SEC File No. 333-01151
SEC File No. 811-3853
As filed with the Securities and Exchange Commission
on April 5, 1996
______________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 16 [X]
MBL VARIABLE CONTRACT ACCOUNT-7
(Previously known as Mutual Benefit Variable Contract Account-7)
(Exact Name of Registrant)
MBL LIFE ASSURANCE CORPORATION
(Name of Insurance Company)
520 Broad Street, Newark, New Jersey 07102-3111
(Address of Insurance Company's Principal Executive Offices)
Insurance Company's Telephone Number,
including Area Code (201)481-8000
Judith C. Keilp, Esq.
Counsel
MBL Life Assurance Corporation
520 Broad Street, Newark, New Jersey 07102-3111
(Name and Address of Agent of Service)
Copies to:
Stephen E. Roth, Esq.
Sutherland, Asbill & Brennan
1275 Pennsylvania Ave., N.W.
Washington, D.C. 20004-0147
_____________________________________________________________________
Approximate Date of Proposed Public Offering: As soon as practicable
after the effective date of the Registration Statement under the
Securities Act of 1933.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant has elected to register an indefinite amount of securities.
The $500 filing fee required pursuant to Rule 24f-2 has been paid.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT-7
previously known as
MUTUAL BENEFIT VARIABLE CONTRACT ACCOUNT-7
______________________________________________________________________
CROSS REFERENCE SHEET
Cross reference sheet showing location in the Prospectus of information
required by the Items in Part A of Form N-3.
Item Number Heading in Prospectus
1 Cover Page
2 Index of Terms
3 Summary of Prospectus
4 Performance Related Information,
Financial Statements *
5 The Variable Contract Account
6 Management; Investment Management
7 Charges
8 Group Tax Deferred Annuity
Contracts; General Rights;
Other Contract Provisions
9 Annuity
10 Payment at Death
11 Accumulation Account
12 Redemption
13 Federal Income Tax Status
14 Legal Developments
15 Table of Contents - Statement of
Additional Information
_________________________________________________________________
* Condensed Financial Information is incorporated by reference
to the Financial Highlights contained in the Account's 1995
Audited Financial Statements.
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT - 7
MBL Life Assurance Corporation
520 Broad Street, Newark, New Jersey 07102-3111
, 1996
The group tax-deferred variable annuity contracts (the "Contracts")
described in this Prospectus were issued by The Mutual Benefit Life
Insurance Company ("Mutual Benefit Life") and assumptively reinsured by
MBL Life Assurance Corporation ("MBL Life") for use with retirement
plans and arrangements meeting applicable requirements of Section 401,
403(b), 408 or 457 of the Internal Revenue Code of 1986, as amended
("Qualified Plans"). Contracts were issued to employers establishing
Qualified Plans or to trustees or custodians serving in conjunction with
those Qualified Plans ("Contract Holders").
Sales of new Contracts ceased July 16, 1991. MBL Life does not
currently intend to resume sales of new Contracts. As of the effective
date of this Prospectus, however, additional purchase payments are being
accepted from existing and new Participants under the Contract.
The Contracts offer flexible purchase payment arrangements. Net
purchase payments made on behalf of a participant of a Qualified Plan
("Participant") are allocated to an account established on behalf of the
Participant ("Variable Accumulation Account") and placed in MBL Variable
Contract Account-7, previously known as Mutual Benefit Variable Contract
Account-7 (the "Account"). At retirement, the value of a Participant's
Variable Accumulation Account may be applied to provide a fixed or
variable annuity. The investment objective of the Account is to provide
as high a level of current income as is consistent with preservation of
capital and liquidity through investments in a diversified portfolio of
high quality short-term money market instruments. There are no sales or
redemption charges under the Contracts.
Existing Contracts, issued by Mutual Benefit Life, were assumed and
reinsured as of May 1, 1994 by MBL Life in accordance with the Plan of
Rehabilitation of Mutual Benefit Life as approved by the Superior Court
of New Jersey. Substantially all of the assets and certain liabilities,
including all insurance liabilities, of Mutual Benefit Life were
transferred to MBL Life as of May 1, 1994 (the "Transfer"). In addition,
the assets and liabilities of the Account were transferred to a new
separate account of MBL Life. MBL Life agreed to assume all the assets
and liabilities of the Account. (See "The Variable Contract Account -
Legal Developments".)
This Prospectus sets forth concisely the information about the
Account that Contract Holders and Participants should know before
investing. Additional information about the Account has been filed with
the Securities and Exchange Commission, including a Statement of
Additional Information, which is incorporated herein by reference. The
Statement of Additional Information is available upon request and
without charge from MBL Life by writing to: Pension and Investment
Products, MBL Life Assurance Corporation, 520 Broad Street, Newark, New
Jersey 07102-3111, Attn: MBL VARIABLE CONTRACT ACCOUNT-7, or telephone:
1-800-435-3191. Contract Holder or Participant inquiries may be made to
the same address or telephone number. The table of contents for the
Statement of Additional Information appears on page 30.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. AN INVESTMENT
IN THIS ACCOUNT IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT.
AN INVESTMENT IN THE ACCOUNT IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
The date of the Statement of Additional Information is , 1996.
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY OF PROSPECTUS
Fee Table . . . . . . . . . . . 4
The Contracts . . . . . . . . . 5
The Account . . . . . . . . . . 5
Investment Adviser and
Principal Underwriter . . . . 5
Expense Charges . . . . . . . . 6
Waiver of Charges . . . . . . . 6
Minimum Investment . . . . . . . 6
Investment Objective of
the Account . . . . . . . . . 6
Redemption . . . . . . . . . . . 6
Certain Investment
Risks . . . . . . . . . . . . 6
FINANCIAL STATEMENTS . . . . . . 7
PERFORMANCE RELATED
INFORMATION . . . . . . . . . 7
GROUP TAX-DEFERRED VARIABLE
ANNUITY CONTRACTS
Eligible Contract
Holders . . . . . . . . . . . 8
Basic Provisions . . . . . . . . 8
Assumption of Expense
Risk . . . . . . . . . . . . . 9
Redemption and Payment
at Death . . . . . . . . . . 9
Companion Contract and
VCA-2 Contract . . . . . . . . 9
THE VARIABLE CONTRACT
ACCOUNT
Organization . . . . . . . . . 10
Legal Developments . . . . . . 10
Assets . . . . . . . . . . . . 11
Investment Objective and
Policies . . . . . . . . . . 12
Portfolio Turnover-Value . . . 14
Certain Investment Risks . . . 14
Investment Restrictions. . . . 15
CHARGES
Expense and Expense Risk
Charges . . . . . . . . . . 15
Investment Advisory Fee. . . . 16
Other Charges . . . . . . . . 16
Premium Taxes . . . . . . . . 16
ACCUMULATION ACCOUNT
Purchase Payments . . . . . . 16
Variable Accumulation
Account . . . . . . . . . . 17
Transfers Between
Contracts . . . . . . . . . 18
Redemption . . . . . . . . . . 18
Payment at Death . . . . . . . 19
ANNUITY
Annuity Commencement Date . . 20
Purchase of Annuity . . . . . 20
GENERAL RIGHTS
Voting Rights . . . . . . . . 21
Confirmation of
Transaction . . . . . . . . 21
Reports . . . . . . . . . . . 22
457 Plan Participant . . . . . 22
MANAGEMENT . . . . . . . . . . 22
INVESTMENT MANAGEMENT . . . . 22
FEDERAL INCOME TAX STATUS
Introduction . . . . . . . . . 23
Taxation of MBL Life . . . . . 23
Tax Status of the
Contract . . . . . . . . . . 24
Retirement Plans . . . . . . . 25
Taxation of Distributions. . . 26
Withholding . . . . . . . . . 27
Possible Changes in
Taxation . . . . . . . . . . 27
Other Tax Consequences . . . . 27
OTHER CONTRACT PROVISIONS
Beneficiary . . . . . . . . . 28
Non-Assignability. . . . . . . 28
Portability . . . . . . . . . 28
Failure of Plan to Qualify . . 28
Discontinuance . . . . . . . . 28
Transfer to New Funding
Agency . . . . . . . . . . . 29
Changes in Contract . . . . . 29
Other Changes . . . . . . . . 30
TABLE OF CONTENTS -
STATEMENT OF ADDITIONAL
INFORMATION . . . . . . . . 30
<PAGE>
INDEX OF TERMS
The following terms are explained on the page indicated.
Account . . . . . . . . . . . . 1
Accumulation Period . . . . . . 5
Annuity . . . . . . . . . . . 19
Annuity Commencement Date. . . 19
Code . . . . . . . . . . . . . 1
Companion Contract . . . . . . . 2
Contract(s) . . . . . . . . . . 1
Contract Holder(s) . . . . . . . 1
Contract Year . . . . . . . . 18
First Priority . . . . . . . . . 5
401 Plan . . . . . . . . . . . . 8
403(b) Plan . . . . . . . . . . 8
457 Plan . . . . . . . . . . . . 8
IRA Plan . . . . . . . . . . . . 8
MBL Life . . . . . . . . . . . . 1
Mutual Benefit Life . . . . . . 1
Net Purchase Payment . . . . . . 8
1940 Act . . . . . . . . . . . . 5
Participant . . . . . . . . . . 1
Qualified Plans . . . . . . . . 1
Rehabilitation . . . . . . . . 10
SEC . . . . . . . . . . . . . 10
Transfer . . . . . . . . . . . . 1
Variable Accumulation
Account . . . . . . . . . . . 1
Variable Accumulation
Unit . . . . . . . . . . . . . 8
Variable Contract
Account - 2 . . . . . . . . . 5
Variable Contract
Account - 7 . . . . . . . . . 1
VCA-2 Contract . . . . . . . . . 5
<PAGE>
SUMMARY OF PROSPECTUS
Fee Table
The purpose of the Fee Table is to help Contract Holders and
Participants understand the various Account expenses that would be paid
prior to commencement of annuity payments, at which time the investment
in the Account will end. The Fee Table, including the Example below,
shows the expenses that are deducted from the assets of the Account.
For a description of these expenses, see "Charges". The Fee Table does
not include premium taxes currently charged by various states, which may
range up to 3.5%, which will be deducted and paid to the states as
required.
Annual Expenses
(as a percentage of average net assets)
Investment Advisory Fee (after expense waiver)* ..... 0.00%
Expense and Expense Risk Charges
(after expense waiver)* ....................... 0.00%
Total Annual Expenses ........................ 0.00%
Example
A $1,000 investment in the Account would be subject to the expenses
indicated, assuming (1) a 5% annual return and (2) redemption at
the end of each time period shown:**
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$0 $0 $0 $0
This example should not be considered a representation of past or
future expenses for the Account. Actual expenses may be greater or
less than those shown above. Similarly, the annual rate of return
assumed in the Example is not an estimate or guarantee of future
investment performance.
__________________________
* Prior to the Transfer, Mutual Benefit Life ceased assessment of the
expense and expense risk charge and assumed payment of the
investment advisory fee. (See "Charges".) MBL Life has
voluntarily agreed to continue with the cessation of the expense
and expense risk charge and assume payment of the investment
advisory fee for the one-year period beginning May 1, 1996, but
reserves the right to reinstate assessment of the expense and
expense risk charge and cease assumption of the investment advisory
fee at the expiration of this one-year period. (See "Waiver of
Charges".) If these charges had not been waived, the total
expenses in 1995 would have been .77%.
** There are no additional charges imposed upon redemption.
<PAGE>
The Contracts
The Contracts described in this Prospectus provide for retirement
and other benefits for persons covered under plans qualified for federal
income tax advantages under Section 401, 403(b), 408 or 457 of the
Internal Revenue Code of 1986, as amended (the "Code"). The Contracts
are funded through the Account, the value of which will vary up or down
depending upon its investment experience. At the time a Contract was
issued, a group fixed annuity companion contract ("Companion Contract"),
which is not described in this Prospectus, was also issued to the
Contract Holder. In addition, at the option of the Contract Holder,
another group variable annuity contract may also have been issued that
was funded through MBL Variable Contract Account-2 ("VCA-2 Contract").
The Contracts, Companion Contracts and VCA-2 Contracts, including
any riders thereto, were issued by Mutual Benefit Life and assumptively
reinsured by MBL Life. The Contracts offer variable investment
accumulations. Fixed annuities are available through the Companion
Contract only at retirement. The optional addition of a VCA-2 Contract
offered variable accumulations, as well as annuities with underlying
investments in common stocks and other equity-type securities.
New Participants, who enroll after the effective date of this
Prospectus, participating in plans qualified under Section 408 of the
Code and, for residents of New York, plans qualified under Section
403(b), are entitled to a return of their initial premium payments
without cost within ten days of purchase under a ten-day revocation
provision.
The Account
The Account operates as a separate account of MBL Life. It was
established by Mutual Benefit Life under New Jersey law in 1983. The
assets and liabilities of the Account were transferred to a new separate
account of MBL Life as of May 1, 1994, and is registered under the
Investment Company Act of 1940 (the "1940 Act") as an open-end,
diversified management investment company. The Account is available
only during the period when funds are accumulated before they are used
to provide annuity benefits ("Accumulation Period"). At retirement,
fixed or variable annuity benefits are provided under the Companion
Contract or a VCA-2 Contract, as elected under a Qualified Plan.
Investment Adviser and Principal Underwriter
First Priority Investment Corporation ("First Priority") serves as
the Account's investment adviser and principal underwriter. First
Priority is a wholly-owned indirect subsidiary of MBL Life. For
managing the Account's investments, First Priority receives a periodic
fee based on a percentage of net assets. For a description of this fee,
see "Investment Advisory Fee". First Priority is a registered
investment adviser under the Investment Advisers Act of 1940 (the
"Advisers Act"). (See "Investment Management".) First Priority also
engages in the sale of other investment company securities and financial
products.
<PAGE>
Expense Charges
The Contract provides for an expense and expense risk charge. The
Contract also provides for an investment advisory fee. There are no
sales or redemption charges under the Contracts, but sales,
administrative or other charges may be imposed under the Companion
Contract. Premium taxes may also be imposed in various jurisdictions.
(See "Charges - Premium Taxes".)
Waiver of Charges
Prior to the Transfer, Mutual Benefit Life ceased assessment of the
expense and expense risk charge and assumed payment of the investment
advisory fee. MBL Life has voluntarily agreed to continue the cessation
of the expense and expense risk charge and assume payment of the
investment advisory fee for the one-year period beginning May 1, 1996,
but reserves the right to reinstate assessment of the expense and
expense risk charge and cease assumption of payment of the advisory fee
at the expiration of this one-year period.
Minimum Investment
The minimum annual contribution for each Participant under a
Contract is $240. (See "Accumulation Account - Purchase Payments".)
Investment Objective of the Account
The Account's objective is to provide as high a level of current
income as is consistent with the preservation of capital and maintenance
of liquidity. It seeks to achieve this goal through investments in high
quality short-term money market instruments.
Redemption
At any time during the Accumulation Period, the current value of a
Participant's Variable Accumulation Account under a Contract may be
withdrawn, in whole or in part. For a description of redemption
procedures, see "Redemptions". There is no charge or fee assessed by
MBL Life for such withdrawals. A penalty and/or tax may be incurred
under the Code upon withdrawal of amounts accumulated under the
Contracts offered by this Prospectus, including a 10% penalty generally
imposed on the taxable amount of withdrawals prior to age 59 1/2
(subject to certain exceptions). (See "Federal Income Tax Status".)
Certain Investment Risks
The value of the Account's assets is not insured or guaranteed by
the U.S. Government, nor is its yield fixed. The yields realized by the
Account will generally rise or fall with short-term interest rates.
(See "The Variable Contract Account - Portfolio Turnover - Value".)
<PAGE>
FINANCIAL STATEMENTS
The Account incorporates by reference into this Prospectus the
Financial Highlights contained in its 1995 Audited Financial Statements,
which should accompany this Prospectus. The Account will furnish
without charge an additional copy of these Reports upon request made to
Pension and Investment Products, MBL Life Assurance Corporation, 520
Broad Street, Newark, New Jersey 07102-3111, Attn: MBL VARIABLE CONTRACT
ACCOUNT-7, or by telephoning 1-800-435-3191. These Reports also contain
the Account's financial statements.
The financial statements for the Account (as well as the auditor's
report thereon) are described in the Statement of Additional
Information.
The financial statements of MBL Life may be found in the Statement
of Additional Information.
PERFORMANCE RELATED INFORMATION
The Account may from time to time advertise its "yield" and
"effective yield". Both yield figures are based upon the Account's past
performance only and are not intended to be an indication of future
performance. Set forth below is the manner in which the data contained
in such advertisements will be calculated.
The "yield" of the Account refers to the income generated by an
investment in the Account over a seven-day period (which period will be
stated in any advertisement). This income is then "annualized". That
is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as
a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in
the Account is assumed to be reinvested. The "effective yield" will be
slightly higher than the "yield" because of the compounding effect of
this assumed reinvestment. For an explanation of the calculation of
"yield" and "effective yield", see the Account's Statement of Additional
Information.
When the Account advertises its "yield" and "effective yield", both
quotations include all recurring Contract charges currently applicable.
Prior to the Transfer, Mutual Benefit Life ceased assessment of the
expense and expense risk charge and assumed payment of the investment
advisory fee. MBL Life has agreed to continue with the cessation of the
expense risk charge and assumption of the investment advisory fee, but
reserves the right to reinstate assessment of the expense and expense
risk charge and cease payment of the investment advisory fee. (See
"Summary of Prospectus - Waiver of Charges".) Such charges and fees, if
included, would reduce the "yield" and "effective yield".
For the seven-day period ended December 29, 1995 the Account's
"yield" was 4.99% and its "effective yield" was 5.11%.
<PAGE>
GROUP TAX-DEFERRED
ANNUITY CONTRACTS
Eligible Contract Holders
The Contracts described by this Prospectus are designed to fund
retirement and other benefits, through employers, trustees or
custodians, to the following categories of employees ("Participants"),
and their beneficiaries:
1. Employees covered under annuity purchase arrangements adopted
pursuant to Section 403(b) of the Code by public school systems and
non-profit organizations described in Section 501(c)(3) of the Code
("403(b) Plans"), including former employees who had been covered
under other such annuity purchase arrangements and who have not
withdrawn their account balances or commenced receiving their
annuity benefits.
2. Employees covered under plans maintained by partnerships and sole
proprietorships which are qualified under Section 401 of the Code
("401 Plans"). These plans were commonly referred to as HR-10
Plans prior to the Tax Equity and Fiscal Responsibility Act of
1982.
3. Employees covered under deferred compensation plans qualified under
Section 457 of the Code ("457 Plans").
4. Individuals covered under Individual Retirement Account Plans
qualified under Section 408 of the Code ("IRA Plans" or "408
Plans").
The Code affords certain federal income tax advantages to
employers, employees and beneficiaries covered under one or more of the
above plans or arrangements. (See "Federal Income Tax Status".)
Basic Provisions
Net Purchase Payments made for or by Participants are invested
during the Accumulation Period before retirement. "Net Purchase
Payment" means the amount of a purchase payment for a Participant, less
any premium tax. (See "Premium Taxes".)
At retirement, the current value of a Participant's Variable
Accumulation Account may be used to purchase fixed annuities under a
Companion Contract, or variable annuities under a VCA-2 Contract, if
currently available.
VARIABLE ACCUMULATION ACCOUNT. Under the Contracts, Net Purchase
Payments are allocated to a Participant's Variable Accumulation Account.
Amounts allocated to a Variable Accumulation Account purchase Variable
Accumulation Units. The value of a Participant's Variable Accumulation
Account varies up or down from day to day depending on the investment
experience of the Account. No assurance of investment results can be
given. The investment experience of a Participant's Variable
Accumulation Account reflects the investment income and realized and
unrealized capital gains and losses, if any, of the Account.
RETIREMENT ANNUITY. Whenever funds accumulated under the Contracts
are to be applied to purchase a fixed rate annuity, the funds will be
transferred to the Companion Contract and the annuity will be funded
through MBL Life's General Account. (See "The Variable Contract Account
- - Legal Developments".) If a VCA-2 Contract has been issued to the
Contract Holder and the Participant has elected to receive all or part
of the annuity as a variable annuity, the appropriate funds will be
transferred to the VCA-2 Contract and the annuity will be funded through
MBL Variable Contract Account-2. (See "Annuity".)
Assumption of Expense Risk
MBL Life assumes the expense risks under the Contracts to the
extent that the charges for expense made under the Contracts do not
cover the actual expenses incurred. (See "Waiver of Charges".)
Redemption and Payment at Death
The current value of a Participant's Variable Accumulation Account
may be withdrawn, in whole or in part, at any time before his or her
Annuity Commencement Date under the Contract. The Annuity Commencement
Date is the first day of any month on which the Participant elects to
begin receiving payments under an annuity. Withdrawals prior to
retirement, however, may involve adverse tax consequences, or may be
restricted. (See "Redemption" and "Federal Income Tax Status".)
If a Participant dies before retirement, MBL Life will cancel the
Participant's Variable Accumulation Account and transfer the value of
such account, as of the date MBL Life receives satisfactory written
notice of death, to the Companion Contract, where the proceeds will be
held at the rate of interest specified in the Companion Contract until
final disposition. (See "The Variable Contract Account - Legal
Developments".) However, in lieu of such transfer, upon election by the
Participant's beneficiary, the beneficiary may receive the current value
of the Participant's Variable Accumulation Account as of the date MBL
Life receives satisfactory written notice of death. Payments will be
made within seven days thereafter, subject to receipt by MBL Life of all
necessary information concerning the beneficiary. (See "Payment at
Death".)
Companion Contract and VCA-2 Contract
At the time a Contract was issued, the Contract Holder was also
issued a Companion Contract. A Companion Contract is a group fixed
annuity contract that provides for, among other things, the purchase of
fixed annuities. (See "The Variable Contract Account -Legal
Developments".)
<PAGE>
VCA-2 Contracts were issued to Contract Holders who wished to be
provided with variable annuities under the Plans. Purchase payments
under a VCA-2 Contract are invested through MBL Variable Contract
Account-2, an MBL Life separate account, in shares of MBL Growth Fund,
Inc. ("MBL Growth"), a mutual fund with the primary investment objective
of long-term appreciation of capital.
The terms "Companion Contract" and "VCA-2 Contract", as used in
this Prospectus, refer to both a previously issued Companion Contract or
VCA-2 Contract, respectively, and to any contracts amended by rider as
the context indicates.
The Contracts, Companion Contracts, and VCA-2 Contracts, including
any riders issued thereto, are part of MBL Life's overall tax-qualified
annuity program which may be utilized by the Plans. This Prospectus
does not furnish detailed information as to the Companion Contract,
VCA-2 Contract or any riders thereto, MBL Variable Contract Account-2 or
MBL Growth. The charges and benefits under the Companion Contract and
the VCA-2 Contract are specified in those contracts. Prospectuses for
MBL Variable Contract Account-2, including the VCA-2 Contract, and MBL
Growth are available upon request made to Pension and Investment
Products, MBL Life Assurance Corporation, 520 Broad Street, Newark, New
Jersey 07102-3111, Attn: MBL VARIABLE CONTRACT ACCOUNT-2.
THE VARIABLE CONTRACT ACCOUNT
Organization
The Account is registered with the Securities and Exchange
Commission ("SEC") as an open-end, diversified management investment
company under the 1940 Act. Registration under the 1940 Act involves
regulation by the SEC, but does not involve supervision or management of
investment practices or policies of either the Account or MBL Life, the
sponsoring insurance company. The Account was established by Mutual
Benefit Life in 1983 under New Jersey law pursuant to a resolution of
the Board of Directors of Mutual Benefit Life. The assets and
liabilities of the Account were transferred to a separate account of MBL
Life as of May 1, 1994 pursuant to a resolution of the Board of
Directors of MBL Life.
MBL Life is a New Jersey stock life insurance company incorporated
in 1972, with its principal office at 520 Broad Street, Newark, New
Jersey. Its stock is held by a Stock Trust, pursuant to the
Rehabilitation Plan of Mutual Benefit Life, MBL Life's former parent.
Legal Developments
The Account was originally a separate account of Mutual Benefit
Life. On July 16, 1991, the Superior Court of New Jersey ("Court")
entered an Order ("Order") appointing the Commissioner of Insurance of
the State of New Jersey as Rehabilitator of Mutual Benefit Life, thereby
granting the Rehabilitator immediate exclusive possession and control
of, and title to, the business and assets of Mutual Benefit Life,
including those of the Account.
<PAGE>
In view of the terms and conditions of the Order, on July 16, 1991,
Mutual Benefit Life, on behalf of the Account, immediately ceased
acceptance of applications for new Contracts and additional purchase
payments under existing Contracts. The cessation of additional purchase
payments continued from July 16, 1991 until the effective date of this
Prospectus. Because the Account was a separate account of Mutual
Benefit Life, the assets and liabilities of the Account were maintained
separate and apart from Mutual Benefit Life's general account assets and
liabilities. Transfers to VCA-2 Contracts were temporarily suspended.
Transfers from the Account to the Companion Contract were temporarily
prohibited and withdrawals from the Companion Contract were restricted
during the Rehabilitation Period, which is to terminate no later than
December 31, 1999. Death Benefit payments upon the death of each
Participant continue to be made to the beneficiaries.
