SEC File No. 333-01151
SEC File No. 811-3853
As filed with the Securities and Exchange Commission
on April 30, 1997
____________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 1 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 17 [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 1-800-435-3191
Judith C. Keilp, Esq.
Counsel
MBL Life Assurance Corporation
520 Broad Street, Newark, New Jersey 07102-3111
(Name and Address of Agent of Service)
Copies to:
Stephen E. Roth, Esq.
Sutherland, Asbill & Brennan, L.L.P.
1275 Pennsylvania Ave., N.W.
Washington, D.C. 20004-0147
_________________________________________________________________
This amendment shall become effective on May 1, 1997, pursuant to
Rule 485(b) under the Securities Act of 1933.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940,
the Registrant has registered an indefinite amount of securities.
The Registrant's Rule 24f-2 Notice was filed with the Commission
on February 13, 1997.
<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 Condensed Financial Information
Financial Highlights
Performance Related Information,
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
_________________________________________________________________
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT-7
MBL Life Assurance Corporation
520 Broad Street, Newark, New Jersey 07102
May 1, 1997
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(a), 403(b), 408 or 457
("Qualified Plans") of the Internal Revenue Code of 1986, as
amended (the "Code"). 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. However,
additional purchase payments are being accepted from existing and
new Participants (defined below) under existing Contracts.
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.
All Contracts 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 24.
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.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.
The date of the Statement of Additional Information is May 1,
1997.
TABLE OF CONTENTS
Page
SUMMARY OF PROSPECTUS
Fee Table 3
The Contracts 4
The Account 4
Investment Adviser and
Principal Underwriter 4
Expense Charges 4
Waiver of Charges 4
Minimum Investment 5
Investment Objective of the Account 5
Redemption 5
Certain Investment Risks 5
PERFORMANCE RELATED INFORMATION 5
CONDENSED FINANCIAL INFORMATION
Financial Highlights 6
Financial Statements 6
GROUP TAX-DEFERRED VARIABLE ANNUITY CONTRACTS
Eligible Contract Holders 7
Basic Provisions 7
Assumption of Expense Risk 8
Redemption and Payment at Death 8
Companion Contract and VCA-2 Contract 8
THE VARIABLE CONTRACT ACCOUNT
Organization 8
Legal Developments 9
Assets 9
Investment Objective and Policies 10
Portfolio Turnover-Value 12
Certain Investment Risks 12
Investment Restrictions 12
CHARGES
Expense and Expense Risk Charges 12
Investment Advisory Fee 13
Other Charges 13
Premium Taxes 13
ACCUMULATION ACCOUNT
Purchase Payments 13
Variable Accumulation Account 13
Transfers Between Contracts 14
Redemption 15
Payment at Death 15
ANNUITY
Annuity Commencement Date 16
Purchase of Annuity 16
GENERAL RIGHTS
Voting Rights 16
Confirmation of Transaction and
Account Statements 17
Reports 17
457 Plan Participants 17
MANAGEMENT 17
INVESTMENT MANAGEMENT 17
FEDERAL INCOME TAX STATUS
Introduction 18
Taxation of MBL Life 18
Tax Status of the Contract 18
Retirement Plans 19
Taxation of Distributions 20
Withholding 21
Possible Changes in Taxation 21
Other Tax Consequences 21
OTHER CONTRACT PROVISIONS
Beneficiary 22
Non-Assignability 22
Portability 22
Failure of Plan to Qualify 22
Discontinuance 22
Transfer to New Funding Agency 22
Changes in Contract 23
Other Changes 23
STATEMENT OF ADDITIONAL INFORMATION
Table of Contents 24
INDEX OF TERMS
The following terms are explained on the page indicated.
Account 1
Accumulation Period 4
Annuity 16
Annuity Commencement Date 16
Code 1
Companion Contract 4
Contract(s) 1
Contract Holder(s) 1
Contract Year 14
First Priority 4
401(a) Plan 7
403(b) Plan 7
457 Plan 7
IRA Plan 7
MBL Life 1
Mutual Benefit Life 1
Net Purchase Payment 7
1940 Act 4
Participant 1
Qualified Plans 1
Rehabilitation 9
SEC 8
Transfer 1
Variable Accumulation Account 1
Variable Accumulation Unit 13
Variable Contract Account - 2 4
Variable Contract Account - 7 1
VCA-2 Contract 4
<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 certain states ranging 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,
1997, 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 1996 would have been .77%.
** There are no additional charges imposed upon redemption.
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(a),
403(b), 408 or 457 of 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. The VCA-2 Contracts offer
variable accumulations, as well as annuities with underlying
investments in common stocks and other equity-type securities.
Fixed annuities are available through the Companion Contract.
New Participants participating in plans qualified under
Section 408 of the Code and, for residents of New York, plans
qualified under Section 403(b), are entitled to a return of their
initial premium payments without cost within ten days of purchase
under a ten-day revocation provision.
The Account
The Account operates as a separate account of MBL Life. The
Account 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"). As noted above, at
retirement fixed or variable annuity benefits are available 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.
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 certain 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, 1997, 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".)
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.
As earlier noted, the expense and expense risk charge is not
currently being assessed and MBL Life is paying the investment
advisory fee. Therefore, when the Account advertises its "yield"
and "effective yield", neither quotation includes any Contract
charges. MBL Life has agreed to continue with the cessation of
the expense risk charge and assumption of the investment advisory
fee for the one-year period beginning May 1, 1997, but reserves
the right after that period 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 31, 1996 the
Account's "yield" was 4.74% and its "effective yield" was 4.86%.
CONDENSED FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
Selected data for each accumulation unit outstanding throughout the
years indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation Unit Value,
Beginning of Year $17.799 $16.864 $16.238 $15.772 $15.232 $14.415 $13.345 $12.328 $11.588 $11.043
Net investment income 0.907 0.935 0.626 0.466 0.540 0.812 1.070 1.017 0.740 0.545
Net gain from investment transactions --- --- --- --- --- 0.005 --- --- --- ---
Net increase in net assets resulting
from operations 0.907 0.935 0.626 0.466 0.540 0.817 1.070 1.017 0.740 0.545
Accumulation Unit Value, End of Year $18.706 $17.799 $16.864 $16.238 $15.772 $15.232 $14.415 $13.345 $12.328 $11.588
Total Return 5.10 % 5.54 % 3.86 % 2.95 % 3.55 % 5.67 % 8.02 % 8.25 % 6.39 % 4.94 %
Ratios/Supplemental Data
Net Assets, End of Year (thousands) $ 2,000 $ 2,050 $ 2,221 $ 2,519 $ 3,266 $ 5,448 $ 3,960 $ 2,033 $ 1,141 $ 773
Ratio of Expenses 1 to Average
Net Assets 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.03 % 0.02 %
Ratio of Net Investment Income 1 to
Average Net Assets. 5.0 % 5.4 % 3.8 % 2.9 % 3.5 % 6.2 % 7.6 % 7.9 % 6.6 % 4.9 %
</TABLE>
1 Without waiver and assumption of expenses by MBL Life, the ratio of
expenses to average net assets would have been 0.77%, and the ratio of net
investment income to average net assets would have been 4.2%. (See Note C
of the Notes to Financial Statements.)
FINANCIAL STATEMENTS
Further information about the Account's performance is
contained in the Account's 1996 Annual Report, which also
contains the Account's audited financial statements. The
Account will furnish without charge an additional copy of
the Account's 1996 Annual Report upon request made to
Pension and Investment Products, MBL Life Assurance
Corporation, 520 Broad Street, Newark, New Jersey 07102-
3111, Attn: MBL VARIABLE CONTRACT ACCOUNT-7, or by
telephoning 1-800-435-3191.
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.
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 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(a) of the Code ("401(a) 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 expenses 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".)
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 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 originally 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,
with the New Jersey Commissioner of Banking and Insurance as
Trustee, pursuant to the Rehabilitation Plan of Mutual Benefit
Life, MBL Life's former parent.
Legal Developments
As noted above, 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.
In view of the terms and conditions of the Order, on July
16, 1991, Mutual Benefit Life, on behalf of the Account,
immediately ceased acceptance of applications for new Contracts
and additional purchase payments under existing Contracts. The
cessation of additional purchase payments continued from July 16,
1991 until April 23, 1996. Because the Account was a separate
account of Mutual Benefit Life, the assets and liabilities of the
Account were maintained separate and apart from Mutual Benefit
Life's general account assets and liabilities. Transfers to 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 continued to be made
to the beneficiaries.
A Rehabilitation Plan confirmed by the Court in January
1994, stipulated that the assets and liabilities of the Account
would be transferred from Mutual Benefit Life to a separate
account of MBL Life. The Transfer was effected pursuant to an
assumption reinsurance transaction on May 1, 1994. Under the
Rehabilitation Plan, MBL Life assumed substantially all of the
business, assets and liabilities of Mutual Benefit Life. MBL
Life will operate under, and is governed, by the terms and
conditions of the Rehabilitation Plan until the termination of
the Rehabilitation Period, not later than December 31, 1999.
While the Rehabilitation Plan was developed based on the
Rehabilitator's best estimates, no 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
Banking and Insurance was appointed Trustee of the Stock Trust.
Pursuant to a settlement agreement, an Order was issued on
January 9, 1997 ending all Plan-related litigation, and awarding
30% of the value of the Trust at its termination to eligible MBL
Life policyholders, and 70% to the Class Four Creditors (as
defined in the Plan) of Mutual Benefit Life.
MBL Life reserves all rights regarding the use of its name,
or any part of its name, including the right to withdraw its use
by the Account or to grant its use to any other investment
company or entity.
Assets
While the Account 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 March 31, 1997, Participants under the Long Island
Jewish Medical Center 403(b) Plan, New Hyde Park, New York, the
largest Contract Holder of the Account, owned 43.86% of the
outstanding Variable Accumulation Units of the Account;
Participants under the New York Hospital 403(b) Plan, New York,
New York owned 11.54% 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 ("Eligible Securities") 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". 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.
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 would be 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.
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.
Premium Taxes
Premium taxes, ranging up to 3.5%, are currently levied by
certain states. If premium taxes are incurred by the 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(a), 403(b), 408 or 457 Plans, the annuity
purchase agreement or salary reduction agreement between each
Participant and his or her employer, must specify that
contributions on the Participant's behalf 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 no greater than an effective annual rate of
0.37% for the expense and expense risk charges (currently, no
deduction is being made) and less a deduction at a maximum rate
no greater than .40% for the investment management charge
(currently, no deduction is being made), and less a deduction for
federal tax attributable to the maintenance and operation of the
Account (currently, no such federal tax is payable); 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.
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. 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 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 Account to the VCA-2 Contract. Until the
termination of the Rehabilitation Period, no later than December
31, 1999, transfers between the Variable Accumulation Account,
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.
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 the Annuity Commencement Date,
a death benefit is payable to the beneficiary. The death benefit
is equal to the greater of (1) the current value of the
participant's Variable Accumulation Account (determined as of the
date MBL Life receives due proof of death), or (2) the full
amount of all purchase payments less all transfers and
redemptions made for the Participant. The death benefit may be
paid in one of several ways. The beneficiary may instruct MBL
Life to pay the amount in a single sum. If the beneficiary is a
spouse of the Participant, the variable Accumulation Account may
be continued; however, no purchase payments may be made. [In
either case, the request must be in writing.] The Contracts
require the beneficiary to make the written request within 90
days of the Participant's death.
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 no
later than the later of (1) the calendar year in which a
Participant attains age 70 1/2, or (2) retires from such
employment. The Code precludes distributions attributable to
certain elective purchase payments prior to attainment of age 59
1/2, separation from service, death, disability or financial
hardship, and prohibits the distribution of income attributable
to elective contributions in the case of financial 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.
Five-percent owners continue to be subject to the rule that
distributions must begin by April 1 of the calendar year
following the year the individual attains age 70 1/2.
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 a 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
its units on each matter in the same proportion as such units
are voted by Contract Holders.
At a Special Meeting of Contract Holders held on April 12,
1995, the Contract Holders voted 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. 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 and Account Statements
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. The quarterly statement for each Participant will
show 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.
