408 $ 6,354 $ 5,720
Net investment and other income 2,898 2,803 2,886 2,898 3,083
----------- ----------- ----------- ----------- -----------
8,626 8,980 9,294 9,252 8,803
----------- ----------- ----------- ----------- -----------
Benefits and expenses:
Policy benefits and payments 5,152 5,450 5,653 6,093 5,409
Addition to policyholders' reserves and funds 1,205 1,263 1,291 967 1,263
Commissions, operating expenses and
state taxes 924 1,064 1,068 1,035 991
Merger restructuring costs (1) 44 0 0 0 0
----------- ----------- ----------- ----------- -----------
7,325 7,777 8,012 8,095 7,663
----------- ----------- ----------- ----------- -----------
Net gain before federal income taxes and dividends 1,301 1,203 1,282 1,157 1,140
Federal income taxes 206 140 212 144 129
----------- ----------- ----------- ----------- -----------
Net gain from operations before dividends 1,095 1,063 1,070 1,013 1,011
Dividends to policyholders (2) 819 825 818 783 791
----------- ----------- ----------- ----------- -----------
Net gain from operations 276 238 252 230 220
Net realized capital loss (86) (164) (96) (82) (19)
----------- ----------- ----------- ----------- -----------
Net income $ 190 $ 74 $ 156 $ 148 $ 201
=========== =========== =========== =========== ===========
Balance Sheet Data (at period end):
Assets:
General account $ 39,108 $ 38,349 $ 38,023 $ 36,118 $ 35,794
Separate account 11,310 8,531 7,811 6,210 4,608
----------- ----------- ----------- ----------- -----------
Total assets $ 50,418 $ 46,880 $ 45,834 $ 42,328 $ 40,402
=========== =========== =========== =========== ===========
Liabilities:
Policyholders' reserves and funds (3) $ 32,893 $ 32,295 $ 31,553 $ 31,161 $ 31,260
Policyholders' dividends(4) 833 838 825 804 828
Long-term debt 107 153 278 257 230
Investment reserves 677 601 563 430 418
Separate account reserves and liabilities 11,310 8,530 7,810 6,208 4,607
Other liabilities 1,997 1,894 2,335 1,337 1,174
----------- ----------- ----------- ----------- -----------
Total liabilities 47,817 44,311 43,364 40,197 38,517
----------- ----------- ----------- ----------- -----------
Policyholders' contingency reserves (surplus) (1):
Designated surplus 38 36 35 33 31
Unassigned funds (surplus) 2,563 2,533 2,435 2,098 1,854
----------- ----------- ----------- ----------- -----------
Total surplus 2,601 2,569 2,470 2,131 1,885
----------- ----------- ----------- ----------- -----------
Total liabilities and policyholders'
contingency reserves $ 50,418 $ 46,880 $ 45,834 $ 42,328 $ 40,402
=========== =========== =========== =========== ===========
Total Adjusted Capital Data (at period end) (5) (6):
Total surplus $ 2,601 $ 2,569 $ 2,470 $ 2,131 $ 1,885
One-half the apportioned dividend liability(4) 411 414 407 396 405
Asset Valuation Reserve 585 479 440 369 365
----------- ----------- ----------- ----------- -----------
Total adjusted capital $ 3,597 $ 3,462 $ 3,317 $ 2,896 $ 2,655
=========== =========== =========== =========== ===========
</TABLE>
(1) In 1995, charges for employee separation and transaction expenses directly
attributable to the merger were $44 million for Massachusetts Mutual (the
Company prior to the merger) and $45 million, net of tax, for Connecticut
Mutual. The expenses incurred by Massachusetts Mutual were recorded in the
statement of income and the expenses incurred by Connecticut Mutual were
recorded as a component of changes in policyholders' contingency reserves,
as permitted by each company's regulatory authority. The Company estimates
an additional $58 million of merger-related expenses will be incurred
after the merger date.
(2) Dividends to policyholders are discretionary and subject to the approval
of the Company's Board of Directors.
(3) During 1995 and 1994, the Company changed its valuation basis for certain
disability income contracts. The effects of these changes, $108 million in
1995 and $51 million in 1994, were recorded as decreases to policyholders'
contingency reserves.
(4) Statutory accounting requires that policyholders' dividends include
dividends currently payable and the full amount of dividends apportioned
for payment over the 12 months following the date of the applicable
financial statement. One-half of such apportioned dividends is unearned at
any point in time and is included in the calculation of total adjusted
capital.
(5) Defined by the NAIC as surplus plus AVR/MSVR and one-half the apportioned
dividend liability. AVR/MSVR includes the AVR/MSVR of wholly-owned life
insurance subsidiaries.
(6) In 1996, as a result of the merger, the Company intends to conform
accounting practices in which policyholder reserves attributable to the
disability income line of business will be strengthened by approximately
$67 million, real estate valuation reserves will increase by approximately
$50 million and the prepaid pension asset will increase by approximately
$39 million.
47
<PAGE>
Report Of Independent Accountants
To the Board of Directors and Policyholders of
Massachusetts Mutual Life Insurance Company
We have audited the supplemental statement of financial position of
Massachusetts Mutual Life Insurance Company as of December 31, 1995 and 1994,
and the related supplemental statements of income, changes in policyholders'
contingency reserves and cash flows for each of the years in the three-year
period ended December 31, 1995. 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The supplemental financial statements give retroactive effect to the merger of
Massachusetts Mutual Life Insurance Company and Connecticut Mutual Life
Insurance Company on March 1, 1996, which has been accounted for as a pooling of
interests as described in the notes to the supplemental financial statements.
Generally accepted accounting principles preclude giving effect to a consummated
business combination accounted for by the pooling of interests methods in
financial statements that do not include the date of consummation. These
financial statements do not extend through the date of consummation; however,
they will become the historical consolidated financial statements of
Massachusetts Mutual Life Insurance Company after financial statements covering
the date of consummation of the business combination are issued. We did not
audit the financial statements of Connecticut Mutual Life Insurance Company
which statements reflect total assets of 25% as of December 31, 1995 and 1994,
revenue of 26%, 26%, and 24% and net gain from operations of 22%, 6% and 17% for
each of the three years in the period ended December 31, 1995, respectively.
Those statements were audited by other auditors whose reports have been
furnished to us, and our opinion, insofar as it relates to the amounts included
for Connecticut Mutual Life Insurance Company, is based solely on the report of
other auditors.
In our opinion, based on our audits and the reports of other auditors, the
supplemental financial statements referred to above present fairly, in all
material respects, the financial position of Massachusetts Mutual Life Insurance
Company at December 31, 1995 and 1994, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1995 in conformity with generally accepted accounting principles applicable
after financial statements are issued for a period which includes the date of
consummation of the business combination.
As discussed in Note 10 to the financial statements, Massachusetts Mutual Life
Insurance Company entered into a definitive agreement for the sale of a wholly-
owned insurance subsidiary.
Coopers & Lybrand L.L.P.
Springfield, Massachusetts
March 1, 1996
48
<PAGE>
Massachusetts Mutual Life Insurance Company
SUPPLEMENTAL STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31,
1995 1994
-------- --------
(In Millions)
<S> <C> <C>
Assets:
Bonds....................................... $23,625.1 $23,298.2
Stocks...................................... 416.1 246.1
Mortgage loans.............................. 3,872.4 4,066.2
Real estate:
Investments................................ 1,502.8 1,673.7
Other...................................... 107.1 108.8
Other investments........................... 1,489.9 1,218.4
Policy loans................................ 4,518.4 4,259.8
Cash and short-term investments............. 2,342.8 2,255.5
Investment and insurance amounts receivable. 1,059.3 1,069.7
Separate account assets..................... 11,309.5 8,530.5
Other assets................................ 174.6 153.3
--------- ---------
$50,418.0 $46,880.2
--------- ---------
Liabilities:
Policyholders' reserves and funds........... $32,893.1 $32,295.1
Policyholders' dividends.................... 832.6 837.5
Policy claims and other benefits............ 395.5 415.9
Federal income taxes........................ 338.5 229.9
Asset valuation reserve..................... 566.8 470.5
Investment reserves......................... 109.9 130.8
Separate account reserves and
liabilities................................ 11,309.6 8,529.5
Amounts due on investments purchased
and other liabilities...................... 1,371.1 1,401.9
--------- ---------
47,817.1 44,311.1
Policyholders' contingency reserves......... 2,600.9 2,569.1
--------- ---------
$50,418.0 $46,880.2
========= =========
</TABLE>
See notes to supplemental financial statements.
49
<PAGE>
Massachusetts Mutual Life Insurance Company
SUPPLEMENTAL STATEMENT OF INCOME
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
---------- ---------- ----------
(In Millions)
<S> <C> <C> <C>
Income:
Premium income...................................... $ 5,727.7 $ 6,177.2 $ 6,408.3
Net investment and other income..................... 2,898.4 2,803.1 2,885.7
---------- ---------- ----------
8,626.1 8,980.3 9,294.0
---------- ---------- ----------
Benefits and expenses:
Policy benefits and payments........................ 5,152.2 5,449.6 5,652.9
Addition to policyholders' reserves and funds....... 1,205.4 1,263.2 1,291.1
Commissions and operating expenses.................. 833.7 959.3 953.5
State taxes, licenses and fees...................... 89.4 105.6 114.9
Merger restructuring costs.......................... 44.0 0.0 0.0
---------- ---------- ----------
7,324.7 7,777.7 8,012.4
---------- ---------- ----------
Net gain before federal income taxes and dividends.. 1,301.4 1,202.6 1,281.6
Federal income taxes................................ 206.2 139.7 211.8
---------- ---------- ----------
Net gain from operations before dividends........... 1,095.2 1,062.9 1,069.8
Dividends to policyholders.......................... 819.0 824.7 817.5
---------- ---------- ----------
Net gain from operations............................ 276.2 238.2 252.3
Net realized capital loss........................... (85.8) (164.3) (96.0)
---------- ---------- ----------
Net income.......................................... $ 190.4 $ 73.9 $ 156.3
========== ========== ==========
</TABLE>
See notes to supplemental financial statements.
50
<PAGE>
Massachusetts Mutual Life Insurance Company
SUPPLEMENTAL STATEMENT OF CHANGES IN
POLICYHOLDERS' CONTINGENCY RESERVES
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
--------- --------- ---------
(In Millions)
<S> <C> <C> <C>
Policyholders' contingency reserves, beginning of year....... $ 2,569.1 $ 2,470.2 $ 2,131.2
---------- ---------- ----------
Increases (decreases) due to:
Net income................................................. 190.4 73.9 156.3
Net unrealized capital gain................................ 88.7 29.5 67.9
Merger restructuring costs, net of tax..................... (45.4) 0.0 0.0
Surplus notes.............................................. 0.0 100.0 250.0
Change in asset valuation and investment reserves.......... (75.6) (38.2) (133.3)
Change in accounting for mortgage-backed securities........ 0.0 44.5 0.0
Change in valuation bases of policyholders' reserves....... (108.2) (51.1) 0.0
Change in non-admitted assets and other.................... (18.1) (59.7) (1.9)
---------- ---------- ----------
Policyholders' contingency reserves, end of year............. $ 2,600.9 $ 2,569.1 $ 2,470.2
========== ========== ==========
</TABLE>
See notes to supplemental financial statements.
51
<PAGE>
Massachusetts Mutual Life Insurance Company
SUPPLEMENTAL STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
---------- ---------- ----------
(In Millions)
<S> <C> <C> <C>
Operating activities:
Net income...................................................... $ 190.4 $ 73.9 $ 156.3
Addition to policyholders' reserves and funds,
net of transfers to separate accounts.......................... 575.8 546.9 389.6
Net realized capital loss....................................... 85.8 164.3 96.0
Other changes................................................... (25.2) 124.2 131.1
---------- ---------- ----------
Net cash provided by operating activities........................ 826.8 909.3 773.0
---------- ---------- ----------
Investing activities:
Loans and purchases of investments.............................. 10,364.2 8,351.6 8,715.1
Sales or maturities of investments and receipts
from repayment of loans........................................ 9,671.1 7,468.7 7,607.3
---------- ---------- ----------
Net cash used in investing activities........................... 693.1 882.9 1,107.8
---------- ---------- ----------
Financing activities:
Issuance of surplus notes....................................... 0.0 100.0 250.0
Repayment of notes payable and other borrowings................. (46.4) (125.0) (100.0)
Proceeds from issuance of notes payable and other borrowings.... 0.0 0.0 120.3
---------- ---------- ----------
Net cash provided by (used in) financing activities............. (46.4) (25.0) 270.3
---------- ---------- ----------
Increase (decrease) in cash and
short-term investments......................................... 87.3 1.4 (64.5)
Cash and short-term investments, beginning of year............... 2,255.5 2,254.1 2,318.6
---------- ---------- ----------
Cash and short-term investments, end of year..................... $ 2,342.8 $ 2,255.5 $ 2,254.1
========== ========== ==========
</TABLE>
See notes to supplemental financial statements.
52
<PAGE>
Notes To Supplemental Financial Statements
Massachusetts Mutual Life Insurance Company ("the Company") is a mutual life
insurance company and as such has no shareholders. The Company's primary
business is individual life insurance, annuity and disability products
distributed through career agents. The Company also provides a wide range of
group life, health and pension products and services, as well investment
services to individuals, corporations and institutions in all 50 states and the
District of Columbia.
On March 1, 1996, the operations of the former Connecticut Mutual Life Insurance
Company ("Connecticut Mutual") were merged into the Company. For the purposes
of this presentation, these supplemental financial statements give retroactive
effect as if the merger had occurred on January 1, 1993 in conformity with the
practices of the National Association of Insurance Commissioners and the
accounting practices prescribed or permitted by the Division of Insurance of the
Commonwealth of Massachusetts and the Department of Insurance of the State of
Connecticut. This merger was accounted for under the pooling of interests
method of accounting. The financial information is not necessarily indicative
of the results that would have been recorded had the merger actually occurred on
January 1, 1993, nor is it indicative of future results. After the merger,
future sales of new products will be predominantly those developed by
Massachusetts Mutual. Additionally, as part of the merger plan, employee
positions have been or will be eliminated over a three-year period,
predominantly through voluntary terminations. In 1995, charges for employee
separation and transaction expenses directly attributable to the merger were
$44 million for Massachusetts Mutual (the Company prior to the merger) and $45
million, net of tax, for Connecticut Mutual. The expenses incurred by
Massachusetts Mutual were recorded in the statement of income and the expenses
incurred by Connecticut Mutual were recorded as a component of changes in
policyholders' contingency reserves, as permitted by each company's regulatory
authority. The Company estimates an additional $58 million of merger-related
expenses will be incurred after the merger date.
It is believed the Company will achieve operating cost savings through
consolidation of certain operations and the elimination of redundant costs. In
particular, the Company expects expense savings in 1996 and 1997 will more than
offset the merger costs, and the level of annual savings will continue to grow
in 1998 and beyond at the rate of inflation. The extent to which cost savings
will be achieved will be influenced by many factors, including economic
conditions, inflation and unanticipated changes in business activities.
Accordingly, there can be no assurance the benefits anticipated to arise out of
the merger will, in fact, be achieved.
These financial statements do not extend through to the date of the merger;
however, they will become the historical financial statements of the Company
after financial statements covering the date of the merger have been issued, but
do not include the adjustments that have been permitted by insurance regulatory
authorities to be made as of the date of the merger. Policyholder reserves
attributable to the disability income line of business will be strengthened by
approximately $67 million, real estate valuation reserves will increase by $50
million and the prepaid pension asset will increase by $39 million.
1. Summary of Accounting Practices
The accompanying supplemental financial statements, except as to form, have been
prepared in conformity with the practices of the National Association of
Insurance Commissioners and the accounting practices prescribed or permitted by
the Division of Insurance of the Commonwealth of Massachusetts and the
Department of Insurance of the State of Connecticut, which are currently
considered generally accepted accounting principles for mutual life insurance
companies and their life insurance subsidiaries.
The Financial Accounting Standards Board, which has no role in establishing
regulatory accounting practices, issued Interpretation 40, Applicability of
Generally Accepted Accounting Principles to Mutual Life Insurance and Other
Enterprises, and Statement of Financial Accounting Standards No. 120, Accounting
and Reporting by Mutual Life Insurance Enterprises and by Insurance Enterprises
for Certain Long-Duration Participating Contracts. The American Institute of
Certified Public Accountants, which also has no role in establishing regulatory
accounting practices, issued Statement of Position 95-1, Accounting for Certain
Insurance Activities of Mutual Life Insurance Enterprises. These pronouncements
will require mutual life insurance companies to modify their financial
statements in order to continue to be in accordance with generally accepted
accounting principles, effective for financial statements issued for 1996 and
prior periods presented. The manner in which policy reserves, new business
acquisition costs, asset valuations and related tax effects are recorded will
change. Management has not determined the impact of such changes on the
Company's Statement of Income, but believes implementation of these
pronouncements will cause policyholders' contingency reserves to increase.