A Rehabilitation Plan was developed by the Rehabilitator, the terms
of which were subsequently approved and confirmed by the Court in
January 1994. Certain terms and conditions of the Rehabilitation Plan
have been appealed by parties to the Rehabilitation Plan, and litigation
brought against Mutual Benefit Life, the ultimate resolutions of which
cannot be determined at this time.
The Rehabilitation Plan stipulated that the assets and liabilities
of the Account would be transferred from Mutual Benefit Life to a
separate account of MBL Life. The Transfer was effected pursuant to an
assumption reinsurance transaction on May 1, 1994. Under the
Rehabilitation Plan, MBL Life assumed substantially all of the business,
assets and liabilities of Mutual Benefit Life. MBL Life will operate
under and is governed by the terms and conditions of the Rehabilitation
Plan until the termination of the Rehabilitation Period, not later than
December 31, 1999. While the Rehabilitation Plan was developed based on
the Rehabilitator's best estimates, no assurances can be provided that
the Rehabilitation Plan will ultimately be successful. For more
information see the financial statements of MBL Life contained in the
Statement of Additional Information.
As of May 1, 1994, all of the issued and outstanding shares of MBL
Life were placed in a Stock Trust which is to terminate at the end of
the Rehabilitation Period. The Commissioner of Insurance was appointed
Trustee of the Stock Trust. On July 5, 1995, Alan J. Bowers was
appointed President and Chief Executive Officer of MBL Life.
MBL Life reserves all rights regarding the use of its name, or any
part of its name, including the right to withdraw its use by the Account
or to grant its use to any other investment company or entity.
Assets
While the Account, as of May 1, 1994, is an asset of MBL Life, it
is held separately from all other assets of MBL Life and may not be
charged with liabilities arising out of any other business of MBL Life.
The Contracts provide that any income, gains or losses from the
Account's investment operations shall be credited to or charged against
the Account without regard to any other income, gains or losses of MBL
Life. The obligations arising under the Contracts are not obligations
of MBL Life during the Accumulation Period.
As of January 2, 1996, Participants under the Long Island Jewish
Medical Center 403(b) Plan, New Hyde Park, New York, the largest
Contract Holder of the Account, owned 42.79% of the outstanding Variable
Accumulation Units of the Account; Participants under the New York
Hospital 403(b) Plan, New York, New York owned 10.38% of the outstanding
Variable Accumulation Units of the Account.
Investment Objective and Policies
The Account offers Participants the opportunity to provide for
retirement and other benefits available under the Contracts through
pooled investments in short-term debt instruments normally available in
denominations of $100,000 or more. These securities, or "money market"
instruments, will be the Account's only investments. The Account's
objective, which may not be changed without the approval of a majority
of Contract Holders, is to provide as high a level of current income as
is consistent with preservation of capital and maintenance of liquidity.
The Account will seek to achieve its objective through investments in
the securities and repurchase agreements relating thereto, described
below, all of which will be U.S. dollar denominated obligations. All
investments will have remaining maturities of 397 days or less with a
dollar-weighted average maturity not exceeding 90 days. The Account
will limit its investments to securities that are determined to have
"minimal credit risks" and that are "Eligible Securities". Eligible
Securities have a remaining maturity at the time of purchase of not more
than 397 days. They are rated in one of the two highest rating
categories by at least two nationally recognized statistical rating
organizations ("NRSRO's") (or by the only NRSRO that has rated the
security), or, if unrated, are of comparable investment quality. The
Account will not invest more than five percent of its assets in Eligible
Securities which are not rated in the highest short-term rating category
by at least two NRSRO's (or by the only NRSRO that has rated the
instrument), or comparable unrated securities ("Second Level
Securities").
U.S. GOVERNMENT SECURITIES. The Account may purchase obligations
issued or guaranteed as to principal and interest by the United States
Government, or its agencies or instrumentalities. Direct obligations of
the United States Government include Treasury Bills, Treasury Notes and
Treasury Bonds, and are backed by the full faith and credit of the
United States Government.
The Account may purchase securities of agencies and
instrumentalities of the United States Government, such as the Federal
Housing Administration, Government National Mortgage Association,
General Services Administration, Tennessee Valley Authority, Federal
Home Loan Banks, Federal Land Banks and the United States Postal
Service. Some of the securities are backed by the full faith and credit
of the United States Government or guaranteed by the United States
Treasury. Obligations of some of the agencies and instrumentalities are
only supported by the issuing agency's or instrumentality's credit or
right to borrow from the United States Treasury. The latter may be no
guarantee against default.
BANK OBLIGATIONS. The Account may purchase certificates of
deposit, banker's acceptances and other obligations of U.S. banks which
have total assets of $1 billion or more and capital surplus and
undivided profits of at least $100 million as of the date of their most
recently published financial statements, including foreign branches of
U.S. banks.
Normally these banks will be members of the Federal Reserve System
and the Federal Deposit Insurance Corporation, but this is not an
investment requirement.
SAVINGS AND LOAN OBLIGATIONS. The Account may invest in negotiable
certificates of deposit and other short-term obligations of savings and
loan associations which have total assets in excess of $1 billion and
are insured by the Federal Deposit Insurance Corporation.
COMMERCIAL PAPER. The Account may invest in commercial paper
obligations which may include variable amount master demand notes.
These notes permit the investment of fluctuating amounts by the Account
at varying rates of interest pursuant to direct arrangements between the
Account, as lender, and the borrower. Daily changes in the amounts
borrowed are permitted and the Account has the right to increase the
amount under the note at any time up to the full amount provided by the
note agreement, or to decrease the amount. The borrower, typically a
large industrial or finance company which also issues commercial paper,
may repay up to the full amount of the note at any time without penalty.
Because variable amount master demand notes are direct lending
arrangements between the lender and borrower, it is not generally
contemplated that such instruments will be traded, and there is no
secondary market for these notes, although they are redeemable (and thus
immediately repayable by the borrower) at face value, plus accrued
interest, at any time. Accordingly, the receipt of payment by the
Account is dependent on the ability of the borrower to pay principal and
interest on demand. It is not expected that the notes will be backed by
bank letters of credit.
The Account's investment adviser will value any master demand notes
held by the Account, taking into consideration such factors as earning
power, cash flow and other liquidity ratios of the issuer.
OTHER CORPORATE DEBT SECURITIES. The Account may purchase other
non-convertible corporate obligations, including bonds and debentures,
which at the time of purchase have less than 397 days remaining to
maturity.
REPURCHASE AGREEMENTS. These involve the purchase of government
securities with the concurrent agreement by the seller, a bank or
securities dealer, to repurchase the securities at an agreed upon price
and date.
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The repurchase price exceeds the cost of the securities subject to
the agreement, thereby providing a determinable yield for the holding
period. Repurchase agreements are short-term investments, usually one
week or less. They are fully collateralized by the purchased securities
and are considered loans under the 1940 Act. During the term of a
repurchase agreement, the seller will be required to provide such
additional collateral as is necessary to maintain the value of all the
collateral under a repurchase agreement at a level at least equal to the
repurchase price. The Account will make payment for such securities
only upon delivery or evidence of book entry transfer to the Custodian.
If the seller defaults, the Account might incur a loss if the value of
the collateral securing the repurchase agreement declines. It might
also incur disposition costs in connection with the liquidation of the
collateral. In addition, if bankruptcy proceedings are commenced with
respect to the seller of the security, realization upon the collateral
by the Account may be delayed or limited. In no event will the Account
enter into a repurchase agreement having a repurchase date more than 397
days after the date of acquisition. Repurchase agreements afford an
opportunity for the Account to earn a higher return on temporarily
available cash than would otherwise be the case.
REVERSE REPURCHASE AGREEMENTS. The Account may invest in reverse
repurchase agreements, which involve the sale of any of the securities
held by the Account (except master demand notes), with an agreement to
repurchase at an agreed upon price, date, and interest payment.
Reverse repurchase agreements are considered borrowing under the
1940 Act and may represent a form of leveraging. The Account will use
the proceeds of reverse repurchase agreements to make other investments
which either mature or are under an agreement to resell at a date
simultaneous with or prior to the expiration of the reverse repurchase
agreement.
The Account may utilize reverse repurchase agreements only if the
interest income to be earned from the investment of proceeds of the
transaction is greater than the interest expense of the reverse
repurchase transaction. Reverse repurchase agreements will only be
entered into with a bank or securities dealer, and only under
circumstances where the repurchase is not more than 397 days after the
date the repurchase agreement is entered into.
Portfolio Turnover-Value
Although it is not the Account's objective to make investments for
capital growth, it may engage in some short-term trading to take
advantage of market fluctuations and may sell any portfolio investment
before it matures to protect principal, improve liquidity or enhance
yield.
The value of the Account's portfolio will vary inversely to changes
in prevailing interest rates. If interest rates increase after the
purchase of a security, its value normally will decline. Conversely, a
drop in interest rates normally will result in an increase in the
security's value. These changes, however, will not generally result in
gains or losses for the Account since it intends to hold its investments
to maturity when the entire principal and accrued interest is due.
Certain Investment Risks
The value of the Account's assets is not insured or guaranteed by
the U.S. Government, nor is its yield fixed. Interest rates on money
market securities fluctuate in response to various economic factors and,
similarly, the yields realized by the Account will generally rise or
fall with short-term rates. Although the Account's investments are
regarded as high quality instruments, many are not guaranteed by any
government and some present special risks such as in the case of
obligations of foreign branches of U.S. banks. The obligations of
foreign branches of U.S. banks involve risk considerations different
from those associated with U.S. domestic banks. These include foreign
economic and political developments, foreign governmental restrictions
which may adversely affect payment of principal and interest on the
obligations, expropriation, limitations on removal of funds, foreign
withholding and other taxes on interest income, and difficulties in
obtaining and enforcing a judgment against a foreign branch.
Investment Restrictions
The Account is subject to certain investment restrictions which are
considered fundamental policies and, unlike the other investment
policies described herein, cannot be changed without approval of the
holders of a majority (as defined in the 1940 Act) of the outstanding
units in the Account. Among other restrictions, the Account will not
enter into repurchase agreements if, as a result thereof, more than 10%
of the Account's total assets would be subject to repurchase agreements
maturing in more than seven days. The Account also will not enter into
reverse repurchase agreements if the Account's obligations would be
greater than 20% of the Account's total assets. The Account may
mortgage, pledge or hypothecate its assets only in limited circumstances
and never in excess of 5% of its total assets taken at cost. The Account
will also not hold more than 10% of any class of securities of any one
issuer nor invest more than 25% of the value of the Account's total
assets in securities of any one industry except that these limitations
will not apply with respect to investments in obligations issued or
guaranteed by the United States Government, but do apply to investments
in securities of agencies and instrumentalities of the United States
Government which are only supported by their own credit or right to
borrow from the United States Treasury. The Account's investment
restrictions are described in full in the Statement of Additional
Information, under "Investment Restrictions".
CHARGES
Expense and Expense Risk Charges
Prior to the Transfer, Mutual Benefit Life ceased assessment of the
expense and expense risk charge. MBL Life has voluntarily agreed to
continue with the cessation of the expense and expense risk charge, but
reserves the right to reinstate assessment of the expense and expense
risk charge. Absent the waiver of the expense and expense risk charge,
a charge, payable to MBL Life, at the annual rate of 0.35% would be made
daily against the Account's assets for expenses and 0.02% for the
expense risk assumed by MBL Life. Expenses include the costs
attributable to the establishment, maintenance and operation of the
Account, other than investment advisory fees and any brokerage
commissions or fees relating to securities transactions, which are paid
by the Account. Expense risk means the contingency that expenses will
be greater than the 0.35% expense charge. This charge may not be
changed, except as described in "Other Contract Provisions - Changes in
Contract". Because these charges are imposed as a percentage of assets,
administrative charges under larger contracts may be greater than actual
expenses under those contracts and larger contracts may subsidize
smaller contracts.
The charge for expenses is not designed to produce a profit but
only to cover the Account costs. If the charges for expenses and
expense risks are less than the actual expense risk assumed by MBL Life,
MBL Life will suffer a loss. However, if the charge is more than
sufficient, there will be a contribution to MBL Life's surplus. To the
extent that there is such a contribution, it may be used for any proper
corporate purpose, including, among other things, payment of certain
sales and promotional expenses incurred in connection with the
distribution of Contracts.
Investment Advisory Fee
Prior to the Transfer, Mutual Benefit Life assumed payment of the
investment advisory fee. MBL Life will continue to assume payment of
the fee for additional one-year periods, but reserves the right to cease
assumption of payment of the investment advisory fee at the expiration
of any one-year period. Absent MBL Life's payment of the advisory fee,
for the investment advisory services of First Priority, described in
"Investment Management", the Account would pay a periodic fee at the annual
rate of .40% of the first $300,000,000 of the Account's average daily net
assets, .35% of the next $400,000,000 of the Account's average daily net
assets and .30% of the Account's average daily net assets in excess of
$700,000,000. For a discussion of how the fee is calculated, see the
Account's Statement of Additional Information, under "Investment
Advisory and Other Services".
Other Charges
Currently, no charges are made against the Account for MBL Life's
federal income taxes, or provisions for such taxes, that may be
attributable to the Account. MBL Life may charge the Account for its
portion of any income tax charged to MBL Life on the Account or its
assets. Under present laws, MBL Life may incur state and local taxes
(in addition to premium taxes) in several states. At present, these
taxes are not significant. If they increase, however, MBL Life may
decide to make charges for such taxes, or provisions for such taxes,
against the Account. Any charges made against the Account could have an
adverse effect on the investment experience of the Account.
<PAGE>
Premium Taxes
Premium taxes ranging up to 3.5% are currently levied by various
states. If premium taxes are incurred by an Account, a charge for the
amount of those taxes will be made when the taxes are incurred.
ACCUMULATION ACCOUNT
Purchase Payments
The Contracts offer flexible purchase payment arrangements which
may be tailored for individual plans as follows:
FREQUENCY. Purchase payments may be made for active Participants
whenever desired, except not more frequently than every two weeks.
AMOUNT. Under 401, 403(b), 408 or 457 Plans, the annuity purchase
agreement or salary reduction agreement between each Participant and his
or her employer, respectively, must specify that contributions on the
Participant's behalf to all Contracts will be at least $240 during each
year under the Plan.
CONTINUITY. Purchase payments for a Participant may be
discontinued at any time, without any effect on the Participant's rights
under the Contract. Purchase payments may be resumed at a later date at
no additional charge, and will again be subject to the minimum of $240
per year per participant.
Variable Accumulation Account
Net Purchase Payments are allocated to a Participant's Variable
Accumulation Account under the Contract and are applied to purchase
Variable Accumulation Units. Each Variable Accumulation Unit represents
a proportionate interest in the assets of the Account.
The number of Variable Accumulation Units purchased is equal to
each Net Purchase Payment, divided by the current dollar value of a
Variable Accumulation Unit. The Variable Accumulation Unit is
calculated as of the end of each Valuation Date, which is a day when the
New York Stock Exchange is open for trading. For any Valuation Date,
the Variable Accumulation Unit value is equal to the value for the
preceding Valuation Date multiplied by the Net Investment Factor for the
current Valuation Date. For any day which is not a Valuation Date, the
Variable Accumulation Unit value is equal to the value for the following
Valuation Date. The Variable Accumulation Unit value is affected by the
investment experience of the Account and the deduction of charges and
may vary either up or down each Valuation Date.
The Net Investment Factor for any Valuation Date is equal to (1)
the net value of the Account determined as of the close of regular
trading on the New York Stock Exchange on that date (exclusive of any
purchase payments or redemptions on such date), less a deduction at an
effective annual rate of 0.37% for the expense and expense risk charges
and less a deduction at a maximum rate of .40% for the investment
management charge (at present, no such charges are deducted, see "Waiver
of Charges"), and less a deduction for federal tax attributable to the
maintenance and operation of the Account (at present, no such federal
tax is payable, see "Charges - Other Charges"); divided by (2) the value
of the Account determined as of such close on the preceding Valuation
Date. For a hypothetical example illustrating the computation of the
Variable Accumulation Unit value and the Net Investment Factor, see the
Account's Statement of Additional Information.
The Account's portfolio securities are valued as follows:
Investments in short-term securities which mature in 60 days or
less are valued under the amortized cost method of valuation. Under
this method, securities are initially valued at cost on their
acquisition date (or the date on which they first have a maturity of 60
days or less), and their subsequent value is based on such initial
value, assuming a constant accretion of a discount or amortization of a
premium to maturity, regardless of any subsequent minor fluctuations in
the market value of the security. Short-term securities which mature in
more than 60 days are valued at market values, based on quoted bid and
asked prices or yield equivalent.
In effect, each Net Purchase Payment (after the first) is invested
in Variable Accumulation Units at the value next determined after
receipt of the payment by MBL Life at its Home Office. Thereafter, the
Variable Accumulation Units credited under a Contract will vary up or
down in value, depending on the value of the assets held by the Account
which is affected by investment performance, expenses and charges.
Transfers Between Contracts
A Participant may transfer between the Variable Accumulation
Account under the Contract described in this Prospectus and the VCA-2
Contract, on proper written request to MBL Life. During any Contract
Year a Participant may transfer, once a quarter, from the Contract to
the VCA-2 Contract. Until the termination of the Rehabilitation Period,
no later than December 31, 1999, transfers between the Variable
Accumulation Account under the Contract, as described in this Prospectus
and the Companion Contract, may be subject to restrictions imposed by
the Companion Contract. (See "The Variable Contract Account - Legal
Developments".)
The Variable Accumulation Account values will also be transferred
to the Companion Contract upon the death of a Participant (see
"Accumulation Account - Payment at Death"), or if a Qualified Plan fails
to qualify under the Code. (See "Other Contract Provisions - Failure of
Plan to Qualify".)
A request to transfer from a Participant's Variable Accumulation
Account under a Contract to a VCA-2 Contract is treated as a request to
transfer the entire Variable Accumulation Account if the total value
remaining in the Contract after the transfer would otherwise be less
than $240 or if the amount specified to be transferred exceeds the value
of the Variable Accumulation Account.
No transfer may be made within 15 days of a Participant's Annuity
Commencement Date. The amount of each transfer must be at least $240.
Transfers from the VCA-2 Contract to the Contract described in this
Prospectus will be subject to the transfer provisions contained in such
other contract, including any limitations or charges contained in that
contract.
Transfers may be made only on a Valuation Date as defined in this
Prospectus. All transfers will be based on the Variable Accumulation
Unit value calculated on the effective date of the transfer. MBL Life
will send Participants written confirmation of all transfers when they
are effected.
Redemption
The current value of a Participant's Variable Accumulation Account
may be withdrawn, in whole or in part, or transferred to another tax-
qualified investment vehicle, at any time before his or her Annuity
Commencement Date under the Contract. However, under 401, 403(b) and
457 Plans, the redemption right may be restricted in accordance with the
Plan. Any partial withdrawal must amount to at least $240. Certain
plans may require forfeiture of non-vested employer contributions, and
may also provide that certain contributions may not be redeemed until
the occurrence of a specified event, such as attainment of age 59 1/2.
The terms of the Plan should be reviewed to determine if contributions
are so restricted.
Redemption is effected by redeeming a sufficient number of Variable
Accumulation Units in the Variable Accumulation Account to pay the
amount requested in cash. The number of units redeemed in the Variable
Accumulation Account is based on their value next determined after
receipt of a proper written request by MBL Life at its Home Office.
A request for partial redemption of a Participant's Variable
Accumulation Account under the Contract is treated as a request for
complete redemption if the total remaining value of the Variable
Accumulation Account would otherwise be less than $240 or if the
redemption request is for an amount which exceeds the value of such
account.
In this event, the Participant's Variable Accumulation Account may
be reduced by deducting any applicable administration charge otherwise
deducted at the end of the year and the remaining value of the Variable
Accumulation Account is paid to the Participant (or, in the case of a
transfer, to the financial institution designated by the Participant)
less any federal taxes withheld. (See "Federal Income Tax Status -
Withholding".) After complete redemption by a Participant, no further
purchase payments may be made for the Participant without the consent of
MBL Life.
Payment of the amount redeemed is made within seven days after
receipt of the request, unless (1) the New York Stock Exchange is closed
(for reasons other than holidays and weekends), or trading on the New
York Stock Exchange is restricted, (2) an emergency exists, as
determined by the SEC, so that valuation of the assets of the Account,
or redemption of the securities held by the Account, is not practicable,
or (3) the SEC permits postponement by order.
Redemption may adversely affect tax benefits otherwise available
under the Code. (See "Federal Income Tax Status".) Under 403(b) Plans
current restrictions imposed by the Code limit withdrawals. (See
"Federal Income Tax Status - 403(b) Plans".)
Payment at Death
If a Participant dies before his or her Annuity Commencement Date,
MBL Life will cancel the Participant's Variable Accumulation Account and
transfer the value of such account, as of the date MBL Life receives
satisfactory written notice of death, to the Companion Contract where
the proceeds will be held at the interest rate specified in the
Companion Contract until final disposition. (See "Group Tax-Deferred
Variable Annuity Contracts - Companion Contract and VCA-2 Contract" and
"The Variable Contract Account - Legal Developments".) No sales charges
will be imposed on the transfer of Account funds to the Companion
Contract. In lieu of transferring the Participant's Variable
Accumulation Account to the Companion Contract, MBL Life may pay all of
such account value to the beneficiary in a single sum, if the
beneficiary has made a written request for such payment. The Contracts
require the beneficiary to make the written request within 90 days of
the Participant's death. If the beneficiary is a spouse, the Variable
Accumulation Account may be continued at the spouse's election; however,
no further purchase payments may be made.
In general, the rights of beneficiaries are subject to the same
conditions as corresponding rights of Participants. In addition, the
rights of a beneficiary may be subject to restrictions imposed by the
Participant in designating his or her beneficiary.
ANNUITY
Annuity Commencement Date
A Participant covered under an annuity purchase agreement adopted
pursuant to Section 403(b) of the Code may elect an Annuity Commencement
Date under the Contracts, which, as discussed above, will be the first
day of any month on which the Participant elects to begin receiving
payments under an annuity. In no event may a Participant's Annuity
Commencement Date be later than the date under which distributions must
begin under the Code. The Code generally requires distributions to
begin by April 1 following the calendar year in which a Participant
attains age 70 1/2, without regard to the actual date of retirement, and
also precludes distributions attributable to elective purchase payments
prior to attainment of age 59 1/2, separation from service, death,
disability or hardship. The selection of an Annuity Commencement Date
must be made in writing, on a form furnished by MBL Life, and received
in MBL Life's Home Office at least 15 days in advance of the Annuity
Commencement Date.
An elected retirement date under other Qualified Plans, which
generally must be no later than April 1 following the calendar year in
which a Participant attains the age of 70 1/2, is the Participant's
Annuity Commencement Date.
Purchase of Annuity
On a Participant's normal or optional Annuity Commencement Date,
the value of the Variable Accumulation Account, less any applicable
premium tax, may be applied to purchase a fixed annuity and, if an VCA-2
Contract has been issued to the Contract Holder, a variable annuity. In
such event, the full value of the Participant's Variable Accumulation
Account will be transferred in the appropriate amounts to the Companion
Contract and/or VCA-2 Contract. The amounts transferred will be as
elected by the Participant, in order to achieve the desired balance
between the fixed and variable annuities. The fixed annuity will then
be purchased under the Companion Contract, and the variable annuity will
be purchased under the VCA-2 Contract.
GENERAL RIGHTS
Voting Rights
All Contract Holders have voting rights with respect to the
Account. The number of votes attributed to each Contract Holder is
equal to the number of Variable Accumulation Units in the Account under
the Contract. Fractional votes are counted. Participants may have the
right to instruct Contract Holders as to casting votes with respect to
their Variable Accumulation Accounts arising from their own purchase
payments under 401, 403(b), IRA, or 457 Plans, as may be provided under
the terms of the Plan. Votes with respect to units for which no voting
instructions are received from Participants are voted by the Contract
Holder on each matter in the same proportion as those units for which
voting instructions are received. MBL Life votes units it holds on each
matter in the same proportion as such units are voted by Contract
Holders.
The Account held a Special Meeting of Contract Holders on April 12,
1995. All Contract Holders and Participants of record as of February
24, 1995 received Proxy materials, dated March 13, 1995, describing
several items in which such Contract Holders were entitled to vote at
that meeting. A majority of the Contract Holders voted, by Proxy, to
elect the five Committee Members; ratify the appointment of Coopers &
Lybrand L.L.P., as the Account's independent accountants; approve the
continuance of the Account's investment advisory agreement with First
Priority; and approve the continuance of the Account's Service Agreement
among the Account, First Priority and MBL Life.
The Account is not required to hold regular annual Contract Holder
meetings and, in the normal course, does not expect to hold such
meetings. The Account is, however, required to hold Contract Holder
meetings for such purposes as, for example: (1) approving certain
agreements as required by the 1940 Act; (2) changing fundamental
investment objectives and restrictions; and (3) filling
vacancies in the membership of the Management Committee of the Account
("Committee") in the event that less than a majority of the Committee
members were elected by Contract Holders. The Account expects that
there will be no meetings of Contract Holders for the purpose of
electing Committee members unless and until such time as less than a
majority of the Committee members holding office have been elected by
Contract Holders. In addition, holders of record of not less than
two-thirds of the outstanding Accumulation Units of the Account may
remove a Committee member from office by a vote cast in person or by
proxy at a Contract Holder meeting called for that purpose at the
request of holders of 10% or more of the outstanding Accumulation Units
of the Account. The Account has the obligation to assist in such
Contract Holder communications. Except as set forth above, Committee
Members will continue in office and may appoint successor Committee
Members.