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
MBL Life will furnish each Participant with semi-annual
reports 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, except in the case of certain
governmental plans which are required to hold all deferred
amounts and earnings thereon in trust for the exclusive benefit
of Participants and their beneficiaries. A Participant must look
exclusively to his or her employer and the employer's financial
resources for any benefits to which the Participant is entitled.
Accordingly all rights of 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
February 13, 1997, and approved by Contract Holders on April 12,
1995. Under the Investment Advisory Agreement with the Account,
First Priority 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 February 13, 1997, 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 also engages 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".
FEDERAL INCOME TAX STATUS
Introduction
The following discussion is a general discussion of federal
income tax considerations relating to the Contract and is not
intended as tax advice. This discussion is not intended to
address the tax consequences resulting from all of the situations
in which a person may be entitled to or may receive a
distribution under the Contract. Any person concerned about
these tax implications should consult a competent tax advisor
before initiating any transaction. This discussion is based upon
MBL Life's understanding of the present federal income tax laws
as they are currently interpreted by the Internal Revenue
Service ("IRS"). No representation is made as to the likelihood
of the continuation of the present federal income tax laws or of
the current interpretation by the IRS. Moreover, no attempt has
been made to consider any applicable state or other tax laws.
The Contract may be used on a non-tax qualified basis ("Non-
Qualified Contract") or used in connection with certain
retirement arrangements entitled to special income tax treatment
under Section 401(a), 403(b), 408(b) or 457 of the Code
("Qualified Contracts").
Taxation of MBL Life
MBL Life is taxed as a life insurance company under Part I
of Subchapter L of the Code. Since the Account is not an entity
separate from the Company, and its operation forms a part of 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.
Retirement Plans
In General. The Contract is designed for use with several
types of retirement plans. The tax rules applicable to
participants and beneficiaries in retirement plans vary according
to the type of plan and the terms and conditions of the plan.
Special favorable tax treatment may be available for certain
types of contributions and distributions. Adverse tax
consequences may result from contributions in excess of specified
limits; distributions prior to age 59 1/2 (subject to certain
exceptions); distributions that do not conform to specified
commencement and minimum distribution rules; aggregate
distributions in excess of a specified annual amount; and in
other specified circumstances. For example, a 10% penalty
generally will be imposed on the taxable amount of withdrawals
prior to age 59 1/2, subject to certain exceptions.
MBL Life makes no attempt to provide more than general
information about use of the Contracts with the various types of
retirement plans. Contract Holders and participants under
retirement plans, as well as annuitants and beneficiaries are
cautioned that the rights of any person to any benefits under
Contracts may be subject to the terms and conditions of the plans
themselves, regardless of the terms and conditions of the
Contracts issued in connection with such a plan. The ultimate
effect of federal income taxes on the amounts held under a
Contract, on annuity payments, and on the economic benefit to the
Contract Holder, the annuitant, or the beneficiary may depend on
the tax status of the individual concerned. Some retirement
plans are subject to distribution and other requirements that are
not incorporated in the administration of the Contracts.
Contract Holders are responsible for determining that
contributions, distributions and other transactions with respect
to the Contracts satisfy applicable law. Contract Holders,
participants and beneficiaries should consult their legal counsel
and tax advisor regarding the use of the Contract under the
retirement plan.
Corporate Pension and Profit-Sharing and H.R. 10 Plans.
Code Section 401(a) permits employers to establish various types
of retirement plans for employees, and permits self-employed
individuals to establish retirement plans for themselves and
their employees. These retirement plans may permit the purchase
of the Contracts to accumulate retirement savings under the
plans. Adverse tax consequences to the plan, the participant, or
both, may result if this Contract is assigned or transferred to
any individual as a means to provide benefit payments.
Section 403(b) Plans. Under Code Section 403(b), payments
made by public school systems and certain tax exempt
organizations to purchase annuity contracts for their employees
are excludible from the gross income of the employee, subject to
certain limitations. However, these payments may be subject to
FICA (Social Security) taxes and state income taxes. Code Section
403(b)(11) restricts the distribution under Code Section 403(b)
annuity contracts of: (1) elective contributions made in years
beginning after December 31, 1988; (2) earnings on those
contributions; and (3) earnings in such years on amounts held as
of the last year beginning before January 1, 1989. Distribution
of those amounts may only occur upon death of the employee,
attainment of age 59 1/2, separation from service, disability, or
financial hardship. In addition, income attributable to elective
contributions may not be distributed in the case of hardship.
Individual Retirement Annuities and Simplified Employee
Pension Plans. Sections 219 and 408 of the Code permit eligible
individuals to contribute to an individual retirement program
known as an Individual Retirement Annuity or Individual
Retirement Account, each hereinafter referred to as an "IRA".
IRAs are subject to limitations on the amount that may be
contributed and deducted and the time when distributions may
commerce. Also, distributions from certain other types of
qualified plans may be "rolled over" on a tax-deferred basis into
an IRA.
Employers may establish Simplified Employee Pension (SEP)
Plans to provide IRA contributions on behalf of their employees.
The sale of a Contract for use with an IRA may be subject to
special disclosure requirements of the Internal Revenue Service.
Purchasers of a Contract for use with IRAs will be provided with
supplemental information required by the Internal Revenue Service
or other appropriate agency. Such purchasers will have the right
to revoke their purchase within seven days of the earlier of the
establishment of the IRA or their purchase.
Deferred Compensation Plans. Code Section 457 provides for
certain deferred compensation plans. These plans may be offered
with respect to service for state governments, local governments,
political subdivisions, agencies, instrumentalities and certain
affiliates of such entities, and tax exempt organizations. These
plans are subject to various restrictions on contributions and
distributions. The plans may permit participants to specify the
form of investment for their deferred compensation account. In
general, for non-governmental plans, all investments are owned by
the sponsoring employer and are subject to the claims of the
general creditors of the employer. Depending on the terms of the
particular plan, the employer may be entitled to draw on deferred
amounts for purposes unrelated to its Section 457 plan
obligations. In general, all amounts received under a Section
457 plan are taxable and are subject to federal income tax
withholding as wages.
Restrictions under Qualified Contracts. Other restrictions
with respect to the election, commencement, or distribution of
benefits may apply under Qualified Contracts or under the terms
of the plans in respect of which Qualified Contracts are issued.
Taxation of Distributions
Section 72 of the Code governs taxation of distributions
from Section 401(a), 403(b) and 408 retirement plans in general.
For this purpose, the assignment, pledge, or agreement to assign
or pledge any portion of the Account Value or any portion of an
interest in the retirement plan generally will be treated as a
distribution. The taxable portion of a distribution (in the form
of a single sum payment or an annuity) is taxable as ordinary
income.
In the case of a withdrawal, a ratable portion of the amount
received is taxable, generally based on the ratio of the
"investment in the contract" to the individual's total accrued
benefit under the retirement plan. The "investment in the
contract" generally equals the amount of any non-deductible
purchase payments paid by or on behalf of any individual. For a
Contract issued in connection with retirement plans, the
"investment in the contract" will most likely be zero. Special
tax rules may be available for certain withdrawals.
Although the tax consequences may vary depending on the
annuity payment elected under the Contract, in general, only the
portion of the annuity payment that represents the amount by
which the Account Value exceeds the "investment in the contract"
will be taxed; after the "investment in the contract" is
recovered, the full amount of any additional Annuity payments is
taxable. For Variable Annuity payment, the taxable portion is
generally determined by an equation that establishes a specific
dollar amount of each payment that is not taxed. The dollar
amount is determined by dividing the "investment in the contract"
by the total number of expected periodic payments. However, the
entire distribution will be taxable once the recipient has
recovered the dollar amount of his or her "investment in the
contract". For Fixed Annuity payments, in general there is no
tax on the portion of each payment which represents the same
ratio that the "investment in the contract" bears to the total
expected value of the Annuity payments for the term of the
payments; however, the remainder of each Annuity payment is
taxable. Once the "investment in the contract" has been fully
recovered, the full amount of any additional Annuity payments is
taxable. If Annuity payments cease as a result of an Annuitant's
death before full recovery of the "investment in the contract",
consult a competent tax advisor regarding deductibility of the
unrecovered amount.
Amounts may be distributed from the Contract because of the
death of a retirement plan participant. Generally, such amounts
are includible in the income of the recipient as follows: (1) if
distributed in a lump sum, they are taxed in the same manner as a
full surrender as described above, or (2) if distributed under an
Annuity Option, they are taxed in the same manner as Annuity
payments, as described above. Other rules relating to
distributions at death apply to Qualified Contracts. You should
consult your legal counsel and tax advisor regarding these rules
and their impact on Qualified Contracts.
Withholding
Retirement distributions generally are subject to
withholding for the recipient's federal income tax liability at
rates that vary according to the type of distribution and the
recipient's tax status. Under certain circumstances recipients
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) Plan or an 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(a) or 457 Plan, the Contract Holder
has the right, with respect to all Participants, to direct MBL
Life, by proper written notice of the selection of a new funding
agency, to cancel each Participant's 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.
STATEMENT OF ADDITIONAL INFORMATION
Table of Contents 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 6
Purchase and Pricing of Securities 9
Calculation of Performance Data . 10
Additional Information 11
Financial Statements 11
<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
May 1, 1997
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 May 1, 1997. Terms not defined in this Statement of
Additional Information shall have the same meaning given to them
in the incorporated Prospectus. A copy of the Prospectus may be
obtained from Pension and Investment Products, MBL Life Assurance
Corporation, 520 Broad Street, Newark, New Jersey 07102-3111,
Attn: MBL VARIABLE CONTRACT ACCOUNT-7, telephone number 1-800-
435-3191.
TABLE OF CONTENTS
Cross Reference to
Page Section in Prospectus
General Information and The Variable Contract
History . . . . . . . . . 2 Account - Organization
Investment Restrictions . . 2 The Variable Contract
Account - Investment
Restrictions
Commercial Paper and Bond The Variable Contract
Ratings . . . . . . . . . 4 Account - Investment
Objective and Policies
Management of the Account . 5 Management
Investment Advisory and
Other Services . . . . . 6 Investment Management
Summary of Prospectus -
Investment Adviser and
Principal Underwriter
Purchase and Pricing of
Securities . . . . . . . 9 Accumulation Account -
Purchase Payments
Calculation of Performance Performance Related
Data . . . . . . . . . . 10 Information
Additional Information . . 11 -----
Financial Statements . . . 11 Condensed Financial
Information
<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), and the sponsoring insurance company, MBL Life
Assurance Corporation ("MBL Life"), is described in its
Prospectus.
INVESTMENT RESTRICTIONS
The Account is subject to the following investment
restrictions in addition to those described in the Prospectus.
The following 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:
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;
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:
Gordon Boyd, Member
P.O. Box 234, Convent Station, New Jersey 07961
Retired.
Joseph Lindner, Jr., M.D., Member
31 Old Fort Drive, Hilton Head Island, SC 29926
President, J. Lindner, Inc. since 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; Director, Vice
President and Treasurer of First Priority Investment
Corporation since 1993.
____________________________
+ 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.
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 1996 is shown below. These amounts are
paid from the expense charges.
Aggregate Total Compensation
Compensation from Account and
Name of Person, from Account Complex
Position Account Paid to Members
Gordon Boyd, $2,400 $2,400
Committee Member
Joseph Lindner, Jr., $2,400 $2,400
Committee Member
Jerome M. Scheckman, $2,400 $8,700
Committee Member
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 February 13, 1997. These
Agreements were approved by Contract Holders on April 12, 1995.
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 1997 for an
additional one-year period.
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
$3,168. No reimbursement was made to Mutual Benefit Life under
the Service Agreement. From May 1, 1994 through December 31,
1994, and for 1995 and 1996, First Priority received advisory
fees from MBL Life, pursuant to its agreement, of $5,945, $8,536
and $8,168, 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.
Brokerage commissions or fees relating to securities transactions
are paid by the Account.
The Sales Agreement was last approved on February 13, 1997
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 1994, 1995, and 1996 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, 1996,
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.
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.
______________________________
** 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.
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 May 1, 1994, Mutual Benefit Life ceased assessment
of expense and expense risk charges against the Account's assets
and assumed payment of the investment advisory fee. Since May 1,
1994, 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 31, 1996, the
Account's "yield" was 4.74% and its "effective yield" was 4.86%.