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, as
well as disclosures of contingent assets and liabilities, at the date of the
financial statements. Management must also make estimates and assumptions that
affect the amounts of revenues and expenses during the reporting period. Future
events, including changes in the levels of mortality, morbidity, interest rates
and asset valuations, could cause actual results to differ from the estimates
used in the financial statements.
The following is a description of the Company's current principal accounting
policies and practices.
53
<PAGE>
Notes To Supplemental Financial Statements (Continued)
A. Investments
Bonds and stocks are valued in accordance with rules established by the National
Association of Insurance Commissioners. Generally, bonds are valued at
amortized cost, preferred stocks in good standing at cost, and common stocks,
except for unconsolidated subsidiaries, at fair value based upon quoted market
value.
As promulgated by the National Association of Insurance Commissioners,
Massachusetts Mutual adopted the retrospective method of accounting for
amortization of premium and discount on mortgage backed securities as of
December 31, 1994. Prepayment assumptions for mortgage backed securities were
obtained from a prepayment model, which factors in mortgage type, seasoning,
coupon, current interest rate and the economic environment. The effect of this
change, $44.5 million, was recorded as of December 31, 1994 as an increase to
policyholders' contingency reserves on the Statement of Financial Position and
had no material effect on 1995 net income. Through December 31, 1994,
MassMutual amortized premium and discount on bonds into investment income over
the stated lives of the securities. Connecticut Mutual used the retrospective
method of amortization.
Mortgage loans are valued at principal less unamortized discount. Real estate
is valued at cost less accumulated depreciation, impairments and mortgage
encumbrances. Encumbrances totaled $2.9 million in 1995 and $16.1 million in
1994. Depreciation on investment real estate is calculated using the straight-
line and constant yield methods.
Policy loans are carried at the outstanding loan balance less amounts unsecured
by the cash surrender value of the policy. Short-term investments are stated at
amortized cost, which approximates fair value.
Investments in unconsolidated subsidiaries, joint ventures and other forms of
partnerships are included in other investments on the Statement of Financial
Position and are accounted for using the equity method.
On July 15, 1994, DHC Inc., a wholly-owned subsidiary of Connecticut Mutual,
sold its 100 percent ownership in GroupAmerica Insurance Company to Veritus,
Inc. for $52.1 million in cash.
In compliance with regulatory requirements, the Company maintains an Asset
Valuation Reserve and an Interest Maintenance Reserve. The Asset Valuation
Reserve and other investment reserves, as prescribed or permitted by the
regulatory authorities, stabilize the policyholders' contingency reserves
against fluctuations in the value of stocks, as well as declines in the value of
bonds, mortgage loans and real estate investments.
The Interest Maintenance Reserve captures after-tax realized capital gains and
losses which result from changes in the overall level of interest rates for all
types of fixed income investments, as well as other financial instruments,
including financial futures, U.S. Treasury purchase commitments, options,
interest rate swaps, interest rate caps and interest rate floors. These
interest rate related gains and losses are amortized into income using the
grouped method over the remaining life of the investment sold or over the
remaining life of the underlying asset. Net realized after tax capital gains of
$110.5 million in 1995, net realized after tax capital losses of $152.6 million
in 1994 and net realized after-tax capital gains of $127.2 million in 1993 were
charged to the Interest Maintenance Reserve. Amortization of the Interest
Maintenance Reserve into net investment income amounted to $5.0 million in 1995,
$45.8 million in 1994 and $71.6 million in 1993. In 1994, the Company's
Interest Maintenance Reserve resulted in a net loss deferral. In accordance
with the practices of the National Association of Insurance Commissioners, the
1994 balance was recorded as a reduction of policyholders' contingency reserves.
Realized capital gains and losses, less taxes, not includable in the Interest
Maintenance Reserve, are recognized in net income. Realized capital gains and
losses are determined using the specific identification method. Unrealized
capital gains and losses are included in policyholders' contingency reserves.
B. Separate Accounts
Separate account assets and liabilities represent segregated funds administered
and invested by the Company for the benefit of pension, variable annuity and
variable life insurance contract holders. Assets consist principally of publicly
traded marketable securities reported at fair value. Premiums, benefits and
expenses of the separate accounts are reported in the Statement of Income. The
Company receives administrative and investment advisory fees from these
accounts.
C. Non-admitted Assets
Assets designated as "non-admitted" (principally prepaid pension costs, certain
fixed assets, receivables and Interest Maintenance Reserve, when in a net loss
deferral position) are excluded from the Statement of Financial Position by an
adjustment to policyholders' contingency reserves.
54
<PAGE>
Notes To Supplemental Financial Statements (Continued)
D. Policyholders' Reserves and Funds
Policyholders' reserves for life contracts are developed using accepted
actuarial methods computed principally on the net level premium and the
Commissioners' Reserve Valuation Method bases using the American Experience and
the 1941, 1958 and 1980 Commissioners' Standard Ordinary mortality tables with
assumed interest rates ranging from 2.5 to 6.0 percent.
Reserves for individual annuities, guaranteed investment contracts and deposit
administration and immediate participation guarantee funds are based on accepted
actuarial methods computed principally using the 1951, 1971, 1983 group and
individual annuity tables with assumed interest rates ranging from 2.25 to 11.25
percent. Reserves for policies and contracts considered investment contracts
have a carrying value of $10,290.5 million (fair value of $10,508.9 million as
determined by discounted cash flow projections). Accident and health policy
reserves are generally calculated using the two-year preliminary term, net level
premium and fixed net premium methods and various morbidity tables.
During 1995 and 1994, the Company changed its valuation basis for certain
disability income contracts. The effects of these changes, $108.2 million in
1995 and $51.1 million in 1994, were recorded as decreases to policyholders'
contingency reserves.
E. Premium and Related Expense Recognition
The Company recognizes life insurance premium revenue annually on the
anniversary date of the policy. Annuity premium is recognized when received.
Accident and health premiums are recognized as revenue when due. Premiums are
recognized when due for the policies issued by Connecticut Mutual. Commissions
and other costs related to issuance of new policies, maintenance and settlement
costs are charged to current operations.
F. Policyholders' Dividends
The Board of Directors annually approves dividends to be paid in the following
year. These dividends are allocated to reflect the relative contribution of each
group of policies to policyholders' contingency reserves and consider investment
and mortality experience, expenses and federal income tax charges.
G. Cash and Short-term Investments
For purposes of the Statement of Cash Flows, the Company considers all highly
liquid short-term investments purchased with a maturity of twelve months or less
to be cash equivalents.
2. POLICYHOLDERS' CONTINGENCY RESERVES
Policyholders' contingency reserves represent surplus of the Company as reported
to regulatory authorities and are intended to protect policyholders against
possible adverse experience.
A. Surplus Notes
The Company issued surplus notes of $100.0 million at 7 1/2 percent and $250.0
million at 7 5/8 percent in 1994 and 1993, respectively. These notes are
unsecured and subordinate to all present and future indebtedness of the Company,
policy claims and prior claims against the Company as provided by the
Massachusetts General Laws. Issuance was approved by the Commissioner of
Insurance of the Commonwealth of Massachusetts ("the Commissioner").
All payments of interest and principal are subject to the prior approval of the
Commissioner. Sinking fund payments are due as follows: $62.5 million in 2021,
$87.5 million in 2022, $150.0 million in 2023 and $50.0 million in 2024.
Interest on the notes issued in 1994 is scheduled to be paid on March 1 and
September 1 of each year, beginning on September 1, 1994, to holders of record
on the preceding February 15 or August 15, respectively. Interest on the notes
issued in 1993 is scheduled to be paid on May 15 and November 15 of each year,
beginning on May 15, 1994, to holders of record on the preceding May 1 or
November 1, respectively. In accordance with regulations of the National
Association of Insurance Commissioners, interest expense is not recorded until
approval for payment is received from the Commissioner. Interest of $26.6
million and $22.8 million was approved and paid in 1995 and 1994, respectively.
The proceeds of the notes, less a $35 million reserve in 1995 and 1994 and a $25
million reserve in 1993 for contingencies associated with the issuance of the
notes, are recorded as a component of the Company's policyholders' contingency
reserves as approved by the Commissioner. These reserves, as permitted by the
Massachusetts Division of Insurance, are included in investment reserves on the
Statement of Financial Position.
55
<PAGE>
Notes To Supplemental Financial Statements (Continued)
B. Other Policyholders' Contingency Reserves
As required by regulatory authorities, contingency reserves established to
protect group life and annuity policyholders are $37.8 million in 1995 and $36.3
million in 1994.
3. EMPLOYEE BENEFIT PLANS
The Company's employee benefit plans include plans in place for the employees of
Massachusetts Mutual and Connecticut Mutual prior to the merge. These plans,
which were managed separately, reflect different assumptions for 1995 and 1994.
The separate plans will continue into 1996 using similar assumptions where
appropriate. Employees previously covered by the Connecticut Mutual plans will
continue coverage under these plans. All other employees, including employees
hired after the merger date, will be covered by the Massachusetts Mutual benefit
plans.
A. Pension
The Company has two non-contributory defined benefit plans covering
substantially all of its employees. One plan includes employees employed by
MassMutual prior to December 31, 1995 and the other includes employees
previously employed by Connecticut Mutual. Benefits are based on the employees'
years of service, compensation during the last five years of employment and
estimated social security retirement benefits. The Company accounts for these
plans following Financial Accounting Standards Board Statement No. 87,
Employers' Accounting for Pensions. Accordingly, as permitted by the
Massachusetts Division of Insurance, the Company has recognized a pension asset
of $37.7 million and $37.6 million in 1995 and 1994, respectively. The net
pension asset of $34 million associated with the Connecticut Mutual plan has
been non-admitted in the financial statements in accordance with Connecticut
insurance regulations. Company policy is to fund pension costs in accordance
with the requirements of the Employee Retirement Income Security Act of 1974
and, based on such requirements, no funding was required for the years ended
December 31, 1995 and 1994. The assets of the Plan are invested in the
Company's general account and separate accounts.
The benefit status of the defined benefit plans as of December 31 is as follows:
<TABLE>
<CAPTION>
1995 1994
------ ------
(In Millions)
<S> <C> <C>
Accumulated benefit obligation $537.5 $451.9
Vested benefit obligation 525.7 437.4
Projected benefit obligation 622.5 529.5
Plan assets at fair value 941.3 814.7
</TABLE>
The following rates were used in determining the actuarial present value of both
the accumulated and projected benefit obligation.
<TABLE>
<CAPTION>
MassMutual Connecticut Mutual
Plan Plan
-------------- --------------------
<S> <C> <C>
Discount rate - 1995 7.5% 7.75%
Discount rate - 1994 8.0 8.5
Increase in future compensation levels 5.0 5.0
Long-term rate of return on assets 10.0 9.0
</TABLE>
The Company also has defined contribution plans for employees and agents. The
expense credited to operations for all pension plans is $10.9 million in 1995,
as compared to charged to operation of $5.0 million in 1994 and $4.0 million in
1993.
B. Life and Health
Certain life and health insurance benefits are provided to retired employees and
agents through group insurance contracts. Substantially all of the Company's
employees may become eligible for these benefits if they reach retirement age
while working for the Company. In 1993, the Company adopted the National
Association of Insurance Commissioners' accounting standard for postretirement
benefit costs, requiring these benefits to be accounted for using the accrual
method for employees and agents eligible to retire and current retirees.
56
<PAGE>
Notes To Supplemental Financial Statements (Continued)
The following rates were used in determining the accumulated postretirement
benefit liability.
<TABLE>
<CAPTION>
MassMutual Connecticut Mutual
Plan Plan
--------------- --------------------
<S> <C> <C>
Discount rate - 1995 7.5% 8.5%
Discount rate - 1994 8.0 7.5
Assumed increases in medical cost rates
in the first year
(for all) 7.5
(for those born prior to 1965) 12.0
(for those born after 1965) 9.5
declining to
(for all) 5.0
(for those born prior to 1965) 6.0
(for those born after 1965) 5.5
within 6 years 7 years
</TABLE>
The initial transition obligation of $137.9 million is being amortized over
twenty years through 2012. At December 31, 1995 and 1994, the net unfunded
accumulated benefit obligation was $109.2 million and $108.1 million,
respectively, for employees and agents eligible to retire or currently retired
and $42.7 million and $36.9 million, respectively, for participants not eligible
to retire. A Retired Lives Reserve Trust was funded to pay life insurance
premiums for certain retired employees. Trust assets available for benefits
were $22.5 million in 1995.
The expense for 1995, 1994 and 1993 was $22.9 million, $19.8 million and $23.4
million, respectively. A one percent increase in the annual assumed increase in
medical cost rates would increase the 1995 accumulated postretirement benefit
liability and benefit expense by $8.5 million and $1.4 million, respectively.
4. RELATED PARTY TRANSACTIONS
At the end of 1994, the Company executed two reinsurance agreements with its
subsidiary, MML Pension Insurance Company ("MML Pension"). In the first of
these contracts, the Company assumed all of the single premium immediate annuity
business written by MML Pension through either an assumption provision or a
coinsurance provision. The second contract ceded the Company's group life,
accident and health business to MML Pension. Additionally, a reinsurance
agreement previously in place, ceding all of the Company's single premium
immediate annuity business, was terminated. These contracts were concurrently
executed at the end of business on December 31, 1994 and were accounted for as a
bulk reinsurance transaction. Accordingly, assets were transferred at fair
value and liabilities were transferred at statutory carrying value. These
transfers did not impact the 1994 Statement of Income of either company. The
net effect of these transactions decreased the Company's assets and liabilities
by $174.6 million in 1994. During 1995, the gain from operations of this
business was reflected as a $41 million dividend received from the subsidiary
which was recorded as net investment income on the Statement of Income.
5. FEDERAL INCOME TAXES
Provision for federal income taxes is based upon the Company's best estimate of
its tax liability. No deferred tax effect is recognized for temporary
differences that may exist between financial reporting and taxable income.
Accordingly, the reporting of equity tax, using the most current information,
and other miscellaneous temporary differences, such as reserves, acquisition
costs, and restructuring costs, resulted in an effective tax rate which is other
than the statutory tax rate.
The Internal Revenue Service has completed examining the Company's income tax
returns through the year 1989 for Massachusetts Mutual and 1991 for Connecticut
Mutual, and is currently examining Massachusetts Mutual for the years 1990
through 1992. The Company believes any adjustments resulting from such
examinations will not materially affect its financial statements.
57
<PAGE>
Notes To Supplemental Financial Statements (Continued)
Components of the formula authorized by the Internal Revenue Service for
determining deductible policyholder dividends have not been finalized for 1995
and 1994. The Company records the estimated effects of anticipated revisions in
the Statement of Income.
Massachusetts Mutual and Connecticut Mutual plan to file their 1995 federal
income tax returns on a consolidated basis with their life and non-life
affiliates. The Companies' and their life and non-life affiliates are subject
to a written tax allocation agreement which allocates tax liability in a manner
permitted under Treasury regulations. Generally, the agreement provides that
loss members shall be compensated for the use of their losses and credits by
other members.
Federal tax payments were $175.2 million in 1995 and $291.1 million in 1993. In
1994, the Company had federal tax refunds of $23.4 million. At December 31,
1995 and 1994, the Company established a liability for federal income taxes of
$338.5 million and $229.9 million, respectively.
6. INVESTMENTS
The Company maintains a diversified investment portfolio. Investment policies
limit concentration in any asset class, geographic region, industry group,
economic characteristic, investment quality or individual investment.
A. Bonds
The carrying value and estimated fair value of bonds are as follows:
<TABLE>
<CAPTION>
December 31, 1995
-------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
------------ ------------ ------------ ------------
(In Millions)
<S> <C> <C> <C> <C>
U.S. Treasury Securities and Obligations of U.S.
Government Corporations and Agencies $ 9,391.5 $ 837.0 $ 43.3 $ 10,185.2
Debt Securities issued by Foreign Governments 261.9 27.9 0.1 289.7
Mortgage-backed securities 3,265.4 176.3 9.4 3,432.3
State and local governments 106.0 15.2 0.1 121.1
Industrial securities 9,030.7 762.8 57.8 9,735.7
Utilities 1,417.6 152.4 2.9 1,567.1
Affiliates 152.1 4.4 1.2 155.3
----------- ------------ ------------ ------------
TOTAL $ 23,625.2 $ 1,976.0 $ 114.8 $ 25,486.4
<CAPTION>
December 31, 1994
-------------------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
------------ ------------ ------------ ------------
(In Millions)
<S> <C> <C> <C> <C>
U.S. Treasury Securities and Obligations of U.S.
Government Corporations and Agencies $ 7,362.0 $ 154.4 $ 388.3 $ 7,128.1
Debt Securities issued by Foreign Governments 124.5 2.5 7.7 119.3
Mortgage-backed securities 3,410.5 55.6 176.7 3,289.4
State and local governments 138.2 5.2 6.4 137.0
Industrial securities 10,991.4 230.2 436.3 10,785.3
Utilities 1,147.2 71.3 30.6 1,187.9
Affiliates 124.4 9.7 8.6 125.5
------------ ------------ ------------ ------------
TOTAL $ 23,298.2 $ 528.9 $ 1,054.6 $ 22,772.5
</TABLE>
The carrying value and estimated fair value of bonds at December 31, 1995 by
contractual maturity are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without prepayment penalties.