Confirmation of Transactions
Within five business days after the end of each calendar quarter a
quarterly statement will be sent to each Participant under the Contract
detailing all activity in the Participant's Variable Accumulation
Account for the previous quarter, including any purchase payments,
redemptions and transfers; the dates of each such transaction; the
amounts allocated to the Variable Accumulation Account; the
administration charges deducted, if any, and the total Variable
Accumulation Account value at the end of the period.
New Participants will be sent a confirmation upon receipt of their
first purchase payment, and quarterly statements thereafter.
In some cases confirmations may be sent more frequently than
quarterly.
Reports
During the Accumulation Period, MBL Life furnishes a quarterly
report for each Participant showing as of a specified date (1) the
number of Variable Accumulation Units in his or her Variable
Accumulation Account under the Contract and (2) the Variable
Accumulation Unit value.
In addition, MBL Life will furnish for each Participant a semi-
annual report showing the financial position of the Account and a
schedule of the investments held by the Account.
457 Plan Participants
The rights and benefits of Participants in a 457 Plan differ from
those of Participants covered under Contracts issued under other
circumstances. Under a 457 Plan the Contract Holder is usually the
employer and the assets of such a Plan are part of the general assets of
the employer. A Participant must look exclusively to his or her
employer and the employer's financial resources for any benefits to
which the Participant is entitled. Accordingly all rights of
Participants referred to or described in this Prospectus are vested in
the Contract Holder.
MANAGEMENT
The Account is managed by a Management Committee in accordance with
the Rules and Regulations adopted by the Management Committee. The names
and addresses of the Chairman, Members, and Officers of the Management
Committee together with a brief description of their principal
occupations during the past five years are found in the Account's
Statement of Additional Information, "Management of the Account".
INVESTMENT MANAGEMENT
The Investment Advisory Agreement between the Account and First
Priority was last approved by the Management Committee on March 13,
1996, and approved by Contract Holders on April 12, 1995. This
Investment Advisory Agreement, which initially became effective on May
1, 1994, provided for the succession of First Priority as investment
adviser to the Account in place of Green Hill Financial Service
Corporation ("Green Hill"). Under the Investment Advisory Agreement
with the Account, First Priority now provides the Account with
investment advisory and management services and, subject to the
authority of the Management Committee, is responsible for overall
management of the Account's business affairs. Under a separate Service
Agreement among the Account, First Priority and MBL Life, last approved
by the Management Committee on March 13, 1996, and approved by Contract
Holders on April 12, 1995, MBL Life provides First Priority with certain
facilities required for performance of its duties under the Investment
Advisory Agreement.
First Priority was incorporated in 1993 under the laws of the State
of New Jersey. It is a registered investment adviser under the Advisers
Act, a registered broker-dealer under the Securities Exchange Act of
1934, and a member of the National Association of Securities Dealers,
Inc. First Priority serves as investment adviser for MAP-Government
Fund, Inc., a money-market mutual fund sponsored by MBL Life, and will
also engage in the sale of other investment company securities and other
financial products.
A description of the services provided by First Priority pursuant
to the Investment Advisory Agreement, and a discussion of the Service
Agreement, appear in the Account's Statement of Additional Information,
"Investment Advisory and Other Services".
During 1993 and from January 1, 1994 through April 30, 1994, Green
Hill received advisory fees from Mutual Benefit Life, pursuant to its
agreement, of $10,840, and $3,168 respectively. From May 1, 1994
through December 31, 1994, and for 1995, First Priority received
advisory fees from MBL Life, pursuant to its agreement, of $5,945 and
$8,536, respectively.
<PAGE>
FEDERAL INCOME TAX STATUS
Introduction
The following discussion is a general discussion of federal income
tax considerations relating to the Contract and is not intended as tax
advice. This discussion is not intended to address the tax consequences
resulting from all of the situations in which a person may be entitled
to or may receive a distribution under the Contract. Any person
concerned about these tax implications should consult a competent tax
advisor before initiating any transaction. This discussion is based
upon MBL Life's understanding of the present federal income tax laws as
they are currently interpreted by the Internal Revenue Service ("IRS").
No representation is made as to the likelihood of the continuation of
the present federal income tax laws or of the current interpretation by
the IRS. Moreover, no attempt has been made to consider any applicable
state or other tax laws.
The Contract may be purchased on a non-tax qualified basis ("Non-
Qualified Contract") or purchased and used in connection with certain
retirement arrangements entitled to special income tax treatment under
Section 401(a), 403(b), 408(b) or 457 of the Code ("Qualified
Contracts").
Taxation of MBL Life
MBL Life is taxed as a life insurance company under Part I of
Subchapter L of the Code. Since the Account is not an entity separate
from the Company, and its operation forms a part of MBL Life, it will
not be taxed separately as a "regulated investment company" under
Subchapter M of the Code. Investment income and realized capital gains
are automatically applied to increase reserves under the Contracts.
Under existing federal income tax law, MBL Life believes that the
Account's investment income and realized net capital gains will not be
taxed to the extent that such income and gains are applied to increase
the reserves under the Contracts.
Accordingly, MBL Life does not anticipate that it will incur any
federal income tax liability attributable to the Separate Account and,
therefore, MBL Life does not intend to make provisions for any such
taxes. However, if changes in the federal tax laws or interpretations
thereof result in MBL Life being taxed on income or gains attributable
to the Account, then MBL Life may impose a charge against the Account
(with respect to some or all Contracts) in order to set aside provisions
to pay such taxes.
Tax Status of the Contract
DIVERSIFICATION. Section 817(h) of the Code requires that with
respect to certain contracts, the investments of the Account must be
"adequately diversified", in accordance with Treasury Regulations in
order for those Contracts to qualify as annuity contracts under federal
tax law. MBL Life believes that all contracts issued in accordance with
this Prospectus are pension plan contracts to which Section 817(h) is
not presently applicable.
In certain circumstances, owners of variable annuity contracts may
be considered the owners, for federal income tax purposes, of the assets
of the separate accounts used to support their contracts. In those
circumstances, income and gains from the separate account assets would
be includible in the variable contract owner's gross income. The IRS
has stated in published rulings that a variable contract owner will be
considered the owner of separate account assets if the contract owner
possesses incidents of ownership in those assets, such as the ability to
exercise investment control over the assets. The Treasury Department
has also announced, in connection with the issuance of regulations
concerning diversification, that those regulations "do not provide
guidance concerning the circumstances in which investor control for the
investments of a segregated asset account may cause the investor [i.e.,
the owner], rather than the insurance company, to be treated as the
owner of the assets in the account". This announcement also stated that
guidance would be issued by way of regulations or rulings on the "extent
to which policyholders may direct their investments to particular Sub-
Accounts without being treated as owners of the underlying assets." As
of the date of this Prospectus, no guidance has been issued.
The ownership rights under the Contract are similar to, but
different in certain respects from those described by the IRS in rulings
in which it was determined that contract owners were not owners of
separate account assets. These differences could result in an owner
being treated as the owner of a pro rata portion of the assets of the
Account. In addition, MBL Life does not know what standards will be set
forth, if any, in the regulations or rulings which the Treasury
Department has stated it expects to issue. MBL Life therefore reserves
the right to modify the Contract as necessary to attempt to prevent an
owner from being considered the owner of a pro rata share of the assets
of the Account.
<PAGE>
Retirement Plans
IN GENERAL. The Contract is designed for use with several types of
retirement plans. The tax rules applicable to participants and
beneficiaries in retirement plans vary according to the type of plan and
the terms and conditions of the plan. Special favorable tax treatment
may be available for certain types of contributions and distributions.
Adverse tax consequences may result from contributions in excess of
specified limits; distributions prior to age 59 1/2 (subject to certain
exceptions); distributions that do not conform to specified commencement
and minimum distribution rules; aggregate distributions in excess of a
specified annual amount; and in other specified circumstances. For
example, a 10% penalty generally will be imposed on the taxable amount
of withdrawals prior to age 59 1/2, subject to certain exceptions.
MBL Life makes no attempt to provide more than general information
about use of the Contracts with the various types of retirement plans.
Owners and participants under retirement plans as well as annuitants and
beneficiaries are cautioned that the rights of any person to any
benefits under Contracts may be subject to the terms and conditions of
the plans themselves, regardless of the terms and conditions of the
Contracts issued in connection with such a plan. The ultimate effect of
federal income taxes on the amounts held under a Contract, on annuity
payments, and on the economic benefit to the Contract owner, the
annuitant, or the beneficiary may depend on the tax status of the
individual concerned. Some retirement plans are subject to distribution
and other requirements that are not incorporated in the administration
of the Contracts. Owners are responsible for determining that
contributions, distributions and other transactions with respect to the
Contracts satisfy applicable law. Owners, participants and
beneficiaries should consult their legal counsel and tax advisor
regarding the use of the Contract under the retirement plan.
CORPORATE PENSION AND PROFIT-SHARING AND H.R. 10 PLANS. Code
Section 401(a) permits employers to establish various types of
retirement plans for employees, and permits self-employed individuals to
establish retirement plans for themselves and their employees. These
retirement plans may permit the purchase of the contracts to accumulate
retirement savings under the plans. Adverse tax consequences to the
plan, to the participant or to both may result if this Contract is
assigned or transferred to any individual as a means to provide benefit
payments.
SECTION 403(B) PLANS. Under Code Section 403(b), payments made by
public school systems and certain tax exempt organizations to purchase
annuity contracts for their employees are excludible from the gross
income of the employee, subject to certain limitations. However, these
payments may be subject to FICA (Social Security) taxes and state income
taxes.
Code Section 403(b)(11) restricts the distribution under Code
Section 403(b) annuity contracts of: (1) elective contributions made in
years beginning after December 31, 1988; (2) earnings on those
contributions; and (3) earnings in such years on amounts held as of the
last year beginning before January 1, 1989. Distribution of those
amounts may only occur upon death of the employee, attainment of age 59
1/2, separation from service, disability, or financial hardship. In
addition, income attributable to elective contributions may not be
distributed in the case of hardship.
INDIVIDUAL RETIREMENT ANNUITIES AND SIMPLIFIED EMPLOYEE PENSION
PLANS. Sections 219 and 408 of the Code permit eligible individuals to
contribute to an individual retirement program known as an Individual
Retirement Annuity or Individual Retirement Account, each hereinafter
referred to as an "IRA". IRAs are subject to limitations on the amount
that may be contributed and deducted and the time when distributions may
commence. Also, distributions from certain other types of qualified
plans may be "rolled over" on a tax-deferred basis into an IRA.
Employers may establish Simplified Employee Pension (SEP) Plans to
provide IRA contributions on behalf of their employees. The sale of a
Contract for use with an IRA may be subject to special disclosure
requirements of the Internal Revenue Service. Purchasers of a Contract
for use with IRAs will be provided with supplemental information
required by the Internal Revenue Service or other appropriate agency.
Such purchasers will have the right to revoke their purchase within
seven days of the earlier of the establishment of the IRA or their
purchase.
DEFERRED COMPENSATION PLANS. Code Section 457 provides for certain
deferred compensation plans. These plans may be offered with respect to
service for state governments, local governments, political
subdivisions, agencies, instrumentalities and certain affiliates of such
entities, and tax exempt organizations. These plans are subject to
various restrictions on contributions and distributions. The plans may
permit participants to specify the form of investment for their deferred
compensation account. In general, all investments are owned by the
sponsoring employer and are subject to the claims of the general
creditors of the employer. Depending on the terms of the particular
plan, the employer may be entitled to draw on deferred amounts for
purposes unrelated to its Section 457 plan obligations. In general, all
amounts received under a Section 457 plan are taxable and are subject to
federal income tax withholding as wages.
RESTRICTIONS UNDER QUALIFIED CONTRACTS. Other restrictions with
respect to the election, commencement, or distribution of benefits may
apply under Qualified Contracts or under the terms of the plans in
respect of which Qualified Contracts are issued.
Taxation of Distributions
Section 72 of the Code governs taxation of distributions from
Section 401, 403(b) and 408 retirement plans in general. For this
purpose, the assignment, pledge, or agreement to assign or pledge any
portion of the Account Value or any portion of an interest in the
retirement plan generally will be treated as a distribution. The
taxable portion of a distribution (in the form of a single sum payment
or an annuity) is taxable as ordinary income.
In the case of a withdrawal, a ratable portion of the amount
received is taxable, generally based on the ratio of the "investment in
the contract" to the individual's total accrued benefit under the
retirement plan. The "investment in the contract" generally equals the
amount of any non-deductible purchase payments paid by or on behalf of
any individual. For a Contract issued in connection with retirement
plans, the "investment in the contract" will most likely be zero.
Special tax rules may be available for certain withdrawals.
Although the tax consequences may vary depending on the annuity
payment elected under the Contract, in general, only the portion of the
annuity payment that represents the amount by which the Account Value
exceeds the "investment in the contract" will be taxed; after the
"investment in the contract" is recovered, the full amount of any
additional Annuity payments is taxable. For Variable Annuity payment,
the taxable portion is generally determined by an equation that
establishes a specific dollar amount of each payment that is not taxed.
The dollar amount is determined by dividing the "investment in the
contract" by the total number of expected periodic payments. However,
the entire distribution will be taxable once the recipient has recovered
the dollar amount of his or her "investment in the contract". For Fixed
Annuity payments, in general there is no tax on the portion of each
payment which represents the same ratio that the "investment in the
contract" bears to the total expected value of the Annuity payments for
the term of the payments; however, the remainder of each Annuity payment
is taxable. Once the "investment in the contract" has been fully
recovered, the full amount of any additional Annuity payments is
taxable. If Annuity payments cease as a result of an Annuitant's death
before full recovery of the "investment in the contract", consult a
competent tax advisor regarding deductibility of the unrecovered amount.
Amounts may be distributed from the Contract because of the death
of a retirement plan participant. Generally, such amounts are
includible in the income of the recipient as follows: (1) if distributed
in a lump sum, they are taxed in the same manner as a full surrender as
described above, or (2) if distributed under an Annuity Option, they are
taxed in the same manner as Annuity payments, as described above.
Withholding
Retirement distributions generally are subject to withholding for
the recipient's federal income tax liability at rates that vary
according to the type of distribution and the recipient's tax status.
Under certain circumstances recipients are provided the opportunity to
elect not to have tax withheld from distributions. Certain
distributions from Section 401(a) plans and Section 403(b) annuities are
subject to mandatory federal income tax withholding.
Possible Changes in Taxation
In past years, legislation has been proposed that would have
adversely modified the federal taxation of certain annuities. For
example, one such proposal would have changed the tax treatment of non-
qualified annuities that did not have "substantial life contingencies"
by taxing income as it is credited to the annuity. Although as of the
date of this Prospectus Congress is not actively considering any
legislation regarding the taxation of annuities, there is always the
possibility that the tax treatment of annuities could change by
legislation or other means (such as IRS regulations, revenue rulings,
judicial decisions, etc.). Moreover, it is also possible that any
change could be retroactive (that is, effective prior to the date of the
change).
Other Tax Consequences
As noted above, the foregoing discussion of the federal income tax
consequences is not exhaustive and special rules are provided with
respect to other tax situations not discussed in this Prospectus.
Further, the federal income tax consequences discussed herein reflect
MBL Life's understanding of the current law and the law may change.
Federal estate and gift tax consequences of ownership or receipt of
distributions under the Contract depend on the individual circumstances
of each Owner or recipient of a distribution. A competent tax advisor
should be consulted for further information.
OTHER CONTRACT PROVISIONS
Beneficiary
The Participant may select a beneficiary to receive any benefit at
death, and may change the beneficiary by proper written notice to MBL
Life.
Non-Assignability
The right to benefits or payments under the Contract is neither
assignable nor subject to the claim of any creditor, except as may be
allowed under 457 Plans.
Portability
A Participant under a 403(b) Plan who becomes employed by a new
employer which is eligible under Section 403(b) of the Code may enter
into an annuity purchase agreement with the new employer, at no
additional charge, so that purchase payments will be continued under the
Contract by the new employer on behalf of the Participant, if the
Contract so provides and if MBL Life consents.
Failure of Plan to Qualify
If a previously issued Qualified Plan fails to qualify under the
Code, MBL Life has the right, without prior notice to or consent of the
Contract Holder, to transfer to the Companion Contract any amounts held
in Variable Accumulation Accounts under the Contract described in this
Prospectus, on the basis of equivalence as of the date of transfer.
Thereafter, the Contract shall be considered terminated. Proof of
qualification may be required by MBL Life.
Discontinuance
Purchase payments under a Contract will no longer be accepted by
MBL Life when any of the following events occurs:
(1) The Contract Holder so notifies MBL Life in writing.
(2) MBL Life so notifies the Contract Holder in writing after an
investment adviser other than First Priority is selected for the
Account. Such a notice would be sent to all Contract Holders
participating in the Account.
(3) After receipt of an amendment or modification of the Plan, MBL Life
gives the Contract Holder written notice that the effect of the
amendment, in MBL Life's judgment based on underwriting principles
then in effect, might be detrimental to MBL Life, and the Contract
Holder and MBL Life are unable to reach a mutual agreement within
30 days after the written notice. If discontinuance occurs for this
reason, the amendment will not be given effect under the Contract.
Effective with any such discontinuance, no further purchase
payments will be accepted by MBL Life under the Contract and no further
transfers will be allowed between the Variable Accumulation Account and
the VCA-2 Contract. However, MBL Life will continue to maintain the
Participant's existing Variable Accumulation Accounts, unless otherwise
requested, as explained below under "Transfer to New Funding Agency".
Discontinuance of purchase payments will have no effect on the rights of
annuitants.
Transfer to New Funding Agency
If MBL Life ceases to accept additional purchase payments, a
Contract Holder may designate a new funding agency to receive amounts to
be transferred in accordance with the following paragraphs.
With respect to a 403(b) or IRA Plan, each Participant has the
right to direct MBL Life, by proper written request to cancel his or her
Variable Accumulation Account and transfer its dollar value to a new
funding agency. All such transfers will be made in the aggregate and
valued as of a single transfer date, which will be 90 days after receipt
by MBL Life of the Contract Holder's notice.
With respect to a 401 or 457 Plan, the Contract Holder has the
right, with respect to all Participants, to direct MBL Life, by proper
written notice of the selection of a new funding agency, to cancel each
Participant's Variable Accumulation Account and transfer such aggregate
dollar value to the new funding agency. The value of such accounts will
be determined as of the day MBL Life receives the Contract Holder's
notice at its Home Office, or any later transfer date specified in the
notice.
For any Plan, the aggregate transfer payment will be paid within
seven days after the transfer date.
Changes in Contract
MBL Life has the right, subject to compliance with the applicable
law, to give written notice to the Contract Holder, at least six months
in advance, of a change to be effective on or after the fifth Contract
anniversary in any of the charges specified in the Contract.
Participants will be informed of any such change.
Any such change which has an adverse effect on any Participant will
not apply to any amount credited to Variable Accumulation Accounts
before the effective date of such change, except that a change in the
risk charge may apply uniformly to all Variable Accumulation Units,
including those credited before the effective date of the change (but
not retroactively).
The Contract may also be changed in any other respect at any time
by an agreement between the Contract Holder and MBL Life, but no such
change will be made without the consent of the persons entitled to
receive benefits under the Contract, unless (1) the change will have no
adverse effect on their rights with respect to the Variable Accumulation
Account balance already credited, (2) the change is required to comply
with a law or governmental regulation or (3) the Plan is a 457 Plan.
Such persons will be informed of any such change which materially
affects their rights.
Other Changes
MBL Life reserves the right, subject to compliance with the law as
currently applicable or subsequently changed, (1) to discontinue
submitting certain matters for approval by persons having voting rights
under the Contracts, (2) to fund additional classes of contracts through
the Account, (3) to transfer assets, determined by MBL Life, to be
assigned to the class of contracts to which the Contracts belong, from
the Account to another separate account by withdrawing the same
percentage of each investment in the Account, with appropriate
adjustments to avoid odd lots and fractions, (4) to operate the Account
as another form of registered investment company or unregistered entity,
and (5) to change the investment policies described in this Prospectus.
TABLE OF CONTENTS
STATEMENT OF ADDITIONAL INFORMATION Page
General Information and History . . . . . . . . . 2
Investment Restrictions . . . . . . . . . . . . . 2
Commercial Paper and Bond Ratings . . . . . . . . 4
Management of the Account . . . . . . . . . . . . 5
Investment Advisory and Other Services . . . . . 7
Purchase and Pricing of Securities . . . . . . . 10
Calculation of Performance Data . . . . . . . . . 11
Additional Information . . . . . . . . . . . . . 12
Financial Statements . . . . . . . . . . . . . . 13
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT - 7
OFFERED BY
MBL LIFE ASSURANCE CORPORATION
520 Broad Street
Newark, New Jersey 07102-3111
(201) 481-8564
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
Parsippany, New Jersey
INVESTMENT ADVISER
FIRST PRIORITY INVESTMENT CORPORATION
520 Broad Street
Newark, New Jersey 07102-3111
1-800-559-5535
PRINCIPAL UNDERWRITER
FIRST PRIORITY INVESTMENT CORPORATION
520 Broad Street
Newark, New Jersey 07102-3111
1-800-559-5535
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION
IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO PERSON IS
AUTHORIZED TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS.
<PAGE>
NO POSTAGE
NECESSARY
IF MAILED
IN THE
UNITED STATES
Business Reply Mail
First Class Permit No.
Newark, NJ
Postage will be paid by
MBL Life Assurance Corporation
Pension and Investment Products
MBL Life Assurance Corporation
520 Broad Street
Newark, New Jersey 07102-3111
Attn: MBL Variable Contract Account-7
-------------------------------------------------------
Please send the current Statement of Additional Information for
MBL VARIABLE CONTRACT ACCOUNT-7 to:
_______________________________________________________________
Name
_______________________________________________________________
Street
_______________________________________________________________
City State Zip
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT-7
previously known as
Mutual Benefit Variable Contract Account-7
_______________________________________________________________
CROSS REFERENCE SHEET
Cross reference sheet showing location in the Statement of
Additional Information of information required by the Items in Part B of
Form N-3.
Heading in Statement of
Item Number Additional Information
16 Cover Page
17 Table of Contents
18 General Information
and History
19 Investment Restrictions
20 Management of the Account
21 Investment Advisory and
Other Services
22 Portfolio Transactions
23 Purchase and Pricing of
Securities
24 *
25 Calculation of
Performance Data
26 *
27 Financial Statements
____________________________________________________________
* Indicates inapplicable or negative.
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT-7
MBL Life Assurance Corporation
STATEMENT OF ADDITIONAL INFORMATION
, 1996
This Statement of Additional Information is not a prospectus but
has been incorporated by reference into, and must be read in conjunction
with, the Prospectus of MBL Variable Contract Account-7 dated
, 1996. Terms not defined in this Statement of Additional Information
shall have the same meaning given to them in the incorporated
Prospectus. A copy of the Prospectus may be obtained from Pension and
Investment Products, MBL Life Assurance Corporation, 520 Broad Street,
Newark, New Jersey 07102-3111, Attn: MBL VARIABLE CONTRACT ACCOUNT-7,
telephone number 1-800-435-3191.
TABLE OF CONTENTS
Cross Reference to
Page Page in Prospectus
General Information and
History 2 5, 10
Investment Restrictions 2 15
Commercial Paper and Bond
Ratings 4 12, 13
Management of the Account 5 22
Investment Advisory and
Other Services
Advisory and Management
Services 7 5, 16, 22,
Distribution Services 8 5
Portfolio Transactions 8 ---------
Purchase and Pricing of
Securities
Purchase 10 8, 16,
Pricing 10 16
Calculation of Performance
Data 11 7
Additional Information 12 --------
Financial Statements 12 7
<PAGE>
GENERAL INFORMATION AND HISTORY
The business history of MBL Variable Contract Account-7 (the
"Account") (previously known as Mutual Benefit Variable Contract
Account-7), is described in its Prospectus.
The sponsoring insurance company, MBL Life Assurance Corporation
("MBL Life"), is a stock life insurance company and the surviving entity
in the Rehabilitation of Mutual Benefit Life Insurance Company ("Mutual
Benefit Life").
On July 16, 1991, the Superior Court of New Jersey ("Court")
entered an Order ("Order") appointing the Commissioner of the State of
New Jersey as Rehabilitator of Mutual Benefit Life, thereby granting the
Rehabilitator immediate exclusive possession and control of, and title
to, the business and assets of Mutual Benefit Life, including those of
the Account. As a separate account, the assets and liabilities of the
Account were maintained separate and apart from Mutual Benefit Life's
other assets and liabilities.
In view of the terms and conditions of the Order, on July 16, 1991,
Mutual Benefit Life, on behalf of the Account, immediately ceased
acceptance of applications for new Contracts and additional purchase
payments under existing Contracts. Transfers to and from the Account
were temporarily suspended. Payments upon the death of the Participant
continued to be made to the beneficiary.