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 from its Annual Report
into this Statement of Additional Information its Audited
Financial Statements and the Report of Independent Accountants
thereon contained in the 1996 Annual Report.
The following financial statements relate to the financial
position and operations of MBL Life. 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 FINANCIAL STATEMENTS
As of December 31, 1996 and 1995
and for the years then ended
MBL LIFE ASSURANCE CORPORATION
INDEX
As of December 31, 1996 and 1995 and for the years then ended
Page(s)
Report of Independent Accountants 2-3
Statutory Financial Statements:
Statement of Admitted Assets, Liabilities and Surplus 4
Statement of Operations 5
Statement of Changes in Surplus 6
Statement of Cash Flows 7
Notes to Statutory Financial Statements 8-36
Supplemental Schedule:
Schedule of Assets and Liabilities for the year ended December 31, 1996 37-39
<PAGE>
Report of Independent Accountants
To the Board of Directors of
MBL Life Assurance Corporation:
We have audited the accompanying statutory statement of admitted assets,
liabilities and surplus of MBL LIFE ASSURANCE CORPORATION (the "Company")
as of December 31, 1996 and 1995 and the related statutory statements of
income, changes in surplus and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As described more fully in Note 2 to the financial statements, the Company
prepared these financial statements using accounting practices prescribed or
permitted by the New Jersey Department of Banking and Insurance ("statutory
financial statements"), which practices differ from generally accepted
accounting principles ("GAAP"). The effects on the financial statements of
the variances between this basis of accounting and GAAP, which have not been
determined as of the date of this report, are presumed to be material.
In our report dated February 16, 1996, we disclaimed an opinion as to whether
the 1995 statutory financial statements, presented fairly, in all material
respects, the financial position of MBL Life Assurance Corporation as of
December 31, 1995, and the results of its operations, and its cash flows for
the year then ended in conformity with GAAP. As described in Note 2 to the
financial statements, auditor's reports on statutory financial statements for
the years ended on or after December 31, 1996, may no longer include a
disclaimer of opinion as to fair presentation in accordance with GAAP.
Accordingly, our present opinion on the 1995 financial statements, as
presented herein, is different from that expressed in our previous report.
In our opinion, because of the effects of the matter discussed in the second
preceding paragraph, the financial statements referred to above do not
present fairly, in conformity with GAAP, the financial position of MBL Life
Assurance Corporation as of December 31, 1996 and 1995, or the results of its
operations or its cash flows for the years then ended.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the admitted assets, liabilities and surplus of MBL
Life Assurance Corporation as of December 31, 1996 and 1995 and the results
of its operations and its cash flows for the years then ended on the basis of
accounting described in Note 2.
Our audits were conducted for the purpose of expressing an opinion on the
statutory financial statements taken as a whole. The Supplemental Schedule
of Assets and Liabilities for the year ended December 31, 1996 is presented
to comply with the NAIC's Annual Statement Instructions and is not a required
part of the basic statutory financial statements. Such information has been
subjected to the auditing procedures applied in the audits of the basic
statutory financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic statutory financial statements
taken as a whole.
As discussed in Note 1, on May 1, 1994 the Company assumed substantially all
of the business, assets and liabilities, of Mutual Benefit life Insurance
Company in Rehabilitation and began operating under the terms and conditions
of the Third Amended Plan of Rehabilitation of Mutual Benefit Life Insurance
Company in Rehabilitation (the "Plan"). As further discussed in Note 1, the
Company's management in conjunction with representatives of the New Jersey
Department of Banking and Insurance, developed the Plan, which was based on
actuarial, valuation and other assumptions, and reflected management's best
estimates of: a) future operations; b) the nature, timing and extent of
policyholders' benefits; and c) the timing and proceeds from the restructuring
of assets to fund the Company's obligations. Further, as discussed in Note
14, the Superior Court of New Jersey entered an Order on January 9, 1997,
effecting certain amendments to the Plan. The appeal period to the Order was
open for 45 days from the date of the Order and ended on February 24, 1997.
COOPERS & LYBRAND L.L.P.
Parsippany, New Jersey
February 11, 1997, except for Note 14,
which is dated February 24, 1997.
MBL LIFE ASSURANCE CORPORATION
Statutory Statement of Admitted Assets, Liabilities and Surplus
As of December 31 1996 and 1995
(in thousands)
ADMITTED ASSETS: 1996 1995
Bonds $ 5,619,889 $ 4,025,613
Stocks:
Preferred 27 1,059
Common 162,123 246,307
------- -------
162,150 247,366
Mortgage loans on real estate 379,419 1,262,465
Real estate owned 208,291 352,093
Policy loans 4,877,528 4,961,122
Other invested assets 49,577 67,395
Short-term investments 30,785 41,154
Cash 11,089 8,372
---------- ----------
Cash and invested assets 11,338,728 10,965,580
---------- ----------
Investment income due and accrued 368,977 381,074
Federal income tax recoverable 10,547 13,192
Other assets 22,511 28,993
Separate account assets:
Industry Separate Account 2,221,408 2,160,347
Net equity in Special Purpose Asset Vehicle 140,009 378,047
Reaffirmed Separate Accounts 262,820 237,191
---------- ---------
Total Separate account assets 2,624,237 2,775,585
---------- ---------
Total admitted assets $ 14,365,000 $ 14,164,424
-------------- --------------
-------------- --------------
LIABILITIES AND SURPLUS: 1996 1995
Policy and contract liabilities:
Life and annuity reserves $ 10,925,068 $ 10,968,478
Accident and health reserves 119,332 107,866
Policyholders' funds left on deposit 131,292 137,257
Dividends payable in following year 8,034 6,563
Policy and contract claims 52,308 42,516
Other 47,811 39,314
---------- ----------
11,283,845 11,301,994
---------- ----------
General liabilities:
Expenses, commissions and taxes 24,518 17,854
Asset valuation reserve 93,295 151,300
Interest maintenance reserve 1,950 0
Other 187,239 172,570
------- -------
307,002 341,724
------- -------
Separate account liabilities:
Industry separate account 2,221,408 2,160,347
Reaffirmed separate accounts 251,846 228,160
--------- ---------
Total Separate account liabilities 2,473,254 2,388,507
--------- ---------
Total liabilities 14,064,101 14,032,225
---------- ----------
Surplus:
Common stock, par value $100 per share;
20,000 shares
authorized and issued 2,000 2,000
Paid-in and contributed surplus 21,448 21,448
Unassigned surplus 277,453 108,753
------- -------
300,901 132,201
Less treasury stock, at cost (7 shares) (2) (2)
------- -------
Total surplus 300,899 132,199
------- -------
Total liabilities and surplus $ 14,365,000 $ 14,164,424
---------- ----------
---------- ----------
The accompany notes are an integrall part of these statutory finanical
statements.
MBL LIFE ASSURANCE CORPORATION
Statutory Statement of Operations
For the years ended December 31, 1996 and 1995
(in thousands)
1996 1995
Premiums and annuity considerations $ 1,240,049 $ 1,778,079
Considerations for supplementary contracts 9,722 41,346
Investment income, net of investment expenses
of $116,611 and $115,056 930,697 958,376
Commissions and expense allowances on
reinsurance ceded, net of
reserve adjustment of $2,359 and $733 78 7,201
Amortization of interest maintenance reserve (783) (3,773)
Net (loss) from operations from Separate
Accounts statements (24,957) 0
Miscellaneous income 17,959 28,826
--------- ---------
Total revenue 2,172,765 2,810,055
--------- ---------
Benefits paid or provided:
Death benefits 249,906 221,878
Annuity benefits 36,403 36,762
Disability and A&H benefits 15,443 11,685
Surrender benefits 1,105,157 727,702
Increase (decrease) in policy and
contract liabilities (37,908) 572,287
Payments on supplementary contracts 25,280 75,398
Other benefits 6,947 7,066
--------- ---------
1,401,228 1,652,778
--------- ---------
Expenses:
Commissions on premiums and annuity
considerations 8,383 8,892
Commissions and expense allowances on
reinsurance assumed 72,924 86,433
General insurance expenses 60,023 44,653
Insurance taxes, licenses and fees 5,641 7,542
Increase in loading, net 193 2
Net transfers from Separate Accounts (110,005) (96,862)
Other expenses 19,593 4,432
--------- ---------
56,752 55,092
--------- ---------
Total benefits and expenses 1,457,980 1,707,870
--------- ---------
Income before dividends, taxes and net
realized capital losses 714,785 1,102,185
Dividends to policyholders (641,738) (895,833)
-------- ---------
Income after dividends and before taxes and
net realized capital losses 73,047 206,352
Federal income tax expense (14,967) (41,058)
------- --------
Income after dividends and taxes, before net
realized capital losses 58,080 165,294
------- --------
Net realized capital losses, net of tax
of $5,054 and $6,262 (27,224) (64,267)
------- -------
Net income $ 30,856 $ 101,027
----------- ---------
----------- ---------
The accompanying notes are an integral part of these statutory financial
statements.
MBL LIFE ASSURANCE CORPORATION
Statutory Statement of Changes in Surplus
For the years ended December 31, 1996 and 1995
(in thousands)
<TABLE>
<CAPTION>
Paid-in and
Common Contributed Unassigned Treasury Total
Stock Surplus Surplus Stock Surplus
<S> <C> <C> <C> <C> <C>
Balance, beginning of year -
January 1,1995 2,000 $ 21,448 $ 83,416 $ (2) $ 106,862
Net income 101,027 101,027
Change in net unrealized capital gains (52,545) (52,545)
Change in non-admitted assets 16,239 16,239
Change in asset valuation reserve (71,844) 10,906 (71,844)
Change in net equity in Special
Purpose Asset Vehicle (after funds
transferred to the General Account
below) (14,356) (14,356)
Funds received from Special
Purpose Asset Vehicle 45,239 45,239
Current year's Federal income tax
benefit not affecting operations 2,693 2,693
Other (1,116) (1,116)
----- ------- ------- ------- -------
Balance, end of year -
December 31, 1995 2,000 21,448 108,753 (2) 132,199
Net income 30,856 30,856
Change in net unrealized capital gains 82,972 82,972
Change in non-admitted assets 5,127 5,127
Change in asset valuation reserve 58,005 58,005
Change in net equity in Special
Purpose Asset Vehicle (after funds
transferred to the General Account
below) (208,874) (208,874)
Funds transferred to Industry
Separate Account (1,508) (1,508)
Funds received from Special
Purpose Asset Vehicle 210,116 210,116
Current year's Federal income tax
benefit not affecting operations (375) (375)
Other (7,619) (7,619)
----- ------ ------- ------- --------
Balance, end of year -
December 31, 1996 $ 2,000 $ 21,448 $ 277,453 $ (2) $ 300,899
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
MBL LIFE ASSURANCE CORPORATION
Statutory Statement of Cash Flows
For the years ended December 31, 1996 and 1995
(in thousands)
1996 1995
Cash flows from operating activities:
Premiums and annuity considerations $ 1,241,753 $ 1,776,725
Considerations for supplementary contracts 9,721 41,345
Net investment income 947,519 889,685
Miscellaneous income 18,484 36,945
Benefits paid to policyholders (2,072,304) (1,982,136)
Operating expenses paid (142,514) (141,117)
Federal income taxes paid (4,672) (37,034)
Transfer to Separate Accounts 110,704 96,774
Other cash provided 31,624 7,378
--------- --------
Net cash provided by operating activities 140,315 688,565
--------- -------
Cash flows from investing activities:
Proceeds from sales, maturities and repayments
of bonds and stocks 1,672,733 2,431,022
Proceeds from sales of real estate 237,219 119,706
Proceeds from sales and repayments of other
invested assets 40,262 9,421
Repayments of mortgage loans 915,133 406,524
Purchase of bonds and stocks (3,146,529) (3,119,292)
Purchase of real estate (15,118) (24,732)
Purchase of other invested assets (22,017) (1,214)
Funding of mortgage loans (93,929) (64,547)
Cash transferred from Special Purpose
Asset Vehicle 210,116 45,239
Tax on capital gains (7,618) (10,005)
Net decrease (increase) in policy loans 83,594 (452,112)
Other cash (used) (21,814) (37,642)
-------- --------
Net cash (used in) investing activities (147,968) (697,632)
-------- --------
Net decrease in cash (7,653) (9,067)
Cash and short-term investments, beginning
of year 49,526 58,593
------- --------
Cash and short-term investments, end of year $ 41,873 $ 49,526
------- --------
------- --------
The accompanying notes are an integral part of these statutory
financial statements.