58
<PAGE>
Notes To Supplemental Financial Statements (Continued)
<TABLE>
<CAPTION>
Estimated
Carrying Fair
Value Value
--------- ---------
<S> <C> <C>
(In Millions)
Due in one year or less $ 2,578.8 $ 2,747.9
Due after one year through five years 3,625.8 3,824.3
Due after five years through ten years 5,356.3 5,857.2
Due after ten years 3,858.0 4,410.9
--------- ---------
15,418.9 16,840.3
Mortgage-backed securities, including securities
guaranteed by the U.S. Government 8,206.3 8,646.1
--------- ---------
TOTAL $23,625.2 $25,486.4
</TABLE>
Proceeds from sales of investments in bonds were $8,068.8 million during 1995,
$5,624.1 million during 1994 and $5,543.5 million during 1993. Gross capital
gains of $255.5 million in 1995, $100.3 million in 1994 and $318.4 million in
1993 and gross capital losses of $67.1 million in 1995, $195.8 million in 1994
and $98.4 million in 1993 were realized on those sales, a portion of which were
included in the Interest Maintenance Reserve. The estimated fair value of non-
publicly traded bonds is determined by the Company using a pricing matrix.
B. Stocks
Preferred stocks in good standing had fair values of $88.0 million in 1995 and
$137.9 million in 1994, using a pricing matrix for non-publicly traded stocks
and quoted market prices for publicly traded stocks. Common stocks, except for
unconsolidated subsidiaries, had a cost of $547.7 million in 1995 and $273.7
million in 1994.
C. Mortgages
The fair value of mortgage loans, as determined from a pricing matrix for
performing loans and the estimated underlying real estate value for non-
performing loans, approximated carrying value less valuation reserves held.
The Company acts as mortgage servicing agent and guarantor for $50.1 million of
mortgage loans sold in 1985. As guarantor, the Company is obligated to advance
unpaid principal and interest on any delinquent loans and to repurchase mortgage
loans under certain circumstances including mortgagor default.
D. Other
The carrying value of investments which were non-income producing for the
preceding twelve months was $76.9 million and $130.9 million at December 31,
1995 and 1994, respectively. The Company had restructured loans with book
values of $415.0 million, and $543.7 million at December 31, 1995 and 1994,
respectively. The loans typically have been modified to defer a portion of the
contracted interest payments to future periods. Interest deferred to future
periods totaled $3.4 million in 1995, $5.9 million in 1994 and $10.2 million in
1993. The Company made voluntary contributions to the Asset Valuation Reserve
of $52.7 million in 1994 and $51.5 million in 1993 for these restructured loans.
No additional voluntary contribution was made in 1995.
It is not practicable to determine the fair value of policy loans as they do not
have a stated maturity.
7. PORTFOLIO RISK MANAGEMENT
The Company manages its investment risks to reduce interest rate and duration
imbalances determined in asset/liability analyses. The fair values of these
instruments, which are not recorded in the financial statements, are based upon
market prices or prices obtained from brokers. The Company does not hold or
issue financial instruments for trading purposes.
The notional amounts described do not represent amounts exchanged by the parties
and, thus, are not a measure of the exposure of the Company. The amounts
exchanged are calculated on the basis of the notional amounts and the other
terms of the instruments, which relate to interest rates, exchange rates,
security prices or financial or other indexes.
59
<PAGE>
Notes To Supplemental Financial Statements (Continued)
The Company is exposed to credit-related losses in the event of nonperformance
by counterparties to financial instruments. This exposure is limited to
contracts with a positive fair value. The amounts at risk in a net gain
position were $84.9 million and $88.4 million at December 31, 1995 and 1994,
respectively. The Company monitors exposure to ensure counterparties are credit
worthy and concentration of exposure is minimized.
The Company enters into financial futures contracts for the purpose of managing
interest rate exposure. The Company's futures contracts are exchange traded
with minimal credit risk. Margin requirements are met with the deposit of
securities. Futures contracts are generally settled with offsetting
transactions. Gains and losses on financial futures contracts are recorded when
the contract is closed and amortized through the Interest Maintenance Reserve
over the remaining life of the underlying asset. As of December 31, 1995, the
Company did not have any open financial futures contracts.
The Company utilizes interest rate swap agreements, options, and purchased caps
and floors to reduce interest rate exposures arising from mismatches between
assets and liabilities and to modify portfolio profiles to manage other risks
identified. Under interest rate swaps, the Company agrees to exchange, at
specified intervals, the difference between fixed and floating interest rates
calculated by reference to an agreed-upon notional principal amount. Net
amounts receivable and payable are accrued as adjustments to interest income and
included in investment and insurance amounts receivable on the Statement of
Financial Position. Gains and losses realized on the termination of contracts
amortized through the Interest Maintenance Reserve over the remaining life of
the associated contract. At December 31, 1995 and 1994, the Company had swaps
with notional amounts of $1,841.8 million and $2,819.2 million, respectively.
The fair values of these instruments were $10.1 million at December 31, 1995 and
$49.6 million at December 31, 1994.
Options grant the purchaser the right to buy or sell a security at a stated
price within a stated period. The Company's option contracts have terms of up
to two years. The amounts paid for options purchased are included in other
investments on the Statement of Financial Position. Gains and losses on these
contracts are recorded at the expiration or termination date and are amortized
through the Interest Maintenance Reserve over the remaining life of the
underlying asset. At December 31, 1995 and 1994, the Company had option
contracts with notional amounts of $1,876.2 million and $2,262.1 million,
respectively. The Company's credit risk exposure was limited to the unamortized
costs of $18.4 million and $24.4 million, which had fair values of $48.1 million
and $10.4 million at December 31, 1995 and 1994, respectively.
Interest rate cap agreements grant the purchaser the right to receive the excess
of a referenced interest rate over a given rate. Interest rate floor agreements
grant the purchaser the right to receive the excess of a given rate over a
referenced interest rate. Amounts paid for interest rate caps and floors are
amortized into interest income over the life of the asset on a straight-line
basis. Unamortized costs are included in other investments on the Statement of
Financial Position. Amounts receivable and payable are accrued as adjustments
to interest income and included in the Statement of Financial Position as
investment and insurance amounts receivable. Gains and losses on these
contracts, including any unamortized cost, are recognized upon termination and
are amortized through the Interest Maintenance Reserve over the remaining life
of the associated cap or floor agreement. At December 31, 1995 and 1994, the
company had agreements with notional amounts of $3,366.3 million and $2,617.0
million, respectively. The Company's credit risk exposure on these agreements
is limited to the unamortized costs of $14.0 million and $12.1 million at
December 31, 1995 and 1994, respectively. The fair values of these instruments
were $30.8 million and $6.0 million at December 31, 1995 and 1994, respectively.
The Company utilizes asset swap agreements to reduce exposures, such as currency
risk and prepayment risk, built into certain assets acquired. Cross-currency
interest rate swaps allow investment in foreign currencies, increasing access to
additional investment opportunities, while limiting foreign exchange risk.
Notional amounts relating to asset and currency swaps totaled $323.7 million and
$220.0 million at December 31, 1995 and 1994, respectively. The fair values
of these instruments were an unrecognized gain of $4.6 million at December 31,
1995 and $2.8 million at December 31, 1994.
The Company enters into forward U.S. Treasury commitments for the purpose of
managing interest rate exposure. The Company generally does not take delivery
on forward commitments. These commitments are instead settled with offsetting
transactions. Gains and losses on forward commitments are recorded when the
commitment is closed and amortized through the Interest Maintenance Reserve over
the remaining life of the asset. At December 31, 1995 and 1994, the Company had
U. S. Treasury purchase commitments which will settle during the following year
with contractual amounts of $292.4 million and $1,000.0 million and fair values
of $298.8 million and $989.2 million, respectively.
60
<PAGE>
Notes To Supplemental Financial Statements (Continued)
8. LIQUIDITY
The withdrawal characteristics of the policyholders' reserves and funds,
including separate accounts, and the invested assets which support them at
December 31, 1995 are illustrated below:
<TABLE>
<CAPTION>
(In Millions)
<S> <C> <C>
Total policyholders' reserves and funds and separate account liabilities $ 44,474.9
Not subject to discretionary withdrawal (6,640.2)
Policy loans (4,518.4)
----------
Subject to discretionary withdrawal $ 33,316.3
----------
Total invested assets, including separate investment accounts $ 49,184.1
Policy loans and other invested assets (12,383.0)
----------
Readily marketable investments $ 36,801.1
----------
</TABLE>
9. BUSINESS RISKS AND CONTINGENCIES
The Company is subject to insurance guaranty fund laws in the states in which it
does business. These laws assess insurance companies amounts to be used to pay
benefits to policyholders and claimants of insolvent insurance companies. Many
states allow these assessments to be credited against future premium taxes. The
Company believes such assessments in excess of amounts accrued will not
materially affect its financial position, results of operations or liquidity.
In 1995, the Company elected not to admit $17.6 million of guaranty fund premium
tax offset receivables relating to prior assessments.
The Company is involved in litigation arising out of the normal course of its
business. Management intends to defend these actions vigorously. While the
outcome of litigation cannot be foreseen with certainty, it is the opinion of
management, after consultation with legal counsel, that the ultimate resolution
of these matters will not materially affect its financial position, results of
operations or liquidity.
10. SUBSEQUENT EVENTS
On January 5, 1996, the Company signed a definitive agreement for the sale of
MassMutual Holding Company Two, Inc., a wholly-owned subsidiary, and its
subsidiaries, including MML Pension Insurance Company, which comprises the
Company's group life and health business, to WellPoint Health Networks, Inc. for
$380 million. The closing of the sale is contingent upon approval by regulatory
authorities. Since the transaction is not expected to close until late in the
first quarter of 1996, management has not determined the final gain on the sale.
The following table presents certain financial information as it pertains to
MassMutual Holding Company Two, Inc. and its effects on the Company's financial
statements.
<TABLE>
1995 1994
------- -------
(In Millions)
<S> <C> <C>
Other Invested Assets $ 187.8 $ 173.9
Net Gain From Operations 41.0 0.0
Unrealized Capital Gain (Loss) 13.9 (12.5)
</TABLE>
11. SUBSIDIARIES AND AFFILIATED COMPANIES
Summary of ownership and relationship of the Company and its subsidiaries and
affiliated companies as of December 31, 1995 is illustrated below. The Company
provides management or advisory services to most of these companies.
Subsidiaries
------------
CM Assurance Company
CM Benefit Insurance Company
CM Financial Services, LLC
CM Financial Services Series Fund I, Inc.
CM Investment Accounts, Inc.
CM Life Insurance Company
CM Transnational, S.A.
DHC, Inc.
61
<PAGE>
Notes To Supplemental Financial Statements (Continued)
MML Bay State Life Insurance Company
MassMutual Holding Company
MassMutual Holding Company Two, Inc.
MML Series Investment Fund
MassMutual Institutional Funds
Oppenheimer Value Stock Fund
Subsidiaries of MassMutual Holding Company
------------------------------------------
Cornerstone Real Estate Advisors, Inc.
DLB Acquisition Corporation
MML Investors Services, Inc.
MML Real Estate Corporation (liquidated during 1995)
MML Realty Management Corporation
MML Reinsurance (Bermuda) Ltd.
Mass Seguros De Vida S.A. (Chile)
MassLife Seguros De Vida S.A. (Argentina)
MassMutual/Carlson CBO N.V.
MassMutual Corporate Value Limited
MassMutual International (Bermuda) Limited
Oppenheimer Acquisition Corporation
Westheimer 335 Suites, Inc.
Subsidiaries of DHC, Inc.
-------------------------
CM Advantage Inc.
CM Insurance Services, Inc.
CM International, Inc.
CM Property Management, Inc.
G.R. Phelps & Company, Inc.
State House 1 Corp.
Urban Properties, Inc.
Subsidiaries of DLB Acquisition Corporation
-------------------------------------------
Concert Capital Management, Inc.
David L. Babson and Company, Inc.
Subsidiaries of MassMutual Corporate Value Limited
--------------------------------------------------
MassMutual Corporate Value Partners Limited
Subsidiaries of MassMutual Holding Company Two, Inc.
- ----------------------------------------------------
MassMutual Holding Company Two MSC, Inc.
Subsidiaries of MassMutual Holding Company Two MSC, Inc.
--------------------------------------------------------
Benefit Panel Services, Inc.
MML Pension Insurance Company
MassMutual of Ireland, Limited
National Capital Health Plan, Inc.
National Capital Preferred Provider Organization
Sloans Lake Management Corporation
Affiliates
- ----------
MassMutual Corporate Investors
MassMutual Participation Investors
62
<PAGE>
PART II. INFORMATION NOT REQUIRED IN A PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
-------------------------------------------
Not applicable.
Item 14. Indemnification of Directors and Officers
-----------------------------------------
MassMutual directors and officers are indemnified under its by-laws. No
indemnification is provided with respect to any liability to any entity
which is registered as an investment company under the Investment
Company Act of 1940 or to the security holders thereof, where the basis
for such liability is willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of office.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of MassMutual pursuant to the foregoing provisions, or
otherwise, MassMutual has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act of 1933, and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by MassMutual of
expenses incurred or paid by a director, officer or controlling person
of MassMutual in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, MassMutual will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed
by the final adjudication of such issue.
Item 15. Recent Sales of Unregistered Securities
---------------------------------------
MassMutual is involved in the sale of several unregistered securities
products including certain products exempt from registration under
Section 3(c)(11) of the 1933 Act. Such products are issued for use with
qualified plans.
Item 16. Exhibits and Financial Statement Schedules
------------------------------------------
Exhibit Number Description Method of Filing
1 Form of Underwriting Agreement Filed Herewith
3(i) MassMutual Articles of *
Incorporation
3(ii) MassMutual Bylaws *
4 Individual Annuity Contract *
5 Opinion re legality Filed herewith
21 List of MassMutual Subsidiaries *
23 Consent of Coppers & Lybrand L.L.P. Filed herewith
& Lybrand L.L.P.,
independent accountants
<PAGE>
23(i) Financial Statement Schedules Filed herewith
ScheSchedules
Powers of Attorney Filed herewith
*Incorporated by reference from Registrant's Registration Statement No. 33-84802
filed on October 5, 1994.
Item 17. Undertakings
------------
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i.) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii.) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement, including (but not limited to) any
addition or deletion of a managing underwriter;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this Post-Effective Amendment No. 2 to Registration Statement No.
33-84802 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Springfield, Commonwealth of Massachusetts, on
April 5, 1996.
- -------------
(Registrant) Massachusetts Mutual Life Insurance Company
-------------------------------------------
By (Signature and Title) Thomas B. Wheeler*
-----------------
Thomas B. Wheeler
Chairman and Chief Executive Officer
/s/ Richard M. Howe On April 5, 1996, as Attorney-in-Fact pursuant to
- -------------------
*Richard M. Howe powers of attorney filed here
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment to
<PAGE>
Registration Statement No. 33-84802 has been signed by the
following persons in the capacities and on the dates indicated.
(Signature) Thomas B. Wheeler*
-----------------
(Title) Chairman and Chief Executive Officer (Date) April 5, 1996
Massachusetts Mutual Life Insurance Company
/s/ Richard M. Howe On April 5, 1996, as Attorney-in-Fact pursuant to
- -------------------
*Richard M. Howe powers of attorney filed herewith.
As required by the Securities Act of 1933, this Post-Effective Amendment to
Registration Statement No. 2-75412 has been signed by the following persons in
the capacities and on the duties indicated.
Signature Title Date
- --------- ----- ----
/s/ Thomas B. Wheeler* Chief Executive Officer and April 5, 1996
- --------------------------
Thomas B. Wheeler Chairman of the Board
/s/ Daniel J. Fitzgerald* Executive Vice President, April 5, 1996
- --------------------------
Daniel J. Fitzgerald Chief Financial Officer &
Chief Accounting Officer
/s/ Roger G. Ackerman* Director April 5, 1996
- --------------------------
Roger G. Ackerman
/s/ James R. Birle* Director April 5, 1996
- --------------------------
James R. Birle
/s/ Frank C. Carlucci, III* Director April 5 , 1996
- --------------------------
Frank C. Carlucci, III
/s/ Gene Chao* Director April 5, 1996
- --------------------------
Gene Chao, Ph.D.
/s/ Patricia Diaz Dennis* Director April 5, 1996
- --------------------------
Patricia Diaz Dennis
/s/ Anthony Downs* Director April 5, 1996
- --------------------------
Anthony Downs
/s/ James L. Dunlap* Director April 5, 1996
- --------------------------
James L. Dunlap
/s/ William B. Ellis* Director April 5, 1996
- --------------------------
William B. Ellis, Ph.D.
<PAGE>
/s/ Robert M. Furek* Director April 5, 1996
- ---------------------------
Robert M. Furek
/s/ Charles K. Gifford* Director April 5, 1996
- ---------------------------
Charles K. Gifford
/s/ William N. Griggs* Director April 5, 1996
- ---------------------------
William N. Griggs
/s/ James G. Harlow, Jr.* Director April 5, 1996
- ---------------------------
James G. Harlow, Jr.