In accordance with the Rehabilitation Plan of Mutual Benefit Life,
as approved by the Court on January 28, 1994, substantially all of the
assets and certain liabilities, including all insurance liabilities, of
Mutual Benefit Life were transferred to MBL Life on April 29, 1994 (the
"Transfer"). In addition, the assets and liabilities of the Account
were transferred to a new separate account of MBL Life.
As of January 2, 1996, Participants under the Long Island Jewish
Medical Center 403(b) Plan, New Hyde Park, New York, the largest
Contract Holder of the Account, owned 42.79% of the outstanding Variable
Accumulation Units of the Account; Participants under the New York
Hospital 403(b) Plan, New York, New York, owned 10.38% of the
outstanding Variable Accumulation Units of the Account.
INVESTMENT RESTRICTIONS
The Account is subject to the following investment restrictions in
addition to those described in the Prospectus. These restrictions are
considered fundamental policies and cannot be changed without the
approval of the Contract Holders of a majority (as defined in the
Investment Company Act of 1940) of the outstanding Variable Accumulation
Units of the Account. The Account may not:
<PAGE>
1. purchase securities other than those in which the Account
is authorized to invest, as set forth under "Investment
Objective and Policies" in the Prospectus;
2. borrow money in excess of 5% of its total assets taken at
cost, and then only from banks as a temporary measure for
extraordinary or emergency purposes, such as to
facilitate redemption requests which might otherwise
require untimely dispositions of portfolio securities;
the Account will not borrow to increase income
(leveraging), provided however, that this restriction
shall not apply to reverse repurchase agreements (see
Prospectus, "Investment Restrictions");
3. make loans, except by the purchase of obligations in
which the Account may invest; provided, however, that
this restriction shall not apply to repurchase agreements
(see Prospectus, "Investment Restrictions");
4. invest more than 5% of the value of the Account's total
assets in the securities of any one issuer;
5. write, or invest in, put, call, straddle, or spread
options or invest in interests in oil, gas or other
mineral exploration or development programs;
6. purchase securities on margin or sell any securities
short;
7. invest more than 5% of the value of its total assets in
the securities of companies having a record of less than
three years continuous operations, including the
operations of any predecessor, but this limitation does
not apply to securities issued or guaranteed as to
interest and principal by agencies or instrumentalities
of the United States Government; but does apply to
investments in securities of agencies and
instrumentalities of the United States Government which
are only supported by their own credit or right to borrow
from the United States Treasury;
8. underwrite the securities of other issuers or purchase
securities subject to restrictions on disposition under
the Securities Act of 1933 (so-called "restricted
securities");
9. purchase securities which are not freely marketable,
except under repurchase agreements and master demand
notes;
<PAGE>
10. invest in real estate, real estate investment trust
securities, commodities, or commodity contracts; however,
the Account may buy commercial paper issued by companies
which invest in real estate or interests therein;
11. invest in companies for the purpose of exercising
control;
12. purchase equity securities, voting securities, or local
or state government securities; or
13. invest in securities of other investment companies;
except as they may be acquired as part of a merger,
consolidation or acquisition of assets.
With respect to Investment Restriction 4. above, the Account, as a
matter of operating policy, may invest more than 5% of the value of its
total assets in U.S. Government Securities and repurchase agreements
that are fully collateralized by U.S. Government Securities. As a
matter of operating policy, the Account will not invest more than (i)
the greater of 1% of its total assets or $1,000,000 in Second Tier
Securities (as defined in Rule 2a-7 under the 1940 Act) of a single
issuer and (ii) 5% of the Account's total assets, when acquired, in
Second Tier Securities.
New Jersey Insurance Law Requirements
The Account limits its investments in accordance with the
provisions of the New Jersey Insurance Law that govern the separate
account operations of a New Jersey life insurance company.
Investments will be made in accordance with the insurance law in
effect at the time. In general, a separate account may only make
investments that an insurance company's general account is permitted to
make. However, an investment not otherwise eligible under these
limitations may be made if, after giving effect to the investment, the
total cost of such non-eligible investment does not exceed 5% of the
total assets of the Account. Investments in the assets of foreign
issuers may not exceed 10% of the total admitted assets of the Account.
Additionally, New Jersey Insurance Law provides that securities of any
one institution may not exceed 5% of the total admitted assets of the
insurer including those assets of the insurer's separate accounts. An
investment opportunity, therefore, may be postponed if a purchase would
cause the combined holdings to exceed this 5% limit.
COMMERCIAL PAPER and BOND RATINGS
A-1 and Prime-1 Commercial Paper Ratings
A commercial paper rating of A-1 by Standard & Poor's implies that
an issue has the following characteristics: liquidity ratios are
adequate to meet cash requirements; long-term senior debt is rated "A"
or better; the issuer has access to at least two additional channels of
borrowing; basic earnings and cash flow have an upward trend with
allowance made for unusual circumstances; typically, the issuer's
industry is well established and the issuer has a strong position within
the industry; and the reliability and quality of management are
unquestioned. The relative strength or weakness of the above factors
determine whether the issuer's commercial paper is A-1, A-2, or A-3.
The rating Prime-1 is the highest commercial paper rating assigned
by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: evaluation of the issuer's industry or
industries and the appraisal of speculative-type risks which may be
inherent in certain areas; evaluation of the issuer's products in
relation to competition and customer acceptance; liquidity; amount and
quality of long-term debt; trend of earnings over a period of ten years;
financial strength of a parent company and the relationships which exist
with the issuer; and, recognition by the management of obligations which
may be present or may arise as a result of public interest questions and
preparations to meet such obligations. These factors determine whether
an issuer's commercial paper is rated Prime-1, Prime-2, or Prime-3.
AA and Aa Bond Ratings
Bonds rated AA by Standard & Poor's are judged by them to be high-
grade obligations, and in the majority of instances differ only in small
degrees from issues rated AAA. Bonds rated AAA are considered by
Standard & Poor's to be the highest grade obligations and possess the
ultimate degree of protection as to principal and interest. Bonds rated
Aa by Moody's are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than Aaa bonds because margins
of protection may not be as large or fluctuations of protective elements
may be of greater amplitude or there may be other elements present which
made the long-term risks appear somewhat larger.
MANAGEMENT OF THE ACCOUNT
The Account is managed by a Management Committee in accordance with
the Rules and Regulations adopted by the Management Committee. The
Chairman, Members, and Secretary of the Management Committee, together
with a brief description of their principal occupations during the past
five years, are as follows:
<PAGE>
* Gordon Boyd, Member
P.O. Box 234, Convent Station, New Jersey 07961
Former Treasurer, Mutual Benefit Life prior to March 1983.
Joseph Lindner, Jr., M.D., Member
31 Old Fort Drive, Hilton Head Island, SC 29926
President, J. Lindner, Inc. since 1991; Vice President,
Brissenden, McFarland, Wagoner & Fuccella, Inc. prior to 1991.
+ Jerome M. Scheckman, Member
P.O. Box 807, Plandome, New York 11030
Formerly Consultant and Managing Director, Salomon
Brothers, Inc.; Member of the Corporation, Babson
College; Member of the Auxillary Board, Mt. Sinai
Hospital; Member of the Business Advisory Counsel,
Alfred University.
** David A. James, Member and Chairman
520 Broad Street, Newark, New Jersey 07102-3111
Senior Vice President - Securities Investments, MBL Life.
** William G. Clark, Member
520 Broad Street, Newark, New Jersey 07102-3111.
Senior Vice President - Pension and Investment Products,
MBL Life since 1995, prior thereto Vice President - Group
Pension Operations; Director and President, First Priority
Investment Corporation since 1993.
+ ** Judith C. Keilp, Secretary of the Committee
520 Broad Street, Newark, New Jersey 07102-3111
Counsel, MBL Life since 1993, prior thereto
Associate Counsel, Mutual Benefit Life since
1990; Vice President and Secretary of First Priority
Investment Corporation since 1993.
+ ** Albert W. Leier, Assistant Secretary of the Committee
520 Broad Street, Newark, New Jersey 07102-3184
Vice President, Controller, MBL Life; Vice President and
Treasurer of First Priority Investment Corporation since
1993.
____________________________
* Mr. Boyd has informed the Account that his duties as Treasurer of
Mutual Benefit Life did not relate to investment companies or services
provided by Mutual Benefit Life to investment companies and that he
currently receives from Mutual Benefit Life only vested retirement plan
benefits.
+ These persons hold similar positions with MBL Growth Fund, Inc., MAP-
Government Fund, Inc. and MAP-Equity Fund.
** Interested persons of the Account. Prior to May 1, 1994 each
officer named above maintained a similar position and/or title with
Mutual Benefit Life that he or she now holds with MBL Life.
<PAGE>
The Account paid no remuneration to Members who also served as
officers or employees of MBL Life, Mutual Benefit Life, the investment
adviser or the distributor. An annual retainer of $1,200 and a fee of
$400 for every meeting attended are paid to "disinterested" Members.
Aggregate compensation of such Members by the Account during 1995 is
shown below. These amounts are paid from the expense charges.
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits Estimated
Aggregate Accrued as Annual Total Compensation
Compensation part of Benefits from Account and
Name of Person from Account upon Account Complex
Position Account Expenses Retirement Paid to Members
<S> <C> <C> <C> <C>
Gordon Boyd $2,800 -0- -0- $ 2,800
Committee Member
Joseph Lindner, Jr., $2,400 -0- -0- $ 2,400
Committee Member
Jerome M. Scheckman, $2,800 -0- -0- $10,300
Committee Member
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
Advisory and Management Services
First Priority Investment Corporation ("First Priority"), a wholly-
owned indirect subsidiary of MBL Life and a New Jersey corporation
incorporated in 1993, provides the Account with investment advisory and
management services, including investment recommendations based on a
continued study of the general economy and specific industries and
companies, placement of orders for the purchase and sale of investment
securities, office space, all necessary office facilities, all personnel
reasonably necessary for the Account's operations and ordinary clerical
services.
In this connection First Priority has entered into a separate
Service Agreement with MBL Life and the Account under which MBL Life
will furnish, through its Securities Investment Division, on a cost
reimbursement basis, investment advisory and other personnel, research
and statistical facilities, and services required by First Priority in
connection with its performance under the Investment Advisory Agreement.
The Investment Advisory Agreement and Service Agreement among the
Account, MBL Life and First Priority were last approved by the Account's
Management Committee on March 13, 1996. These Agreements were approved
by Contract Holders on April 12, 1995.
<PAGE>
Each Agreement will continue from year to year, provided that such
continuance is approved at least annually: (a) by the vote, at a
meeting, of a majority of the Management Committee members who are not
parties to the Agreements or interested persons (as defined in the
Investment Company Act of 1940) of such parties and (b) by the Account's
Management Committee or by the vote of Contract Holders. Each Agreement
may be terminated at any time by any party on written notice of not more
than 60 days, nor less than 30 days, and automatically terminates in the
event of assignment.
For the investment advisory services of First Priority, the Account
has agreed to pay a periodic fee at the annual rate of .40% of the first
$300,000,000 of the Account's average daily net assets, .35% of the next
$400,000,000 of the Account's average daily net assets and .30% of the
Account's average daily net assets in excess of $700,000,000. Absent
the assumption by MBL Life of the advisory fee, described below, the fee
would be reflected in the unit value computation, accrued daily and paid
quarterly.
Prior to the Transfer, Mutual Benefit Life assumed payment of the
investment advisory service fee. MBL Life will continue to assume
payment of the fee for additional one-year periods, but reserves the
right to cease assumption of payment of the fee at the expiration of any
one-year period. The assumption of payment of this fee by MBL Life was
extended again in 1996 for an additional one-year period.
During 1993, and from January 1, 1994 through April 30, 1994, Green
Hill Financial Service Corporation ("Green Hill"), the Account's
previous investment adviser and distributor, received advisory fees from
Mutual Benefit Life, pursuant to its agreement, of $10,840, and $3,168.
respectively. No reimbursement was made to Mutual Benefit Life under
the Service Agreement. From May 1, 1994 through December 31, 1994, and
for 1995, First Priority received advisory fees from MBL Life, pursuant
to its agreement, of $5,945 and $8,536 respectively. No reimbursement
was made to MBL Life under the Service Agreement.
Distribution Services
First Priority is also the Account's distributor. First Priority
is a registered broker-dealer under the Securities Exchange Act of 1934,
and a member of the National Association of Securities Dealers, Inc.
First Priority serves as exclusive distributor of the Account under
a Sales Agreement which is subject to the same annual renewal
requirements and termination provisions as the Investment Advisory
Agreement and Service Agreement. No new Contracts will be offered;
however, additional purchase payments will be accepted under existing
Contracts. First Priority will not receive fees or commissions as
distributor for the Account. Pursuant to the Agreement, MBL Life will
pay all expenses incurred in the Account's operation, except as
indicated below, including interest charges, taxes and governmental fees
attributable to transactions for the Account, and all other applicable
taxes arising out of the investment operations of the Account, including
income and capital gains taxes, if any, certain expenses of issue, sale,
or redemption, charges of custodians (for custodial, bookkeeping and
daily pricing services), administrative costs, and costs of auditing and
legal services. Investment advisory fees and brokerage commissions or
fees relating to securities transactions are paid by the Account.
The Sales Agreement was last approved on March 13, 1996 by the
Members of the Account's Management Committee who are not interested
persons (as defined in the Investment Company Act of 1940) of the
Account or of First Priority and who have no financial interest in the
operation of the Sales Agreement. The Sales Agreement will continue
from year to year, provided the Management Committee, including Members
who are not interested persons, approve such continuance annually.
Portfolio Transactions
First Priority makes decisions as to buying and selling investment
securities for the Account, subject to supervision by the Account's
Management Committee. The Account's portfolio securities normally will
be purchased on a principal basis directly from issuers, underwriters or
dealers. Accordingly, minimal brokerage charges and mark-ups, if any,
are expected to be paid by the Account on its portfolio transactions.
Purchases from an underwriter generally include a commission or
concession paid by the issuer, and transactions with dealers usually
include a dealer's mark-up. During 1993, 1994 and 1995, no brokerage
commissions were incurred on behalf of the Account.
In placing orders for the purchase and sale of the Account's
investment securities, First Priority seeks the best execution at the
most favorable price, considering all of the circumstances. First
Priority does not pay for research or other services through the use of
concessions or mark-ups charged by underwriters or dealers in a
principal (including riskless principal) capacity. Both the relatively
low level of assets in the Account and the Account's investment
objective and policies serve to limit the Account to investment in
United States government securities and commercial paper with maturities
of less than one year. To accomplish the necessary portfolio
transactions thereby, First Priority, through its Service Agreement with
MBL Life, has access to financial statements of those issuers, brokers
and dealers with which the Account executes portfolio transactions. In
addition, at no cost to First Priority or the Account, First Priority
has access to a variety of publications which monitor the financial
condition of issuers, brokers and dealers, thereby enabling a review of
each individually. During the past year, no transactions occurred in
which furnishing of research was a factor in the selection of dealers.
No payment was allocated for any products or services providing a
research or non-research function. First Priority does not "pay up" for
research in principal transactions.
Securities purchased for the portfolio of the Account are not
normally made contemporaneously with purchases for other accounts
managed by First Priority or MBL Life. In light of the Service
Agreement among First Priority, MBL Life, and the Account, under which
MBL Life furnishes, through its Securities Investment Division,
investment advisory and other personnel, research and statistical
facilities, and services required by First Priority in connection with
its performance under the Investment Advisory Agreement, such investment
advisory personnel serve as advisers to the MBL Life general account and
other accounts that may or may not be registered investment companies.
Securities of the same issuer may be included, from time to time, in the
portfolio of the Account and the portfolios of these other entities
where it is consistent with their respective investment objectives.
Because of the difficulty in purchasing commercial paper in small sizes,
when commercial paper is bought in large denominations for the general
portfolio of MBL Life, First Priority will from time to time request the
seller to issue the commercial paper in smaller denominations for the
Account, but at a higher rate as if it were purchased in the larger
denomination. Not all sellers provide this service. As of December 31,
1995, the Account was almost fully invested in government securities
with a small amount of cash on hand to meet redemptions,
Bankers Trust Company New Jersey Limited, 34 Exchange Place, Jersey
City, New Jersey 07302, is the Custodian of the portfolio securities of
the Account. Due to the nature and duration of securities purchased by
Adviser for the Account, most of the securities purchased are held by
the Depository Trust Company or through the Book-Entry System of the
Federal Reserve Bank.
PURCHASE AND PRICING OF SECURITIES
Purchase
Sales of new Contracts ceased July 16, 1991. MBL Life will not
resume sales of new Contracts.
A description of the flexible purchase payment arrangements is
described in the Account's Prospectus under "Accumulation Account-
Purchase Payments".
Pricing
Net Purchase Payments are allocated to a Participant's Variable
Accumulation Account under the Contract and are applied to purchase
Variable Accumulation Units. The method of calculating the Variable
Accumulation Unit and the Net Investment Factor is described in the
Account's Prospectus, "Accumulation Account-Variable Accumulation
Account", and may be illustrated by the following hypothetical example.
<PAGE>
Assume that July 1st and July 2nd of some year are both valuation
dates and that the value of the Account as of the close of regular
trading on the New York Stock Exchange on July 1 was $2,000,000 and the
Variable Accumulation Unit value was $10.291111. Also, assume that on
July 2 there was investment income of $600, no realized or unrealized
capital gains, and the daily charge for expenses and expense risk and
investment management was $40. The Variable Accumulation Unit value for
July 2nd would be determined as follows:
(a) Account value at close of day, July 1 $2,000,000
(b) Variable Accumulation Unit value for July 1 $10.291111
(c) Investment Income, July 2 $ 600
(d) Realized and unrealized capital gains, July 2 $ 0
(e) Daily accrual for expenses and expense
risk charge and investment advisory fee *** $ 40
(f) Account value at close of day, July 2,
excluding any new purchase payments or
redemption (a) + (c) + (d) - (e) $2,000,560
(g) Net Investment Factor (f) divided by (a) $1.0002800
(h) Variable Accumulation Unit value for
July 2 (b) x (g) $10.293992
The Variable Accumulation Unit is calculated as of the end of each
valuation date, which is a day when the New York Stock Exchange is open
for trading. The New York Stock Exchange is normally closed on the
following days: New Year's Day (January 1), Washington's Birthday
(third Monday in February), Good Friday (a variable date between March
20 and April 23, both inclusive), Memorial Day (last Monday in May),
Independence Day (July 4), Labor Day (first Monday in September),
Election Day (first Tuesday following first Monday in November),
Thanksgiving Day (fourth Thursday in November), and Christmas Day
(December 25). In the event that any of the holidays falls on Sunday,
it is regularly observed on the following Monday.
______________________________
*** Prior to the Transfer, Mutual Benefit Life ceased assessment of the
expense and expense risk charge and assumed payment of the investment
advisory fee. MBL Life has voluntarily continued to waive the expense
and expense risk charge and to assume payment of the investment advisory
fee for an additional one-year period, but reserves the right to
reinstate assessment of the expense and expense risk charge and cease
assumption of payment of the investment advisory fee at the expiration
of such period.
<PAGE>
CALCULATION OF PERFORMANCE DATA
The Account's yield is its investment income, less expenses,
expressed as a percentage of assets on an annualized basis for a
specified period. The yield is expressed as a current annualized yield
and as a compounded effective yield. From time to time, it may be
quoted in sales literature, advertisements and reports.
The yield is computed by determining the net change, exclusive of
capital changes, in the value of a hypothetical pre-existing account
having a balance of one Accumulation Unit of the Account at the
beginning of the period, and dividing the difference by the value of the
Account at the beginning of the base period to obtain the base period
return, and then multiplying the base period return by (365/7) with the
resulting yield figure carried to at least the nearest hundredth of one
percent.
The effective yield is computed by determining the net change,
exclusive of capital changes, in the value of a hypothetical pre-
existing Account having a balance of one Accumulation Unit of the
Account at the beginning of the period, subtracting a hypothetical
charge reflecting deductions from Participant Accounts, and dividing the
difference by the value of the Account at the beginning of the base
period to obtain the base period return, and then compounding the base
period return by adding 1, raising the sum to a power equal to 365
divided by 7, and subtracting 1 from the result, according to the
following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1) * (365/7)] - 1;
with the resulting effective yield figure carried to at least the
nearest hundredth of one percent. The effective yield assumes that any
income earned by an investment is reinvested in the Account. The
effective yield is slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
The yield and effective yield illustrated do not include an expense
charge and expense risk charge at an annual rate of 0.35% and 0.02%,
respectively, of the Account's assets, premium taxes of up to 3.5% in
those jurisdictions which apply such a tax, and an investment advisory
fee at the annual rate of .40% of the first $300,000,000 of the
Account's average daily net assets, .35% of the next $400,000,000 of the
Account's average daily net assets and .30% of the Account's average
daily net assets in excess of $700,000,000. There are no sales charges
or redemption charges incurred upon a partial or total redemption from
the Account. Such charges and fees, if included, would reduce the yield
and effective yield.
Prior to the Transfer, Mutual Benefit Life ceased assessment of
expense and expense risk charges against the Account's assets and
assumed payment of the investment advisory fee. MBL Life has stated
that it will continue to assume payment of the investment advisory fee
for additional one-year periods, but reserves the right to reinstate the
assessment of the expenses and expense risk charge and cease assumption
of payment of the investment advisory fee at the expiration of any
waiver period.
Although the calculation of yield does not recognize any realized
or unrealized gains or losses on the Account's investments, the
dividends paid during a period will include any realized gains or losses
and, therefore, may not be the same on an annualized basis as the yield.
(See the Prospectus, "Performance Related Information".)
For the seven-day period ended December 29, 1995, the Account's
"yield" was 4.99% and its "effective yield" was 5.11%.
ADDITIONAL INFORMATION
This Statement of Additional Information, and the Prospectus to
which it relates, omit some information contained in the registration
statement filed with the Securities and Exchange Commission, Washington,
D. C. Copies of such information may be obtained from the Commission
upon payment of the prescribed fees.
FINANCIAL STATEMENTS
The Account incorporates by reference into this Statement of
Additional Information its Audited Financial Statements, including the
Financial Highlights, and the Report of Independent Accountants thereon
contained in the 1995 Audited Financial Statements.
The following financial statements relate to the financial position
and operations of MBL Life. MBL Life's financial statements should be
considered by Contract Holders only as bearing upon the ability of MBL
Life to meet its obligations under the Contract.
Copies of the Account's financial statements are mailed to each
Contract Holder and Participant semiannually. The Account's annual
financial statements are audited by a firm of independent accountants.
The firm of Coopers & Lybrand L.L.P. has been selected to audit the
Account's financial statements for the current fiscal year. The Account
will furnish, without charge, an additional copy of the Account's
Audited Financial Statements (including the accountants report thereon) upon
request made to: Pension and Investment Products, MBL Life Assurance
Corporation, 520 Broad Street, Newark, New Jersey 07102-3111, Attn: MBL
VARIABLE CONTRACT ACCOUNT-7, telephone number 1-800-435-3191.
MBL LIFE ASSURANCE CORPORATION
STATUTORY-BASIS FINANCIAL
STATEMENTS
As of December 31, 1995 and 1994
and for the years ended
<PAGE>
MBL LIFE ASSURANCE CORPORATION
INDEX
As of December 31, 1995 and 1994 and for the two years ended
December 31, 1995
Page(s)
Report of Independent Accountants 2-3
Statutory-Basis Financial Statements:
Balance Sheets 4
Statements of Operations 5
Statements of Changes in Capital and Surplus 6
Statements of Cash Flows 7
Notes to Statutory-Basis Financial Statements 8-34
Supplemental Schedule:
Schedule of Assets and Liabilities for the year ended
December 31, 1995 35-38
<PAGE>
[Coopers & Lybrand L.L.P. Letterhead]
Report of Independent Accountants
To the Board of Directors and Shareholders of
MBL Life Assurance Corporation:
We have audited the accompanying statutory-basis balance sheets
of MBL LIFE ASSURANCE CORPORATION (the "Company") (see Note 1)
as of December 31, 1995 and 1994 and the related statutory-basis
statements of operations, changes in capital and surplus and
cash flows for the years then ended. These statutory-basis
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on
these statutory-basis financial statements based on our audits.
We conducted our audits of the accompanying statutory-basis
financial statements in accordance with generally accepted
auditing standards; however, as discussed in the following
paragraph, we were not engaged to determine or audit the effects
of the variances between statutory accounting practices and
generally accepted accounting principles ("GAAP"). Generally
accepted auditing standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion on the accompanying
statutory-basis financial statements.
The Company presents its financial statements in conformity with
accounting practices prescribed or permitted by the Insurance
Department of the State of New Jersey. When statutory-basis
financial statements are presented for purposes other than
solely for filing with a regulatory agency, generally accepted
auditing standards require that an auditor's report on them
state whether they are presented in conformity with GAAP. The
accounting practices used by the Company vary from GAAP as
explained in Note 2, and the Company has not determined the
effects of these variances. Since the financial statements
referred to above do not purport to be a presentation in
conformity with GAAP, we are not in a position to express and do
not express an opinion on the financial statements referred to
above as to fair presentation of financial position, results of
operation, or cash flow in conformity with GAAP.
<PAGE>
In our opinion, the statutory-basis financial statements
referred to above present fairly, in all material respects, the
admitted assets, liabilities, and capital and surplus of MBL
Life Assurance Corporation as of December 31, 1995 and 1994 and
the results of its operations and its cash flows for the years
then ended in conformity with accounting practices prescribed or
permitted by the Insurance Department of the State of New Jersey.