MBL LIFE ASSURANCE CORPORATION
Notes to Statutory Financial Statements
December 31, 1996
1. Organization and Rehabilitation of Mutual Benefit Life Insurance Company
Organization
MBL Life Assurance Corporation ("MBL Life" or the "Company") is a New Jersey
domiciled stock life insurance company licensed in each of the fifty states
and the District of Columbia. Prior to May 1, 1994, MBL Life was a wholly
owned subsidiary of The Mutual Benefit Life Insurance Company in
Rehabilitation ("Mutual Benefit Life"). As discussed below, substantially
all of the assets and liabilities of Mutual Benefit Life were transferred to
MBL Life as of May 1, 1994 under the terms of the Agreement of Assumption and
Reinsurance.
The accompanying statutory financial statements reflect the statutory
financial position of MBL Life after giving effect to the transfer of such
items as discussed below.
Rehabilitation of Mutual Benefit Life
On July 16, 1991, the Superior Court of New Jersey (the "Court") entered an
Order (the "Order") appointing the New Jersey Insurance Commissioner (the
"Commissioner") as the Rehabilitator of Mutual Benefit Life.
The Commissioner was empowered by the Order to take such steps as deemed
appropriate to remove the cause and conditions that made rehabilitation
necessary. The initial Plan of Rehabilitation was filed with the Court on
August 3, 1992. On January 15, 1993, the Commissioner filed the First
Amended Plan of Rehabilitation (the "Plan") with the Court. On August 12,
1993, the Court approved the Plan with certain modifications. Subsequently,
two amendments to the Plan were filed and on November 10, 1993, the Court
entered an Order of Confirmation provided certain further modifications to
the Plan were made. The Court entered an order approving the modified plan
on January 28, 1994 which provided for the implementation of the Plan on
April 29, 1994 (the effective date of which is deemed to be May 1, 1994,
the "Plan Implementation Date"), to extend through December 31, 1999. The
Plan is based on actuarial, valuation and other assumptions and reflects
management's best estimates of: a) future operations; b) the nature, timing
and extent of policyholders' benefits; and c) the timing and proceeds from
the restructuring of assets to fund the Company's obligation. In view of
the operating environment and circumstances under which the Company operates,
there is significant uncertainty inherent in the assumptions made by
management, and as such, the actual results may differ materially from
management's estimates (see Note 14).
Under the terms of the Plan, the assets and liabilities of Mutual Benefit
Life were allocated to a number of distinct legal entities as described
below:
A majority of Mutual Benefit Life's insurance and annuity contracts were
restructured and transferred to MBL Life under the terms of the Agreement of
Assumption and Reinsurance, along with certain other liabilities and assets
necessary to fund such liabilities. The individual insurance and annuity
contracts which were restructured according to the Plan were guaranteed as
to account values and stated interest rates by various State Insurance
Guaranty Associations, collectively referred to as the Participating Guaranty
Associations.
Group annuity contract liabilities deemed not to be covered by the
Participating Guaranty Associations were restructured and segregated into a
separate account (the "Industry Separate Account"). These liabilities were
guaranteed by a consortium of insurance companies (the "Industry Reinsurers").
Assets and liabilities which were not transferred to one of the above
entities are held in a liquidating trust, of which the Commissioner is the
sole Trustee. These assets and liabilities are not included in the
accompanying statutory financial statements. The residual value, if any, in
the Liquidating Trust after settlement of all liabilities, will be distributed
to MBL Life, the beneficiary of the Trust. The amount of any residual value
cannot currently be determined.
The assets not retained in the liquidating trust were allocated to MBL Life's
General Account ("General Account") and the Industry Separate Account in
proportion to the liabilities assumed by each entity. This allocation
generally resulted in the assuming entities receiving assets with similar
characteristics and proportionate estimated fair values. In addition, the
General Account and the Industry Separate Account each received a
proportionate share of a Special Purpose Asset Vehicle (the "SPAV") separate
account. The SPAV was created under the terms of the Plan and includes
assets which could not be allocated between the two entities in their
entirety because of their large size or other special characteristics (see
Note 4).
In addition to the establishment of the entities discussed above, the Plan
also provided numerous other terms and conditions which affected policy-
holders, contractholders, creditors and other parties. The more significant
of these terms and conditions include:
A majority of policyholder liabilities were restructured based upon estimates
of the value and expected yield of the assets owned by Mutual Benefit Life at
the time the Plan was submitted to the Court. Such restructuring generally
resulted in the value of such liabilities as of July 16, 1991 being retained,
however, future interest rates were tied to expected asset yields with only
minimum interest rates guaranteed. In addition, restrictions were placed on
policyholder accessibility of guaranteed values including the imposition of
early withdrawal charges through December 31, 1999, the end of the
Rehabilitation Period (see Notes 13 and 15).
The Plan provided an option allowing Mutual Benefit Life policyholders,
annuitants and pension contract participants to withdraw ("opt-out") their
account values prior to the Plan closing at substantial discounts from such
values. Approximately $103.7 million was paid to policyholders, annuitants
and pension contract participants who elected to opt-out as of May 1, 1994.
Pursuant to the terms of the Plan, the ownership of the stock of MBL Life was
transferred to a Trust, of which the Commissioner is the sole Trustee. The
beneficiaries of this Trust consist of the holders of general unsecured
claims as defined in the Plan (see Note 14).
The Plan provided policyholders whose contracts were originally issued by MBL
Life with an option to withdraw, without penalty, their current account
values. Actual withdrawals amounted to $8.3 million.
Separate account contract liabilities, and related assets, which existed
prior to the Plan implementation date, were considered "reaffirmed contracts"
pursuant to the terms of the Plan and were not affected by the implementation
of the Plan. These contracts consist primarily of individual and group
variable annuities.
2. Significant Accounting Policies
Basis of Presentation
The accompanying statutory financial statements have been prepared in
accordance with accounting practices prescribed or permitted by the New
Jersey Department of Banking and Insurance (the "Department") ("statutory
accounting practices"). Prescribed statutory accounting practices are those
practices included in a variety of publications of the National Association
of Insurance Commissioners ("NAIC"), as well as state laws, regulations and
general administrative rules. Permitted statutory accounting practices
encompass all accounting practices not so prescribed that have been approved
by the Department. In order to account for those transactions which were
uniquely related to the implementation of the Plan, MBL Life received written
approval from the Department for a number of accounting practices which
differed from or were ambiguous to the prescribed statutory accounting
practices. The effects on surplus related to those permitted accounting
practices have not been determined.
Statutory accounting practices differ from generally accepted accounting
principles ("GAAP"). The effects on the statutory financial statements of
the variances between statutory accounting practices and GAAP which have not
as yet been determined, are presumed to be material. The accompanying
statutory financial statements do not purport to represent the estimated fair
value of the information presented therein. Significant accounting policies,
permitted statutory accounting practices and the manner that such policies
and practices differ from GAAP for stock life insurance companies, applied in
preparing the statutory financial statements follow.
In December 1995, the American Institute of Certified Public Accountants
issued Statement of Position 95-9 which stated that, effective for audits of
statutory financial statements for years ended on or after December 31, 1996,
auditors should not issue reports on statutory financial statements as to
fair presentation in conformity with GAAP. Accordingly, the opinion expressed
by our independent accountants on the 1995 statutory financial statements as
to the conformity of those statements with GAAP is different from that
expressed in their previous report.
Certain prior year amounts have been reclassified to conform with current
year presentation.
Carrying Amounts of Assets and Liabilities
Under the Company's permitted accounting practices, the carrying amount of
assets transferred to MBL Life from Mutual Benefit Life pursuant to the Plan
are based upon the carrying amounts of such assets as reflected in Mutual
Benefit Life's accounting records immediately prior to the transfer.
In addition, liabilities, other than those retained in the Liquidating Trust
and Policy and Contractholder Reserves restructured pursuant to the Plan,
were transferred at historical carrying amounts of such liabilities as
reflected in Mutual Benefit Life's accounting records prior to the transfer.
Investments
Bonds and Stocks
Bonds qualifying for amortization based upon their classification by the NAIC
Securities Valuation Office ("SVO") are stated at amortized cost; all other
bonds are stated at values prescribed by the SVO. Under GAAP, only those
bonds classified by MBL Life as held-to-maturity would be carried at
amortized cost. Bonds classified as available for sale or trading would be
carried at their estimated fair value. Unaffiliated preferred stocks in good
standing are carried at cost. Unaffiliated preferred stocks not in good
standing are stated at the lower of cost or estimated fair value;
unaffiliated common stocks are carried at estimated fair value. Under GAAP,
unaffiliated preferred and common stock would be carried at estimated fair
value.
Investments in subsidiaries are stated at MBL Life's equity in the
subsidiaries' net assets and are included in stocks. Under GAAP, the assets
and liabilities and revenues and expenses of the majority owned subsidiaries
would be consolidated with those of MBL Life.
Short-term investments generally maturing within one year, are carried at
amortized cost which approximates estimated fair value.
Realized gains or losses from the sale of bonds and stocks are determined on
the basis of specific identification.
Mortgage Loans on Real Estate
Under the Company's permitted accounting practices, all commercial mortgage
loans are carried at the lower of their individual unpaid principal balance
or discounted net recoverable amount based upon ten year cash flows plus an
eleventh year reversion at estimated sales value.
In addition, the Company established a portfolio carrying value reserve for
its mortgage loan portfolio in light of the inherent credit risks associated
with such a portfolio. The mortgage portfolio reserve was approximately 2-4%
of the mortgage portfolio's statutory carrying value at December 31, 1996.
The total valuation reserve established by the Company approximates those
which would be required under GAAP.
Real Estate Owned
Home office real estate is stated at depreciated cost with depreciation
calculated using the straight-line basis. Real estate acquired in
satisfaction of debt, which is presumed to be held for sale, is valued at the
lower of the recorded investment in the loan or estimated fair value based
upon discounted cash flow analyses at the date of foreclosure. Subsequent to
its initial valuation, such real estate is stated at the lower of depreciated
cost or estimated fair value by establishing a valuation allowance for any
differences between estimated fair value and depreciated cost where the
estimated fair value is lower. Under GAAP, foreclosed properties are
recorded at the estimated fair value of the property at the date of
foreclosure and are depreciated from the date of foreclosure until such time
as the Company determines that the property will be sold and has commenced
marketing efforts. At such time, the property is carried at the lower of
depreciated value or estimated fair value based on discounted cash flow
analysis.
Policy Loans
Policy loans are stated at current unpaid principal balances and are not in
excess of cash surrender values.
Other Invested Assets
Other invested assets consist primarily of investments in joint ventures and
partnerships. Real estate joint ventures are reported based on the equity
method of accounting.
Certain Mutual Benefit Life industrial revenue bond guarantees on Real Estate
Joint Venture indebtedness were not carried over to MBL Life because MBL Life
is not a party to such guarantees. Pursuant to the terms and conditions of
the Plan, these guarantees were not assumed by MBL Life (see Notes 12, 13 and
14). Negative carrying values of the equity in these joint ventures resulting
from the industrial revenue bond guarantees as reflected in Mutual Benefit
Life's books prior to May 1, 1995 were reversed.
Investments in non-real estate partnerships are generally carried at cost,
adjusted for any unrealized gains or losses attributable to partnership
investments for which quoted market values are available.
Other Assets and Other Liabilities
The accompanying statutory financial statements contain amounts due to and
due from the Industry Separate Account for transactions handled by the
General Account on its behalf. As of December 31, 1996 and 1995 the net
amounts due to the Industry Separate Account approximate $18 million and $12
million, respectively.
Investment Valuation Reserves
Mandatory reserves have been established for General Account investments in
accordance with guidelines prescribed by insurance regulatory authorities.