/s/ George B. Harvey* Director April 5, 1996
- ---------------------------
George B. Harvey
/s/ Barbara B. Hauptfuhrer* Director April 5, 1996
- ---------------------------
Barbara B. Hauptfuhrer
/s/ Sheldon B. Lubar* Director April 5, 1996
- ---------------------------
Sheldon B. Lubar
/s/ William B. Marx, Jr.* Director April 5, 1996
- ---------------------------
William B. Marx, Jr.
/s/ John F. Maypole* Director April 5, 1996
- ---------------------------
John F. Maypole
/s/ Donald F. McCullough* Director April 5, 1996
- ---------------------------
Donald F. McCullough
/s/ John J. Pajak* Director April 5, 1996
- ---------------------------
John J. Pajak
/s/ Barbara S. Preiskel* Director April 5, 1996
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Barbara S. Preiskel
/s/ David E. Sams, Jr.* Director April 5, 1996
- ---------------------------
David E. Sams, Jr.
/s/ Alfred M. Zeien* Director April 5, 1996
- ---------------------------
Alfred M. Zeien
<PAGE>
/s/ Richard M. Howe On April 5, 1996, as Attorney-in-Fact pursuant to
- -------------------------- powers of attorney filed herewith.
*Richard M. Howe
<PAGE>
FORM OF UNDERWRITING AND SERVICING AGREEMENT
This UNDERWRITING AND SERVICING AGREEMENT is made this 1st day of May,
1996, by and between MML Investors Services, Inc. ("MMLISI") and Massachusetts
Mutual Life Insurance Company ("MassMutual"), on its own behalf and on behalf of
Separate Account (the "Separate Account"), a separate
- -----------------------
account of MassMutual, as follows:
WHEREAS, the Separate Account was established on , pursuant
----------------
to authority of the Board of Directors of MassMutual in order to set aside and
invest assets attributable to certain variable annuity contracts (the
"Contracts") issued by MassMutual; and
WHEREAS, MassMutual has registered the Separate Account under the
Investment Company Act of 1940, as amended, (the "1940 Act") and has registered
the Contracts under the Securities Act of 1933, as amended, (the "1933 Act");
and
WHEREAS, MassMutual will continue the effectiveness of the registrations of
the Separate Account under the 1940 Act and the Contracts under the 1933 Act;
and
WHEREAS, MassMutual intends for the Contracts to be sold by its agents and
brokers who are required to be registered representatives of a broker-dealer
that is registered with the Securities and Exchange Commission (the "SEC") under
the Securities Exchange Act of 1934 ("1934 Act") and a member of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, MassMutual desires to engage MMLISI, a broker-dealer registered
with the SEC under the 1934 Act and a member of the NASD, to act as a co-
underwriter ("Co-underwriter") in connection with the distribution of the
Contracts by the full-time career contracted agents of MassMutual ("Agents") and
certain other brokers, and in connection therewith, to provide certain services
and supervision to such Agents and brokers who are also registered
representatives of MMLISI and who sell the Contracts, and to otherwise perform
certain duties and functions that are necessary and proper for the distribution
of the Contracts as required under applicable federal and state securities laws
and NASD regulations, and MMLISI desires to act as Co-underwriter for the sale
of the Contracts and to assume such responsibilities;
NOW, THEREFORE, the parties hereto agree as follows:
1. Underwriter. MassMutual hereby appoints MMLISI as, and MMLISI agrees to
serve as, Co-underwriter of the Contracts during the term of this Agreement for
purposes of federal and state securities laws. MassMutual reserves the right,
however, to refuse at any time or times to sell any Contracts hereunder for any
reason, and MassMutual maintains ultimate responsibility for the sales of the
Contracts.
2. Services. MMLISI agrees, on behalf of MassMutual and in its capacity as Co-
underwriter, to undertake at its own expense except as otherwise provided
herein, to provide certain sales, administrative and supervisory services
relative to the Contracts as described below, and otherwise to perform all
duties that are necessary and proper for the distribution of the Contracts as
required under applicable federal and state securities laws and NASD
regulations.
3. Best Efforts. MMLISI shall use reasonable efforts to sell the Contracts but
does not agree hereby to sell any specific number of Contracts and shall be free
to act as underwriter of other securities. MMLISI agrees to offer the Contracts
for sale in accordance with the prospectus then in effect for the
<PAGE>
Contracts.
4. Compliance and Supervision. All persons who are engaged directly or
indirectly in the operations of MMLISI and MassMutual in connection with the
offer or sale of the Contracts shall be considered a "person associated" with
MMLISI as defined in Section 3(a)(18) of the 1934 Act. MMLISI shall have full
responsibility for the securities activities of each such person as contemplated
by Section 15 of the 1934 Act.
MMLISI shall be fully responsible for carrying out all compliance,
supervisory and other obligations hereunder with respect to the activities of
its registered representatives as required by the NASD Rules of Fair Practice
(the "Rules") and applicable federal and state securities laws. Without limiting
the generality of the foregoing, MMLISI agrees that it shall be fully
responsible for:
(a) ensuring that no representative of MMLISI shall offer or sell the
Contracts until such person is appropriately licensed, registered, or otherwise
qualified to offer and sell such Contracts under the federal securities laws and
any applicable securities laws of each state or other jurisdiction in which such
Contracts may be lawfully sold, in which MassMutual is licensed to sell the
Contracts, and in which such person shall offer or sell the Contracts; and
(b) training and supervising MassMutual's Agents and brokers who are also
registered representatives of MMLISI for purposes of complying on a continuous
basis with the Rules and with federal and state securities laws applicable in
connection with the offering and sale of the Contracts. In this connection,
MMLISI shall:
(i) jointly conduct with MassMutual such training (including the
preparation and utilization of training materials) as in the opinion of MMLISI
and MassMutual is necessary to accomplish the purposes of this Agreement;
(ii) establish and implement reasonable written procedures for
supervision of sales practices of registered representatives of MMLISI who sell
the Contracts;
(iii) provide a sufficient number of registered principals and an
adequately staffed compliance department to carry out the responsibilities as
set forth herein;
(iv) take reasonable steps to ensure that MassMutual Agents and
brokers who are also registered representatives of MMLISI recommend the purchase
of the Contracts only upon reasonable grounds to believe that the purchase of
the Contracts is suitable for such applicant; and
(v) impose disciplinary measures on agents of MassMutual who are
also registered representatives of MMLISI as required.
The parties hereto recognize that any registered representative of MMLISI
selling the Contracts as contemplated by this Agreement shall also be acting as
an insurance agent of MassMutual or as an insurance broker, and that the rights
of MMLISI to supervise such persons shall be limited to the extent specifically
described herein or required under applicable federal or state securities laws
or NASD regulations. Such persons shall not be considered employees of MMLISI
and shall be considered agents of MMLISI only as and to the extent required by
such laws and regulations. Further, it is intended by the parties hereto that
such persons are and shall continue to be considered to have a common law
independent contractor relationship with MassMutual and not to be common law
employees of MassMutual.
5. Registration and Qualification of Contracts. MassMutual has prepared or
caused to be prepared
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<PAGE>
a registration statement describing the Contracts, together with exhibits
thereto (hereinafter referred to as the "Registration Statement"). The
Registration Statement includes a prospectus (the "Prospectus") for the
Contracts.
MassMutual agrees to execute such papers and to do such acts and things as shall
from time-to-time be reasonably requested by MMLISI for the purpose of
qualifying and maintaining qualification of the Contracts for sale under
applicable state law and for maintaining the registration of the Separate
Account and interests therein under the 1933 Act and the 1940 Act, to the end
that there will be available for sale from time-to-time such amounts of the
Contracts as MMLISI may reasonably be expected to sell. MassMutual shall advise
MMLISI promptly of any action of the SEC or any authorities of any state or
territory, of which it is aware, affecting registration or qualification of the
Separate Account, or rights to offer the Contracts for sale.
If any event shall occur as a result of which it is necessary to amend or
supplement the Registration Statement in order to make the statements therein,
in light of the circumstances under which they were or are made, true, complete
or not misleading, MassMutual will forthwith prepare and furnish to MMLISI,
without charge, amendments or supplements to the Registration Statement
sufficient to make the statements made in the Registration Statement as so
amended or supplemented true, complete and not misleading in light of the
circumstances under which they were made.
6. Representations of MassMutual. MassMutual represents and warrants to MMLISI
as follows:
(a) MassMutual is an insurance company duly organized under the laws
of the Commonwealth of Massachusetts and is in good standing and is authorized
to conduct business under the laws of each state in which the Contracts are
sold, that the Separate Account was legally and validly established as a
segregated asset account under the Insurance Code of Massachusetts, and that the
Separate Account has been properly registered as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts.
(b) All persons that will be engaging in the offer or sale of the
Contracts will be authorized insurance agents of MassMutual.
(c) The Registration Statement does not and will not contain any
misstatements of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were or are made, not
materially misleading.
(d) MassMutual shall make available to MMLISI copies of all financial
statements that MMLISI reasonably requests for use in connection with the
offer and sale of the Contracts.
(e) No federal or state agency or bureau has issued an order preventing or
suspending the offer of the Contracts or the use of the Registration
Statement, or of any part thereof, with respect to the sale of the
Contracts.
(f) The offer and sale of the Contracts is not subject to registration, or
if necessary, is registered, under the Blue Sky laws of the states in which
the Contracts will be offered and sold.
(g) The Contracts are qualified for offer and sale under the applicable
state insurance laws in those states in which the Contracts shall be
offered for sale. In each state where such qualification is effected,
MassMutual shall file and make such statements or reports as are or may be
required by the laws of such state.
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(h) This Agreement has been duly authorized, executed and delivered by
MassMutual and constitutes the valid and legally binding obligation of
MassMutual. Neither the execution and delivery of this Agreement by
MassMutual nor the consummation of the transactions contemplated herein
will result in a breach or violation of any provision of the state
insurance laws applicable to MassMutual, any judicial or administrative
orders in which it is named or any material agreement or instrument to
which it is a party or by which it is bound.
7. Representations of MMLISI. MMLISI represents and warrants to MassMutual as
follows:
(a) MMLISI is duly registered as a broker-dealer under the 1934 Act and is
a member in good standing of the NASD and, to the extent necessary to
perform the activities contemplated hereunder, is duly registered, or
otherwise qualified, under the applicable securities laws of every state or
other jurisdiction in which the Contracts are available for sale.
(b) This Agreement has been duly authorized, executed and delivered by
MMLISI and constitutes the valid and legally binding obligation of MMLISI.
Neither the execution and delivery of this Agreement by MMLISI nor the
consummation of the transactions contemplated herein will result in a
breach or violation of any provision of the federal or state securities
laws or the Rules, applicable to MMLISI, or any judicial or administrative
orders in which it is named or any material agreement or instrument to
which it is a party or by which it is bound.
(c) MMLISI shall comply with the Rules and the securities laws of any
jurisdiction in which it sells, directly or indirectly, any Contracts.
8. Expenses. MMLISI shall be responsible for all expenses incurred in
connection with its provision of services and the performance of its
obligations hereunder, except as otherwise provided herein.
MassMutual shall be responsible for all expenses of printing and
distributing the Prospectuses, and all other expenses of preparing,
printing and distributing all other sales literature or material for use in
connection with offering the Contracts for sale.
9. Sales Literature and Advertising. MMLISI agrees to ensure that its
registered representatives use only the Prospectus, statements of
additional information, or other applicable and authorized sales literature
then in effect in selling the Contracts. MMLISI is not authorized to give
any information or to make any representations concerning the Contracts
other than those contained in the current Registration Statement filed with
the SEC or in such sales literature as may be authorized by MassMutual.
MMLISI agrees to make timely filings with the SEC, the NASD, and such other
regulatory authorities as may be required of any sales literature or
advertising materials relating to the Contracts and intended for
distribution to prospective investors. MassMutual shall review and approve
all advertising and sales literature concerning the Contracts utilized by
MMLISI. MMLISI also agrees to furnish to MassMutual copies of all
agreements and plans it intends to use in connection with any sales of the
Contracts.
10. Applications. All applications for Contracts shall be made on
application forms supplied by MassMutual, and shall be remitted by MMLISI
promptly, together with such forms and any other required documentation,
directly to MassMutual at the address indicated on such application or to
such other address as MassMutual may, from time to time, designate in
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<PAGE>
writing. All applications are subject to acceptance or rejection by
MassMutual at its sole discretion.
11. Payments. All money payable in connection with any of the Contracts,
whether as premiums, purchase payments or otherwise, and whether paid by,
or on behalf of any applicant or Contract owner, is the property of
MassMutual and shall be transmitted immediately in accordance with the
administrative procedures of MassMutual without any deduction or offset for
any reason, including by example but not limitation, any deduction or
offset for compensation claimed by MMLISI. Checks or money orders as
payment on any Contract shall be drawn to the order of "Massachusetts
Mutual Life Insurance Company." No cash payments shall be accepted by
MMLISI in connection with the Contracts. Unless otherwise agreed to by
MassMutual in writing, neither MMLISI nor any of MassMutual's Agents nor
any broker shall have an interest in any surrender charges, deductions or
other fees payable to MassMutual as set forth herein.
12. Insurance Licenses. MassMutual shall apply for and maintain the proper
insurance licenses and appointments for each of the Agents and brokers
selling the Contracts in all states or jurisdictions in which the Contracts
are offered for sale by such person. MassMutual reserves the right to
refuse to appoint any proposed Agent or broker, and to terminate an Agent
or broker once appointed. MassMutual agrees to be responsible for all
licensing or other fees required under pertinent state insurance laws to
properly authorize Agents or brokers for the sale of the Contracts;
however, the foregoing shall not limit MassMutual's right to collect such
amount from any person or entity other than MMLISI.
13. Agent/Broker Compensation. Commissions or other fees due all brokers
and Agents in connection with the sale of Contracts shall be paid by
MassMutual, on behalf of MMLISI, to the persons entitled thereto in
accordance with the applicable agreement between each such broker or Agent
and MassMutual or a general agent thereof. MMLISI shall assist MassMutual
in the payment of such amounts as MassMutual shall reasonably request,
provided that MMLISI shall not be required to perform any acts that would
subject it to registration under the insurance laws of any state. The
responsibility of MMLISI shall include the performance of all activities by
MMLISI necessary in order that the payment of such amounts fully complies
with all applicable federal and state securities laws. Unless applicable
federal or state securities law shall require, MassMutual retains the
ultimate right to determine the commission rate paid to its Agents.
14. MMLISI Compensation. As payment for its services hereunder, MMLISI
shall receive an annual fee in the amount of $______ per year. Payments
shall commence and be made no later than December 31 of the year in which a
Contract is issued.
15. Books and Records. MMLISI and MassMutual shall each cause to be
maintained and preserved for the period prescribed such accounts, books,
and other documents as are required of it by the 1934 Act and any other
applicable laws and regulations. In particular, without limiting the
foregoing, MMLISI shall cause all the books and records in connection with
the offer and sale of the Contracts by its registered representatives to be
maintained and preserved in conformity with the requirements of Rules 17a-3
and 17a-4 under the 1934 Act, to the extent that such requirements are
applicable to the Contracts. The books, accounts, and records of MMLISI and
MassMutual as to all transactions hereunder shall be maintained so as to
disclose clearly and accurately the nature and details of the transactions.
The payment of premiums, purchase payments, commissions and other fees and
payments in connection with the Contracts by its registered representatives
shall be reflected on the books and records of MMLISI as required under
applicable NASD regulations and federal and state securities laws
16
<PAGE>
requirements.
MMLISI and MassMutual, from time to time during the term of this
Agreement, shall divide the administrative responsibility for maintaining
and preserving the books, records and accounts kept in connection with the
Contracts; provided, however, in the case of books, records and accounts
kept pursuant to a requirement of applicable law or regulation, the
ultimate and legal responsibility for maintaining and preserving such
books, records and accounts shall be that of the party which is required to
maintain or preserve such books, records and accounts under the applicable
law or regulation, and such books, records and accounts shall be maintained
and preserved under the supervision of that party. MMLISI and MassMutual
shall each cause the other to be furnished with such reports as it may
reasonably request for the purpose of meeting its reporting and
recordkeeping requirements under such regulations and laws, and under the
insurance laws of the Commonwealth of Massachusetts and any other
applicable states or jurisdictions.
MMLISI and MassMutual each agree and understand that all documents,
reports, records, books, files and other materials required under
applicable Rules and federal and state securities laws shall be the
property of MMLISI, unless such documents, reports, records, books, files
and other materials are required by applicable regulation or law to be also
maintained by MassMutual, in which case such material shall be the joint
property of MMLISI and MassMutual. All other documents, reports, records,
books, files and other materials maintained relative to this Agreement
shall be the property of MassMutual. Upon termination of this Agreement,
all said material shall be returned to the applicable party.