Our audit was conducted for the purpose of expressing an opinion
on the statutory-basis financial statements taken as a whole.
The Supplemental Schedule of Assets and Liabilities for the year
ended December 31, 1995 is presented to comply with the NAIC's
Annual Statement Instructions and is not a required part of the
basic statutory-basis financial statements. Such information
has been subjected to the auditing procedures applied in the
audit of the basic statutory-basis financial statements and, in
our opinion, is fairly stated in all material respects in
relation to the basic statutory-basis financial statements taken
as a whole.
As discussed in Note 1, on May 1, 1994 the Company assumed
substantially all of the business, assets and liabilities, of
Mutual Benefit Life Insurance Company in Rehabilitation ("Mutual
Benefit Life") and began operating under the terms and
conditions of the Third Amended Plan of Rehabilitation of the
Mutual Benefit Life Insurance Company in Rehabilitation (the
"Plan"). As further discussed in Note 1, the Company's
management, in conjunction with representatives of the Insurance
Department of the State of New Jersey, developed the Plan, which
is based on actuarial, valuation and other assumptions and
reflects management's best estimates of: a) future operations;
b) the nature, timing and extent of policyholders' benefits; and
c) the timing and proceeds from the restructuring of assets to
fund the Company's obligation. Further as discussed in Note 13,
certain terms and conditions of the Plan have been appealed by
parties to the Plan, and litigation has been brought against
Mutual Benefit Life Insurance Company in Rehabilitation.
COOPERS & LYBRAND L.L.P.
Parsippany, New Jersey
February 16, 1996.
<PAGE>
MBL LIFE ASSURANCE CORPORATION
BALANCE SHEETS
(STATUTORY-BASIS)
As of December 31, 1995 and 1994
(in thousands)
ADMITTED ASSETS: 1995 1994
--------------- ---------------
Bonds $ 4,025,613 $ 3,402,171
Stocks:
Preferred 1,059 2,492
Common 246,307 106,568
--------------- ---------------
247,366 109,060
Mortgage loans on real estate 1,262,465 1,821,229
Real estate owned 352,093 330,432
Policy loans 4,961,122 4,509,009
Other invested assets 67,395 112,254
Short-term investments 41,154 56,187
Cash 8,372 2,406
--------------- ---------------
Cash and invested assets 10,965,580 10,342,748
--------------- ---------------
Investment income due and accrued 381,074 313,461
Federal income tax recoverable 13,192 7,618
Other assets 28,993 58,477
Separate account assets:
Industry Separate Account 2,160,347 2,151,117
Net equity in Special Purpose
Asset Vehicle 378,047 392,404
Reaffirmed Separate Accounts 237,191 200,350
--------------- ---------------
Total Separate account assets 2,775,585 2,743,871
--------------- ---------------
Total admitted assets $ 14,164,424 $ 13,466,175
The accompanying notes are an integral part of these statutory-basis
financial statements.
The above statutory-basis balance sheets do not purport to represent the
estimated fair value of the assets and liabilities presented.
<PAGE>
LIABILITIES, CAPITAL AND SURPLUS:
1995 1994
---------------- --------------
Policy and contract liabilities:
Life and annuity reserves $ 10,968,478 $ 10,394,824
Accident and health reserves 107,866 88,015
Policyholders' funds left on deposit 137,257 158,479
Dividends payable in following year 6,563 7,242
Policy and contract claims 42,516 48,841
Other 39,314 39,478
---------------- --------------
11,301,994 10,736,879
---------------- --------------
General liabilities:
Expenses, commissions and taxes 17,854 8,739
Asset valuation reserve 151,300 79,456
Other 172,570 189,447
---------------- --------------
341,724 277,642
---------------- --------------
Separate account liabilities:
Industry separate account 2,160,347 2,151,117
Reaffirmed separate accounts 228,160 193,675
---------------- --------------
Total Separate account liabilities 2,388,507 2,344,792
---------------- --------------
Total liabilities 14,032,225 13,359,313
---------------- --------------
Capital and surplus:
Common stock, par value $100 per share;
20,000 shares authorized and issued 2,000 2,000
Paid-in and contributed surplus 21,448 21,448
Unassigned surplus 108,753 83,416
---------------- --------------
132,201 106,864
Less treasury stock, at cost (7 shares) (2) (2)
---------------- --------------
Total capital and surplus 132,199 106,862
---------------- --------------
Total liabilities, capital and
surplus $ 14,164,424 $ 13,466,175
---------------- ---------------
The accompanying notes are an integral part of these statutory-basis
financial statements.
The above statutory-basis balance sheets do not purport to represent the
estimated fair value of the assets and liabilities presented.
<PAGE>
MBL LIFE ASSURANCE CORPORATION
STATEMENTS OF OPERATIONS (STATUTORY-BASIS)
For the years ended December 31, 1995 and 1994 (in thousands)
1995 1994
------------ --------------
Premium and annuity considerations $ 1,778,079 $ 1,003,824
Supplementary contracts 41,346 42,663
Commissions and expense allowances on
reinsurance ceded, net of reserve
adjustment of $733 and $1,178 7,201 1,303
Investment income, net of investment
expenses of $115,056 and $61,605 958,376 588,280
Amortization of interest maintenance reserve (3,773) (2,261)
Miscellaneous income 28,826 18,466
-------------- ---------------
Total revenue 2,810,055 1,652,275
-------------- ---------------
Benefits paid or provided:
Death benefits 221,878 141,204
Annuity benefits 36,762 28,773
Disability and A&H benefits 11,685 9,856
Surrender benefits 727,702 450,628
Increase in policy and contract reserves 572,287 456,521
Payments on supplementary contracts 75,398 22,262
Other benefits 7,066 2,744
------------- ---------------
1,652,778 1,111,988
------------- ---------------
Expenses:
Commissions 8,892 4,297
Commissions and expense allowance on
reinsurance assumed 86,433 65,585
General insurance expenses 44,653 25,928
Insurance taxes, licenses and fees 7,542 5,126
Increase in loading, net 2 (101)
Net transfer from Separate Accounts (96,862) (111,728)
Other expenses 4,432 11,549
-------------- ---------------
55,092 656
-------------- ---------------
Total benefits and expenses 1,707,870 1,112,644
-------------- ---------------
Income before dividends, taxes
and net realized capital losses 1,102,185 539,631
Dividends to policyholders (895,833) (422,810)
-------------- ---------------
Income after dividends and before taxes
and net realized capital losses 206,352 116,821
Federal income tax expense (41,058) (31,231)
-------------- ---------------
Income after dividends and taxes,
before net realized capital losses 165,294 85,590
-------------- ---------------
Net realized capital losses, net of tax of
$6,262 and $10,153 (64,267) (50,212)
-------------- ---------------
Net income $ 101,027 $ 35,378
-------------- ---------------
The accompanying notes are an integral part of these statutory-basis
financial statements.
<PAGE>
MBL LIFE ASSURANCE CORPORATION
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
(STATUTORY-BASIS)
For the years ended December 31, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
Paid-in and Total
Common Contributed Unassigned Treasury Capital and
Stock Surplus Surplus Stock Surplus
------ ----------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Balance, beginning of year -
January 1,1994 $ 2,000 $ 21,448 $ 31,687 $ (2) $ 55,133
Net surplus transferred from
Mutual Benefit Life (Note 1) 49,330 49,330
Net income 35,378 35,378
Net unrealized capital gains 57,421 57,421
Change in non-admitted assets (14,404) (14,404)
Change in asset valuation reserve (77,324) (77,324)
Change in net equity in Special
Purpose Asset Vehicle (22,476) (22,476)
Current year's Federal income tax
benefit not affecting operations 13,433 13,433
Payment on sale of Group Insurance
operations 5,180 5,180
Other 5,191 5,191
-------- --------- ---------- -------- -----------
Balance, end of year -
December 31, 1994 2,000 21,448 83,416 (2) 106,862
Net income 101,027 101,027
Net unrealized capital gains (52,545) (52,545)
Change in non-admitted assets 16,239 16,239
Change in asset valuation reserve (71,844) (71,844)
Change in net equity in Special
Purpose Asset Vehicle (after
funds transferred to the General
Account below) (14,356) (14,356)
Funds received from Special
Purpose Asset Vehicle 45,239 45,239
Current year's Federal income tax
benefit not affecting operations 2,693 2,693
Other (1,116) (1,116)
-------- --------- ---------- ------- -----------
Balance, end of year -
December 31, 1995 $ 2,000 $ 21,448 $ 108,753 $ (2) $ 132,199
-------- --------- ---------- ------- -----------
</TABLE>
The accompanying notes are an integral part of these statutory-basis
financial statement.
<PAGE>
MBL LIFE ASSURANCE CORPORATION
STATEMENTS OF CASH FLOWS
(STATUTORY-BASIS)
For the years ended December 31, 1995 and 1994
(in thousands)
1995 1994
------------ ------------
Cash flows from operations:
Premium and annuity deposits received $ 1,818,070 $ 1,045,697
Investment income received 889,685 527,886
Other operating income received 36,945 21,780
Benefits paid to policyholders (2,434,248) (1,528,470)
Operating expenses paid (141,117) (103,389)
Federal income taxes paid (37,034) (22,310)
Transfer to Separate Accounts 96,774 111,502
Policy and contract holder opt-outs - (103,704)
Other cash provided 7,378 22,615
------------ ------------
Net cash provided (used) in operations 236,453 (28,393)
------------ ------------
Cash flows from investing activities:
Proceeds from sales, maturities and
repayments of bonds and stocks 2,431,022 2,007,882
Proceeds from sales of real estate 119,706 20,140
Proceeds from sales and repayments
of other invested assets 9,421 14,059
Repayments of mortgage loans 406,524 122,755
Purchase of bonds and stocks (3,119,292) (2,258,753)
Purchase of real estate (24,732) (20,038)
Purchase of other invested assets (1,214) (2,858)
Funding of mortgage loans (64,547) (46,410)
Cash transferred to Industry Separate Account - (59,820)
Cash transferred from Special Purpose
Asset Vehicle 45,239 -
Tax on capital gains (10,005) (4,564)
Other cash provided (used) (37,642) 49,386
------------ -------------
Net cash used in investing activities (245,520) (178,221)
Cash and short-term investments transferred
from Mutual Benefit Life - 260,700
------------ -------------
Net increase (decrease) in cash (9,067) 54,086
Cash and short-term investments,
beginning of year 58,593 4,507
------------ -------------
Cash and short-term investments,
end of year $ 49,526 $ 58,593
------------ -------------
The accompanying notes are an integral part of these statutory-basis
financial statements.
<PAGE>
MBL LIFE ASSURANCE CORPORATION
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
December 31, 1995
1. ORGANIZATION AND REHABILITATION OF MUTUAL BENEFIT LIFE
INSURANCE COMPANY
ORGANIZATION
MBL Life Assurance Corporation ("MBL Life") is a New Jersey domiciled
stock life insurance company licensed in each of the fifty states and
the District of Columbia. Prior to May 1, 1994, MBL Life was a wholly
owned subsidiary of The Mutual Benefit Life Insurance Company in
Rehabilitation ("Mutual Benefit Life"). As discussed below,
substantially all of the assets and liabilities of Mutual Benefit Life
were transferred to MBL Life as of May 1, 1994 under the terms of an
Assumption Reinsurance Agreement.
The accompanying statutory-basis financial statements reflect the
statutory financial position of MBL Life after giving effect to the
transfer of such items as discussed below.
REHABILITATION OF MUTUAL BENEFIT LIFE
On July 16, 1991, the Superior Court of New Jersey (the "Court")
entered an Order (the "Order") appointing the New Jersey Insurance
Commissioner (the "Commissioner") as the Rehabilitator of Mutual
Benefit Life.
The Commissioner was empowered by the Order to take such steps as
deemed appropriate to remove the cause and conditions that made
rehabilitation necessary. The initial Plan of Rehabilitation was
filed with the Court on August 3, 1992. On January 15, 1993, the
Commissioner filed the First Amended Plan of Rehabilitation (the
"Plan") with the Court. On August 12, 1993, the Court approved the
Plan with certain modifications. Subsequently, two amendments to the
Plan were filed and on November 10, 1993, the Court issued an Order of
Confirmation provided certain further modifications to the Plan were
made. The Court entered an order approving the modified plan on
January 28, 1994 which provided for the implementation of the Plan on
April 29, 1994 (the effective date of which is deemed to be May 1,
1994, the "Plan Implementation Date"), to extend through December 31,
1999. The Plan, which is subject to certain appeals (see Note 13), is
based on actuarial, valuation and other assumptions and reflects
management's best estimates of: a) future operations; b) the nature,
timing and extent of policyholders' benefits; and c) the timing and
proceeds from the restructuring of assets to fund the Company's
obligation. In view of the operating environment and circumstances
under which the Company operates, there is significant uncertainty
inherent in the assumptions made by management, and as such, the
actual results may differ materially from management's estimates.
<PAGE>
Under the terms of the Plan, the assets and liabilities of Mutual
Benefit Life were allocated to a number of distinct legal entities as
described below:
A majority of Mutual Benefit Life's insurance and annuity
contracts were restructured and transferred to MBL Life under the
terms of an Assumption and Reinsurance Agreement, along with
certain other liabilities and assets necessary to fund such
liabilities. The individual insurance and annuity contracts
which were restructured according to the Plan were guaranteed as
to account values and stated interest rates by various State
Insurance Guaranty Associations, collectively referred to as the
Participating Guaranty Associations.
Group annuity contract liabilities deemed not to be covered by
the Participating Guaranty Associations were segregated into a
separate account (the "Industry Separate Account"). These
liabilities were restructured and guaranteed by a consortium of
insurance companies (the "Industry Reinsurers").
Assets and liabilities which were not transferred to one of the
above entities are held in a liquidating trust, of which the
Commissioner is the sole Trustee. These assets and liabilities
are not included in the accompanying statutory-basis financial
statements.
The assets not retained in the liquidating trust were allocated to MBL
Life's General Account ("General Account") and the Industry Separate
Account in proportion to the liabilities assumed by each entity. This
allocation generally resulted in the assuming entities receiving
assets with similar characteristics and proportionate estimated fair
values. In addition, the General Account and the Industry Separate
Account each received a proportionate share of a Special Purpose Asset
Vehicle (the "SPAV") separate account. The SPAV was created under the
terms of the Plan and includes assets which could not be allocated
between the two entities in their entirety because of their large size
or other special characteristics (see Note 4).
A summary of the assets and liabilities assumed by MBL Life as of
April 29, 1994, the date of the transfer, is as follows (in
thousands):
Assets:
From General Account $ 10,778,985
From Industry Separate Account 2,102,310
----------------
$ 12,881,295
----------------
Liabilities:
From General Account $ 10,729,655
From Industry Separate Account 2,102,310
----------------
$ 12,831,965
----------------
Capital and surplus:
From General Account $ 49,330
----------------
<PAGE>
In addition to the establishment of the entities discussed above, the
Plan also provided numerous other terms and conditions which affected
policyholders, contractholders, creditors and other parties. The more
significant of these terms and conditions include:
A majority of policyholder liabilities were restructured based
upon estimates of the value and expected yield of the assets
owned by Mutual Benefit Life at the time the Plan was submitted
to the Court. Such restructuring generally resulted in the value
of such liabilities as of July 16, 1991 being retained, however,
future interest rates were tied to expected asset yields with
only minimum interest rates guaranteed. In addition,
restrictions were placed on policyholder accessibility of
guaranteed values including the imposition of early withdrawal
charges through December 31, 1999, the end of the Rehabilitation
Period (see Note 12).
The Plan provided an option allowing Mutual Benefit Life
policyholders, annuitants and pension contract participants to
withdraw ("opt-out") their account values prior to the Plan
closing at substantial discounts from such values. Approximately
$103.7 million was paid to policyholders, annuitants and pension
contract participants who elected to opt-out as of May 1, 1994.
The Plan provided policyholders whose contracts were originally
issued by MBL Life with an option to withdraw, without penalty,
their current account values. Actual withdrawals amounted to
$8.3 million and are reflected in the accompanying December 31,
1994 statutory-basis financial statements.
Pursuant to the terms of the Plan, the ownership of the stock of
MBL Life was transferred to a Trust, of which the Commissioner is
the sole Trustee. The beneficiaries of this Trust consist of the
holders of general unsecured claims as defined in the Plan.
Further, 80% of any excess surplus at the end of the
Rehabilitation Period, as defined in the Plan, will revert to the
holders of general unsecured claims (see Note 13).
Separate account contract liabilities, and related assets, which
existed prior to the Plan implementation date, were considered
"reaffirmed contracts" pursuant to the terms of the Plan and were
not affected by the implementation of the Plan. These contracts
consist primarily of individual and group variable annuities.
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying statutory-basis financial statements have been
prepared in accordance with accounting practices prescribed or
permitted by the Insurance Department of the State of New Jersey
("statutory accounting practices"). Prescribed statutory accounting
practices include a variety of publications of The National
Association of Insurance Commissioners ("NAIC"), as well as state
laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not
so prescribed that have been approved by the Insurance Department of
the State of New Jersey. In order to account for those transactions
which were uniquely related to the implementation of the Plan, MBL
Life received written approval from the Insurance Department of the
State of New Jersey for a number of accounting practices which
differed from or were ambiguous to the prescribed statutory accounting
practices.
Statutory accounting practices differ from generally accepted
accounting principles. The effects on the statutory-basis financial
statements of the variances between statutory accounting practices and
generally accepted accounting principles, although not reasonably
determinable, are presumed to be material. The accompanying
statutory-basis financial statements do not purport to represent the
estimated fair value of the information presented therein.
Significant accounting policies, permitted statutory accounting
practices and the manner that such policies and practices differ from
generally accepted accounting principles for stock life insurance
companies ("GAAP"), as applicable, applied in preparing the
statutory-basis financial statements follow.
CARRYING AMOUNTS OF ASSETS AND LIABILITIES
The carrying amount of assets transferred to MBL Life from Mutual
Benefit Life pursuant to the Plan are based upon the carrying amounts
of such assets as reflected in Mutual Benefit Life's accounting
records immediately prior to the transfer.
Liabilities, other than Policy and Contractholder Reserves
restructured pursuant to the Plan, were transferred at historical
carrying amounts of such liabilities as reflected in Mutual Benefit
Life's accounting records prior to the transfer.
BONDS AND STOCKS
Bonds qualifying for amortization based upon their classification by
the National Association of Insurance Commissioners ("NAIC")
Securities Valuation Office ("SVO") are stated at amortized cost; all
other bonds are stated at values prescribed by the SVO. Under GAAP,
only those bonds classified by MBL Life as held-to-maturity would be
carried at amortized cost. Bonds classified as available for sale or
trading would be carried at their estimated fair value. Unaffiliated
preferred stocks in good standing are carried at cost. Unaffiliated
preferred stocks not in good standing are stated at the lower of cost
or estimated fair value; unaffiliated common
stocks are carried at estimated fair value. Under GAAP, unaffiliated
preferred and common stock would be carried at estimated fair value.
<PAGE>
Investments in subsidiaries are stated at MBL Life's equity in the
subsidiaries' net assets and are included in stocks. Under GAAP, the
assets and liabilities and revenues and expenses of the majority owned
subsidiaries would be consolidated with those of MBL Life.
Short-term investments generally maturing within one year, are carried
at amortized cost which approximates estimated fair value.
Realized gains or losses from the sale of bonds and stocks are
determined on the basis of specific identification.
MORTGAGE LOANS ON REAL ESTATE
Performing mortgage loans are stated at their unpaid principal
balance, adjusted for amortization of any premium or discount.
Non-performing commercial mortgage loans and modified and restructured
commercial mortgage loans which are not in the process of foreclosure
are carried at the lower of their aggregate unpaid principal balance
or undiscounted net recoverable amount based upon ten year cash flows
plus an eleventh year reversion at estimated sales value.
Non-performing commercial mortgage loans which are in the process of
foreclosure are carried at the lower of their aggregate unpaid
principal balance or estimated fair value of the underlying collateral
determined using discounted cash flow analysis based upon ten year
cash flows plus an eleventh year reversion at estimated sales value
using discount rates commensurate with the risk of the loan.
Under GAAP prior to December 15, 1994, certain loans would qualify as
in-substance foreclosures and be included in real estate owned,
carried at the lower of the estimated fair value of the properties
less estimated costs to sell or the recorded investment in the related
loan at the date of foreclosure (loan cost). A loan is in
in-substance foreclosure if (1) the borrower has little or no equity
in the collateral; (2) proceeds for repayment of the loan can be
expected to come only from the collateral; and (3) the borrower has
effectively abandoned control of the collateral or it is doubtful that
the borrower will be able to rebuild equity in the collateral or
otherwise repay the loan in the foreseeable future.
Further, under GAAP, a reserve would be established based on
management's estimate, and maintained at a level considered adequate
to reflect the risk of loss in the overall loan portfolio, including
performing mortgages, based on circumstances, including appraisals of
collateral securing specific loans, known or anticipated at each
reporting date.
In May 1993, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 114, Accounting by Creditors for Impairment of a Loan which
is effective for fiscal years beginning after December 15, 1994. SFAS
No. 114 requires that impaired loans be measured on the basis of the
present value of expected future cash flows discounted at the loan's
effective interest rate, the loan's observable market price or the
fair value of the collateral if the loan is collateral dependent.
<PAGE>
In October 1994, the FASB issued SFAS No. 118 Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosures, which
is also effective for fiscal years beginning after December 15, 1994.
SFAS No. 118 amends the provisions of SFAS No. 114 regarding the
recognition of interest income on impaired loans, allowing companies
to substantially use the methods of income recognition presently in effect.
REAL ESTATE OWNED
Home office real estate is stated at depreciated cost with
depreciation calculated using the straight-line basis. Real estate
acquired in satisfaction of debt, which is presumed to be held for
sale, is valued at the lower of the recorded investment in the loan
(property cost) or estimated fair value based upon discounted cash
flow analyses at the date of foreclosure. Subsequent to its initial
valuation, such real estate is stated at the lower of depreciated cost
or estimated fair value by establishing a valuation allowance for any
differences between estimated fair value and depreciated cost where
the estimated fair value is lower.
POLICY LOANS
Policy loans are stated at unpaid principal balances and are not in
excess of cash surrender values.
OTHER INVESTED ASSETS
Investments in real estate joint ventures, included in other invested
assets, are reported based on the equity method of accounting.
Certain Mutual Benefit Life industrial revenue bond guarantees on Real
Estate Joint Venture indebtedness were not carried over to MBL Life
because MBL Life is not a party to such guarantees. Pursuant to the
terms and conditions of the Plan, these guarantees were not assumed by
MBL Life (see Notes 12 and 13). Negative carrying values of the
equity in these joint ventures resulting from the industrial revenue
bond guarantees as reflected in Mutual Benefit Life's books prior to
May 1, 1994 were reversed.
Investments in non-real estate partnerships are generally carried at
cost, adjusted for any unrealized gains or losses attributable to
partnership investments for which quoted market values are available.
OTHER ASSETS AND LIABILITIES
The accompanying statutory financial statements contain amounts due to
and due from the Industry Separate Account for transactions handled by
the General Account on its behalf. As of December 31, 1995 the net
amounts due to the Industry Separate Account approximate $12 million.
As of December 31, 1994 the net amounts due from the Industry Separate
Account amounted to approximately $32 million.
INVESTMENT VALUATION RESERVES
Mandatory reserves have been established for general account
investments in accordance with guidelines prescribed by insurance
regulatory authorities. Such reserves consist of an Asset Valuation
Reserve (AVR) for all General Account invested assets (including the
general accounts proportionate share of the invested assets held in
the SPAV), and an Interest Maintenance Reserve (IMR), which defers
General Account realized capital gains and losses (including the
General Account's proportionate share of realized gains and losses
incurred by the SPAV) (net of tax) attributable to interest rate
fluctuations on fixed income investments and recognizes them over the
estimated remaining duration of the investments sold.
The AVR as of December 31, 1995 and 1994 for the General Account was
calculated using the prescribed formula. The opening balance utilized
in calculating the 1994 contribution was that of MBL Life's December
31, 1993 AVR which was adjusted, to the extent possible, for the
appropriate realized and unrealized gains and losses incurred in the
General Account (including the General Account's proportionate share
of appropriate realized and unrealized gains and losses in the SPAV)
subsequent to May 1, 1994 and by MBL Life prior to May 1, 1994. The
current year's contribution to the AVR was based on General Account
assets at December 31, 1995 (including the General Account's
proportionate share of assets held in the SPAV).
The IMR as of December 31, 1995 and 1994 was calculated, using the
prescribed formula, based upon the interest rate related gains and
losses of MBL Life through the effective date of the Plan and those of
the General Account (including its proportionate share of such gains
and losses in the SPAV) for the period subsequent to the effective
date of the Plan. The December 31, 1995 IMR amounted to a negative
$2.7 million, and according to prescribed statutory accounting
practices, was treated as a "Disallowed Interest Maintenance Reserve"
asset and non-admitted in the accompanying statutory-based financial
statements.
Under GAAP, AVR and IMR reserves are not established. MBL Life also
established voluntary investment valuation reserves for certain
General Account invested assets. Changes to the AVR and voluntary
investment reserve will be reported as direct additions to or
deductions from surplus. Transfers to the IMR will be deducted from
realized capital gains.