Such reserves consist of an Asset Valuation Reserve (AVR) for all General
Account invested assets (including the General Account's proportionate share
of the invested assets held in the SPAV), and an Interest Maintenance Reserve
(IMR), which defers General Account realized capital gains and losses
(including the General Account's proportionate share of realized gains and
losses incurred by the SPAV) (net of tax) attributable to interest rate
fluctuations on fixed income investments and recognizes them over the
estimated remaining duration of the investments sold.
The AVR as of December 31, 1996 and 1995 for the General Account was
calculated using the prescribed formula. Under the Company's permitted
accounting practices, the opening balance utilized in calculating the 1994
contribution was that of MBL Life's December 31, 1993 AVR which was adjusted,
to the extent possible, for the appropriate realized and unrealized gains and
losses incurred in the General Account (including the General Account's
proportionate share of appropriate realized and unrealized gains and losses
in the SPAV) subsequent to May 1, 1994 and by MBL Life prior to May 1, 1994.
The current year's contribution to the AVR was based on General Account
assets at December 31, 1996 (including the General Account's proportionate
share of assets held in the SPAV).
The IMR as of December 31, 1996 and 1995 was calculated, using the prescribed
formula, based upon the interest rate related gains and losses of the General
Account (including its proportionate share of such gains and losses in the
SPAV). The December 31, 1995 IMR amounted to a negative $2.7 million, and
according to prescribed statutory accounting practices, was treated as a
"Disallowed Interest Maintenance Reserve" asset and non-admitted in the
accompanying statutory financial statements.
Under GAAP, AVR and IMR reserves are not established. MBL Life also
established voluntary investment valuation reserves for certain General
Account invested assets. Changes to the AVR and voluntary investment reserve
will be reported as direct additions to or deductions from surplus. Transfers
to the IMR will be deducted from realized capital gains.
Non-Admitted Assets
Certain assets, principally furniture and equipment, leasehold improvements,
prepaid pension costs, certain due and accrued interest on delinquent
mortgage loans, accident and health insurance premiums past due and agents'
debit balances are designated as "non-admitted" and are not included in the
statutory balance sheets. Under GAAP, these assets would be included in the
balance sheet, net of applicable depreciation, amortization and valuation
reserves.
Policy and contract reserves
Reserves for restructured life insurance policies (universal life plans) and
reaffirmed contracts amounted to $10.9 billion at December 31, 1996 and 1995
and are comprised as follows:
Policyholder Reserves for Mutual Benefit Life traditional and adjustable life
policies that have been restructured as Universal Life Insurance policies
pursuant to the terms and conditions of the Plan, amounted to $2.3 billion
and $2.4 billion for 1996 and 1995, respectively. Under the Company's
permitted accounting practices, these reserves are carried at account value
(without reduction for moratorium charge), plus any unearned cost of
insurance charge, plus an excess interest reserve based on any future
guaranteed interest in excess of the 1994 valuation rate. The basis for the
opening July 16, 1991 (restructured date) restructured account value for
restructured policies was the statutory life insurance reserve on Mutual
Benefit Life's accounting records for such policies. Under GAAP, life
insurance reserves for universal life plans are equal to policy account or
contract values.
Reserves for Corporate Owned Life Insurance ("COLI") policies amounted to
$5.1 billion at December 31, 1996 and 1995. Reserves for such policies are
generally computed under the Commissioners' Reserve Valuation Method, using
the Commissioner's 1980 Standard Ordinary Mortality Table for individual
policies and the Commissioner's 1958 Standard Ordinary Mortality Table for
group policies, and assuming interest rates ranging from 4.5% to 6.0%. Under
GAAP, such reserves are equal to contract value.<PAGE>
Reserves for annuity
contracts in the General Account amounted to approximately $3.4 billion at
December 31, 1996 and 1995. For those annuity contracts which were
restructured pursuant to the Plan, reserves are based on crediting rates of
5.1% in 1996 and 1995. Under the Company's permitted accounting practices,
reserves for such contracts are generally equal to contract fund balances
(without reduction for moratorium charges), plus an excess interest reserve
based on any future guaranteed interest in excess of the applicable valuation
rate. For those contracts not restructured pursuant to the Plan, reserves are
based on crediting rates ranging from 2.25% to 11.0%. Under GAAP, reserves
for annuity contracts are generally equal to contract fund balances.
Policyholder reserves for Mutual Benefit Life policies that were reaffirmed,
pursuant to the terms of the Plan amounted to approximately $44.4 million and
$46.7 million at December 31, 1996 and 1995, respectively and consisted
primarily of $26.7 million and $29.0 million in each year for individual
supplementary contracts involving life contingencies (SCILC). The individual
SCILC reserves are calculated using the 1971 and 1983 Individual Annuity
Mortality Tables and Annuitants' 1949 Table, assuming interest rates of 3.5%
to 8.75%. Under GAAP, individual SCILC reserves are calculated using the
Company's actual experience assuming the same interest rates.
Reserves relating to guaranteed investment contracts and other deposit-type
contracts amounted to $33.0 million and $36.3 million at December 31, 1996
and 1995, respectively. These reserves are equal to contract values.
Reserves for individual and group accident and health policies amounted to
$119.3 million and $107.9 million at December 31, 1996 and 1995, respectively,
and are comprised as follows:
Active life reserves for individual accident and health contracts, amounting
to $ 34.1 million and $32.9 million at December 31, 1996 and 1995,
respectively, include unearned premium reserves computed on a pro rata basis
and additional reserves based on the 1964 Commissioners' Disability Table,
combined with the 1958 and 1980 Commissioner's Standard Ordinary Mortality
Tables at interest rates ranging from 3.5% to 4.5%. Under GAAP, such
reserves would be accrued as GAAP premium is recognized.
Reserves for individual disabled lives, $83.1 million and $73.3 million at
December 31, 1996 and 1995, respectively, are calculated principally using
the 1964 Commissioners' Disability Table at 3.5% interest and the 1985
Commissioners' Individual Disability Table A at 5% interest. Under GAAP, such
reserves would be accrued as GAAP premium is recognized, representing the
present value of future benefits to be paid to policyholders, less the
present value of future net premiums.
Reserves for group accident and health contracts amounting to $2.1 million
and $1.6 million at December 31, 1996 and 1995, respectively, are based upon
the Company's actual experience assuming an interest rate of 6%.
Reserves for annuity contracts in the Industry Separate Account amounted to
approximately $2.0 billion at December 31, 1996 and 1995. Reserves for those
annuity contracts which were restructured pursuant to the Plan are based on
crediting rates of 6.25% and 3.55% in 1996 and 1995, respectively. Under the
Company's permitted accounting practices, reserves for such contracts are
generally equal to contract fund balances (without reduction for moratorium
charges), plus an excess interest reserve based on any future guaranteed
interest in excess of applicable valuation rate. Under GAAP, reserves for
these annuity contracts are generally equal to fund balance.
Pension, Post-retirement and Post-employment Benefits
The Company has several employee benefit plans in effect that provide for
pension, post-retirement and post-employment benefits (see Note 9).
MBL Life recognizes defined benefit pension plan costs based on the annual
amounts contributed to the plan. Under GAAP, pension costs are accounted for
in accordance with SFAS No. 87, Employers' Accounting for Pensions.
MBL Life accounts for the costs of its retirees' post-retirement healthcare
and life insurance benefits plans using the statutory method which accrues
for retirees and fully eligible employees only. Under GAAP, the post-
retirement liability would include an accrual for current employees who are
not currently eligible to receive post-retirement benefits, but are expected
to become eligible for these benefits, in addition to retirees and fully
eligible or vested employees.
The Company provides certain post-employment benefits which are expensed as
incurred and other benefits that are provided for currently. Under GAAP,
post-employment benefits are accounted for in accordance with SFAS No. 112,
Employers' Accounting for Postemployment Benefits.
General Other Liabilities
Without giving regard to the validity of the claims or the Settlement
Agreement with the Class Four Creditors (see Note 15), the statutory balance
sheet at December 31, 1996 and 1995 includes an amount then estimated to
equal the potential liability of MBL Life of certain Class 1 claims as
established by the Order of the Superior Court. Under GAAP, the inclusion of
these liabilities would be determined by the applicable requirements of SFAS
No. 5, Accounting for Contingencies.
Industry Separate Account
Pursuant to the terms of the Plan of Operations of the Industry Separate
Account, as approved by the Department, a liability has been established
within the Industry Separate Account representing the excess of the carrying
value of the assets of the Industry Separate Account over its liabilities. A
receivable from the Industry Reinsurers will be established if statutory
liabilities exceed statutory assets of the account in the future. This amount
will be adjusted throughout the Rehabilitation Period with final payments
being made in accordance with the Participation and Reinsurance Agreement
which is part of the Plan.
Under the Company's permitted accounting practices, the Industry Separate
Account assets are reflected in the December 31, 1996 and 1995 statutory
balance sheet with all other separate account assets. The Industry Separate
Account liabilities are included with all other separate account liabilities
on the statutory balance sheet. The accounting practices of the Industry
Separate Account are the same as corresponding accounting practices of the
General Account; however, the Industry Separate Account has not established
an AVR or IMR reserve.
Special Purpose Asset Vehicle
Under the Company's permitted accounting practices, the General Account's net
equity in the Special Purpose Asset Vehicle is reflected in the December 31,
1996 and 1995 statutory assets with all other separate account assets. Funds
transferred from the SPAV ($210 million) represent the General Account's
proportionate share of the distribution of cash flows from the assets
maintained in the SPAV. The accounting practices for this separate account
are the same as the corresponding practices for the General Account. The
General Account's proportionate share of the assets in this separate account
are included in the calculation of the General Account's AVR and IMR, as
necessary (see Note 4). The General Account's proportionate share of the net
gain or loss from operations of the SPAV are included in the accompanying
statutory statement of operations for 1996 and in the accompanying statutory
statement of changes in surplus for 1995.
Reaffirmed Separate Accounts
Assets held in separate accounts which were reaffirmed pursuant to the terms
of the Plan are carried at market value. They are reflected in the December
31, 1996 and 1995 statutory balance sheet with all other separate account
assets. The liabilities of each of these separate accounts are reported at
participants' corresponding equity in the accounts and shown with all other
separate account liabilities in the accompanying statutory balance sheet.
These liabilities are considered to be reported at estimated fair value.
The net gain or loss from operations of the Reaffirmed Separate Accounts are
included in the accompanying statutory statement of operations for 1996 and
in the accompanying statutory statement of changes in surplus for 1995.
The Reaffirmed Separate accounts are pooled investment funds in which
investment income and gains or losses accrue directly to account participants.
The assets of these accounts are segregated from and are not subject to the
claims which may arise out of any other business of MBL Life. The underlying
investment risks are assumed by the account participants.
Acquisition Costs
In accordance with statutory accounting practices, commissions and other
costs incurred in acquiring new business are charged to operations as
incurred. Under GAAP, acquisition costs would be deferred and amortized over
the estimated duration of the underlying policies or contracts.
Revenue Recognition
Premium revenues are recognized when due during the premium paying period of
the contract. Premiums are credited to account funds and the cost of
insurance is charged against account values. Under GAAP, premiums are
recognized as earned over the life of the contract.
Net realized investment gains and losses, less applicable income taxes and
amounts resulting from changes in interest rates which have been deferred and
charged or credited to the IMR are reported in the accompanying statutory
statement of operations and are determined using the specific identification
method.
Income Taxes
The provision for Federal income taxes is based on net gain from operations
after adjusting for certain income and expense items, principally differences
in statutory and tax reserves, accrual of discount on bonds and specified
policy acquisition expenses. In accordance with statutory accounting
practices,
no provision has been made for deferred income taxes, to account for the tax
effects of temporary differences between the tax and book basis of assets and
liabilities. Under GAAP, such a provision would be made.
Statement of Cash Flows
The statement of cash flows is presented in accordance with guidelines
established by the NAIC rather than in accordance with GAAP. For purposes of
the statements of cash flows, MBL Life considers all highly liquid
investments with a maturity of one year or less to be short-term investments.
Use of Estimates
The preparation of financial statements in conformity with statutory
accounting practices requires management to make estimates and assumptions
which affect the reporting of assets and liabilities and disclosure of
contingent liabilities as of the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates. Appropriate disclosures
regarding the use of estimates have been made throughout these statutory
financial statements.