MMLISI and MassMutual shall establish and maintain facilities and
procedures for the safekeeping of all books, accounts, records, files, and
other materials related to this Agreement. Such books, accounts, records,
files, and other materials shall remain confidential and shall not be
voluntarily disclosed to any other person or entity except as described
below in section 16..
16. Availability of Records. MMLISI and MassMutual shall each submit to
all regulatory and administrative bodies having jurisdiction over the sales
of the Contracts, present or future, any information, reports, or other
material that any such body by reason of this Agreement may request or
require pursuant to applicable laws or regulations. In particular, without
limiting the foregoing, MassMutual agrees that any books and records it
maintains pursuant to paragraph 15 of this Agreement which are required to
be maintained under Rule 17a-3 or 17a-4 of the 1934 Act shall be subject to
inspection by the SEC in accordance with Section 17(a) of the 1934 Act and
Sections 30 and 31 of the 1940 Act.
17. Confirmations. MassMutual agrees to prepare and mail a confirmation
for each transaction in connection with the Contracts at or before the
completion thereof as required by the 1934 Act and applicable
interpretations thereof, including Rule 10b-10 thereunder. Each such
confirmation shall reflect the facts of the transaction, and the form
thereof will show that it is being sent on behalf of MMLISI acting in the
capacity of agent for MassMutual.
18. Indemnification. MassMutual shall indemnify MMLISI, its registered
representatives, officers, directors, employees, agents and controlling
persons and hold such persons harmless, from and against any and all
losses, damages, liabilities, claims, demands, judgments, settlements,
costs and expenses of any nature whatsoever (including reasonable
attorneys' fees
17
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and disbursements) resulting or arising out of or based upon an allegation
or finding that: (i) the Registration Statement or any application or other
document or written information provided by or on behalf of MassMutual
includes any untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, unless such
statement or omission was made in reliance upon, and in conformity with,
written information furnished to MassMutual by MMLISI or its registered
representatives specifically for use in the preparation thereof, or (ii)
there is a misrepresentation, breach of warranty or failure to fulfill any
covenant or warranty made or undertaken by MassMutual hereunder.
MMLISI will indemnify MassMutual, its officers, directors, employees,
agents and controlling persons and hold such persons harmless, from and
against any and all losses, damages, liabilities, claims, demands,
judgments, settlements, costs and expenses of any nature whatsoever
(including reasonable attorneys' fees and disbursements) resulting or
arising out of or based upon an allegation or finding that: (i) MMLISI or
its registered representatives offered or sold or engaged in any activity
relating to the offer and sale of the Contracts which was in violation of
any provision of the federal securities laws or, (ii) there is a material
misrepresentation, material breach of warranty or material failure to
fulfill any covenant or warranty made or undertaken by MMLISI hereunder.
Promptly after receipt by an indemnified party under this paragraph 18
of notice of the commencement of any action by a third party, such
indemnified party will, if a claim in respect thereof is to be made against
the indemnifying party under this paragraph 18, notify the indemnifying
party of the commencement thereof; but the omission to notify the
indemnifying party will not relieve the indemnifying party from liability
which the indemnifying party may have to any indemnified party otherwise
than under this paragraph. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, to assume the
defense thereof, with counsel satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this paragraph for any legal or
other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation.
19. Independent Contractor. MMLISI shall be an independent contractor.
MMLISI is responsible for its own conduct and the employment, control and
conduct of its agents and employees and for injury to such agents or
employees or to others through its agents or employees. MMLISI assumes full
responsibility for its agents and employees under applicable statutes and
agrees to pay all employer taxes thereunder.
20. Termination. Subject to termination as hereinafter provided, this
Agreement shall remain in full force and effect for the initial term of the
Agreement, which shall be for a two year period commencing on the date
first above written, and this Agreement shall continue in full force and
effect from year to year thereafter, until terminated as herein provided.
This Agreement may be terminated by either party hereto upon 30 days
written notice to the other party, or at any time upon the mutual written
consent of the parties hereto. This Agreement shall automatically be
terminated in the event of its assignment. Subject to MassMutual's
approval, however, MMLISI may delegate any duty or function assigned to it
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in this agreement provided that such delegation is permissible under
applicable law. Upon termination of this Agreement, all authorizations,
rights and obligations shall cease except the the obligations to settle
accounts hereunder, including the settlement of monies due in connection
with the Contracts in effect at the time of termination or issued pursuant
to applications received by MassMutual prior to termination.
21. Interpretation. This Agreement shall be subject to the provisions of
the 1934 Act and the rules, regulations, and rulings thereunder and of the
NASD, from time to time in effect, and the terms hereof shall be
interpreted and construed in accordance therewith. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule,
or otherwise, the remainder of this Agreement shall not be affected
thereby. This Agreement shall be interpreted in accordance with the laws of
the Commonwealth of Massachusetts.
22. Non-exclusivity. The services of MMLISI and MassMutual to the Separate
Account hereunder are not to be deemed exclusive and MMLISI and MassMutual
shall be free to render similar services to others so long as their
services hereunder are not impaired or interfered with hereby.
23. Amendment. This Agreement constitutes the entire Agreement between the
parties hereto and may not be modified except in a written instrument
executed by all parties hereto.
24. Interests in and of MMLISI. It is understood that any of the
policyholders, directors, officers, employees and agents of MassMutual may
be a shareholder, director, officer, employee, or agent of, or be otherwise
interested in, MMLISI, any affiliated person of MMLISI, any organization in
which MMLISI may have an interest, or any organization which may have an
interest in MMLISI; that MMLISI, any such affiliated person or any such
organization may have an interest in MassMutual; and that the existence of
any such dual interest shall not affect the validity hereof or of any
transaction hereunder except as otherwise provided in the Charter, Articles
of Incorporation, or By-Laws of MassMutual and MMLISI, respectively, or by
specific provision of applicable law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed by their respective officials thereunto duly authorized and seals
to be affixed, as of the day and year first above written.
ATTEST: MASSACHUSETTS MUTUAL
LIFE INSURANCE COMPANY, on its behalf
and on behalf of __________SEPARATE ACCOUNT
By:
---------------------------
ATTEST: MML INVESTORS SERVICES, INC.
By:
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<PAGE>
April 5, 1996
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
RE: Massachusetts Mutual Fixed Account with Market Value
Adjustment; Commission File No. 33-84802
Ladies and Gentlemen:
This opinion is furnished in connection with the filing of Post-Effective
Amendment No. 2 to the Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act of 1933 for Massachusetts Mutual Fixed
Account with Market Value Adjustment (the "Fixed Account") offered in connection
with OppenheimerFunds LifeTrust Variable Annuity contract, issued by MassMutual.
The Fixed Account offers investors the choice among various guarantee periods to
which account value may be allocated. If such amounts remain in the Fixed
Account for the chosen guarantee period, then a guaranteed rate of interest will
be paid. If, however, amounts are withdrawn prior to the expiration of the
selected guarantee period, such withdrawal will be subject to a market value
adjustment.
As Second Vice President and Associate General Counsel for Massachusetts Mutual
Life Insurance Company, ("MassMutual"), I provide legal advice to MassMutual in
connection with the operation of its variable products. In such role I have
participated in the preparation of Post-Effective Amendment No. 2 to the
Registration Statement for the Fixed Account.
In so acting, I have made such examination of the law and examined such records
and documents as in my judgment are necessary or appropriate to enable me to
render the opinion expressed below. I am of the following opinion:
1. MassMutual is a valid and subsisting corporation, organized and operated
under Massachusetts law, and subject to regulation by the Massachusetts
Commissioner of Insurance.
2. The securities being registered, when sold will be legally issued, fully
paid and non-assessable.
I hereby consent to the use of this opinion as an exhibit to the Post-Effective
Amendment.
Very truly yours,
Thomas F. English
Thomas F. English
Second Vice President and
Associate General Counsel
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LIST OF SUBSIDIARIES AND AFFILIATES
The following entities are, or may be deemed to be, controlled by MassMutual
through the direct or indirect ownership of such entities' stock.
1. MassMutual Holding Company, a Delaware corporation, all the stock of
which is owned by MassMutual.
2. MML Series Investment Fund, a registered open-end investment company
organized as a Massachusetts business trust, all of the shares of which
are owned by separate accounts of MassMutual and companies controlled
by MassMutual.
3. MassMutual Institutional Funds, a registered open-end investment
company organized as a Massachusetts business trust, all of the shares
are owned by MassMutual.
4. MML Bay State Life Insurance Company, a Missouri corporation, all the
stock of which is owned by MassMutual.
5. MassMutual of Ireland, Ltd., incorporated in the Republic of Ireland,
to operate a group life and health claim office for MassMutual, all of
the stock of which is owned by MassMutual.
6. DHC, Inc., a Connecticut holding company, all the stock of which is
owned by MassMutual.
7. CM Assurance Company, a Connecticut life, accident, disability and
health insurer, all the stock of which is owned by MassMutual.
8. CM Benefit Insurance Company, a Connecticut life, accident, disability
and health insurer, all the stock of which is owned by MassMutual.
9. C.M. Life Insurance Company, a Connecticut life, accident, disability
and health insurer, all the stock of which is owned by MassMutual.
10. CM Transnational, S.A., a Luxembourg corporation that sells life
insurance endowments and annuity contracts. MassMutual owns 99.7% of
the outstanding shares and DHC, Inc. owns the remaining 0.3% of the
shares.
11. Connecticut Mutual Investment Accounts, Inc., a registered open-end
investment company organized as a Maryland corporation. MassMutual and
its subsidiaries own approximately 30% of the outstanding shares.
12. Sunriver Properties, Inc., an inactive Oregon corporation, whose name
is associated with a development project. MassMutual owns all the
shares of outstanding stock.
13. Connecticut Mutual Financial Services Series Fund I, Inc., a
registered open-end investment company organized as a Maryland
corporation. Shares of the fund are sold only to MassMutual and its
affiliates.
14. Connecticut Mutual Financial Services, LLC, a registered broker-dealer
incorporated as a limited liability company in Connecticut. MassMutual
has a 99% ownership interest and CM Strategic Ventures has a 1%
ownership interest.
15. Cornerstone Real Estate Advisers, Inc., a Massachusetts equity real
estate advisory corporation, all the stock of which is owned by
MassMutual Holding Company.
16. DLB Acquisition Corporation ("DLB"), a Delaware corporation.
MassMutual Holding
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Company owns 83.7% of the outstanding capital stock of DLB, which
serves as a holding company for certain investment advisory
subsidiaries of MassMutual.
17. MML Investors Services, Inc., registered broker-dealer incorporated in
Massachusetts, all the stock of which is owned by MassMutual Holding
Company.
18. MML Realty Management Corporation, a property manager incorporated in
Massachusetts, all the stock of which is owned by MassMutual Holding
Company.
19. MassMutual International, Inc., a Delaware holding company of foreign
insurance companies. MassMutual Holding Company owns all of the stock
of MassMutual International, Inc.
20. MML Reinsurance (Bermuda) Ltd., a property and casualty reinsurer
incorporated in Bermuda, all of the stock of which is owned by
MassMutual Holding Company.
21. MML International (Bermuda) Ltd., a writer of variable life insurance
for overseas markets that was incorporated in Bermuda, all of the
stock of which is owned by MassMutual Holding Company
22. Mass Seguros de Vida S.A. (Chile), a life insurance company
incorporated in Chile. MassMutual Holding Company owns 33.5% of the
outstanding capital stock of Mass Seguros de Vida S.A.
23. MassLife Seguros de Vida S.A. (Argentine), a life insurance company
incorporated in Argentine. MassMutual Holding Company owns 99.99% of
the outstanding capital stock of MassLife Seguros de Vida S.A.
24. Oppenheimer Acquisition Corporation is a Delaware corporation ("OAC").
MassMutual Holding Company owns 81.3% of the capital stock of OAC,
which serves as a holding company for OppenheimerFunds, Inc.
25. Charter Oak Capital Management, Inc., a Delaware corporation, is a
registered investment adviser. MassMutual Holding Company owns 80% of
the outstanding shares of Charter Oak Capital Management, Inc.
26. Westheimer 335 Suites, Inc., was incorporated in Delaware to serve as
a general partner of the Westheimer 335 Suites Limited Partnership.
MassMutual Holding Company owns all the stock of Westheimer 335
Suites, Inc.
27. CM Advantage, Inc., a Connecticut corporation that acts as a general
partner in real estate limited partnerships. DHC, Inc. owns all of the
outstanding stock.
28. CM Insurance Services, Inc., a licensed insurance broker incorporated
in Connecticut, all of the stock of which is owned by DHC, Inc.
29. G.R. Phelps & Company, Inc., a registered investment adviser
incorporated in Connecticut, all the stock of which is owned by DHC,
Inc.
30. CM International, Inc., a Delaware corporation that holds a mortgage
pool and issues collateralized bond obligations. DHC, Inc. owns all
the outstanding stock.
31. CM Property Management, Inc., a Connecticut real estate holding
company, all the stock of which is owned by DHC, Inc.
32. State House 1 Corporation, a Delaware corporation, that acts as a
general partner of CML Investments I L.P. and State House I L.P. DHC,
Inc. owns all the outstanding
24
<PAGE>
stock.
33. Urban Properties, Inc., a Delaware real estate holding and development
company, all the stock of which is owned by DHC, Inc.
34. Concert Capital Management, Inc., a registered investment adviser
incorporated in Massachusetts, all the stock of which is owned by DLB
Acquisition Corporation.
35. David L. Babson and Company, Incorporated, a registered investment
adviser incorporated in Massachusetts, all of the stock of which is
owned by DLB Acquisition Corporation.
36. Babson Securities Corporation, a registered broker-dealer incorporated
in Massachusetts, all of the stock of which is owned by David L.
Babson and Company, Incorporated.
37. Potomac Babson Incorporated, a Massachusetts corporation, is a
registered investment advisor. David L. Babson and Company
Incorporated own 60% of the outstanding shares of Potomac Babson
Incorporated.
38. MML Insurance Agency, Inc., a licensed insurance broker incorporated
in Massachusetts, all of the stock of which is owned by MML Investors
Services, Inc.
39. MML Securities Corporation, a Massachusetts securities corporation,
all of the stock of which is owned by MML Investors Services, Inc.
40. MML Insurance Agency of Nevada, Inc., a Nevada corporation, all of the
stock of which is owned by MML Insurance Agency, Inc.
41. MML Insurance Agency of Ohio, Inc., a subsidiary of MML Insurance
Agency, Inc., is incorporated in the state of Ohio. The outstanding
capital stock is controlled by MML Insurance Agency, Inc. by means of
a voting trust.
42. MML Insurance Agency of Texas, Inc., a subsidiary of MML Insurance
Agency, Inc., is incorporated in the state of Texas. The outstanding
capital stock is controlled by MML Insurance Agency, Inc. by means of
a voting trust.
43. CM Insurance Services, Inc. (Arkansas), a licensed insurance broker
incorporated in Arkansas, all of the stock of which is owned by CM
Insurance Services, Inc.
44. CM Insurance Services, Inc. (Texas) a licensed insurance broker
incorporated in Texas. CM Insurance Services, Inc. controls 100% of
the shares of outstanding stock by means of a voting trust.
45. Diversified Insurance Services Agency of America, Inc. (DISA Ohio), a
licensed insurance broker incorporated in Ohio. CM Insurance Services,
Inc. controls 100% of the shares of outstanding stock by means of a
voting trust.
46. Diversified Insurance Services Agency of America, Inc. (DISA
Massachusetts), a licensed insurance broker incorporated in
Massachusetts. CM Insurance Services, Inc. owns all the shares of
outstanding stock.
47. Diversified Insurance Services Agency of America, Inc. (DISA Alabama),
a licensed insurance broker incorporated in Alabama. CM Insurance
Services, Inc. owns all the shares of outstanding stock.
48. Diversified Insurance Services Agency of America, Inc. (DISA New
York), a licensed insurance broker incorporated in New York. CM
Insurance Services, Inc. owns all the
25
<PAGE>
shares of outstanding stock.
49. Diversified Insurance Services Agency of America, Inc. (DISA Hawaii),
a licensed insurance broker incorporated in Hawaii. CM Insurance
Services, Inc. owns all the shares of outstanding stock.
50. MassMutual Corporate Value Limited, a Cayman Islands corporation that
owns approximately 93% of MassMutual Corporate Value Partners Limited.
MassMutual Holding Company owns 43.68% of the outstanding capital
stock of MassMutual Corporate Value Limited.
51. CM Strategic Ventures, Inc., a Connecticut corporation that serves as
general partner in limited partnerships, all of the stock of which is
owned by G. R. Phelps & Co., Inc.
52. CML Investments I Corp., a Delaware corporation organized to issue and
sell notes and bonds secured by non-investment grade corporate debt
obligations. CML Investments I L.P. owns all the outstanding stock.
53. Oppenheimer Value Stock Fund ("OVSF) is a series of Oppenheimer
Integrity Funds, a Massachusetts business Trust. OVSF is a registered
open-end investment company of which MassMutual owns 29% of the
outstanding shares of beneficial interest.