POLICY AND CONTRACT RESERVES
Reserves for restructured life insurance policies (universal life
plans) and reaffirmed contracts amounted to $10.9 and $10.4 billion at
December 31, 1995 and 1994, respectively and are comprised as follows:
Policyholder Reserves for Mutual Benefit Life traditional and
adjustable life policies that have been restructured as Universal
Life Insurance policies pursuant to the terms and conditions of
the Plan, amounted to $2.4 billion and $2.6 billion for 1995 and
1994, respectively. These reserves are computed under the
Commissioners' Reserve Valuation Method, using the Commissioners'
1980 Standard Ordinary Mortality Table and the 1995 valuation
interest rate of 5.35%, provided however that the reserve held
shall not be less than the account value (without reduction for
moratorium charge), plus any unearned cost of insurance charge,
plus an excess interest reserve based on any future guaranteed
interest in excess of the 1995 valuation rate. The basis for the
opening July 16, 1991 (restructured date) restructured account
value for restructured policies was the statutory life insurance
reserve on Mutual Benefit Life's accounting records for such
policies. Under GAAP, life insurance reserves for universal life
plans are equal to policy account or contract values.
<PAGE>
Reserves for Corporate Owned Life Insurance ("COLI") policies
amounted to $5.1 billion and $4.4 billion at December 31, 1995
and 1994, respectively. Reserves for such policies are
generally computed under the Commissioners' Reserve Valuation
Method, using the Commissioner's 1980 Standard Ordinary Mortality
Table for individual policies and the Commissioner's 1958
Standard Ordinary Mortality Table for group policies, and
assuming interest rates ranging from 4.5% to 6.0%. Under GAAP,
such reserves would be accrued as GAAP premium is recognized,
representing the present value of future benefits to be paid to
policyholders, less the present value of future net premiums. In
addition, under GAAP, mortality assumptions are based on actual
company experience rather than prescribed mortality tables.
Reserves for annuity contracts in the General and Industry
Separate Accounts amounted to approximately $3.4 billion and $2.0
billion, respectively at both December 31, 1995 and 1994. For
those annuity contracts which were restructured pursuant to the
Plan, reserves are based on crediting rates of 5.1% for annuity
contracts in the general account in 1995 and 1994 and 3.55% and
3.5% for those annuity contracts allocated to the Industry
Separate Account in 1995 and 1994, respectively. Such rates were
adjusted at December 31, 1995, based on the investment results of
the respective Account's assets to 5.1% and 5.25%, respectively.
Pursuant to the terms and conditions of the Plan, reserves for
such contracts are generally equal to contract fund balances
(without reduction for moratorium charges), plus an excess
interest reserve based on any future guaranteed interest in
excess of the applicable valuation rate. For those contracts not
restructured pursuant to the Plan, reserves are based on
crediting rates ranging from 2.25% to 11%. Under GAAP, reserves
for annuity contracts are generally equal to contract fund
balances.
Policyholder reserves for Mutual Benefit Life policies that were
reaffirmed, pursuant to the terms of the Plan amounted to
approximately $38.5 million and $40.5 million at December 31,
1995 and 1994, respectively and consisted primarily of $29.0
million and $30.3 million in each year for supplementary
contracts involving life contingencies (SCILC). The SCILC
reserves are calculated using the 1971 and 1983 Individual
Annuity Mortality Tables and Annuitants' 1949 Table, assuming
interest rates of 3.5% to 8.75%.
Active life reserves for accident and health contracts, amounting
to $32.9 million and $30.8 million at December 31, 1995 and 1994,
respectively, include unearned premium reserves computed on a pro
rata basis and additional reserves based on the 1964
Commissioners' Disability Table, combined with the 1958 and 1980
Commissioner's Standard Ordinary Mortality Tables at interest
rates ranging from 3.5% to 4.5%. Reserves for disabled lives,
$75.0 million and $57.2 million at December 31, 1995 and 1994,
respectively, are calculated principally using the 1964
Commissioners' Disability Table at 3.5% interest and the 1985
Commissioners' Individual Disability Table A at 5% interest.
Under GAAP, such reserves would be accrued as GAAP premium is
recognized, representing the present value of future benefits to
be paid to policyholders, less the present value of future net
premiums.
<PAGE>
GENERAL OTHER LIABILITIES
Without giving regard to the validity of the claims, the
statutory-basis balance sheet at December 31, 1995 and 1994 includes
an amount equal to the potential liability of MBL Life of certain
Class 1 claims as established by the Order of the Superior Court.
Under GAAP, the inclusion of these liabilities would be determined by
the applicable requirements of SFAS No. 5, Accounting for
Contingencies.
NON-ADMITTED ASSETS
Certain assets, principally furniture and equipment, leasehold
improvements, prepaid pension costs, certain due and accrued interest
on delinquent mortgage loans, accident and health insurance premiums
past due and agents' debit balances are designated as "nonadmitted"
and are not included in the statutory-basis balance sheets. Under
GAAP, these assets would be included in the balance sheet, net of
applicable depreciation, amortization and valuation reserves.
INDUSTRY SEPARATE ACCOUNT
Pursuant to the terms of the Plan of Operations of the Industry
Separate Account, as approved by the Insurance Department of the State
of New Jersey, a liability has been established within the Industry
Separate Account representing the excess of the carrying value of the
assets of the Industry Separate Account over its liabilities. A
receivable from the Industry Reinsurers will be established if
statutory liabilities exceed statutory assets of the account in the
future. This amount will be adjusted throughout the Rehabilitation
Period with final payments being made in accordance with the
Participation and Reinsurance Agreement which is part of the Plan.
The Industry Separate Account assets are reflected in the December 31,
1995 and 1994 statutory-basis balance sheet with all other separate
account assets. The Industry Separate Account liabilities are
included with all other separate account liabilities on the
statutory-basis balance sheet. The accounting practices of the
Industry Separate Account are the same as corresponding accounting
practices of the General Account; however, the Industry Separate
Account has not established an AVR or IMR reserve.
REAFFIRMED SEPARATE ACCOUNTS
Assets held in the separate accounts which were reaffirmed pursuant to
the terms of the Plan are carried at market value. They are reflected
in the December 31, 1995 and 1994 statutory-basis balance sheet with
all other separate account assets. The liabilities of each of these
separate accounts are reported at participants' corresponding equity
in the accounts and shown with all other separate account liabilities
in the December 31, 1995 and 1994 statutory-basis balance sheet.
These liabilities are considered to be reported at estimated fair
value.
<PAGE>
SPECIAL PURPOSE ASSET VEHICLE
The General Account's net equity in the Special Purpose Asset Vehicle
is reflected in the December 31, 1995 and 1994 statutory-basis balance
sheet with all other separate account assets. Funds transferred from
the SPAV ($45,239) represent the General Account's proportionate share
of the distribution of cash flows from the assets maintained in the
SPAV. The accounting practices for this separate account will be
generally the same as the corresponding practices for the General
Account. The General Account's proportionate share of the assets in
this separate account are included in the calculation of the general
account's AVR (see Note 4).
ACQUISITION COSTS
In accordance with statutory accounting practices, commissions and
other costs incurred in acquiring new business are charged to
operations as incurred. Under GAAP, acquisition costs would be
deferred and amortized over the estimated duration of the underlying
policies or contracts. However, since MBL Life assumed the assets and
liabilities of Mutual Benefit Life pursuant to an Assumption
Reinsurance Agreement, and MBL Life did not incur any acquisition
costs, deferral and amortization of any costs would not be applicable.
REVENUE RECOGNITION
The Statement of Operations for the year ended December 31, 1994
includes the results of the business assumed from Mutual Benefit Life
from May 1, 1994 and does not include the four months of operations of
Mutual Benefit Life prior to implementation of the Plan.
Premium revenues are recognized when due during the premium paying
period of the contract. Premiums are credited to account funds and
the cost of insurance is charged against account values and reflected
as premium income. Under GAAP, premiums are recognized as earned over
the life of the contract.
Net realized investment gains and losses, less applicable income taxes
and amounts resulting from changes in interest rates which have been
deferred and charged or credited to the IMR are reported in the
accompanying statutory-basis statement of operations and are
determined using the specific identification method.
STATEMENTS OF CASH FLOWS
The statements of cash flows are presented in accordance with
guidelines established by the NAIC rather than in accordance with
GAAP. For purposes of the statements of cash flows, MBL Life
considers all highly liquid investments with a maturity of one year or
less to be short-term investments.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles prescribed or permitted by the Insurance Department of the
State of New Jersey requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. Appropriate disclosures regarding the use of estimates
have been made throughout these statutory financial statements.
<PAGE>
3. UNCONSOLIDATED SUBSIDIARIES AND OTHER AFFILIATES
MBL Life's subsidiary operations primarily include real estate
investment management, brokerage activities and other investment
management and advisory services. At December 31, 1995 and 1994, MBL
Life's investment in the net equity of such unconsolidated
subsidiaries, including those carried in the Special Purpose Asset
Vehicle, amounted to approximately $10 million and $80 million,
respectively. MBL Life incurs charges on behalf of its subsidiaries
which are reimbursed pursuant to agreements for shared use of
property, personnel and facilities.
MBL Life's net equity in joint ventures and other partnerships,
principally real estate, including those transferred to the Industry
Separate Account and the Special Purpose Asset Vehicle, was
approximately $280 and $383 million at December 31, 1995 and 1994,
respectively. MBL Life has outstanding mortgage loans with several of
its real estate joint ventures. The carrying value of such mortgages,
including those transferred to the Industry Separate Account and the
Special Purpose Asset Vehicle, was approximately $87 and $140 million
at December 31, 1995 and 1994, respectively. The real estate joint
ventures, mostly residential in nature, consisting of either apartment
projects or developmental residential type condominiums are primarily
located in the southeastern United States. The carrying value of MBL
Life's investment in the largest project (Fisher Island), which is
located in South Florida, was approximately $157 million and $199
million at December 31, 1995 and 1994, respectively. In addition,
residential mortgage loans with a carrying value of approximately $59
and $65 million, respectively, were issued to purchasers of units in
this development.
Furthermore, as a result of participating in certain leveraged buyout
transactions, MBL Life has a controlling interest in a home
improvement retailer located in the northwestern United States and a
significant investment in an integrated manufacturer and distributor
of children's clothing. The carrying value of MBL Life's investment in
these two noninsurance subsidiaries was approximately $82 and $102
million at December 31, 1995 and 1994, respectively. The
aforementioned assets were included with the large and/or illiquid
assets which were transferred to the Special Purpose Asset Vehicle
separate account.
<PAGE>
4. INVESTMENTS
Net investment income for the years ended December 31, 1995 and
1994 were derived from the following sources (in thousands):
1995 1994
------------- -------------
Bonds $ 274,482 $ 162,862
Stocks:
Preferred 63 96
Common 5,894 1,932
Mortgage loans on
real estate 141,445 114,453
Real estate owned 115,356 61,063
Policy loans 525,483 302,345
Other invested assets 2,551 1,968
Short term investments 4,334 3,739
Other 3,824 1,427
-------------- -------------
Total investment income 1,073,432 649,885
Investment expenses (115,056) (61,605)
-------------- -------------
Net investment income $ 958,376 $ 588,280
-------------- -------------
BONDS
The carrying values, gross unrealized gains and losses and NAIC market
values of bonds by category, as of December 31, 1995 and 1994, are shown
below.
December 31, 1995
(in thousands) NAIC
Carrying Gross Unrealized Market
Value Gains Losses Value
------------- ------------------- -----------
U.S. Treasury securities
and obligations of U.S.
Government agencies $ 45,449 $ 278 $ 477 $ 45,250
Foreign governments 143,581 5,863 - 149,444
Corporate securities 3,546,374 58,623 657 3,604,340
Mortgage-backed
securities 290,209 - - 290,209
----------- -------- ------ ------------
Total $ 4,025,613 $ 64,764 $ 1,134 $ 4,089,243
----------- -------- ------ ------------
<PAGE>
<TABLE>
<CAPTION>
December 31, 1994
(in thousands) NAIC
Carrying Gross Unrealized Market
Value Gains Losses Value
------------- -------- --------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities
and obligations of U.S.
Government agencies $ 513,536 $ - $ 17,797 $ 495,739
Foreign governments 91,058 - 1,887 89,171
Corporate securities 2,500,384 22,103 31,589 2,490,898
Mortgage-backed securities 297,193 - - 297,193
------------- -------- --------- -----------
Total $ 3,402,171 $ 22,103 $ 51,273 $ 3,373,001
------------- -------- --------- -----------
</TABLE>
The carrying value and NAIC market value of bonds, at December 31, 1995,
respectively, by contractual maturity are shown below. Bonds not due at a
single maturity date have been included in the table in the year of final
maturity. Expected maturities may differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without prepayment penalties.
December 31, 1995
(in thousands)
Carrying NAIC
Value Market Value
------------- ------------
Due in one year or less $ 223,738 $ 225,243
Due after one year through five
years 3,452,445 3,511,305
Due after five years through ten years 57,604 60,869
Due after ten years 1,617 1,617
------------- ------------
3,735,404 3,799,034
Mortgage-backed securities 290,209 290,209
------------- ------------
Total $ 4,025,613 $ 4,089,243
------------- ------------
Proceeds from sales of investments in debt securities during 1995 and 1994
were $2.3 billion and $1.8 billion, respectively. Gross gains of $22.1 and
$2.4 million and gross losses of $10.2 million and $30.9 million were
realized on those sales in 1995 and 1994, respectively.
MORTGAGE LOANS ON REAL ESTATE
As of December 31, 1995 and 1994, the carrying value of mortgage loan
investments in the general account was $1.3 billion and $1.8 billion,
respectively. The carrying value is at admitted asset value, therefore the
effects of any valuation allowances, either individually or in the
aggregate, have been reflected in the accompanying statutory-basis
financial statements. Mortgage loans are collateralized by properties
located throughout the United States. The states with the highest
concentrations as a percentage of carrying value were California 12%, New
Jersey 8%, Michigan 11%, Florida 8%, North Carolina 6% and Iowa 5%. The
remaining carrying value is geographically disbursed throughout the country
with no individual state concentration exceeding 5%.
<PAGE>
As of December 31, 1995, the underlying collateral of the mortgage loan
investments as a percentage of total mortgages were diversified as follows:
Office buildings - 37%
Retail - 11%
Apartment buildings - 13%
Agricultural - 20%
Industrial - 9%
Other - 10%
-----
100%
-----
During 1995 the Industry Separate Account sold in two separate transactions
mortgage loans with a principal balance of approximately $192 million that
Mutual Benefit Life had originated.
A Securitization of mortgage loans with a principal balance of
approximately $109 million was sold effective November 28, 1995. These
mortgage loans were sold to a depositor under an agreement which contained
certain recourse or cure provisions. The Industry Separate Account would
be required to repurchase the mortgage loan based on the following:
discovery of a material defect in a Trustee Mortgage File not cured within
90 days; or a breach of any of the representations, warranties or covenants
of seller with respect to the mortgage loans.
The second transaction was a bulk sale of mortgage loans with a principal
balance of approximately $83 million sold effective December 20, 1995.
These mortgage loans were sold to an investor under an agreement which
contained certain recourse or cure provisions. The Industry Separate
Account would be required to repurchase the mortgage loan in the event of a
material breach of a representation or warranty with respect to an asset,
which breach materially and adversely affects the value of such asset.
The sale of these mortgage loans was the full responsibility of the
Industry Separate Account and as such MBL Life and the General Account have
no future potential for monetary involvement or support.
POLICY LOANS
Policy loans consist of outstanding loans issued to holders of COLI
contracts and universal life contracts. Interest charged on the COLI loans
is adjustable and determined periodically based on published market
interest rates. The carrying value of the COLI loans was approximately $4.5
billion and $4.0 billion as of December 31, 1995 and 1994, respectively.
The carrying value of universal life policy loans as of December 31, 1995
and 1994 was approximately $452 million and $542 million, respectively.
<PAGE>
ASSETS ON DEPOSIT
As of December 31, 1995 and 1994, MBL Life had securities with a carrying
value of $5.3 and $6.0 million, respectively on deposit with regulatory
agencies. The securities on deposit are reflected in the accompanying
statutory-basis balance sheets as follows:
December 31,
1995 1994
----------------- -----------------
Bonds $ 3.5 million $ 2.5 million
SPAV 1.8 million 3.5 million
SPECIAL PURPOSE ASSET VEHICLE
The following is a summary of the carrying values of the net assets
originally transferred to the Special Purpose Asset Vehicle (in thousands):
December 31,
1995 1994
------------ ------------
Bonds $ 55,878 $ 83,140
Stocks:
Preferred 46,371 42,671
Common 126,195 116,260
Mortgage loans on real estate 67,991 19,738
Real estate owned 2,443 12,400
Other invested assets:
Investment in Fisher Island 157,118 199,318
Other real estate joint ventures 36,168 39,087
Investment income due and accrued 1,434 2,114
Other assets 22,938 22,424
Liabilities (91) (1,094)
------------- -------------
$ 516,445 $ 536,058
------------- -------------
Net equity of SPAV:
Included in General Account $ 378,047 $ 392,404
Included in Industry
Separate Account 138,398 143,654
------------- -------------
$ 516,445 $ 536,058
------------- -------------
5. INVESTMENT CONTRACT LIABILITIES
Investment contracts represent policies or contracts that do not
incorporate significant insurance risk. Included in reserves
for life and annuity contracts are amounts classified as investment
contracts. The carrying value of such investment contracts was
approximately $3.1 billion as of December 31, 1995 and 1994, respectively.
Policyholder funds left on deposit, which are classified as investment
contracts, had a carrying value of approximately $135 million and $156
million as of December 31, 1995 and 1994, respectively.
<PAGE>
6. FAIR VALUE INFORMATION
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
Disclosures about Fair Value of Financial Instruments. The estimated fair
value amounts of financial instruments included herein have been determined
by MBL Life using market information available as of December 31, 1995 and
1994 and appropriate valuation methodologies. However, considerable
judgment is necessarily required to interpret market data to develop the
estimates of fair value for financial instruments for which there are no
available market value quotations.
The estimates presented herein are not necessarily indicative of the
amounts MBL Life could realize in a market exchange. The use of different
market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.
The following table discloses the fair value of financial instruments. For
financial instruments not discussed below the carrying amount is a
reasonable estimate of fair value.
December 31, 1995
(in thousands)
Carrying Estimated
Value Fair Value
-------------- -------------
Assets:
Bonds $ 4,025,613 $ 4,192,158
Stocks 247,366 247,071
Mortgage loans on real estate 1,262,465 1,205,867
Policy loans 4,961,122 4,961,122
Short-term investments 41,154 41,154
Cash 8,372 8,372
Other assets 28,993 28,993
Financial instruments included in
SPAV (General Account's Share) 216,996 211,539
Liabilities:
Investment contracts:
Life and annuity contracts 3,081,459 2,868,582
Policyholder funds left on deposit 135,063 139,046
Policy and contract claims 42,516 42,516
Dividends payable in following year 6,563 6,563
Other liabilities:
Policy and contract 39,314 39,223
General 172,570 171,574
<PAGE>
December 31, 1994
(in thousands)
Carrying Estimated
Value Fair Value
-------------- -------------
Assets:
Bonds $ 3,402,171 $ 3,316,273
Stocks 109,060 108,085
Mortgage loans on real estate 1,821,229 1,633,293
Policy loans 4,509,009 4,509,009
Short-term investments 56,187 56,187
Cash 2,406 2,406
Other assets 58,477 58,477
Financial instruments included in
SPAV (General Account's Share) 191,649 178,605
Liabilities:
Investment contracts:
Life and annuity contracts 3,062,179 2,685,727
Policyholder funds left on deposit 155,917 161,709
Policy and contract claims 48,841 48,841
Dividends payable in following year 7,242 7,242
Other liabilities:
Policy and contract 39,478 39,325
General 189,447 187,835
The General Account's share of the net equity in the estimated fair value
of the Special Purpose Asset Vehicle includes only those financial
instruments, namely bonds, stocks and mortgage loans on real estate, that
qualify for disclosure under SFAS No. 107.
BONDS
For debt securities that are publicly traded, estimated fair value was
obtained from an independent market pricing service. Publicly traded
securities represented approximately 95% of the carrying value and
estimated fair value of the total debt securities as of December 31, 1995.
For all other debt securities, estimated fair value was determined by
management based on interest rates, maturity, credit quality and average
life.
STOCKS
The estimated fair value for unaffiliated common stocks was determined on
the basis of values provided by the SVO. Estimated fair value of
affiliated common stock was determined on the basis of MBL Life's equity in
the subsidiary's net assets, after adjusting the subsidiary's financial
instruments to an estimated fair value in a manner consistent with that of
MBL Life. For publicly traded preferred stocks, estimated fair value was
obtained from an independent market pricing service. For all other
preferred stock, estimated fair value was determined by management based on
such factors as interest rates, credit quality, conversion options and
dividend paying status.
<PAGE>
MORTGAGE LOANS ON REAL ESTATE
The fair values of mortgage loans on real estate were estimated based on
expected discounted cash flows with the interest rates being adjusted for
credit risk. The estimated fair value presented is not necessarily
indicative of the amounts MBL Life could realize in a market exchange.
POLICY LOANS
All policy loans carried on MBL Life's books involve some combination of
variable loan rate and liability adjustment factor to directly recognize
the presence of policy loans. These factors work to increase or decrease
interest credited to policy account values in a way that is tied to the
actual policy loan interest charged. These loans, therefore, are
determined to have a fair value equal to the face value of the policy loans.
INVESTMENT CONTRACT LIABILITIES
The fair values for liabilities of investment contracts included in
reserves for life and annuity contracts are estimated using discounted
projected cash flows, based on interest rates which would be offered at
December 31, 1995 for similar contracts with maturities consistent with
those remaining for the contracts being valued.
The fair values for liabilities of investment contracts included in
policyholder funds left on deposit are estimated using discounted projected
cash flows, based on interest rates being offered at December 31, 1995 for
similar contracts with maturities consistent with those remaining for the
contracts being valued.
INDUSTRY SEPARATE ACCOUNT
As indicated in Note 1, the purpose of the Industry Separate Account is to
segregate those assets which are supporting the liabilities being
guaranteed by the Industry Reinsurers. For purposes of the disclosure
requirements of SFAS No. 107, the carrying value and estimated fair
value of the financial instruments in the Industry Separate Account have
been determined to be equivalent since the Industry Reinsurers would be
required to support any adjustment in the estimated fair value of the
assets to the extent such support is necessary to cover the liabilities. To
the extent the estimated fair value of the assets exceeds the estimated
fair value of the liabilities at the end of the Rehabilitation Period, as
defined in the Plan, such excess would be paid out in accordance with the
terms of the Participation and Reinsurance Agreement, which is part of the
Plan.
<PAGE>
7. REINSURANCE TRANSACTIONS
MBL Life has entered into a joint venture with another insurer to operate
MBL Life's COLI business. The joint venture agreement calls for assumption
of individual COLI policies as of November 4, 1992 and group COLI policies
as of August 2, 1994 by the other insurer with MBL Life retaining an 80%
interest in future profits and losses of that business. The agreements
also gave MBL Life the option to assume a specified percentage of new COLI
business issued by the other insurer. COLI policy reserves and contract
liabilities, including dividends to be paid in the following year, amounted
to $5.1 billion and $4.4 billion at December 31, 1995 and 1994,
respectively.
In addition, MBL Life has reinsured certain of its life, health, and
annuity contracts with other insurance companies under various agreements.
The financial statements are shown net of reinsurance. Policy and contract
liabilities have been reduced by $149.3 million and $175.1 million at
December 31, 1995 and 1994, respectively, for life, health and annuity
reserve credits taken on $1.3 billion and $1.6 billion of in-force life
reinsurance ceded. Under GAAP, assets would include amounts for reinsurance
recoverable, and policy and contract liabilities would not be reduced for
reserve credits.
MBL Life has direct liability to the policy or contract holder on policies
ceded and would be responsible for payment if the reinsurer is unable to
meet its obligation under the reinsurance agreements.
8. FEDERAL INCOME TAXES
For tax periods through May 1, 1994, MBL Life filed a consolidated Federal
income tax return with Mutual Benefit Life. Tax allocations between MBL
Life and Mutual Benefit Life through May 1, 1994 were based on an agreement
which provides, among other things, that in the event MBL Life has a tax
gain (loss) from operations for any year, it would pay to (receive from)
Mutual Benefit Life an amount equal to the corresponding increase
(reduction) in the consolidated tax liability. For tax periods subsequent
to May 1, 1994, MBL Life files as a stand alone company. MBL Life entered
into a tax allocation agreement with the Industry Reinsurers which
provides, among other things, that in the event the Industry Separate
Account has a tax gain (loss) for any year, it shall pay to (receive from)
the General Account an amount equal to the corresponding increase
(reduction) in MBL Life's overall tax liability.
The provision for Federal income taxes is based on net gain from operations
after adjusting for certain income and expense items, principally
differences in statutory and tax reserves, accrual of discount on bonds and
specified policy acquisition expenses. In accordance with statutory
accounting practices, no provision has been made for deferred income taxes,
to account for the tax effects of temporary differences. Under GAAP, such a
provision would be made.