3. Unconsolidated Subsidiaries and Other Affiliates
MBL Life's subsidiary operations primarily include real estate investment
management, brokerage activities and other investment management and advisory
services. At December 31, 1996 and 1995, MBL Life's investment in the net
equity of such unconsolidated subsidiaries, including those carried in the
SPAV, amounted to approximately $14 million and $10 million, respectively.
MBL Life incurs charges on behalf of its subsidiaries which are reimbursed
pursuant to agreements for shared use of property, personnel and facilities.
MBL Life's net equity in joint ventures and other partnerships, principally
real estate and venture capital, including those transferred to the Industry
Separate Account and the SPAV, was approximately $149 and $280 million at
December 31, 1996 and 1995, respectively. MBL Life has outstanding mortgage
loans with several of its real estate joint ventures. The carrying value of
such mortgages, including those transferred to the Industry Separate Account
and the SPAV, was approximately $78 and $87 million at December 31, 1996 and
1995, respectively. The real estate joint ventures are mostly residential in
nature, consisting of either apartment projects or developmental residential
type condominiums are primarily located in the southeastern United States.
The carrying value of MBL Life's investment in the largest project was
approximately 33% and 30% of the SPAV assets at December 31, 1996 and 1995,
respectively. In addition, residential mortgage loans with a carrying value
of approximately 20% and 13% of the SPAV assets at December 31, 1996 and
1995, respectively, were issued to purchasers of units in this largest
project.
As a result of participating in certain leveraged buyout transactions, MBL
Life had a controlling interest in a home improvement retailer located in the
northwestern United States and a significant investment in an integrated
manufacturer and distributor of children's clothing. The carrying value of
MBL Life's investment in these two noninsurance subsidiaries was
approximately $82 million at December 31, 1995. The aforementioned assets
were included with the large and/or illiquid assets which were transferred to
the SPAV. During 1996, the home improvement retailer filed for bankruptcy
protection under Chapter 11, which resulted in MBL Life's investment being
written off. Also during 1996, the Company sold its investment in the
children's clothing operation. The net gain to the SPAV during 1996 relating
to these two assets was $19.8 million.
The Company monitors and adjusts the carrying value of the SPAV assets based
upon the disposition plan of the individual assets in the SPAV.
<PAGE>
4. Investments
Net investment income for the years ended December 31, 1996 and 1995
were derived from the following sources (in thousands):
1996 1995
Bonds $ 330,670 $ 274,482
Stocks:
Preferred 4 63
Common 6,664 5,894
Mortgage loans on real estate 82,499 141,445
Real estate owned 104,172 115,356
Policy loans 513,114 525,483
Other invested assets 3,048 2,551
Short term investments 2,914 4,334
Other 4,223 3,824
--------- ---------
Total investment income 1,047,308 1,073,432
Investment expenses (116,611) (115,056)
--------- ---------
Net investment income $ 930,697 $ 958,376
--------- ---------
--------- ---------
Bonds
The amortized cost, gross unrealized gains and losses and NAIC market
values of bonds by category, as of December 31, 1996 and 1995, are
shown below (in thousands).
<TABLE>
<CAPTION>
December 31, 1996 NAIC
Amortized Gross Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. Government agencies $ 511,384 $ 514 $ 83 $ 511,815
Foreign governments 99,617 2,384 - 102,001
Corporate securities 4,705,137 21,673 533 4,726,277
Mortgage-backed securities 303,751 - - 303,751
--------- ------ ----- ---------
Total $5,619,889 $24,571 $ 616 $5,643,844
--------- ------ ----- ---------
--------- ------ ----- ---------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995 NAIC
Amortized Gross Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of U.S. Government agencies $ 45,449 $ 278 $ 477 $ 45,250
Foreign governments 143,581 5,863 - 149,444
Corporate securities 3,546,374 58,623 657 3,604,340
Mortgage-backed securities 290,209 - - 290,209
--------- ------ ----- ---------
Total $4,025,613 $64,764 $1,134 $4,089,243
--------- ------ ----- ---------
--------- ------ ----- ---------
</TABLE>
The amortized cost and NAIC market value of bonds, at December 31, 1996,
respectively, by contractual maturity are shown below. Bonds not due at a
single maturity date have been included in the table in the year of final
maturity. Expected maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
prepayment penalties.
December 31, 1996 (in thousands)
Amortized Cost NAIC Market Value
Due in one year or less $ 333,654 $ 335,282
Due after one year through five years 4,917,947 4,939,275
Due after five years through ten years 63,601 64,600
Due after ten years 936 936
--------- ---------
5,316,138 5,340,093
Mortgage-backed securities 303,751 303,751
--------- ---------
Total $ 5,619,889 $ 5,643,844
--------- ---------
--------- ---------
Proceeds from sales of investments in debt securities during 1996 and 1995
were $1.3 billion and $2.3 billion, respectively. Gross gains of $11.7 and
$22.1 million and gross losses of $6.4 million and $10.2 million were
realized on those sales in 1996 and 1995, respectively.
Stocks
The statement values, which also represent fair values, and the cost of
preferred and common stocks as of December 31, 1996 and 1995, are shown
below (in thousands):
<TABLE>
<CAPTION>
December 31,
1996 1995
NAIC NAIC
Statement Statement
Cost Value Cost Value
<S> <C> <C> <C> <C>
Preferred stocks:
Industrial and miscellaneous $ 27 $ 27 $ 1,382 $ 1,059
------ ------ ------- ------
Common stocks:
Public Utilities 990 3,208 1,517 3,954
Banks, thrifts and insurance companies 610 2,904 550 1,758
Industrial and miscellaneous 111,867 141,813 207,200 230,953
Unconsolidated subsidiaries 12,524 14,198 17,014 9,642
------- ------- ------- -------
125,991 162,123 226,281 246,307
------- ------- ------- -------
Total stocks $126,018 $162,150 $ 227,663 $ 247,366
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
Gross unrealized investment gains on preferred and common stocks totaled
$43.7 million and $34.3 million and gross unrealized investment losses
totaled $781,000 and $1.9 million at December 31, 1996 and 1995,
respectively.
Proceeds from sales of preferred and common stocks during 1996 and 1995 were
$398.8 million and $158.2 million, respectively. Gross gains of $21.1
million and $7.5 million and gross losses of $1.7 million and $2.0 million
were realized on those sales in 1996 and 1995, respectively.
Mortgage Loans on Real Estate
As of December 31, 1996 and 1995, the carrying value of mortgage loan
investments in the General Account was $379.4 million and $1.3 billion,
respectively. The carrying value is at admitted asset value, therefore the
effects of any valuation allowances, either individually or in the aggregate,
have been reflected in the accompanying statutory financial statements.
Mortgage loans are collateralized by properties located throughout the United
States. The states with the highest concentrations as a percentage of
carrying value at December 31, 1996 and 1995 were:
Concentration %
December 31,
1996 1995
State
California 12% 12%
Florida 12% 8%
Texas 10% <5%
Georgia 10% <5%
Michigan 7% 11%
Virginia 7% <5%
Pennsylvania 5% <5%
District of Columbia 5% <5%
New Jersey <5% 8%
North Carolina <5% 6%
Iowa <5% 5%
The remaining carrying value is geographically disbursed throughout the
country with no individual state concentration exceeding 5%.
<PAGE>
As of December 31, 1996 and 1995, the underlying collateral of the mortgage
loan investments as a percentage of total mortgages were diversified as
follows:
1996 1995
Office buildings 34% 37%
Retail 14% 11%
Apartment buildings 30% 13%
Agricultural - 20%
Industrial 11% 9%
Other 11% 10%
--- ---
100% 100%
--- ---
--- ---
During 1996, the General Account sold in four separate transactions,
mortgage loans with a principal balance of approximately $635 million which
Mutual Benefit Life had originated, including $40 million held in the
Industry Separate Account. These transactions resulted in a pre-tax loss to
the General Account of $39.6 million and a pre-tax gain of $.3 million to the
Industry Separate Account for 1996.
A securitization of commercial mortgage loans with a principal balance of
approximately $128 million was completed effective May 21, 1996. These
mortgage loans were sold to a depositor under an agreement which contained
certain recourse and cure provisions. The General Account would be required
to repurchase individual mortgage loans based on the discovery of a material
defect in a Trustee Mortgage File not cured within 90 days or a material
breach of any of the representations, warranties or covenants of seller with
respect to the mortgage loans, and indemnify the depositor and the under-
writer for securities law violations based upon an untrue statement of
material fact or omission of a material fact by MBL Life in connection with
certain information in the prospectus and certain materials delivered to the
depositor in relation to the transaction.
The second transaction was a bulk sale of commercial mortgage loans with a
principal balance of approximately $119 million sold effective in June 1996.
These mortgage loans were sold to investors under an agreement which
contained certain recourse or cure provisions. The General Account would be
required to repurchase individual mortgage loans in the event of a material
breach of a representation or warranty with respect to an asset.
The third transaction was a portfolio sale of residential mortgage loans with
a principal balance of approximately $28 million, including $7 million held
in the Industry Separate Account sold effective November 20, 1996. These
mortgage loans were sold to an investor under an agreement which contained
certain recourse or cure provisions. The General Account or Industry
Separate Account would be required to repurchase individual mortgage loans
in the event of a material breach of a representation or warranty with
respect to an asset.
The fourth transaction was a sale of the Company's farm mortgage loan
portfolio with a principal balance of approximately $360 million, including
$33 million held in the Industry Separate Account sold effective December 10,
1996. These mortgage loans were sold to an investor under an agreement which
contained certain recourse or cure provisions. The General Account or
Industry Separate Account would be required to repurchase individual mortgage
loans in the event of a material breach of a representation or warranty with
respect to an asset.
The sale of the mortgage loans held in the Industry Separate Account in 1996
was the full responsibility of the Industry Separate Account. The General
Account has no future potential for monetary investment or support.
During 1995 the Industry Separate Account sold, in two separate transactions,
a securitization and a bulk sale, mortgage loans with a principal balance of
approximately $192 million that Mutual Benefit Life had originated. These
transactions resulted in a pre-tax loss of $98.9 million to the Industry
Separate Account for 1995.
The securitization of mortgage loans with a principal balance of
approximately $109 million was sold effective November 28, 1995. These
mortgage loans were sold to a depositor under an agreement which contained
certain recourse or cure provisions. The Industry Separate Account would be
required to repurchase individual mortgage loans based on the following:
discovery of a material defect in a Trustee Mortgage File not cured within
90 days; or a breach of any of the representations, warranties or covenants
of seller with respect to the mortgage loans.
The bulk sale of mortgage loans with a principal balance of approximately $83
million was effective December 20, 1995. These mortgage loans were sold to
an investor under an agreement which contained certain recourse or cure
provisions. The Industry Separate Account would be required to repurchase
individual mortgage loans in the event of a material breach of a
representation or warranty with respect to an asset, which breach materially
and adversely affects the value of such asset.
The sale of these mortgage loans in 1995 was the full responsibility of the
Industry Separate Account. The General Account has no future potential for
monetary investment or support.
Policy Loans
Policy loans consist of outstanding loans issued to holders of COLI contracts
and universal life contracts. Interest charged on the COLI loans is
adjustable and determined periodically based on published market interest
rates. The carrying value of the COLI loans was approximately $4.5 billion
as of December 31, 1996 and 1995. The carrying value of universal life policy
loans as of December 31, 1996 and 1995 was approximately $396 million and
$452 million, respectively.