54. OppenheimerFunds, Inc., a registered investment adviser incorporated
in Colorado, all of the stock of which is owned by Oppenheimer
Acquisition Corporation
55. Centennial Asset Management Corporation, a Delaware corporation that
serves as the investment adviser and general distributor of the
Centennial Funds. OppenheimerFunds, Inc. owns all the stock of
Centennial Asset Management Corporation.
56. HarbourView Asset Management Corporation, a registered investment
adviser incorporated in New York, all the stock of which is owned by
OppenheimerFunds, Inc.
57. Main Street Advisers, Inc., a Delaware corporation, all the stock of
which is owned by OppenheimerFunds, Inc.
58. OppenheimerFunds Distributor, Inc., a registered broker-dealer
incorporated in New York, all the stock of which is owned by
OppenheimerFunds, Inc.
59. Oppenheimer Partnership Holdings, Inc., a Delaware holding company,
all the stock of which is owned by OppenheimerFunds, Inc.
60. Shareholder Financial Services, Inc., a transfer agent incorporated in
Colorado, all the stock of which is owned by OppenheimerFunds, Inc.
61. Shareholder Services, Inc., a transfer agent incorporated in Colorado,
all the stock of which is owned by OppenheimerFunds, Inc.
62. Centennial Capital Corporation, a former sponsor of unit investment
trust incorporated in Delaware, all the stock of which is owned by
Centennial Asset Management Corporation.
MassMutual is the investment adviser the following investment companies, and as
such may be deemed to control them.
1. MassMutual Corporate Investors, a registered closed-end Massachusetts
business trust.
26
<PAGE>
2. MassMutual Participation Investors, a registered closed-end
Massachusetts business trust.
3. MML Series Investment Fund, a registered open-end Massachusetts
business trust, all of the shares are owned by separate accounts of
MassMutual and companies controlled by MassMutual.
4. MassMutual Institutional Funds, a registered open-end Massachusetts
business trust, all of the shares are owned by MassMutual.
5. MassMutual/Carlson CBO N.V., a Netherlands Antilles corporation that
issued Collateralized Bond Obligations on or about May 1, 1991, owned
equally by MassMutual interests (MassMutual and MassMutual Holding
Company) and Carlson Investment Management Co.
6. MassMutual Corporate Value Partners, Ltd., an off-shore unregistered
investment company.
27
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Massachusetts Mutual Life Insurance Company
We consent to the inclusion in this registration statement on
Form S-1 (File No. 33-84802) of our reports dated March 1, 1996,
on our audits of the supplemental financial statements and
supplemental financial statement schedules of Massachusetts
Mutual Life Insurance Company, which, as more fully described in
our report, give retroactive effect to the merger of
Massachusetts Mutual Life Insurance Company and Connecticut
Mutual Life Insurance Company, and which include an explanatory
paragraph relating to the pending sale of a wholly-owned
insurance subsidiary. We also consent to the reference to our
Firm under the caption "Experts."
Coopers & Lybrand L.L.P.
Springfield, Massachusetts
April 4, 1996
29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Massachusetts Mutual Life Insurance Company
In connection with our audits of the supplemental financial
statements of Massachusetts Mutual Life Insurance Company as of
December 31, 1995 and 1994, and for each of the three years in
the period ended December 31, 1995, which financial statements
are included in the Prospectus, we have also audited the
supplemental financial statement schedules listed in Item 16
herein.
The supplemental financial statements and the supplemental
financial statement schedules give retroactive effect to the
merger of Massachusetts Mutual Life Insurance Company and
Connecticut Mutual Life Insurance Company on March 1, 1996,
which has been accounted for as a pooling of interests as
described in the notes to the supplemental financial statements.
Generally accepted accounting principles preclude giving effect
to a consummated business combination accounted for by the
pooling of interests method in financial statements that do not
include the date of consummation. These supplemental financial
statements do not extend through the date of consummation;
however, they will become the historical consolidated financial
statements of Massachusetts Mutual Life Insurance Company after
financial statements covering the date of consummation of the
business combination are issued. We did not audit the financial
statements or the financial statement schedules of Connecticut
Mutual Life Insurance Company which statements reflect total
assets of 25% as of December 31, 1995 and 1994, revenue of 26%,
26%, and 24% and net gain from operations of 22%, 6% and 17% for
each of the three years in the period ended December 31, 1995,
respectively. Those statements and schedules were audited by
other auditors whose reports have been furnished to us, and our
opinion, insofar as it relates to the amounts included for
Connecticut Mutual Life Insurance Company, is based solely on
the reports of other auditors.
In our opinion, these supplemental financial statement
schedules, when considered in relation to the basic supplemental
financial statements taken as a whole, present fairly, in all
material respects, the information required to be included
therein.
As discussed in Note 10 to the supplemental financial
statements, Massachusetts Mutual Life Insurance Company entered
into a definitive agreement for the sale of a wholly-owned
insurance subsidiary.
Coopers & Lybrand L.L.P.
Springfield, Massachusetts
March 1, 1996
30
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
SCHEDULE I: SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED
PARTIES(1)
December 31, 1995
(In Millions)
<TABLE>
<CAPTION>
Amount at
which
shown on
Type of Investment Cost Fair Value Balance Sheet
- ------------------ ---- ---------- -------------
<S> <C> <C> <C>
Bonds:
U.S. Treasury Securities and Obligations of U.S.
Government Corporations and Agencies $ 9,391 $10,185 $ 9,391
Debt Securities issued by Foreign Governments 262 290 262
Mortgage-backed securities 3,265 3,432 3,265
State and local governments 106 121 106
Industrial Securities 9,031 9,736 9,031
Utilities 1,418 1,567 1,418
Affiliates 152 155 152
------- ------- -------
Total Bonds 23,625 $25,486 23,625
------- ======= -------
Common Stock:
Public utilities 57 $ 60 60
Banks, Trusts and Insurance Companies 49 53 53
Industrial, Miscellaneous and Other 244 303 303
------- ------- -------
Subtotal 350 416 416
Other, Including Subsidiaries 797 997 997
------- ------- -------
Total Common Stock 1,147 $ 1,413 1,413
------- ======= -------
Mortgage Loans on Real Estate 3,872 3,872
Real Estate:
Properties in Satisfaction of Debt 280 280
Investment Real Estate 1,223 1,223
------- -------
Subtotal - Real Estate Investment 1,503 1,503
Real Estate - Other 107 107
------- -------
Total Real Estate 1,610 1,610
------- -------
Policy Loans 4,518 4,518
Cash and Short-term investments 2,343 2,343
Other Investments 493 493
------- -------
Total Investments 37,608 37,874
------- -------
Related Parties:
Bonds 152 $ 155 152
Common Stock 797 997 997
------- ------- -------
Total Related Parties 949 $ 1,152 1,149
------- ======= -------
Investments Other than Investments in Related Parties $36,659 $36,725
======= =======
</TABLE>
(1) This supplemental financial statement schedule gives retroactive effect to
the merger of Massachusetts Mutual Life Insurance Company and Connecticut
Mutual Life Insurance Company on March 1, 1996, which has been accounted for
as a pooling of interests as prescribed by statutory accounting practices
and described in the notes to the supplemental financial statements.
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
SCHEDULE III: SUPPLEMENTARY INSURANCE INFORMATION (1) (2)
December 31, 1995
(In Millions)
<TABLE>
<CAPTION>
Net Policy Benefits
Policyholders' Policyholders' Investment and Payments Other
Reserves and Dividends, Claims Premium and Other and Increase Insurance
Segment Funds and Other Benefits Income Income (3) in Reserves Commissions Expenses
- ------- ----- ------------------ ------ --------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1995
Individual line $23,280 $1,221 $3,925 $1,967 $3,796 $331 $550
Pension Management 9,613 7 1,803 904 2,561 9 66
Life & Health Benefits Management 0 0 0 27 0 0 12
------- ------ ------ ------ ------ ---- ----
$32,893 $1,228 $5,728 $2,898 $6,357 $340 $628
======= ====== ====== ====== ====== ==== ====
Year ended December 31, 1994
Individual line $21,764 $1,246 $3,878 $1,781 $3,733 $334 $515
Pension Management 10,531 7 1,566 967 2,399 8 73
Life & Health Benefits Management 0 0 733 55 581 26 108
------- ------ ------ ------ ------ ---- ----
$32,295 $1,253 $6,177 $2,803 $6,713 $368 $696
======= ====== ====== ====== ====== ==== ====
Year ended December 31, 1993
Individual line $19,843 $1,245 $3,882 $1,725 $3,607 $340 $521
Pension Management 11,475 12 1,778 1,112 2,748 7 67
Life & Health Benefits Management 235 179 748 49 589 25 108
------- ------ ------ ------ ------ ---- ----
$31,553 $1,436 $6,408 $2,886 $6,944 $372 $696
======= ====== ====== ====== ====== ==== ====
</TABLE>
(1) This supplemental financial statement schedule gives retroactive effect to
the merger of Massachusetts Mutual Life Insurance Company and Connecticut
Mutual Life Insurance Company on March 1, 1996, which has been accounted
for as a pooling of interests as prescribed by statutory accounting
practices and described in the notes to the supplemental financial
statements.
(2) Deferred policy acquisition cost column has been omitted from this schedule
because it does not apply to mutual life insurance companies.
(3) Includes other income of $61 million, $116 million and $112 million for
1995, 1994 and 1993, respectively.
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS(1)
(In Millions)
<TABLE>
<CAPTION>
Additions Net change to
Balance at Reserve Transfers Realized Unrealized Policyholders' Balance at
beginning of Contributions among Capital Gains Capital Gains Contingency end of
Description period (2) categories (Losses)(3) (Losses) (4) Reserves (5) period (6)
----------- ------ --- ---------- ---------- ----------- ----------- ---------
As of and for the year ended
December 31, 1993
- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Bonds, Preferred Stocks and
Short-term Investments $160 $ 33 ($ 14) ($ 48) $ 38 $ 9 $169
Mortgage Loans 122 126 14 (80) (5) 55 177
Real Estate 80 34 30 (46) (2) 16 96
Other Investments 68 6 (30) 44 8 28 96
Special investment reserve for
surplus notes 0 25 0 0 0 25 25
---- ---- ---- ----- ---- ---- ----
Total $430 $224 $ 0 ($130) $ 39 $133 $563
==== ==== ==== ===== ==== ==== ====
Detail (7):
Asset Valuation Reserve $363 $432
Investment Reserves 67 131
---- ----
Total $430 $563
==== ====
<CAPTION>
As of and for the year ended
December 31, 1994
- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Bonds, Preferred Stocks and
Short- term Investments $ 169 $ 39 ($ 14) ($ 12) $ 26 $ 39 $208
Mortgage Loans 177 90 14 (110) (3) (9) 168
Real Estate 96 22 3 (41) 3 (13) 83
Other Investments 96 9 (3) 7 (2) 11 107
Special investment reserve for
surplus notes 25 10 0 0 0 10 35
---- ---- ---- ----- ---- ---- ----
Total $563 $170 $ 0 ($156) $ 24 $ 38 $601
==== ==== ==== ===== ==== ==== ====
Detail (7):
Asset Valuation Reserve $432 $470
Investment Reserves 131 131
---- ----
Total $563 $601
==== ====
</TABLE>
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS - CONTINUED (1)
(In Millions)
<TABLE>
<CAPTION>
Additions Net change to
Balance at Reserve Transfers Realized Unrealized Policyholders' Balance at
beginning of Contributions among Capital Gains Capital Gains Contingency end of
Description period (2) categories (Losses) (3) (Losses) (4) Reserves (5) period (6)
- ----------- ------ --- ---------- ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
As of and for the year ended
December 31, 1995
- ----------------------------
Bonds, Preferred Stocks and
Short-term Investments $208 $44 ($2) ($1) ($39) $ 2 $210
Mortgage Loans 168 11 2 (70) (6) (63) 105
Real Estate 83 27 27 (42) (2) 10 93
Other Investments 107 5 (27) 18 131 127 234
Special investment reserve
for surplus notes 35 0 0 0 0 0 35
---- ---- ---- ---- ---- ---- ----
Total $601 $87 $ 0 ($95) $84 $ 76 $677
==== ==== ==== ==== ==== ==== ====
Detail (7):
Asset Valuation Reserve $470 $567
Investment Reserves 131 110
---- ----
Total $601 $677
==== ====
</TABLE>
(1) This supplemental financial statement schedule gives retroactive effect to
the merger of Massachusetts Mutual Life Insurance Company and Connecticut
Mutual Life Insurance Company on March 1, 1996, which has been accounted
for as a pooling of interests as prescribed by statutory accounting
practices and described in the notes to the supplemental financial
statements.
(2) Amounts represent contributions calculated using a statutory formula plus
amounts deemed necessary by the Company. Represents the net impact on
Policyholders' Contingency Reserves for investment gains and losses not
related to changes in interest rates.
(3) These amounts offset realized capital gains and losses, net of tax, that
have been recorded as a component of net income. Amounts include realized
capital gains and losses, net of tax, on sales not related to interest
fluctuations, repayments of mortgage loans at a discount, mortgage loan
foreclosures, and real estate permanent write-downs.
(4) These amounts offset unrealized capital gains, recorded as a change in
Policyholders' Contingency Reserves (Surplus). Amounts include unrealized
losses due to market value reductions of securities with a NAIC quality
rating of 6 and net changes in the undistributed earnings of subsidiaries.
(5) Amounts represent the reserve contribution (note 2) less amounts already
recorded (notes 3 and 4). This net change in reserves is recorded as a
charge to Policyholders' Contingency Reserves.
(6) The balance is comprised of the Asset Valuation Reserve and Investment
Reserves which are recorded separately as liabilities on the Statement of
Financial Position.
(7) The Asset Valuation Reserve is a component of Total Adjusted Capital, while
Investment Reserves are excluded from Total Adjusted Capital, according to
the NAIC definition.
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
SCHEDULE IV: REINSURANCE(1)
(In Millions)
<TABLE>
<CAPTION>
Ceded Assumed Percentage of
Gross to Other from Other Net Amount Assumed
Year ended December 31, 1995 Amount Companies Companies Amount to Net
- ---------------------------- ------ --------- --------- ------ ------
<S> <C> <C> <C> <C> <C>
Life Insurance in Force $200,804 $44,331 $ 855 $157,328 0.5%
======== ======= ======= ======== ====
Premiums and other considerations
Individual life & annuities $ 3,505 $ 99 $ 68 $ 3,474 2.0%
Group life & annuities 2,081 85 10 2,006 0.5
Accident & health 967 719 0 248 0.0
-------- ------- ------- -------- ----
Total Premium and other considerations $ 6,553 $ 903 $ 78 $ 5,728 1.4%
======== ======= ======= ======== ====
Year ended December 31, 1994
- ----------------------------
Life Insurance in Force $223,805 $68,908 $ 1,115 $156,012 0.7%
======== ======= ======= ======== ====
Premiums and other considerations
Individual life & annuities $ 3,387 $ 103 $ 71 $ 3,355 2.1%
Group life & annuities 1,926 10 7 1,923 0.4
Accident & health 938 39 0 899 0.0
-------- ------- ------- -------- ---
Total Premium and other considerations $ 6,251 $ 152 $ 78 $ 6,177 1.3%
======== ======= ======= ======== ====
Year ended December 31, 1993
- ----------------------------
Life Insurance in Force $213,476 $35,359 $16,954 $195,071 8.7%
======== ======= ======= ======== ====
Premiums and other considerations
Individual life & annuities $ 3,384 $ 93 $ 65 $ 3,356 1.9%
Group life & annuities 2,154 4 24 2,174 1.1
Accident & health 938 62 2 878 0.2
-------- ------- ------- -------- ---
Total Premium and other considerations $ 6,476 $ 159 $ 91 $ 6,408 1.4%
======== ======= ======= ======== ====
</TABLE>
(1) This supplemental financial statement schedule gives retroactive effect to
the merger of Massachusetts Mutual Life Insurance Company and Connecticut
Mutual Life Insurance Company on March 1, 1996, which has been accounted
for as a pooling of interests as prescribed by statutory accounting
practices and described in the notes to the supplemental financial
statements.
<PAGE>
POWER OF ATTORNEY: MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
The Undersigned, Daniel J. Fitzgerald, Chief Financial Officer of
Massachusetts Mutual Life Insurance Company ("MassMutual"), does hereby
constitute and appoint Lawrence V. Burkett, Thomas F. English, Richard M.
Howe, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
Such attorneys and agents shall have full power of substitution and to take
any and all action and execute any and all instruments on the Undersigned's
behalf as Chief Financial Officer of MassMutual that said attorneys and
agents may deem necessary or advisable to enable MassMutual to comply with
the Securities Act of 1933, as amended (the "1933 Act"), the Investment
Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission (the "Commission") thereunder. This power of attorney applies
to the registration, under the 1933 Act and the 1940 Act, of shares of
beneficial interest of MassMutual separate investment accounts (the
"MassMutual Separate Accounts"). This power of attorney authorizes such
attorneys and agents to sign the Undersigned's name on his behalf as Chief
Financial Officer of MassMutual to the Registration Statements and to any
instruments or documents filed or to be filed with the Commission under the
1933 Act and the 1940 Act in connection with such Registration Statements,
including any and all amendments to such statements, documents or
instruments of any MassMutual Separate Account, including but not limited
to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life Separate Account I
Panorama Plus Separate Account
38
<PAGE>
CML/OFFITBANK Separate Account
The Undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 1st day of March,
1996.