MBL Life requested and received a private letter ruling from the Internal
Revenue Service stating that the transfer of assets pursuant to the terms
of the Plan qualified as a tax free reorganization under the Internal
Revenue Code.
<PAGE>
As of December 31, 1995, MBL Life had reached agreement on its federal tax
liability with the Internal Revenue Service for all years through 1993. In
the opinion of management, MBL Life has established adequate reserves to
provide for the payment of any additional taxes which might result from
settlement of possible deficiencies for years subsequent to 1993.
Under pre-1984 life insurance company income tax laws, a portion of current
"gain from operations" of MBL Life is not subject to current taxation but
is accumulated, for tax purposes, in a memorandum account designated as
"policyholders' surplus". The aggregate accumulation in this account at
December 31, 1995 was approximately $8 million. Subject to certain
limitations, "policyholders' surplus" is not taxed until distributed or the
insurance company no longer qualifies to be taxed as a life insurance
company. Taxes have not been provided on amounts included in this
memorandum account since MBL Life contemplates no action or events that
would create such a tax.
9. EMPLOYEE BENEFIT PLANS
PENSION PLANS
In accordance with the terms of the Plan, MBL Life assumed the sponsorship
of Mutual Benefit Life's defined benefit pension plans covering all
eligible employees, soliciting agents and agency office employees of MBL
Life and certain of its subsidiaries. MBL Life is also the administrator of
these plans. Retirement benefits are based on years of credited service
and final average earnings history. MBL Life recognizes defined benefit
pension plan costs based on amounts contributed to the plan.
The funded status of the qualified defined benefit pension plans at January
1, 1995, the date of the most recent valuation, and the accumulated benefit
obligation and plan assets at January 1, 1995 are as follows:
January 1, 1995
(in thousands)
-------------
Actuarial present value of obligations:
Vested $ 62,855
Non-vested 3,985
-------------
Accumulated benefit obligation $ 66,840
-------------
Plan assets available for benefits $ 94,316
-------------
The prepaid pension cost is a non-admitted asset and is not included in the
accompanying statutory-basis balance sheet. Due to the funded position of
the pension plans, no contributions were required to be made in 1995.
The weighted average discount rate used in determining the actuarial
present value of the accumulated benefit obligation was 7.25% for 1994.
During 1994, annuities amounting to $43.1 million were purchased, out of
plan assets, from Mutual Benefit Life (the former sponsor of the plans) to
satisfy future benefit obligations. These annuities were transferred to
MBL Life as part of the implementation of the Plan.
<PAGE>
As of December 31, 1995, the pension plan's assets are principally
comprised of investments in U.S. Government securities and long-term and
short-term corporate obligations.
MBL Life has established a liability of $10.0 million and $9.8 million at
December 31, 1995 and 1994, respectively, to cover estimated future funding
requirements of a non-qualified excess benefit plan.
Under GAAP, pension costs are accounted for in accordance with SFAS No. 87,
Employers' Accounting for Pensions.
SAVINGS AND INVESTMENT PLANS
MBL Life sponsors savings and investment plans available for substantially
all employees and qualifying agents under which MBL Life matches a portion
of their contributions which vest ratably over five years. MBL Life
contributed approximately $1.1 million and $628,000 in 1995 and 1994,
respectively, which is reflected in the accompanying statutory-basis
statements of operations.
OTHER POST-RETIREMENT BENEFITS
In addition to pension benefits, MBL Life provides certain health care and
life insurance benefits ("post-retirement benefits") for retired employees.
Substantially all employees may become eligible for these benefits if they
reach retirement age while working for MBL Life. Life insurance benefits
are generally set at a fixed amount.
In 1993, Mutual Benefit Life changed its method of accounting for the costs
of its retirees benefit plans to the accrual method, and elected to
amortize its transition obligation for retirees and fully eligible or
vested employees over 20 years. The unamortized portion of the transition
obligation as of December 31, 1995 and 1994 was $20.5 million and $21.7
million, respectively. The accrued obligation for such post-retirement
benefits included in the liabilities in the accompanying statutory-basis
financial statements is $10.0 million and $7.9 million at December 31, 1995
and 1994, respectively. The discount rate used in determining the current
year accumulated post-retirement benefit obligation was 8.25% and the
health care cost trend rate was 9.0% graded to 5% over nine years.
Under GAAP, the post-retirement liability would include an accrual for
current employees who are not currently eligible to receive post-retirement
benefits, but are expected to become eligible for these benefits, in
addition to retirees and fully eligible or vested employees.
<PAGE>
10. CAPITAL AND SURPLUS
While not prohibited by the Plan, it is currently not anticipated that any
future earnings of MBL Life will be distributed to the stockholder prior to
the end of the Rehabilitation Period, as defined in the Plan. The amount
of dividends which the Company may pay to the stockholder without the prior
approval of the Commissioner is subject to restrictions relating to profits
on participating policies and contracts and to a requirement that the
Company maintain a statutory surplus equal to 105% of required risk based
capital. Under New Jersey Insurance Law, MBL Life must maintain minimum
statutory capital and surplus of $7,650,000.
The NAIC has developed risk-based capital formulas to be applied to all
insurance companies. These formulas calculate a minimum required statutory
net worth, based on the underwriting, investment and other business risks
inherent in an individual company's operations. Any insurance company
which does not meet threshold risk-based capital levels ultimately will be
subject to regulatory proceedings. MBL Life did not meet its minimum
risk-based capital levels as of December 31, 1995 and 1994. As
discussed in Note 1, MBL Life is currently operating under the Third
Amended Plan of Rehabilitation of the Mutual Benefit Life Insurance Company
in Rehabilitation. The Plan sets forth MBL Life's strategy to restore its
risk-based capital to required statutory levels.
11. LEASES
MBL Life does not have any material operating or capital lease obligations.
12. OTHER COMMITMENTS AND CONTINGENCIES
GUARANTEES
MBL Life has entered into certain arrangements in the course of its
business which, under certain circumstances, may impose financial
obligations upon MBL Life.
In connection with an initial public offering of an affiliate which
occurred in November 1994, MBL Life has undertaken to indemnify the
underwriters of the offering. No payments have been made under this
arrangement and it is the opinion of management that any payments required
pursuant to this arrangement would not likely have a material adverse
effect on MBL Life's assets and liabilities.
Pursuant to the terms and conditions of the Plan, certain Mutual Benefit
Life industrial revenue bond guarantees on real estate joint venture
indebtedness were not assumed by MBL Life (see Note 13).
WARRANT SHARES
Pursuant to the terms of the Plan, MBL Life granted to the Participating
Guaranty Associations and the Industry Reinsurers, in exchange for nominal
value, a nontransferable warrant to purchase an interest in MBL Life's
issued and outstanding shares, which interests together shall constitute a
20% interest. The warrants shall be exercisable for one year commencing on
the first day following the end of the Rehabilitation Period, as defined in
the Plan, at a formula price as set forth in the warrant to be determined
at the exercise date.
<PAGE>
LITIGATION
MBL Life is involved in litigation arising in the ordinary course of
business or as may be related to the rehabilitation proceedings involving
its former parent, Mutual Benefit Life (see Note 13).
LINES OF CREDIT
As of December 31, 1995 and 1994, MBL Life had no lines of credit.
REHABILITATION PLAN EVENTS
Pursuant to the terms of the Plan, the Commissioner, prior to July 1996,
shall determine whether, in her opinion, the General Account has sufficient
liquidity and has performed adequately to allow Restructured Contract
Holders to make withdrawals prior to the end of the Rehabilitation Period
with a reduction or elimination of the early withdrawal charges (i.e.
moratorium charges). Any such determination would require approval by both
the Participating Guaranty Associations and the Industry Reinsurers. The
impact on the financial statements of a change or elimination of the early
withdrawal charges cannot be determined at this time, however, any lifting
of or gradual reduction in moratorium charges may increase the Company's
vulnerability to surrenders.
In accordance with the terms and conditions under which the Life Insurance
Company Guaranty Corporation of New York (the "Corporation") agreed to
become a Participating Guaranty Association under the Plan, the Corporation
has agreed to provide to each New York covered policyholder, no later than
July 16, 1996, the following enhancement to the Plan. The Corporation will
assure payment of the full non-loaned account balance without the
application of any early withdrawal charges, to any New York covered
policyholder who elects to receive the full amount of their non-loaned
account balance on or after July 16, 1996 and who (a) submits an affidavit
stating that the funds will not be transferred to other insurance policies
or rolled over to other tax-qualified vehicles, or (b) is eligible to elect
retirement benefits from MBL Life pursuant to the terms of the Plan, and
submits an affidavit stating that the funds will be used in their entirety
to purchase a life annuity (with no cash value to the annuitant) from
another insurance company. The Corporation has the option to either absorb
the moratorium charges or substitute itself as the policyholder. The
ultimate impact of this enhancement cannot be determined.
The Company has begun a study with regard to possibly excelerating the
timing of the changes in the invested asset mix of the General Account as
outlined in the Plan. The Company is evaluating a possible "bulk sale" of
mortgage loans during 1996 from the General Account. The eventual impact
on the statutory financial statements, should the transaction be approved,
has not yet been determined.
<PAGE>
13. REHABILITATION PLAN APPEALS
Several appeals have been filed by parties to the Plan challenging the
constitutionality of the application of the New Jersey Life and Health
Insurers Rehabilitation and Liquidation Law to the Mutual Benefit Life
Rehabilitation, as well as the order of priority imposed upon claimants
under the Plan. In general, the appellants: (1) assert that general
unsecured creditors are entitled to parity of treatment with policyholders;
(2) requested reclassification of certain claims as policyholder claims
rather than general unsecured claims; and (3) challenge the crediting of
interest to policyholders during certain periods subsequent to the
commencement of the Rehabilitation. Should the general unsecured creditors
achieve parity of treatment with policyholders or should the challenge to
crediting of interest be successful upon appeal, certain Plan provisions
including those provisions governing restructured policyholder account
values and contract interest rates will be awarded as may be necessary.
Any such amendments are likely to reduce restructured policyholder account
values (life and annuity reserves) and contract interest rates while
increasing general unsecured liabilities. The general unsecured claims
involved, after adjustment to a basis which would establish parity of
treatment with policyholders, are estimated to be approximately $705
million. However, there are multiple scenarios which could result that are
too numerous and complex to predict at this time. Should the appellants be
successful on the reclassification issue, the amount of industrial revenue
bond guarantee claims which MBL Life would be required to assume would be
approximately $44 million, after adjusting to a basis which would establish
parity of treatment with policyholders. The outcome of the appeals cannot
be reasonably predicted at this time. The Commissioner will vigorously
defend against the appeals. Further, the Commissioner has appealed certain
of the Court's modifications to the Plan. The modifications of the Court
include: (1) a change to the beneficiaries of the stock trust from holders
of restructured policyholder contracts in the general account to the
unsecured creditors (and to give the unsecured creditors a right to approve
a sale of MBL Life stock or assets); (2) the elimination of the possibility
that holders of restructured policyholder contracts in the general account
would receive a bonus crediting rate at the end of the Rehabilitation
Period in the event MBL Life has assets in excess of minimum risk based
capital requirements for insurance companies; and (3) the requirement that
MBL Life distribute to the unsecured creditors at the end of the
Rehabilitation Period any assets in excess of 105% of its risk based
capital requirement. If the Commissioner's appeals are unsuccessful, the
Plan as originally modified by the Court will prevail. If the
Commissioner's appeals are successful, no modifications to the accompanying
statutory-basis financial statements as of December 31, 1995, other than
certain disclosures, would be required.
<PAGE>
MBL LIFE ASSURANCE CORPORATION
SUPPLEMENTAL SCHEDULE OF ASSETS AND LIABILITIES
For the year ended December 31, 1995
The following is a summary of certain financial data included in
other exhibits and schedules of the 1995 Statutory Annual
Statement subjected to audit procedures by independent auditors
and utilized by actuaries in the determination of reserves.
Investment Income Earned:
Government bonds $ 32,980,530
Other bonds (unaffiliated) 241,502,270
Bonds of affiliates 0
Preferred stocks (unaffiliated) 63,688
Preferred stocks of affiliates 0
Common stocks (unaffiliated) 5,269,987
Common stocks of affiliates 623,559
Mortgages loans 141,444,724
Real estate 115,356,083
Premium notes, policy loans and liens 525,482,561
Collateral loans 0
Cash on hand and on deposit 0
Short-term investments 4,334,350
Other invested assets 2,551,048
Derivative Instruments 0
Aggregate write-ins for investment income 3,823,853
Gross investment income $ 1,073,432,653
Real Estate Owned - Book Value less Encumbrances 352,092,546
Mortgage Loans - Book Value:
Farm mortgages $ 275,050,877
Residential mortgages 25,851,458
Commercial mortgages 1,055,118,933
Total mortgages loans $ 1,356,021,268
Mortgage Loans By Standing - Book Value:
Good standing 745,709,932
Good standing with restructured terms 448,172,562
Interest overdue more than three months,
not in foreclosure 54,357,924
Foreclosure in process 107,780,850
Other Long-term Assets - Statement Value -
Other Invested Assets 67,395,445
Collateral Loans 0
Bonds and Stocks of Parents, Subsidiaries
and Affiliates - Book Value:
Bonds 0
Preferred Stocks 0
Common Stocks 30,889,409
<PAGE>
Bonds and Short-term Investments by Class
and Maturity:
Bonds by Maturity - Statement Value
Due within one year less $ 276,841,784
Over 1 year through 5 years 3,488,095,755
Over 5 years through 10 years 257,550,908
Over 10 years through 20 years 27,461,378
Over 20 years 16,817,561
Total by Maturity $ 4,066,767,386
Bonds by Class - Statement Value
Class 1 $ 3,316,952,103
Class 2 685,414,814
Class 3 41,007,301
Class 4 19,922,020
Class 5 3,471,148
Class 6 0
Total by Class $ 4,066,767,386
Total Bonds Publicly Traded 3,859,139,581
Total Bonds Privately Placed 207,627,805
Preferred Stocks - Statement Value 1,059,256
Common Stocks - Market Value 246,306,937
Short-term Investments - Book Value 41,154,356
Financial Options Owned - Statement Value 0
Financial Options Written and
In-force -Statement Value 0
Financial Futures Contracts Open - Current Price 0
Cash on Deposit 8,311,339
Life Insurance In Force: (000's omitted)
Industrial 0
Ordinary 48,597,579
Credit Life 0
Group Life 619,814
Amount of Accidental Death Insurance In
Force Under (000's omitted)
Ordinary Policies 480,824
Life Insurance Policies with Disability
Provisions In Force (000's omitted):
Industrial 0
Ordinary 3,193,123
Credit Life 0
Group Life 0
Supplementary Contracts In Force:
Ordinary - Not Involving Life Contingencies
Amount on Deposit 79,525,431
Income Payable 5,429,412
Ordinary - Involving Life Contingencies
Income Payable 4,426,854
Group - Not Involving Life Contingencies
Amount of Deposit 22,012,502
Income Payable 7,187,098
Group - Involving Life Contingencies
Income Payable 976,000
Annuities:
Ordinary
Immediate - Amount of Income Payable 359,474
Deferred - Fully Paid Account Balance 8,709,278
Deferred - Not Fully Paid -
Account Balance 113,981,078
Group
Amount of Income Payable 34,944,843
Fully Paid Account Balance 4,871,315
Not Fully Paid - Account Balance 3,048,393,892
Accident and Health Insurance - Premiums In Force:
Ordinary 12,614,472
Group 0
Credit 0
Deposit Funds and Dividend Accumulations:
Deposit Funds - Account Balance 36,315,473
Dividend Accumulation - Account Balance 59,885
Claim Payments 1995:
Group Accident and Health year -
ended December 31, 1995
1995 0
1994 0
1993 and prior 888,021
Other Accident & Health
1995 960,132
1994 2,334,535
1993 and prior 8,171,858
Other coverages that use developmental methods to calculate
claims reserves
1995 0
1994 0
1993 and prior 0
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT-7
previously known as
MUTUAL BENEFIT VARIABLE CONTRACT ACCOUNT-7
_________________________________________________________________
PART C
OTHER INFORMATION
Item 28. Financial Statements and Exhibits.
(a) Financial Statements.
The following Financial Statements are incorporated into Part B of
this Registration Statement by reference from the Audited Financial
Statements dated December 31, 1995, as filed with the Commission
under the Investment Company Act of 1940 on February 27, 1996
(Accession No. 0000912057-96-003094):
MBL Variable Contract Account-7:
Report of Independent Accountants.
Statement of Assets and Liabilities, December 31, 1995.
Statement of Operations (year ended December 31, 1995).
Statements of Changes in Net Assets (two years ended
December 31, 1995).
Financial Highlights for Each of the Ten Years in the
Period Ended December 31, 1995.
The following Financial Statements are filed pursuant to Item 23 of
Part B of this Registration Statement:
MBL Life Assurance Corporation:
Report of Independent Accountants.
Balance Sheet as of December 31, 1995.
Statement of Operations (year ended December 31, 1995).
Statement of Changes in Capital and Surplus
(year ended December 31, 1995).
Statement of Cash Flows (year ended December 31, 1995).
(b) Exhibits *
(1)(A) Resolution of the Board of Directors of Mutual
Benefit Life establishing Mutual Benefit
Variable Contract Account-7, incorporated by
reference to earlier filing on September 23,
1983, SEC File No. 2-86722, Exhibit #(1)(c) of
Form N-1 Registration Statement of Registrant.
(1)(B) Resolution of the Board of Directors of MBL Life
Assurance Corporation establishing MBL Variable
Contract Account-7, incorporated by reference to
earlier filing on April 29, 1994, SEC File No.
811-3853, Exhibit (1)(B) to Amend-ment No. 12 of
Form N-3 Registration Statement.
<PAGE>
(2) Rules and Regulations of Mutual Benefit Variable
Contract Account-7, as amended, incorporated by
reference to earlier filing on May 1, 1990, SEC
File No. 2-86722, Exhibit (2) to Post-Effective
Amendment No. 7 of Form N-3 Registration
Statement.
(3) Custody Agreement dated September 20, 1991, among
Mutual Benefit Life Insurance Company in
Rehabilitation Mutual Benefit Variable Contract
Account-7 and Bankers Trust Company New Jersey
Limited, incorporated by reference to earlier
filing on April 30, 1992, SEC File No. 811-3853,
Exhibit (3) to Amendment No. 10 of Form N-3
Registration Statement.
(4)(A) Investment Advisory Agreement, dated April 29,
1994 between Registrant and First Priority
Investment Corporation, incorporated by reference
to earlier filing on April 29, 1994, SEC File No.
811-3853, Exhibit (4)(A) to Amendment No. 12 of
Form N-3 Registration Statement.
(4)(B) Service Agreement, dated April 29, 1994 among the
Registrant, First Priority Investment Corporation
and MBL Life Assurance Corporation, incorporated
by reference to earlier filing on April 29, 1994,
SEC File No. 811-3853, Exhibit (4)(B) to
Amendment No. 12 of Form N-3 Registration
Statement.
(5) Sales Agreement, dated April 29, 1994 among the
Registrant, MBL Life Assurance Corporation and
First Priority Investment Corporation,
incorporated by reference to earlier filing on
April 29, 1994, SEC File No. 811-3853, Exhibit
(5) to Amendment No. 12 of Form N-3 Registration
Statement.
(6)(A) Form of Group Tax Deferred Annuity Contract
[403(b) Plans].
(6)(B) Form of Group Tax Deferred Annuity Contract [IRA
Plans].
(6)(C) Form of Group Tax Deferred Annuity Contract
[HR-10 Plans].
(6)(D) Form of Group Tax Deferred Annuity Contract [457
Plans].
Exhibits (6)(A)-(D) incorporated by reference to
earlier filing on September 23, 1983, SEC File
No. 2-86722, Exhibits #(4)(a)-(d), respectively,
of Form N-1 Registration Statement of Registrant.
(6)(E) Form of Group Tax-Deferred
Annuity Contract, Individual Allocation [403(b)
Plans].
(6)(F) Form of Group Annuity Deposit Administration
Individual Allocation Companion Contract [403(b)
Plans].
<PAGE>
(6)(G) Form of First Amendment to Group Variable Annuity
Contracts.
Exhibits (6)(E)-(G) incorporated by reference to
earlier filing on April 28, 1989, SEC File No. 2-
86722, Exhibits #(6)(E)-(G), respectively, of
Form N-3 Registration Statement.
(6)(H) Form of Contract Assumption CRT-AC1.
(6)(I) Form of Certificate Assumption CRT-AA2C.
(6)(J) Form of Certificate of Participation CRT-TDA0.
Exhibits (6)(H)-(J) incorporated by reference to
earlier filing on April 29, 1994, SEC File No.
811-3853, Exhibits #(6)(H)-(J), respectively, to
Amendment No. 12 of Form N-3 Registration
Statement.
(7)(A) Form of Application used with Contracts listed in
response to Exhibit (6) above, incorporated by
reference to earlier filing on May 1, 1991, SEC
File No. 2-86722, Exhibit (6)(A) to Post-
Effective Amendment No. 8 of Form N-3
Registration Statement.
(7)(B) Form of Acknowledgment of Statutory TDA
Withdrawal Restrictions, incorporated by
reference to earlier filing on April 28, 1989,
SEC File No. 2-86722, Exhibit #(7)(b) of Form N-3
Registration Statement.
(8)(A) Charter, as amended, of Mutual Benefit Life.
(8)(B) By-Laws, as amended, of Mutual Benefit Life.
Exhibits (8)(A) and (8)(B) incorporated by
reference to earlier filing on May 1, 1991, SEC
File No. 2-86722, Exhibits (8)(A) and (8)(B),
respectively, to Post-Effective Amendment No. 8
of Form N-3 Registration Statement.
(8)(C) Second Amended and Restated Articles of
Redomestication and Incorporation of MBL Life
Assurance Corporation.
(8)(D) By-Laws of MBL Life Assurance Corporation.
Exhibits (8)(C) and (8)(D) incorporated by
reference to earlier filing on April 29, 1994,
SEC File No. 811-3853, Exhibits (8)(C) and
(8)(D), respectively, to Amendment No. 12 of Form
N-3 Registration Statement.
(9) Not applicable.
(10) Not applicable.
(11) Consent of Coopers & Lybrand L.L.P., Independent
Accountants;
Report of Arthur Andersen LLP, Independent Public
Accountants;
Consent of Arthur Andersen LLP, Independent
Public Accountants;
Report of Ernst & Young LLP, Independent
Auditors;
Consent of Ernst & Young LLP, Independent
Auditors;
<PAGE>
(12) Opinion of Frank D. Casciano, General Counsel,
MBL Life Assurance Corporation.
(13) Not applicable.
(14) Not applicable.
(15) Initial Capital Undertaking by Mutual Benefit
Life, incorporated by reference to earlier filing
on September 23, 1983, SEC File No. 2-86722,
Exhibit #13 of Form N-1 Registration Statement of
Registrant.
(16)(A) Schedule of Computation for Yield Quotation.
(16)(B) Schedule of Computation for Effective Yield
Quotation.
(17) (A) Powers of Attorney, incorporated by
reference to earlier filing on February 22, 1996,
SEC File No. 333-01151, Exhibit (17) of Form N-3
Registration Statement.
(B) Powers of Attorney filed herewith.
(18) Consent Order to Show Cause with Temporary
Restraints of the Superior Court of New Jersey
entered July 16, 1991, incorporated by reference
to earlier filing on April 30, 1992, SEC File No.
811-3853, Exhibit (18) to Amendment No. 10 of
Form N-3 Registration Statement.
(19) Mutual Benefit Fund et al. No-Action Letter,
dated October 27, 1993, incorporated by reference
to earlier filing on April 29, 1994, SEC File No.
811-3853, Exhibit (19) to Amendment No. 12 of
Form N-3 Registration Statement.
(20) Mutual Benefit Life Insurance Company Information
Statement Plan of Rehabilitation and Related
Documents, including the Confirmation Order,
dated January 28, 1994, incorporated by reference
to earlier filing on April 29, 1994, SEC File No.
811-3853, Exhibit (19) to Amendment No. 12 of
Form N-3 Registration Statement.
(27) Financial Data Schedule.
__________________________________________________________
* Page numbers inserted in manually signed copy only.
<PAGE>
Item 29. Directors and Officers of MBL Life Assurance Corporation.
Pursuant to an Order dated July 16, 1991, entered by the
Superior Court of the State of New Jersey, the Commissioner of
Insurance of the State of New Jersey was appointed as
"Rehabilitator" of Mutual Benefit Life Insurance Company
("Mutual Benefit Life"). The Rehabilitator was directed to
conduct the business of Mutual Benefit Life. From July 16,
1991 through May 1, 1994, Mutual Benefit Life did not have a
Board of Directors.
As of May 1, 1994, Mutual Benefit Life was transferred to MBL
Life Assurance Corporation ("MBL Life"), pursuant to the
Rehabilitation Plan of Mutual Benefit Life, as approved by the
Court on January 28, 1994. MBL Life, as the successor
sponsoring life insurance company of the Registrant, is
managed by a Board of Directors.