Assets on Deposit
As of December 31, 1996 and 1995, MBL Life had securities with a carrying
value of $5.5 and $5.3 million, respectively on deposit with regulatory
agencies. The securities on deposit are reflected in the accompanying
statutory balance sheets as follows:
December 31,
1996 1995
Bonds $ 3.4 million $ 3.5 million
SPAV 2.1 million 1.8 million
Special Purpose Asset Vehicle
The following is a summary of the carrying values of the net assets in the
SPAV (in thousands):
December 31,
1996 1995
Bonds $ 17,559 $ 55,878
Stocks:
Preferred 1,500 46,371
Common 31,025 126,195
Mortgage loans on real estate 38,951 67,991
Real estate owned 215 2,443
Other invested assets 88,969 193,286
Investment income due and accrued 264 1,434
Other assets 12,782 22,938
Liabilities - (91)
-------- ----------
$ 191,265 $ 516,445
-------- ----------
-------- ----------
Net equity of SPAV:
Included in General Account $ 140,009 $ 378,047
Included in Industry Separate Account 51,256 138,398
-------- ----------
$ 191,265 $ 516,445
-------- ----------
-------- ----------
5. Investment Contract Liabilities
Investment contracts represent policies or contracts that do not incorporate
significant insurance risk. Included in reserves for life and annuity
contracts are amounts classified as investment contracts. The carrying
value of such investment contracts was approximately $3.1 billion as of
December 31, 1996 and 1995.
Policyholder funds left on deposit, which are classified as investment
contracts, had a carrying value of approximately $129 million and $135
million as of December 31, 1996 and 1995, respectively.
6. Fair Value Information
The estimated fair value amounts of financial instruments included herein
have been determined by MBL Life using market information available as of
December 31, 1996 and 1995 and appropriate valuation methodologies. However,
considerable judgment is necessarily required to interpret market data to
develop the estimates of fair value for financial instruments for which there
are no available market value quotations.
The estimates presented herein are not necessarily indicative of the amounts
MBL Life could realize in a market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts.
The following table discloses the fair value of financial instruments. For
financial instruments not discussed below the carrying amount is a reasonable
estimate of fair value.
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
(in thousands) (in thousands)
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
<S> <C> <C> <C> <C>
Assets:
Bonds $ 5,619,889 $ 5,670,809 $ 4,025,613 $ 4,192,158
Stocks 162,150 162,154 247,366 247,071
Mortgage loans on real estate 379,419 380,821 1,262,465 1,205,867
Financial instruments included in
SPAV (General Account's Share) 65,175 68,950 216,996 211,539
Liabilities:
Investment contracts:
Life and annuity contracts 3,082,098 2,913,511 3,081,459 2,868,582
Policyholder funds left on deposit 129,352 127,767 135,063 139,046
Other liabilities:
Policy and contract 47,811 47,738 39,314 39,223
General 187,239 185,718 172,570 171,574
</TABLE>
The General Account's share of the net equity in the estimated fair value of
the SPAV includes only those financial instruments, namely bonds, stocks and
mortgage loans on real estate, that qualify for disclosure under SFAS No. 107.
Bonds
For debt securities that are publicly traded, estimated fair value was
obtained from an independent market pricing service. Publicly traded
securities represented approximately 98% of the carrying value and estimated
fair value of the total debt securities as of December 31, 1996. For all
other debt securities, estimated fair value was determined by management
based on interest rates, maturity, credit quality and average life.
Stocks
The estimated fair value for unaffiliated common stocks was determined on
the basis of values provided by the SVO. Estimated fair value of affiliated
common stock was determined on the basis of MBL Life's equity in the
subsidiary's net assets, after adjusting the subsidiary's financial
instruments to an estimated fair value in a manner consistent with that of
MBL Life. For publicly traded preferred stocks, estimated fair value was
obtained from an independent market pricing service. For all other preferred
stock, estimated fair value was determined by management based on such
factors as interest rates, credit quality, conversion options and dividend
paying status.
Mortgage Loans on Real Estate
The fair values of mortgage loans on real estate were estimated based on
expected discounted cash flows with the interest rates being adjusted for
credit risk. The estimated fair value presented is not necessarily
indicative of the amounts MBL Life could realize in a market exchange.
Policy Loans
All policy loans carried on MBL Life's books involve some combination of
variable loan rate and liability adjustment factor to directly recognize the
presence of policy loans. These factors work to increase or decrease
interest credited to policy account values in a way that is tied to the
actual policy loan interest charged. These loans, therefore, are determined
to have a fair value equal to the face value of the policy loans.
Investment Contract Liabilities
The fair values for liabilities of investment contracts included in both
reserves for life and annuity contracts and policyholder funds left on
deposit are estimated using discounted projected cash flows, based on
interest rates which would be offered at December 31, 1996 for similar
contracts with maturities consistent with those remaining for the contracts
being valued.
Industry Separate Account
As indicated in Note 1, the purpose of the Industry Separate Account is to
segregate those assets which are supporting the liabilities being guaranteed
by the Industry Reinsurers. For purposes of the disclosure requirements of
SFAS No. 107, the carrying value and estimated fair value of the financial
instruments in the Industry Separate Account have been determined to be
equivalent since the Industry Reinsurers would be required to support any
adjustment in the estimated fair value of the assets to the extent such
support is necessary to cover the liabilities. To the extent the estimated
fair value of the assets exceeds the estimated fair value of the liabilities
at the end of the Rehabilitation Period, as defined in the Plan, such excess
would be paid out in accordance with the terms of the Participation and
Reinsurance Agreement, which is part of the Plan.
7. Reinsurance Transactions
MBL Life has direct liability to the policy or contract holder on policies
ceded and would be responsible for payment if the reinsurer is unable to meet
its obligation under the reinsurance agreements.
MBL Life has entered into a joint venture with another insurer to operate
MBL Life's COLI business. The joint venture agreement calls for assumption
of individual COLI policies as of November 4, 1992 and group COLI policies
as of August 2, 1994 by the other insurer with MBL Life retaining an 80%
interest in future profits and losses of that business. The agreements also
gave MBL Life the option to reinsure a specified percentage of new COLI
business issued by the other insurer. COLI policy reserves and contract
liabilities, including dividends to be paid in the following year, amounted
to $5.1 billion at December 31, 1996 and 1995.
In addition, MBL Life has reinsured certain of its life, health, and annuity
contracts with other insurance companies under various agreements. The
financial statements are shown net of reinsurance. Policy and contract
liabilities have been reduced by $142.9 million and $149.3 million at
December 31, 1996 and 1995, respectively, for life, health and annuity
reserve credits taken on $1.2 billion and $1.3 billion of in-force life
reinsurance ceded. Under GAAP, assets would include amounts for reinsurance
recoverable, and policy and contract liabilities would not be reduced for
reserve credits.
<PAGE>
8. Federal Income Taxes
For tax periods through May 1, 1994, MBL Life filed a consolidated Federal
income tax return with Mutual Benefit Life. Tax allocations between MBL
Life and Mutual Benefit Life through May 1, 1994 were based on an agreement
which provides, among other things, that in the event MBL Life has a tax
gain (loss) from operations for any year, it would pay to (receive from)
Mutual Benefit Life an amount equal to the corresponding increase (reduction)
in the consolidated tax liability. For tax periods subsequent to May 1, 1994,
MBL Life files as a stand alone company. MBL Life entered into a tax
allocation agreement with the Industry Reinsurers which provides, among other
things, that in the event the Industry Separate Account has a tax gain (loss)
for any year, it shall pay to (receive from) the General Account an amount
equal to the corresponding increase (reduction) in MBL Life's overall tax
liability.
MBL Life requested and received a private letter ruling from the Internal
Revenue Service stating that the transfer of assets pursuant to the terms of
the Plan qualified as a tax free reorganization under the Internal Revenue
Code.
As of December 31, 1996, MBL Life had reached agreement on its federal tax
liability with the Internal Revenue Service for all years through 1993. In
the opinion of management, MBL Life has established adequate reserves to
provide for the payment of any additional taxes which might result from
settlement of possible deficiencies for years subsequent to 1993.
Under pre-1984 life insurance company income tax laws, a portion of current
"gain from operations" of MBL Life for those years is not subject to current
taxation but is accumulated, for tax purposes, in a memorandum account
designated as "policyholders' surplus". The aggregate accumulation in this
account at December 31, 1996 was approximately $8 million. Subject to certain
limitations, "policyholders' surplus" is not taxed until distributed or the
insurance company no longer qualifies to be taxed as a life insurance
company. Taxes have not been provided on amounts included in this memorandum
account since MBL Life contemplates no action or events that would create
such a tax.
9. Employee Benefit Plans
Pension Plans
In accordance with the terms of the Plan, MBL Life assumed the sponsorship of
Mutual Benefit Life's defined benefit pension plans covering all eligible
employees, soliciting agents and agency office employees of MBL Life and
certain of its subsidiaries. MBL Life is also the administrator of these
plans. Retirement benefits are based on years of credited service and final
average earnings history.
<PAGE>
The funded status of the qualified defined benefit pension plans at January
1, 1996, the date of the most recent valuation, and the accumulated benefit
obligation and plan assets at January 1, 1996 are as follows (in thousands):
January 1, 1996
Actuarial present value of obligations:
Vested $ 65,824
Non-vested 6,030
--------
Accumulated benefit obligation $ 71,854
--------
--------
Plan assets available for benefits $ 125,568
--------
--------
The prepaid pension cost is a non-admitted asset and is not included in the
accompanying statutory statement of assets, liabilities and surplus. Due to
the funded position of the pension plans, no contributions were required to
be made in 1996.
The weighted average discount rate used in determining the actuarial present
value of the accumulated benefit obligation was 8.0% for 1995. During 1994,
annuities amounting to $43.1 million were purchased, out of plan assets,
from Mutual Benefit Life (the former sponsor of the plans) to satisfy future
benefit obligations. These annuities were transferred to MBL Life as part
of the implementation of the Plan.
As of December 3l, 1996, the pension plan's assets are principally comprised
of investments in U.S. Government securities and long-term and short-term
corporate obligations.
MBL Life has established a liability of $12.8 million and $10.5 million at
December 31, 1996 and 1995, respectively, to cover estimated future funding
requirements of the non-qualified excess benefit plans.
Post-Retirement Benefits Other Than Pensions
In addition to pension benefits, MBL Life provides certain health care and
life insurance benefits ("post-retirement benefits") for retired employees.
Substantially all employees may become eligible for these benefits if they
reach retirement age while working for MBL Life. Life insurance benefits are
generally set at a fixed amount.
In 1993, Mutual Benefit Life changed its method of accounting for the costs
of its retirees' benefit plans to the accrual method, and elected to amortize
its transition obligation for retirees and fully eligible or vested employees
over 20 years. The unamortized portion of the transition obligation as of
December 31, 1996 and 1995 was $18.1 million and $20.5 million, respectively.
<PAGE>
Net periodic post-retirement benefits cost includes the following
(in thousands):
1996
Accrued post-retirement benefit cost at January 1 $ 10,014
-------
Service cost 571
Interest cost 9,938
Amortization of unrecognized transition obligation 2,465
Net amortization and deferral 140
-------
Total expense for the year 13,114
Expected benefits paid during the year (1,528)
-------
Accrued post-retirement benefit cost at December 31 $ 21,600
-------
-------
The following represents the unfunded accumulated post-retirement benefit
obligation as determined by the plan's actuaries (in thousands):
1996
Retirees $ 39,032
Other fully eligible plan participants 46
-------
Accumulated post-retirement benefit obligation 39,078
Unrecognized net gain 606
Unrecognized transition obligation (18,084)
-------
Accrued post-retirement benefit cost $ 21,600
-------
-------
The weighted average discount rate used in determining the current year
accumulated benefit obligation was 7.25%. The health care cost trend rate
was 8.5% graded to 5.0% over eight years for pre-age 65 claims and 8.0%
graded to 5.0% over eight years for post-age 65 claims.
Post-employment Benefits
The Company has certain post-employment benefits provided to former or
inactive employees who are not retirees. These benefits are for uninsured
expenses that include long and short-term disability medical and life
insurance continuation. The provision for these benefits at December 31,
1996 and 1995 and the incremental expense are insignificant.
<PAGE>
Savings and Investment Plans
MBL Life sponsors savings and investment plans available for substantially
all employees and qualifying agents under which MBL Life matches a portion
of their contributions which vest ratably over three years. MBL Life
contributed approximately $1.2 million and $1.1 million in 1996 and 1995,
respectively, which is reflected in the accompanying statutory statements of
operations.
Early Retirement Plan
In October 1996, MBL Life announced its plan to reduce future operating
expenses through a reduction in the Company's workforce. Such reduction was
accomplished by a special voluntary early retirement program affecting 121
eligible employees. This was supplemented by an involuntary staff reduction
of 59 employees. This staff reduction will be completed by June 30, 1997.