/s/ Daniel J. Fitzgerald
------------------------ -----------------------------
Daniel J. Fitzgerald Witness
Chief Financial Officer
39
<PAGE>
POWER OF ATTORNEY
MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
The Undersigned, Thomas B. Wheeler, Chief Executive Officer and Chairman of
the Board of Directors of Massachusetts Mutual Life Insurance
Company ("MassMutual"),does hereby constitute and appoint Lawrence V.
Burkett, Thomas F. English, Richard M. Howe, and Michael Berenson, and each
of them individually, as his true and lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take
any and all action and execute any and all instruments on the Undersigned's
behalf as Chief Executive Officer and Chairman of the Board of Directors of
MassMutual that said attorneys and agents may deem necessary or advisable
to enable MassMutual to comply with the Securities Act of 1933, as amended
(the "1933 Act"), the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations, orders or other requirements of the
Securities and Exchange Commission (the "Commission") thereunder. This
power of attorney applies to the registration, under the 1933 Act and the
1940 Act, of shares of beneficial interest of MassMutual separate
investment accounts (the "MassMutual Separate Accounts"). This power of
attorney authorizes such attorneys and agents to sign the Undersigned's
name on his behalf as Chief Executive Officer and Chairman of the Board of
Directors of MassMutual to the Registration Statements and to any
instruments or documents filed or to be filed with the Commission under the
1933 Act and the 1940 Act in connection with such Registration Statements,
including any and all amendments to such statements, documents or
instruments of any MassMutual Separate Account, including but not limited
to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life Separate Account I
40
<PAGE>
Panorama Plus Separate Account
CML/OFFITBANK Separate Account
The Undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 1st day of March,
1996.
/s/ Thomas B. Wheeler
----------------------- ------------------------------
Thomas B. Wheeler Witness
Chief Executive Officer and
Chairman of the Board of Directors
41
<PAGE>
POWER OF ATTORNEY
MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
The Undersigned, John J. Pajak, Vice Chairman of the Board of Directors of
Massachusetts Mutual Life Insurance Company ("MassMutual"),does hereby
constitute and appoint Lawrence V. Burkett, Thomas F. English, Richard M.
Howe, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take
any and all action and execute any and all instruments on the Undersigned's
behalf as Vice Chairman of the Board of Directors of MassMutual that said
attorneys and agents may deem necessary or advisable to enable MassMutual
to comply with the Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission (the "Commission") thereunder. This power of attorney applies
to the registration, under the 1933 Act and the 1940 Act, of shares of
beneficial interest of MassMutual separate investment accounts (the
"MassMutual Separate Accounts"). This power of attorney authorizes such
attorneys and agents to sign the Undersigned's name on his behalf as Vice
Chairman of the Board of Directors of MassMutual to the Registration
Statements and to any instruments or documents filed or to be filed with
the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such
statements, documents or instruments of any MassMutual Separate Account,
including but not limited to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life Separate Account I
Panorama Plus Separate Account
CML/OFFITBANK Separate Account
42
<PAGE>
The Undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 1st day of March,
1996.
/s/ John J. Pajak
---------------------- -----------------------------
John J. Pajak Witness
Vice Chairman of the Board of Directors
43
<PAGE>
POWER OF ATTORNEY
MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
The Undersigned, James R. Birle, a member of the Board of Directors of
Massachusetts Mutual Life Insurance Company ("MassMutual"),does hereby
constitute and appoint Lawrence V. Burkett, Thomas F. English, Richard M.
Howe, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take
any and all action and execute any and all instruments on the Undersigned's
behalf as a member of the Board of Directors of MassMutual that said
attorneys and agents may deem necessary or advisable to enable MassMutual
to comply with the Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission (the "Commission") thereunder. This power of attorney applies
to the registration, under the 1933 Act and the 1940 Act, of shares of
beneficial interest of MassMutual separate investment accounts (the
"MassMutual Separate Accounts"). This power of attorney authorizes such
attorneys and agents to sign the Undersigned's name on his behalf as a
member of the Board of Directors of MassMutual to the Registration
Statements and to any instruments or documents filed or to be filed with
the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such
statements, documents or instruments of any MassMutual Separate Account,
including but not limited to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life Separate Account I
Panorama Plus Separate Account
CML/OFFITBANK Separate Account
44
<PAGE>
The Undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 16th day of
February, 1996.
/s/ James R. Birle
----------------------- ------------------------------
James R. Birle Witness
Member, Board of Directors
45
<PAGE>
POWER OF ATTORNEY
MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
---------------------------------------
The Undersigned, Frank C. Carlucci, a member of the Board of Directors of
Massachusetts Mutual Life Insurance Company ("MassMutual"),does hereby
constitute and appoint Lawrence V. Burkett, Thomas F. English, Richard M.
Howe, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take
any and all action and execute any and all instruments on the Undersigned's
behalf as a member of the Board of Directors of MassMutual that said
attorneys and agents may deem necessary or advisable to enable MassMutual
to comply with the Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission (the "Commission") thereunder. This power of attorney applies
to the registration, under the 1933 Act and the 1940 Act, of shares of
beneficial interest of MassMutual separate investment accounts (the
"MassMutual Separate Accounts"). This power of attorney authorizes such
attorneys and agents to sign the Undersigned's name on his behalf as a
member of the Board of Directors of MassMutual to the Registration
Statements and to any instruments or documents filed or to be filed with
the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such
statements, documents or instruments of any MassMutual Separate Account,
including but not limited to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life Separate Account I
Panorama Plus Separate Account
46
<PAGE>
CML/OFFITBANK Separate Account
The Undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 1st day of March,
1996.
/s/ Frank C. Carlucci
-------------------------- ------------------------------
Frank C. Carlucci Witness
Member, Board of Directors
47
<PAGE>
POWER OF ATTORNEY
MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
---------------------------------------
The Undersigned, Gene Chao, a member of the Board of Directors of
Massachusetts Mutual Life Insurance Company ("MassMutual"),does hereby
constitute and appoint Lawrence V. Burkett, Thomas F. English, Richard M.
Howe, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take
any and all action and execute any and all instruments on the Undersigned's
behalf as a member of the Board of Directors of MassMutual that said
attorneys and agents may deem necessary or advisable to enable MassMutual
to comply with the Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission (the "Commission") thereunder. This power of attorney applies
to the registration, under the 1933 Act and the 1940 Act, of shares of
beneficial interest of MassMutual separate investment accounts (the
"MassMutual Separate Accounts"). This power of attorney authorizes such
attorneys and agents to sign the Undersigned's name on his behalf as a
member of the Board of Directors of MassMutual to the Registration
Statements and to any instruments or documents filed or to be filed with
the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such
statements, documents or instruments of any MassMutual Separate Account,
including but not limited to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life Separate Account I
Panorama Plus Separate Account
CML/OFFITBANK Separate Account
48
<PAGE>
The Undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 1st day of March,
1996.
/s/ Gene Chao
------------------------ ------------------------------
Gene Chao Witness
Member, Board of Directors
49
<PAGE>
POWER OF ATTORNEY
MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
---------------------------------------
The Undersigned, Patricia Diaz Dennis, a member of the Board of Directors
of Massachusetts Mutual Life Insurance Company ("MassMutual"),does hereby
constitute and appoint Lawrence V. Burkett, Thomas F. English, Richard M.
Howe, and Michael Berenson, and each of them individually, as her true and
lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take
any and all action and execute any and all instruments on the Undersigned's
behalf as a member of the Board of Directors of MassMutual that said
attorneys and agents may deem necessary or advisable to enable MassMutual
to comply with the Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission (the "Commission") thereunder. This power of attorney applies
to the registration, under the 1933 Act and the 1940 Act, of shares of
beneficial interest of MassMutual separate investment accounts (the
"MassMutual Separate Accounts"). This power of attorney authorizes such
attorneys and agents to sign the Undersigned's name on her behalf as a
member of the Board of Directors of MassMutual to the Registration
Statements and to any instruments or documents filed or to be filed with
the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such
statements, documents or instruments of any MassMutual Separate Account,
including but not limited to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life Separate Account I
Panorama Plus Separate Account
50
<PAGE>
CML/OFFITBANK Separate Account
The Undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set her hand this 19th day of
February, 1996.
/s/ Patricia Diaz Dennis
----------------------------- -----------------------------
Patricia Diaz Dennis Witness
Member, Board of Directors
51
<PAGE>
POWER OF ATTORNEY
MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
---------------------------------------
The Undersigned, William B. Ellis, a member of the Board of Directors of
Massachusetts Mutual Life Insurance Company ("MassMutual"),does hereby
constitute and appoint Lawrence V. Burkett, Thomas F. English, Richard M.
Howe, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take
any and all action and execute any and all instruments on the Undersigned's
behalf as a member of the Board of Directors of MassMutual that said
attorneys and agents may deem necessary or advisable to enable MassMutual
to comply with the Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission (the "Commission") thereunder. This power of attorney applies
to the registration, under the 1933 Act and the 1940 Act, of shares of
beneficial interest of MassMutual separate investment accounts (the
"MassMutual Separate Accounts"). This power of attorney authorizes such
attorneys and agents to sign the Undersigned's name on his behalf as a
member of the Board of Directors of MassMutual to the Registration
Statements and to any instruments or documents filed or to be filed with
the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such
statements, documents or instruments of any MassMutual Separate Account,
including but not limited to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life Separate Account I
Panorama Plus Separate Account
52
<PAGE>
CML/OFFITBANK Separate Account
The Undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 1st day of March,
1996.
/s/ William B. Ellis
-------------------------- ------------------------------
William B. Ellis Witness
Member, Board of Directors
53
<PAGE>
POWER OF ATTORNEY
MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
---------------------------------------
The Undersigned, Robert M. Furek, a member of the Board of Directors of
Massachusetts Mutual Life Insurance Company ("MassMutual"), does hereby
constitute and appoint Lawrence V. Burkett, Thomas F. English, Richard M.
Howe, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take
any and all action and execute any and all instruments on the Undersigned's
behalf as a member of the Board of Directors of MassMutual that said
attorneys and agents may deem necessary or advisable to enable MassMutual
to comply with the Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission (the "Commission") thereunder. This power of attorney applies
to the registration, under the 1933 Act and the 1940 Act, of shares of
beneficial interest of MassMutual separate investment accounts (the
"MassMutual Separate Accounts"). This power of attorney authorizes such
attorneys and agents to sign the Undersigned's name on his behalf as a
member of the Board of Directors of MassMutual to the Registration
Statements and to any instruments or documents filed or to be filed with
the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such
statements, documents or instruments of any MassMutual Separate Account,
including but not limited to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life Separate Account I
Panorama Plus Separate Account
54
<PAGE>
CML/OFFITBANK Separate Account
The Undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 1st day of March,
1996.
/s/ Robert M. Furek
------------------------ ------------------------------
Robert M. Furek Witness
Member, Board of Directors
55
<PAGE>
POWER OF ATTORNEY
MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
---------------------------------------
The Undersigned, George B. Harvey, a member of the Board of Directors of
Massachusetts Mutual Life Insurance Company ("MassMutual"), does hereby
constitute and appoint Lawrence V. Burkett, Thomas F. English, Richard M.
Howe, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take
any and all action and execute any and all instruments on the Undersigned's
behalf as a member of the Board of Directors of MassMutual that said
attorneys and agents may deem necessary or advisable to enable MassMutual
to comply with the Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission (the "Commission") thereunder. This power of attorney applies
to the registration, under the 1933 Act and the 1940 Act, of shares of
beneficial interest of MassMutual separate investment accounts (the
"MassMutual Separate Accounts"). This power of attorney authorizes such
attorneys and agents to sign the Undersigned's name on his behalf as a
member of the Board of Directors of MassMutual to the Registration
Statements and to any instruments or documents filed or to be filed with
the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such
statements, documents or instruments of any MassMutual Separate Account,
including but not limited to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life Separate Account I
Panorama Plus Separate Account
56
<PAGE>
CML/OFFITBANK Separate Account
The Undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 1st day of March,
1996.
/s/ George B. Harvey
-------------------------- ------------------------------
George B. Harvey Witness
Member, Board of Directors
57
<PAGE>
POWER OF ATTORNEY
MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
---------------------------------------
The Undersigned, John F. Maypole, a member of the Board of Directors of
Massachusetts Mutual Life Insurance Company ("MassMutual"), does hereby
constitute and appoint Lawrence V. Burkett, Thomas F. English, Richard M.
Howe, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take
any and all action and execute any and all instruments on the Undersigned's
behalf as a member of the Board of Directors of MassMutual that said
attorneys and agents may deem necessary or advisable to enable MassMutual
to comply with the Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission (the "Commission") thereunder. This power of attorney applies
to the registration, under the 1933 Act and the 1940 Act, of shares of
beneficial interest of MassMutual separate investment accounts (the
"MassMutual Separate Accounts"). This power of attorney authorizes such
attorneys and agents to sign the Undersigned's name on his behalf as a
member of the Board of Directors of MassMutual to the Registration
Statements and to any instruments or documents filed or to be filed with
the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such
statements, documents or instruments of any MassMutual Separate Account,
including but not limited to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life Separate Account I
Panorama Plus Separate Account
58
<PAGE>
CML/OFFITBANK Separate Account
The Undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 1st day of March,
1996.
/s/ John F. Maypole
-------------------------- ------------------------------
John F. Maypole Witness
Member, Board of Directors
59
<PAGE>
POWER OF ATTORNEY
MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
---------------------------------------
The Undersigned, David E. Sams, Jr., a member of the Board of Directors of
Massachusetts Mutual Life Insurance Company ("MassMutual"), does hereby
constitute and appoint Lawrence V. Burkett, Thomas F. English, Richard M.
Howe, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take
any and all action and execute any and all instruments on the Undersigned's
behalf as a member of the Board of Directors of MassMutual that said
attorneys and agents may deem necessary or advisable to enable MassMutual
to comply with the Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission (the "Commission") thereunder. This power of attorney applies
to the registration, under the 1933 Act and the 1940 Act, of shares of
beneficial interest of MassMutual separate investment accounts (the
"MassMutual Separate Accounts"). This power of attorney authorizes such
attorneys and agents to sign the Undersigned's name on his behalf as a
member of the Board of Directors of MassMutual to the Registration
Statements and to any instruments or documents filed or to be filed with
the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such
statements, documents or instruments of any MassMutual Separate Account,
including but not limited to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life Separate Account I
Panorama Plus Separate Account
60
<PAGE>
CML/OFFITBANK Separate Account
The Undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 19th day of
February, 1996.
/s/ David E. Sams, Jr.
-------------------------- ------------------------------
David E. Sams, Jr. Witness
Member, Board of Directors
61
<PAGE>
POWER OF ATTORNEY
MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
---------------------------------------
The Undersigned, Roger G. Ackerman, a member of the Board of Directors of
Massachusetts Mutual Life Insurance Company ("MassMutual"), does hereby
constitute and appoint Lawrence V. Burkett, Thomas F. English, Richard M.
Howe, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take
any and all action and execute any and all instruments on the Undersigned's
behalf as a member of the Board of Directors of MassMutual that said
attorneys and agents may deem necessary or advisable to enable MassMutual
to comply with the Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission (the "Commission") thereunder. This power of attorney applies
to the registration, under the 1933 Act and the 1940 Act, of shares of
beneficial interest of MassMutual separate investment accounts (the
"MassMutual Separate Accounts"). This power of attorney authorizes such
attorneys and agents to sign the Undersigned's name on his behalf as a
member of the Board of Directors of MassMutual to the Registration
Statements and to any instruments or documents filed or to be filed with
the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such
statements, documents or instruments of any MassMutual Separate Account,
including but not limited to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life Separate Account I
Panorama Plus Separate Account
62
<PAGE>
CML/OFFITBANK Separate Account
The Undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 1st day of March,
1996.
/s/ Roger G. Ackerman
--------------------------- ------------------------------
Roger G. Ackerman Witness
Member, Board of Directors
63
<PAGE>
POWER OF ATTORNEY
MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
---------------------------------------
The Undersigned, Anthony Downs, a member of the Board of Directors of
Massachusetts Mutual Life Insurance Company("MassMutual"), does hereby
constitute and appoint Lawrence V. Burkett, Thomas F. English, Richard M.
Howe, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take
any and all action and execute any and all instruments on the Undersigned's
behalf as a member of the Board of Directors of MassMutual that said
attorneys and agents may deem necessary or advisable to enable MassMutual
to comply with the Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission (the "Commission") thereunder. This power of attorney applies
to the registration, under the 1933 Act and the 1940 Act, of shares of
beneficial interest of MassMutual separate investment accounts (the
"MassMutual Separate Accounts"). This power of attorney authorizes such
attorneys and agents to sign the Undersigned's name on his behalf as a
member of the Board of Directors of MassMutual to the Registration
Statements and to any instruments or documents filed or to be filed with
the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such
statements, documents or instruments of any MassMutual Separate Account,
including but not limited to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life Separate Account I
Panorama Plus Separate Account
CML/OFFITBANK Separate Account
64
<PAGE>
The Undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 1st day of March,
1996.