The Directors of MBL Life, their principal business addresses
and their positions and offices with MBL Life, are as follows:
Name and Principal Position and Offices with
Business Address Sponsoring Insurance Company
Alan J. Bowers Director, President
MBL Life and Chief
520 Broad Street Executive Officer
Newark, New Jersey 07102
Elizabeth E. Randall Director, Chairman
20 W. State Street of the Board
CN-325
Trenton, NJ 08625
Sheldon Brooks Director
The Prudential Asset
Management Company, Inc.
71 Hanover Road
Florham Park, NJ 07932
Donald Bryan Director
20 W. State Street
CN-325
Trenton, NJ 08625
Harry D. Garber Director
76 Mulberry Avenue
Garden City, NY 11530
John C. Kerr, Jr. Director
20 W. State Street
CN-325
Trenton, NJ 08625
<PAGE>
Richard W. Klipstein Director
National Organization of
Life and Health Insurance
Guaranty Association
13873 Park Center Road
Herndon, VA 22071
Anita Kartalopoulos Director
20 W. State Street
CN-325
Trenton, NJ 08625
Felix Schirripa Director
The Metropolitan Life
Insurance Company
One Madison Avenue
New York, NY 10010-3690
___________________________________
Officers (Other than Directors) of MBL Life whose activities
relate to the Account are listed below.
Frank D. Casciano Executive Vice President,
General Counsel and Secretary
Robert T. Budwick Executive Vice President -
Chief Investment Officer
Kenneth A. Watson Executive Vice President
and Chief Financial Officer
Kathleen M. Koerber Executive Vice President -
Chief Operating Officer
Kenneth K. Schaefer Second Vice President
and Treasurer
Walter A. Appel Vice President,
Securities Investment
David A. James Senior Vice President,
Securities Investment
Albert W. Leier Vice President
and Controller
William G. Clark Senior Vice President,
Pension and Investment Products
All of these Officers maintain a principal business address at
520 Broad Street, Newark, New Jersey 07102.
Prior to May 1, 1994 each officer named above maintained a
similar position and/or title with Mutual Benefit Life.
<PAGE>
Item 30. Persons Controlled by or Under Common Control with
the Sponsoring Insurance Company or Registrant.
Mutual Benefit Variable Contract Account-7 was formerly a
separate account of Mutual Benefit Life. As described above
and in accordance with the Rehabilitation Plan of Mutual
Benefit Life, the assets and liabilities of Mutual Benefit
Variable Contract Account-7 were transferred to a separate
account of MBL Life.
The Account is a separate account of MBL Life, a stock life
insurance company organized under the laws of New Jersey. The
voting stock of MBL Life was transferred to a Stock Trust
established by the Rehabilitation Plan appointing the
Commissioner of Insurance of the State of New Jersey as
Trustee until the end of the Rehabilitation Period, scheduled
for December 31, 1999.
The Account is under the general supervision of a Management
Committee ("Committee").
No person, other than the Trustee, has the direct or indirect
power to control MBL Life except insofar as he or she may have
such power by virtue of his or her capacity as a director.
As of May 1, 1995, those persons under common control with the
sponsoring insurance company (MBL Life) are illustrated by the
chart on the following page. The following information
relates to that chart.
All corporations are organized under the laws of New Jersey
except where a different state is indicated.
The principal business of certain of MBL Life Assurance
Corporation's affiliates are as follows:
MBLLAC Holding Corporation is a holding company; First
Priority Investment Corporation is a registered investment
adviser and broker/dealer; Metro IRB, Inc., Fisher Island
Corporation, Pelican Apartment Properties, Inc. and Metro JV,
Inc. act as general partners in joint ventures; Mutual Benefit
Marketing Group Inc. markets insurance products; EHC
Companies, Inc. is a holding company for Ernst Home Center,
Infotech Corp., Extraspace Inc., and EDC, Inc., a home and
garden chain, a data service provider, specialty retail
stores, and a warehousing operation, respectively; and NWD
Investment Company is a holding company for WD Holdings, Inc.
a distribution company; Fisher Island Mortgage Corporation
acts as mortgage originator and holder for residential loans.
Markston Investment Management, a registered investment
adviser, is a partnership owned 51 percent by MBL Sales
Corporation; Hawaiian Macadamia Company, Inc., a processing
company; Tong Yang Benefit Life Insurance Company, a foreign
insurance company; Outlet Communications Inc. a holding
company for Outlet Broadcasting Inc., a broadcasting company;
and International Corporate Marketing Group, an insurance
broker.
[The following page contains an organizational diagram of the
direct and indirect subsidiaries of MBL Life and the mutual
funds sponsored by MBL Life. The diagram indicates the state
of incorporation for each entity and the percentage of voting
securities controlled by MBL Life.]
MAP-Equity Fund, MBL Growth Fund, Inc. and MAP-Government
Fund, Inc. are investment companies as defined by the
Investment Company Act of 1940 (the "Act"). First Priority
Investment Corporation ("First Priority"), a wholly-owned
indirect subsidiary of the Depositor, serves as distributor
for the shares of both MAP-Equity Fund and MBL Growth Fund,
Inc. Markston Investment Management, a partnership between
Markston International, Inc. and MBL Sales Corporation, serves
as investment adviser to MAP-Equity Fund and MBL Growth Fund,
Inc. Shares of MBL Growth Fund, Inc. may be purchased only by
separate accounts which are registered under the Investment
Company Act of 1940. First Priority also serves as
distributor and investment adviser for MAP-Government Fund,
Inc. The Funds file separate financial statements. Ernst
Home Centers, Inc. and First Priority file independent
financial statements with the Securities and Exchange
Commission.
As of January 2, 1996 Participants under the Long Island
Jewish Medical Center 403(b) Plan, New Hyde Park, New York,
owned 42.79% percent of the outstanding Variable Accumulation
Units of the Account. Registrant does not believe that this
degree of ownership constitutes an exercise of control over
the activities of the Account, for the following reasons:
(1) The Contract Holder passes its voting rights through to
Participants under the Contract,
(2) Each Participant controls the right to withdraw his or
her funds attributable to Variable Accumulation Units held in
the Account, and
(3) The Contract Holder cannot exercise control over the
direction of the Participant interest in the Account.
Item 31. Number of Contract Holders.
As of January 2, 1996: 115
<PAGE>
Item 32. Indemnification.
The Account maintains investment errors and omissions
insurance ("E & O") covering each officer and those Management
Committee Members who are not interested persons of the
Account. This policy protects those Committee Members from
legal liabilities and expenses which they may incur as a
result of claims for breach of duty, negligent acts, errors,
omissions, misstatements or misleading statements committed or
alleged to have been committed by them in their capacity as
members of the Committee. The policy would also insure the
Account according to the terms and conditions of the policy.
The policy excludes expenses and liabilities based upon, among
other things, any claim alleging dishonesty or fraudulent acts
or omissions, or any criminal or malicious acts or omissions.
The limits on the policy are $2,000,000 each wrongful act and
$2,000,000 aggregate. Notwithstanding any agreement or
document to the contrary, the Account undertakes not to insure
any member for any liability the indemnification of which has
been determined to be prohibited under the federal securities
laws.
The Account is the joint owner of the E & O policy with MAP-
Equity Fund, MBL Growth Fund, Inc. and MAP-Government Fund,
Inc., and the premiums are allocated based on the proportion
of each entity's net assets to the total net assets of all the
joint insured entities.
The Account also maintains an Investment Companies Blanket
Bond covering the Account against larceny and embezzlement
committed by specified individuals who may have access to
funds of the Account.
In addition to the aforementioned E & O insurance and Blanket
Bond, to the extent permitted by law of the State of New
Jersey under NJSA 14A:3-5 and subject to all applicable
requirements thereof, MBL Life has undertaken to indemnify
each of its officers and each Management Committee Member, his
heirs, executors and administrators, who is made or threatened
to be made a party to any action or proceeding, whether civil
or criminal, by reason of the fact that he is or was an
officer of MBL Life or a Committee Member.
Under the Sales Agreement between the Account and First
Priority, First Priority agrees to indemnify the Account and
its Officers and Committee Members and Controlling Persons
from all liabilities and expenses arising out of certain
actual or alleged material misstatements or other mistakes,
negligence or willful misconduct of First Priority or any of
its agents or employees in connection with sales of the
Account's units.
Insofar as indemnification for liability arising under the Act
may be provided to Directors, Officers and Committee Members
of the Account pursuant to the foregoing provisions, or
otherwise, MBL Life has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by MBL Life of expenses incurred or paid by a
Director, Officer, or Committee Member of the Account in the
successful defense of any action, suit or proceeding) is
asserted by such Director, Officer, or Committee Member in
connection with the securities being registered, MBL Life
will, unless if in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue. Notwithstanding any agreement or document to the
contrary, MBL Life undertakes not to indemnify any Director,
Officer or Committee Member for any liability, the
indemnification of which has been determined to be prohibited
under the Federal securities laws.
<PAGE>
Item 33. Business and Other Connections of Investment Adviser.
First Priority is the Registrant's investment adviser. First
Priority is a wholly-owned indirect subsidiary of MBL Life. First
Priority also acts as principal distributor of shares of the
Registrant, MBL Growth Fund, Inc., MAP-Equity Fund, and MAP-
Government Fund, Inc., as well as MBL Variable Contract Account-2
and MBL Variable Contract Account-3, and engages in the sale of
other investment company securities and other financial products as
described in the Prospectus constituting Part A of this
Registration Statement and in the Statement of Additional
Information constituting Part B. The table below sets forth
certain information as to First Priority's directors and officers.
<TABLE>
<CAPTION>
Other Substantial
Business Profession, and
Name and Principal Position with Vocation of Employment
Business Address* First Priority Within Past Two Years
<S> <C> <C>
William G. Clark Director, President Senior Vice President -
Pension and Investment
Products, MBL Life.**
Frank D. Casciano Director, Vice Executive Vice President
President and General Counsel and
General Counsel Secretary, MBL Life.**
Robert T. Budwick Director, Vice Executive Vice President
President and Chief Securities Investment,
Investment Officer MBL Life.**
Alan J. Bowers Director President and CEO, MBL Life
since 7/1/95; prior thereto,
Managing Partner, Coopers &
Lybrand L.L.P.
Eugene J. Ciarkowski Director Vice President - Securities
Investment, MBL Life.**
Kathleen M. Koerber Director Executive Vice President
and Chief Operating
Officer, MBL Life.**
Albert W. Leier Director, Vice Vice President and
President and Controller, MBL Life.**
Treasurer
Judith C. Keilp Vice President and Counsel, MBL Life.**
Secretary
Christopher S. Auda Vice President, Vice President, Operations,
Operations First Priority.
James Switlyk Second Vice President Second Vice President,
Marketing Support Marketing Support,
First Priority.
Roger A. Vellekamp Assistant Secretary Second Vice President -
Tax, MBL Life. **
</TABLE>
_______________________________
* All of the Officers and Directors named maintain a principal business
address at 520 Broad Street, Newark, New Jersey 07102-3111.
** Prior to May 1, 1994 each officer named maintained a similar position
and/or title with Mutual Benefit Life.
<PAGE>
Item 34. Principal Underwriter.
(a) First Priority, the Account's principal underwriter, pursuant
to a Sales Agreement, serves as principal underwriter for the
following registered investment companies: MAP-Equity Fund,
MBL Growth Fund, Inc., and MAP-Government Fund, Inc., and for
the following unit investment trusts: MBL Variable Contract
Account-2 and MBL Variable Contract Account-3, each a separate
account of MBL Life.
First Priority also serves as the investment adviser to MAP-
Government Fund, Inc.
(b) Information regarding First Priority's officers and directors:
See Item 33 above.
(c) Not applicable.
Item 35. Location of Accounts and Books.
All accounts, books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the
rules thereunder are maintained at the offices of the Account and
the Account's Custodian, Bankers Trust Company New Jersey Limited,
34 Exchange Place, Jersey City, New Jersey 07302.
Item 36. Management Services.
Other than as set forth under the caption "Investment Management"
in the Prospectus, as amended, constituting Part A of this
Registration Statement, and under "Investment Advisory and Other
Services" in the Statement of Additional Information constituting
Part B, the Account is not a party to any management-related
service contract.
Item 37. Undertakings.
(a) Not applicable.
(b) Registrant undertakes to file a post-effective amendment to
its Securities Act of 1933 Registration Statement as
frequently as necessary to ensure that the audited financial
statements in the Registration Statement are never more than
16 months old for so long as payments under the variable
annuity contracts may be accepted.
(c) Registrant undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus,
a space that an applicant can check to request a Statement of
Additional Information, or (2) a post card or similar written
communication affixed to or included in the Prospectus that
the applicant can remove to send for a Statement of Additional
Information.
(d) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made
available under this form promptly upon written or oral
request.
(e) Registrant undertakes to rely upon American Council of Life
Insurance (Ref. No. IP-6-88, pub. avail. November 28, 1988)
(the "Letter"), which permits restrictions on cash
distributions to Participants in retirement plans meeting the
requirements of Section 403(b) of the Internal Revenue Code of
1986, and represents that the following provisions of the
Letter have been complied with:
(1) That the Account has included appropriate disclosure
regarding the redemption restrictions imposed by Section
403(b)(11) in this registration statement, including the
prospectus;
(2) That the Account has included appropriate disclosure
regarding the redemption restrictions imposed by Section
403(b)(11) in all sales literature used in connection
with the offer of the Contract;
(3) That the Account's Distributor has instructed sales
representatives, who solicit Participants to purchase the
Contract, specifically to bring the redemption
restrictions imposed by Section 403(b)(11) to the
attention of potential Participants;
(4) That the Account has obtained from each Participant
purchasing a Section 403(b) Contract, prior to or at the
time of purchase, a signed statement acknowledging the
Participant's understanding of: (a) The restrictions on
redemption imposed by Section 403(b)(11), and (b) The
investment alternatives available under the employer's
Section 403(b) arrangement to which the Participant may
elect to transfer his or her Contract value.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has caused this Pre-Effective
Amendment to the Registration Statement to be signed on its behalf, in
the City of Newark, and State of New Jersey, on the 3rd day of April,
1996.
MBL VARIABLE CONTRACT ACCOUNT-7
(Registrant)
By: JUDITH C. KEILP
Judith C. Keilp
Secretary of the Management Committee
of MBL Variable Contract Account-7
As required by the Securities Act of 1933, this Pre-Effective
Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
MBL VARIABLE CONTRACT ACCOUNT-7
Signature Title Date
DAVID A. JAMES Chairman, April 3, 1996
David A. James Member
GORDON BOYD Member April 3, 1996
Gordon Boyd
WILLIAM G. CLARK Member April 3, 1996
William G. Clark
JOSEPH LINDNER, JR. Member April 3, 1996
Joseph Lindner, Jr.
JEROME M. SCHECKMAN Member April 3, 1996
Jerome M. Scheckman
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Act of
1940, the Sponsoring Insurance Company has caused this Pre-Effective
Amendment to the Registration Statement to be signed on its behalf, in
the City of Newark, and State of New Jersey, on the day of April 3,
1996.
By: MBL Life Assurance Corporation
(Sponsoring Insurance Company)
By: FRANK D. CASCIANO
Frank D. Casciano
Executive Vice President,
General Counsel and Secretary
As required by the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and
on the dates indicated.
ALAN J. BOWERS Chief Executive Officer April 3, 1996
Alan J. Bowers Director, President
KENNETH A. WATSON Chief Financial Officer April 3, 1996
Kenneth A. Watson
ALBERT W. LEIER Chief Accounting April 3, 1996
Albert W. Leier Officer
Directors:
Elizabeth E. Randall
Sheldon Brooks *
Donald Bryan *
Harry D. Garber *
Anita Kartalopoulos **
John Kerr *
Richard W. Klipstein *
Felix Schirripa *
By: FRANK D. CASCIANO Date: April 3, 1996
Frank D. Casciano
Attorney-in-Fact
* Executed by Frank D. Casciano, Attorney-in-Fact, on behalf of those
indicated pursuant to the Powers of Attorney.
** Executed by Frank D. Casciano, Attorney-in-Fact, on behalf of those
indicated pursuant to the Powers of Attorney, filed herewith.
<PAGE>
EXHIBIT INDEX*
Exhibit No.
(11) Consent of Coopers & Lybrand L.L.P., Independent Accountants;
Report of Arthur Andersen LLP, Independent Public Accountants;
Consent of Arthur Andersen LLP, Independent Public
Accountants;
Report of Ernst & Young LLP, Independent Auditors;
Consent of Ernst & Young LLP, Independent Auditors;
(12) Opinion of Frank D. Casciano, General Counsel, MBL Life
Assurance Corporation.
(16)(A) Schedule of Computation for Yield Quotation.
(16)(B) Schedule of Computation for Effective Yield Quotation.
(17) Powers of Attorney.
(27) Financial Data Schedule.
* Pages numbers inserted in manually signed copy only.
Exhibit (11)
[Coopers & Lybrand L.L.P. Letterhead]
CONSENT OF INDEPENDENT ACCOUNTANTS
________________
We consent to the (a) incorporation by reference of our report dated
February 16, 1996 on the financial statements of MBL Variable Contract
Account-7, and (b) the inclusion of our report dated February 16, 1996
on the financial statements of MBL Life Assurance Corporation appearing
in Pre-Effective Amendment No. 1 to the Registration Statement (Form N-
3) of MBL Variable Contract Account-7 to be filed with the Securities
and Exchange Commission under the provisions of the Securities Act of
1933 and the Investment Company Act of 1940, as amended.
We also consent to the reference of our firm under the caption
"Financial Statements" in the Statement of Additional Information.
COOPERS & LYBRAND L.L.P.
Parsippany, New Jersey
April 5, 1996
<PAGE>
Exhibit (11)
[Arthur Andersen LLP Letterhead]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Management Committee and Contract Holders
Mutual Benefit Variable Contract Account-7:
We have audited the accompanying financial highlights of Mutual Benefit
Variable Contract Account-7 (the "Account") for each of the two years in
the period ended December 31, 1993. The financial highlights are the
responsibility of the Account's management. Our responsibility is to
express an opinion on these financial highlights based on our audits.
The financial highlights for each of the 6 years in the period ended
December 31, 1991 were audited by other auditors whose reported dated
February 21, 1992 included explanatory comments on the matter described
below.
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 highlights
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial highlights. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial highlight presentation. We believe
that our audits provide a reasonable basis for our opinion.
On July 16, 1991, the Superior Court of New Jersey entered an order (the
"Order") appointing the New Jersey Insurance Commissioner as
Rehabilitator of The Mutual Benefit Life Insurance Company.
In our opinion, the financial highlights referred to above present
fairly, in all material respects, the financial highlights of Mutual
Benefit Variable Contract Account-7 for each of the two years in the
period then ended December 31, 1993 in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN, LLP
Roseland, New Jersey
February 7, 1994
<PAGE>
Exhibit (11)
[Arthur Andersen LLP Letterhead]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To MBL Variable Contract Account-7
As independent public accountants, we hereby consent to the use of our
report dated February 7, 1994 on the financial highlights of MBL
Variable Contract Account-7 and to all references to our firm included
in or made a part of this registration statement.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
April 5, 1996
<PAGE>
Exhibit (11)
[Ernst & Young LLP Letterhead]
REPORT OF INDEPENDENT AUDITORS
To the Contractholders and Participants
MBL Variable Contract Account-7
We have audited the accompanying financial highlights of the MBL
Variable Contract Account-7 for each of the six years in the period
ended December 31, 1991. These financial highlights are the
responsibility of the Account's management. Our responsibility is to
express an opinion on these financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audits
to obtain reasonable assurance about whether the financial highlights
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial highlights. 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.
In our opinion, the financial highlights referred to above present
fairly, in all material respects, the financial highlights of MBL
Variable Contract Account-7 for each of the six years in the period
ended December 31, 1991, in conformity with generally accepted
accounting principles.
ERNST & YOUNG
February 21, 1992
<PAGE>
Exhibit (11)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the inclusion in this Post-Effective Amendment Number 16
to Registration Statement Number 811-03853 on Form N-3 of our report
dated February 21, 1992 on the financial highlights of MBL Variable
Contract Account-7 included in the 1995 Audited Financial Statements.
ERNST & YOUNG LLP
New York, New York
April 3, 1996
Exhibit (12)
[MBL Life Assurance Corporation Letterhead]
April 1, 1996
MBL Life Assurance Corporation
520 Broad Street
Newark, NJ 07102-3111
Gentlemen:
This opinion is furnished in connection with the Registration
Statement, File No. 333-01151 of MBL Variable Contract Account-7 (the
"Variable Contract Account") under the Securities Act of 1933, as
amended (the "Act"), relating to units of interest ("Units") in the
Variable Contract Account under Group Tax-Qualified Variable Annuity
Contracts (the "Contracts") assumed by MBL Life Assurance Corporation
("MBL Life"). The Contracts are designed to provide retirement and
other benefits for persons covered under plans qualified for Federal
income tax advantages under certain sections of the Internal Revenue
Code of 1986, as amended. The securities are offered in the manner
described in the Registration Statement.
I have examined or caused to be examined all relevant corporate
records of MBL Life and such laws as I consider appropriate as a basis
for the opinion hereinafter expressed. On the basis of such
examination, it is my opinion that:
1. MBL Life is a corporation duly organized and validly existing
under the laws of the State of New Jersey.
2. The Variable Contract Account was established pursuant to a
resolution of the Board of Directors of The Mutual Benefit
Life Insurance Company ("Mutual Benefit Life") and in
accordance with the provisions of New Jersey Insurance Law.
On July 16, 1991, the Superior Court of New Jersey entered an
Order appointing the Insurance Commissioner of the State of
New Jersey as Rehabilitator of Mutual Benefit Life, thereby
granting the Rehabilitator immediate exclusive possession ad
control of, and title to, the business and assets of Mutual
Benefit Life, including those of the Variable Contract
Account.
Pursuant to the terms and conditions of the Plan of
Rehabilitation submitted by the Insurance Commissioner and
approved by the Superior Court, and pursuant to a resolution
of the Board of Directors of MBL Life, the assets and
liabilities of the Variable Contract Account were transferred
by Mutual Benefit Life to a separate account of MBL Life.
<PAGE>
3. The assets of the Variable Contract Account will be the
property of MBL Life and will be held separately from all
other assets of MBL Life. Under New Jersey law, any income,
gains and losses, whether realized or not, from the Variable
Contract Account's investment operations must be credited to
or charged against the Variable Contract Account without
regard to any other income, gains or losses of Mutual Benefit
Life. MBL Life will maintain the assets of the Variable
Contract Account in an amount at least equal to the amount
required for MBL Life to meet its obligations under the
Contracts, as determined at least once each year. Annuity
payments, when based on the investment experience of the
Variable Contract Account, will vary with the performance of
the Variable Contract Account.
4. The New Jersey Insurance Law provides that to the extent
provided in the applicable contract or contracts, assets held
in a Variable Contract Account shall not be chargeable with
liabilities arising out of any other business of an insurance
company, but makes no explicit provision as to whether or not
the assets of a Variable Contract Account are as a matter of
law absolutely insulated from the claims of other
policyholders or creditors of the insurance company.
Accordingly, no representation can be made that, in all
possible contingencies, the assets held in the Variable
Contract Account cannot, as a matter of law, be subject to
such claims. However, it is my opinion that any such claims
could be made only upon insolvency of MBL Life, in which event
equitable principles would be applied by the Commissioner of
Insurance of New Jersey or by a court dealing with any
resulting liquidation or rehabilitation of MBL Life under New
Jersey Insurance Law and should afford appropriate protection
to Contract Holders participating in the Variable Contract
Account.
5. When executed, the Contracts, as amended, and the Units will
have been duly authorized and each of the Contracts (including
any Units when duly credited thereunder) will constitute a
validly issued and binding obligation of MBL Life in
accordance with the terms of such Contracts. Individuals
having an interest under a Contract will be subject only to
the deductions, charges and fees set forth in the Prospectus
included in the Registration Statement, including any
Amendments thereto.
<PAGE>
6. The discussion of tax matters set forth in the Prospectus
included in the Registration Statement is an accurate summary
of the effect of applicable Federal income tax laws, but no
representation is made that such discussion is exhaustive or
that it purports to cover all situations.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
MBL LIFE ASSURANCE CORPORATION
By: FRANK D. CASCIANO
Frank D. Casciano
Executive Vice President and
General Counsel, and Secretary
Exhibits (16)(A) & (B)
MBL Variable Contract Account-7
Item: 28(b)(16)(A) Schedule of Computation for Yield Quotation
Unit Unit Unit Base
Value - Value = Net Value = Period X 365/7 = 7-Day
12/29/95 12/22/95 Change / 12/22/95 Return Yield
$17.799 $17.777 .022 / $17.777 .001238 = 4.99%
Item: 28(b)(16)(B) Schedule of Computation for Effective
Yield Quotation
Effective Yield = [(Base Period Return + 1) * (365/7)] - 1
= [(.001238 + 1) * (365/7)] - 1
= 5.11%
Exhibit (17)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints Alan J. Bowers, Frank D.
Casciano, Kathleen M. Koerber, and Kenneth A. Watson, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign the Registration Statement and any and all
amendments to the Registration Statement for MBL Variable Contract
Account-7 and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite
and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Signature Title Date
ANITA KARTALOPOULOS Director March 29, 1996
Anita Kartalopoulos
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE ANNUAL REPORT OF MBL VARIABLE CONTRACT ACCOUNT-7 DATED
DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<NAME> MBL VARIABLE CONTRACT ACCOUNT-7
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