/s/ Anthony Downs
------------------------- ------------------------------
Anthony Downs Witness
Member, Board of Directors
65
<PAGE>
POWER OF ATTORNEY
MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
---------------------------------------
The Undersigned, James L. Dunlap, a member of the Board of Directors of
Massachusetts Mutual Life Insurance Company ("MassMutual"), does hereby
constitute and appoint Lawrence V. Burkett, Thomas F. English, Richard M.
Howe, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take
any and all action and execute any and all instruments on the Undersigned's
behalf as a member of the Board of Directors of MassMutual that said
attorneys and agents may deem necessary or advisable to enable MassMutual
to comply with the Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission (the "Commission") thereunder. This power of attorney applies
to the registration, under the 1933 Act and the 1940 Act, of shares of
beneficial interest of MassMutual separate investment accounts (the
"MassMutual Separate Accounts"). This power of attorney authorizes such
attorneys and agents to sign the Undersigned's name on his behalf as a
member of the Board of Directors of MassMutual to the Registration
Statements and to any instruments or documents filed or to be filed with
the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such
statements, documents or instruments of any MassMutual Separate Account,
including but not limited to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life Separate Account I
Panorama Plus Separate Account
66
<PAGE>
CML/OFFITBANK Separate Account
The Undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 1st day of March,
1996.
/s/ James L. Dunlap
------------------------- ------------------------------
James L. Dunlap Witness
Member, Board of Directors
67
<PAGE>
POWER OF ATTORNEY
MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
---------------------------------------
The Undersigned, Charles K. Gifford, a member of the Board of Directors of
Massachusetts Mutual Life Insurance Company ("MassMutual"), does hereby
constitute and appoint Lawrence V. Burkett, Thomas F. English, Richard M.
Howe, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take
any and all action and execute any and all instruments on the Undersigned's
behalf as a member of the Board of Directors of MassMutual that said
attorneys and agents may deem necessary or advisable to enable MassMutual
to comply with the Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission (the "Commission") thereunder. This power of attorney applies
to the registration, under the 1933 Act and the 1940 Act, of shares of
beneficial interest of MassMutual separate investment accounts (the
"MassMutual Separate Accounts"). This power of attorney authorizes such
attorneys and agents to sign the Undersigned's name on his behalf as a
member of the Board of Directors of MassMutual to the Registration
Statements and to any instruments or documents filed or to be filed with
the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such
statements, documents or instruments of any MassMutual Separate Account,
including but not limited to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life Separate Account I
Panorama Plus Separate Account
68
<PAGE>
CML/OFFITBANK Separate Account
The Undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 1st day of March,
1996.
/s/ Charles K. Gifford
--------------------------- ------------------------------
Charles K. Gifford Witness
Member, Board of Directors
69
<PAGE>
POWER OF ATTORNEY
MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
---------------------------------------
The Undersigned, William N. Griggs, a member of the Board of Directors of
Massachusetts Mutual Life Insurance Company ("MassMutual"), does hereby
constitute and appoint Lawrence V. Burkett, Thomas F. English, Richard M.
Howe, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take
any and all action and execute any and all instruments on the Undersigned's
behalf as a member of the Board of Directors of MassMutual that said
attorneys and agents may deem necessary or advisable to enable MassMutual
to comply with the Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission (the "Commission") thereunder. This power of attorney applies
to the registration, under the 1933 Act and the 1940 Act, of shares of
beneficial interest of MassMutual separate investment accounts (the
"MassMutual Separate Accounts"). This power of attorney authorizes such
attorneys and agents to sign the Undersigned's name on his behalf as a
member of the Board of Directors of MassMutual to the Registration
Statements and to any instruments or documents filed or to be filed with
the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such
statements, documents or instruments of any MassMutual Separate Account,
including but not limited to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life Separate Account I
Panorama Plus Separate Account
70
<PAGE>
CML/OFFITBANK Separate Account
The Undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 16th day of
February, 1996.
/s/ William N. Griggs
--------------------------- ---------------------------
William N. Griggs Witness
Member, Board of Directors
71
<PAGE>
POWER OF ATTORNEY
MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
---------------------------------------
The Undersigned, James G. Harlow, Jr., a member of the Board of Directors
of Massachusetts Mutual Life Insurance Company ("MassMutual"), does hereby
constitute and appoint Lawrence V. Burkett, Thomas F. English, Richard M.
Howe, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take
any and all action and execute any and all instruments on the Undersigned's
behalf as a member of the Board of Directors of MassMutual that said
attorneys and agents may deem necessary or advisable to enable MassMutual
to comply with the Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission (the "Commission") thereunder. This power of attorney applies
to the registration, under the 1933 Act and the 1940 Act, of shares of
beneficial interest of MassMutual separate investment accounts (the
"MassMutual Separate Accounts"). This power of attorney authorizes such
attorneys and agents to sign the Undersigned's name on his behalf as a
member of the Board of Directors of MassMutual to the Registration
Statements and to any instruments or documents filed or to be filed with
the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such
statements, documents or instruments of any MassMutual Separate Account,
including but not limited to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life Separate Account I
Panorama Plus Separate Account
72
<PAGE>
CML/OFFITBANK Separate Account
The Undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 1st day of March,
1996.
/s/ James G. Harlow, Jr.
---------------------------- ------------------------------
James G. Harlow, Jr. Witness
Member, Board of Directors
73
<PAGE>
POWER OF ATTORNEY
MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
---------------------------------------
The Undersigned, Barbara B. Hauptfuhrer, a member of the Board of Directors
of Massachusetts Mutual Life Insurance Company ("MassMutual"), does hereby
constitute and appoint Lawrence V. Burkett, Thomas F. English, Richard M.
Howe, and Michael Berenson, and each of them individually, as her true and
lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take
any and all action and execute any and all instruments on the Undersigned's
behalf as a member of the Board of Directors of MassMutual that said
attorneys and agents may deem necessary or advisable to enable MassMutual
to comply with the Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission (the "Commission") thereunder. This power of attorney applies
to the registration, under the 1933 Act and the 1940 Act, of shares of
beneficial interest of MassMutual separate investment accounts (the
"MassMutual Separate Accounts"). This power of attorney authorizes such
attorneys and agents to sign the Undersigned's name on her behalf as a
member of the Board of Directors of MassMutual to the Registration
Statements and to any instruments or documents filed or to be filed with
the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such
statements, documents or instruments of any MassMutual Separate Account,
including but not limited to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life Separate Account I
Panorama Plus Separate Account
74
<PAGE>
CML/OFFITBANK Separate Account
The Undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set her hand this 1st day of March,
1996.
/s/ Barbara B. Hauptfuhrer
---------------------------- ------------------------------
Barbara B. Hauptfuhrer Witness
Member, Board of Directors
75
<PAGE>
POWER OF ATTORNEY
MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
---------------------------------------
The Undersigned, Sheldon B. Lubar, a member of the Board of Directors of
Massachusetts Mutual Life Insurance Company ("MassMutual"), does hereby
constitute and appoint Lawrence V. Burkett, Thomas F. English, Richard M.
Howe, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take
any and all action and execute any and all instruments on the Undersigned's
behalf as a member of the Board of Directors of MassMutual that said
attorneys and agents may deem necessary or advisable to enable MassMutual
to comply with the Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission (the "Commission") thereunder. This power of attorney applies
to the registration, under the 1933 Act and the 1940 Act, of shares of
beneficial interest of MassMutual separate investment accounts (the
"MassMutual Separate Accounts"). This power of attorney authorizes such
attorneys and agents to sign the Undersigned's name on his behalf as a
member of the Board of Directors of MassMutual to the Registration
Statements and to any instruments or documents filed or to be filed with
the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such
statements, documents or instruments of any MassMutual Separate Account,
including but not limited to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life Separate Account I
Panorama Plus Separate Account
CML/OFFITBANK Separate Account
76
<PAGE>
The Undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 1st day of March,
1996.
/s/ Sheldon B. Lubar
---------------------------- ------------------------------
Sheldon B. Lubar Witness
Member, Board of Directors
77
<PAGE>
POWER OF ATTORNEY
MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
---------------------------------------
The Undersigned, William B. Marx, Jr., a member of the Board of Directors
of Massachusetts Mutual Life Insurance Company ("MassMutual"), does hereby
constitute and appoint Lawrence V. Burkett, Thomas F. English, Richard M.
Howe, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take
any and all action and execute any and all instruments on the Undersigned's
behalf as a member of the Board of Directors of MassMutual that said
attorneys and agents may deem necessary or advisable to enable MassMutual
to comply with the Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission (the "Commission") thereunder. This power of attorney applies
to the registration, under the 1933 Act and the 1940 Act, of shares of
beneficial interest of MassMutual separate investment accounts (the
"MassMutual Separate Accounts"). This power of attorney authorizes such
attorneys and agents to sign the Undersigned's name on his behalf as a
member of the Board of Directors of MassMutual to the Registration
Statements and to any instruments or documents filed or to be filed with
the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such
statements, documents or instruments of any MassMutual Separate Account,
including but not limited to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life Separate Account I
Panorama Plus Separate Account
78
<PAGE>
CML/OFFITBANK Separate Account
The Undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 1st day of March,
1996.
/s/ William B. Marx, Jr.
----------------------------- ------------------------------
William B. Marx, Jr. Witness
Member, Board of Directors
79
<PAGE>
POWER OF ATTORNEY
MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
---------------------------------------
The Undersigned, Donald F. McCullough, a member of the Board of Directors
of Massachusetts Mutual Life Insurance Company ("MassMutual"), does hereby
constitute and appoint Lawrence V. Burkett, Thomas F. English, Richard M.
Howe, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take
any and all action and execute any and all instruments on the Undersigned's
behalf as a member of the Board of Directors of MassMutual that said
attorneys and agents may deem necessary or advisable to enable MassMutual
to comply with the Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission (the "Commission") thereunder. This power of attorney applies
to the registration, under the 1933 Act and the 1940 Act, of shares of
beneficial interest of MassMutual separate investment accounts (the
"MassMutual Separate Accounts"). This power of attorney authorizes such
attorneys and agents to sign the Undersigned's name on his behalf as a
member of the Board of Directors of MassMutual to the Registration
Statements and to any instruments or documents filed or to be filed with
the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such
statements, documents or instruments of any MassMutual Separate Account,
including but not limited to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life Separate Account I
Panorama Plus Separate Account
80
<PAGE>
CML/OFFITBANK Separate Account
The Undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 1st day of March,
1996.
/s/ Donald F. McCullough
--------------------------- ------------------------------
Donald F. McCullough Witness
Member, Board of Directors
81
<PAGE>
POWER OF ATTORNEY
MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
---------------------------------------
The Undersigned, Barbara Scott Preiskel, a member of the Board of Directors
of Massachusetts Mutual Life Insurance Company ("MassMutual"), does hereby
constitute and appoint Lawrence V. Burkett, Thomas F. English, Richard M.
Howe, and Michael Berenson, and each of them individually, as her true and
lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take
any and all action and execute any and all instruments on the Undersigned's
behalf as a member of the Board of Directors of MassMutual that said
attorneys and agents may deem necessary or advisable to enable MassMutual
to comply with the Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission (the "Commission") thereunder. This power of attorney applies
to the registration, under the 1933 Act and the 1940 Act, of shares of
beneficial interest of MassMutual separate investment accounts (the
"MassMutual Separate Accounts"). This power of attorney authorizes such
attorneys and agents to sign the Undersigned's name on her behalf as a
member of the Board of Directors of MassMutual to the Registration
Statements and to any instruments or documents filed or to be filed with
the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such
statements, documents or instruments of any MassMutual Separate Account,
including but not limited to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life Separate Account I
Panorama Plus Separate Account
82
<PAGE>
CML/OFFITBANK Separate Account
The Undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set her hand this 1st day of March,
1996.
/s/ Barbara Scott Preiskel
----------------------------- ------------------------------
Barbara Scott Preiskel Witness
Member, Board of Directors
83
<PAGE>
POWER OF ATTORNEY
MASSMUTUAL SEPARATE INVESTMENT ACCOUNTS
---------------------------------------
The Undersigned, Alfred M. Zeien, a member of the Board of Directors of
Massachusetts Mutual Life Insurance Company ("MassMutual"), does hereby
constitute and appoint Lawrence V. Burkett, Thomas F. English, Richard M.
Howe, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take
any and all action and execute any and all instruments on the Undersigned's
behalf as a member of the Board of Directors of MassMutual that said
attorneys and agents may deem necessary or advisable to enable MassMutual
to comply with the Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission (the "Commission") thereunder. This power of attorney applies
to the registration, under the 1933 Act and the 1940 Act, of shares of
beneficial interest of MassMutual separate investment accounts (the
"MassMutual Separate Accounts"). This power of attorney authorizes such
attorneys and agents to sign the Undersigned's name on his behalf as a
member of the Board of Directors of MassMutual to the Registration
Statements and to any instruments or documents filed or to be filed with
the Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such
statements, documents or instruments of any MassMutual Separate Account,
including but not limited to those listed below.
MassMutual Separate Investment Account C
Massachusetts Mutual Variable Annuity Fund 1
Massachusetts Mutual Variable Annuity Fund 2
Massachusetts Mutual Variable Annuity Separate Account 1
Massachusetts Mutual Variable Annuity Separate Account 2
Massachusetts Mutual Variable Annuity Separate Account 3
Massachusetts Mutual Variable Life Separate Account I
Massachusetts Mutual Variable Life Separate Account II
Panorama Separate Account
CML Variable Annuity Account A
CML Variable Annuity Account B
CML Accumulation Annuity Account E
Connecticut Mutual Variable Life
Separate Account I
84
2
<PAGE>
Panorama Plus Separate Account
CML/OFFITBANK Separate Account
The Undersigned hereby ratifies and confirms all that said attorneys and
agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 16th day of
February, 1996.
/s/ Alfred M. Zeien
-------------------------- ------------------------------
Alfred M. Zeien Witness
Member, Board of Directors
85
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the
supplemental financial statements of Massachusett's Mutual Life Insurance
Company and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<DEBT-HELD-FOR-SALE> 0<F1>
<DEBT-CARRYING-VALUE> 23,625
<DEBT-MARKET-VALUE> 25,486
<EQUITIES> 416
<MORTGAGE> 3,872
<REAL-ESTATE> 1,610
<TOTAL-INVEST> 37,834<F2>
<CASH> 2,343<F3>
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 0<F1>
<TOTAL-ASSETS> 50,418
<POLICY-LOSSES> 32,893
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 396
<POLICY-HOLDER-FUNDS> 833
<NOTES-PAYABLE> 0
0<F4>
0<F4>
<COMMON> 0<F4>
<OTHER-SE> 2,601
<TOTAL-LIABILITY-AND-EQUITY> 50,418
5,728
<INVESTMENT-INCOME> 2,898<F5>
<INVESTMENT-GAINS> (86)<F6>
<OTHER-INCOME> 0<F5>
<BENEFITS> 7,177<F7>
<UNDERWRITING-AMORTIZATION> 0<F1>
<UNDERWRITING-OTHER> 967<F8>
<INCOME-PRETAX> 396<F9>
<INCOME-TAX> 206
<INCOME-CONTINUING> 190
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 190
<EPS-PRIMARY> 0<F4>
<EPS-DILUTED> 0<F4>
<RESERVE-OPEN> 0<F1>
<PROVISION-CURRENT> 0<F1>
<PROVISION-PRIOR> 0<F1>
<PAYMENTS-CURRENT> 0<F1>
<PAYMENTS-PRIOR> 0<F1>
<RESERVE-CLOSE> 0<F1>
<CUMULATIVE-DEFICIENCY> 0<F1>
<FN>
<F1>This item is not applicable in accordance with statutory accounting
requirements. See note 1 to the supplemental financial statements.
<F2>Derived from the supplemental statement of financial position, by adding
bonds, stocks, mortgage loans, real estate, other investments, policy loans, and
cash and short-term investments. Separate account assets are not included.
<F3>Cash includes short-term investments. See note 1G to the supplemental
financial statements.
<F4>The Company is a mutual insurance company and is owned by participating
policyholders rather than shareholders, therefore no common or preferred stock
exists. According, earnings per share has not been calculated.
<F5>Investment income includes other income and is presented as "net investment
and other income" in the supplemental statement of income.
<F6>Investment gains is presented as "net realized capital loss" in the
supplemental statement of income. See note 1A to the supplemental financial
statements.
<F7>Derived from the supplemental statement of income, by adding policy benefits
and payments, addition to policyholder's reserves and funds, and dividends to
policyholders.
<F8>Derived from the supplemental statement of income, by adding commissions and
operating expenses; state taxes, licenses and fees; and merger restructuring
costs.
<F9>Derived from the supplemental statement of income, by adding net income
and federal income taxes.
</FN>
</TABLE>