The estimated cost of this program amounted to approximately $18 million
pre-tax and included amounts for enhanced pension benefits, post-retirement
benefits and severance. These costs have been reflected in the accompanying
1996 statutory statement of operations.
10. Capital and Surplus
While not prohibited by the Plan, it is currently not anticipated that any
future earnings of MBL Life will be distributed to the stockholders prior to
the end of the Rehabilitation Period, as defined in the Plan. The amount of
dividends which the Company may pay to the stockholders without the prior
approval of the Commissioner is subject to restrictions relating to profits
on participating policies and contracts and to a requirement that the Company
maintain a statutory surplus equal to 105% of required risk based capital.
Under New Jersey Insurance Law, MBL Life must maintain minimum statutory
capital and surplus of $7,650,000.
The NAIC has developed risk-based capital formulas to be applied to all
insurance companies. These formulas calculate a minimum required statutory
net worth, based on the underwriting, investment and other business risks
inherent in an individual company's operations. Any insurance company which
does not meet threshold risk-based capital levels ultimately will be subject
to regulatory proceedings. MBL Life met its minimum risk-based capital
level as of December 31, 1996.
<PAGE>
11. Leases
MBL Life does not have any material operating or capital lease obligations.
12. Other Commitments and Contingencies
Guarantees
MBL Life has entered into certain arrangements in the course of its business
which, under certain circumstances, may impose financial obligations upon
MBL Life.
Pursuant to the terms and conditions of the Plan, certain Mutual Benefit
Life industrial revenue bond guarantees on real estate joint venture
indebtedness were not assumed by MBL Life (see Note 13).
Warrant Shares
Pursuant to the terms of the Plan, MBL Life granted to the Participating
Guaranty Associations and the Industry Reinsurers, in exchange for nominal
value, a nontransferable warrant to purchase an interest in MBL Life's
issued and outstanding shares, which interests together shall constitute a
20% interest. The warrants shall be exercisable for one year commencing on
the first day following the end of the Rehabilitation Period, as defined in
the Plan, at a formula price as set forth in the warrant to be determined at
the exercise date. No value was assigned to these warrants upon issuance.
Litigation
MBL Life is involved in litigation arising in the ordinary course of business
or as may be related to the Rehabilitation proceedings involving its former
parent, Mutual Benefit Life (see Notes 14 and 15).
Lines of Credit
As of December 31, 1996 and 1995, MBL Life had no lines of credit.
13. Rehabilitation Plan Events during 1996
Pursuant to the terms of the Plan, the Commissioner, prior to July 1996, was
to determine whether, in her opinion, the General Account had sufficient
liquidity and has performed adequately to allow Restructured Contract Holders
to make withdrawals prior to the end of the Rehabilitation Period with a
reduction or elimination of the early withdrawal charges (i.e. moratorium
charges). Any such determination would have required approval by both the
Participating Guaranty Associations and the Industry Reinsurers. The
Commissioner decided not to reduce or eliminate the early withdrawal charge
and as part of the Settlement Agreement (see Note 14), the moratorium
charges as defined in the Plan will remain in effect for the duration of the
Rehabilitation Period.
In accordance with the terms and conditions under which the Life Insurance
Company Guaranty Corporation of New York (the "LICGCNY") agreed to become a
Participating Guaranty Association under the Plan, the LICGCNY has agreed to
provide to each New York covered policyholder, no later than July 16, 1996,
the following enhancement to the Plan. The LICGCNY will assure payment of
the full non-loaned account balance without the application of any early
withdrawal charges, to any New York covered policyholder who elects to
receive the full amount of their non-loaned account balance on or after July
16, 1996 and who (a) submits an affidavit stating that the funds will not be
transferred to other insurance policies or rolled over to other tax-qualified
vehicles, or (b) is eligible to elect retirement benefits from MBL Life
pursuant to the terms of the Plan, and submits an affidavit stating that the
funds will be used in their entirety to purchase a life annuity (with no cash
value to the annuitant) from another insurance company. The LICGCNY had the
option to either absorb the moratorium charges or substitute itself as the
policyholder. As of December 31, 1996, $22 million of surrenders pursuant
to the terms of the New York enhancement have been processed by the Company.
New York policyholders were paid out their full account value, less policy
loans, upon request and the LICGCNY immediately reimbursed MBL Life for any
moritorium charges that would normally have been charged against the
policyholders' account value. The LICGCNY is also reimbursing MBL Life for
the net account values paid out as of each year end and the LICGCNY will be
"refunded" these monies plus normal interest credited at the end of the
Rehabilitation period. A substitute liability amounting to $13.8 million
representing these amounts due to the LICGCNY has been included in the
accompanying statutory financial statements.
14. Rehabilitation Plan Appeals and Subsequent Event
Several appeals had been filed by parties to the Plan challenging the
constitutionality of the application of the New Jersey Life and Health
Insurers Rehabilitation and Liquidation Law to the Mutual Benefit Life
Rehabilitation, as well as the order of priority imposed upon claimants
under the Plan. In general, the appellants: (1) asserted that general
unsecured creditors were entitled to parity of treatment with policyholders;
(2) requested reclassification of certain claims as policyholder claims
rather than general unsecured claims; and (3) challenged the crediting of
interest to policyholders during certain periods subsequent to the
commencement of the Rehabilitation.
<PAGE>
Further, the Commissioner had appealed certain of the Court's modifications
to the Plan. The modifications of the Court included: (1) a change to the
beneficiaries of the stock trust from holders of restructured policyholder
contracts in the general account to the unsecured creditors (and to give the
unsecured creditors a right to approve a sale of MBL Life stock or assets);
(2) the elimination of the possibility that holders of restructured
policyholder contracts in the general account would receive a bonus crediting
rate at the end of the Rehabilitation Period in the event MBL Life has assets
in excess of minimum risk based capital requirements for insurance companies;
and (3) a requirement that MBL Life distribute to the unsecured creditors at
the end of the Rehabilitation Period any assets in excess of 105% of its risk
based capital requirement.
On January 9, 1997 the Superior Court of New Jersey entered an order
approving a Settlement Agreement between the Company and the Class Four
Creditors ("Settlement Agreement") as identified in the Plan. The key
elements of the Settlement Agreement are:
The appeals, cross appeals, and other related litigation, including
challenges to interest crediting rates filed in connection with the approval
of the Plan of Rehabilitation, will be dismissed.
Interest rates credited to restructured General Account insurance liabilities
each year for 1996 through 1999 will be fixed at the rates in effect in 1996.
Those rates ranged from 4.35% to 5.35%.
Policyholder guarantees, the length of the Rehabilitation Period, and the
current schedule of moratorium charges remain in effect and unchanged.
Class Four Creditors and eligible policyholders who remain with the Company
after the end of 1999 will share in the future value of the Company. The
sharing will be based on a ratio of 70% to the Class Four Creditors and 30%
to eligible policyholders, if MBL Life meets its capital growth projections
(although the policyholder share may be reduced if it does not meet its
capital growth projections).
As an incentive to stay with the Company, eligible policyholders will earn
the right to share in future value in four stages over three and one-half
years, beginning January 1, 2000.
The account values of Industry Separate Account contracts will be paid in
full immediately on or about December 31, 1999. The option to delay payouts
or to pay out account values in five installments, as defined in the Plan,
will be eliminated. In return for the certainty of full access on December
31, 1999, Industry Separate Account contractholders will waive their right
to dispute their eligibility for guaranty association coverage.
After a 45 day appeal period ending February 24, 1997, the Settlement
Agreement became final and non-appealable. The Settlement Agreement is not
expected to have a significant impact on the financial position of the
Company.
MBL LIFE ASSURANCE CORPORATION
Supplemental Schedule of Assets and Liabilities
The following is a summary of certain financial data included in other
exhibits and schedules of the 1996 Statutory Annual Statement subjected to
audit procedures by our independent auditors and utilized by our actuaries
in the determination of reserves.
Investment Income Earned:
U.S. Government bonds $ 9,211,525
Other bonds (unaffiliated) 321,458,103
Bonds of affiliates 0
Preferred stocks (unaffiliated) 3,921
Preferred stocks of affiliates 0
Common stocks (unaffiliated) 5,777,023
Common stocks of affiliates 887,197
Mortgages loans 82,498,746
Real estate 104,172,363
Premium notes, policy loans and liens 513,114,438
Collateral loans 0
Cash on hand and on deposit 99,006
Short-term investments 2,913,893
Other invested assets 3,048,051
Derivative Instruments 0
Aggregate write-ins for investment income 4,123,813
----------------
Gross investment income $ 1,047,308,079
----------------
----------------
Real Estate Owned - Book Value less Encumbrances 208,290,633
Mortgage Loans - Book Value:
Farm mortgages $ 0
Residential mortgages 0
Commercial mortgages 406,938,361
----------------
Total mortgages loans $ 406,938,361
----------------
----------------
Mortgage Loans By Standing - Book Value:
Good standing 218,530,639
Good standing with restructured terms 142,719,009
Interest overdue more than three months, not
in foreclosure 45,688,713
Foreclosure in process 0
Other Long-term Assets - Statement Value -
Other Invested Assets 49,577,417
Collateral Loans 0
Bonds and Stocks of Parents, Subsidiaries
and Affiliates - Book Value:
Bonds 0
Preferred Stocks 0
Common Stocks 45,430,425
Bonds and Short-term Investments by Class and Maturity:
Bonds by Maturity - Statement Value
Due within one year less $ 488,133,230
Over 1 year through 5 years 5,114,804,527
Over 5 years through 10 years 36,934,377
Over 10 years through 20 years 10,800,698
Over 20 years 1,120
----------------
Total by Maturity $ 5,650,673,952
----------------
----------------
Bonds by Class - Statement Value
Class 1 $ 4,727,508,096
Class 2 886,071,871
Class 3 14,901,602
Class 4 20,455,434
Class 5 1,736,949
Class 6 0
----------------
Total by Class $ 5,650,673,952
----------------
----------------
Total Bonds Publicly Traded 5,528,260,376
Total Bonds Privately Placed 122,413,577
Preferred Stocks - Statement Value 27,246
Common Stocks - Market Value 162,123,446
Short-term Investments - Book Value 30,784,747
Options, Caps and Floors Owned - Statement Value 0
Options, Caps and Floors Written and In-force
- Statement Value 0
Collar, Swap and Forward Agreements Open
- Statement Value 0
Futures Contracts Open - Current Price 0
Cash on Deposit 11,074,456
Life Insurance In Force: (000's omitted)
Industrial 0
Ordinary 46,238,294
Credit Life 0
Group Life 633,650
Amount of Accidental Death Insurance In
Force Under (000's omitted)
Ordinary Policies 433,235
Life Insurance Policies with Disability Provisions
In Force (000's omitted):
Industrial 0
Ordinary 2,561,821
Credit Life 0
Group Life 0
Supplementary Contracts In Force:
Ordinary - Not Involving Life Contingencies
Amount on Deposit 80,008,026
Income Payable 5,486,000
Ordinary - Involving Life Contingencies
Income Payable 4,154,646
Group - Not Involving Life Contingencies
Amount of Deposit 18,759,200
Income Payable 5,945,477
Group - Involving Life Contingencies
Income Payable 976,000
Annuities:
Ordinary
Immediate - Amount of Income Payable 345,270
Deferred - Fully Paid Account Balance 7,113,024
Deferred - Not Fully Paid - Account Balance 113,217,267
Group
Amount of Income Payable 34,442,616
Fully Paid Account Balance 4,986,983
Not Fully Paid - Account Balance 3,051,536,600
Accident and Health Insurance - Premiums In Force:
Ordinary 12,839,032
Group 0
Credit 0
Deposit Funds and Dividend Accumulations:
Deposit Funds - Account Balance 33,041,450
Dividend Accumulation - Account Balance 1,939,688
Claim Payments 1996:
Group Accident and Health year - ended December 31, 1996
1996 216,736
1995 0
1994 and prior 620,141
Other Accident & Health
1996 833,277
1995 2,698,845
1994 and prior 8,763,710
Other coverages that use developmental methods to
calculate claims reserves
1996 0
1995 0
1994 and prior 0
<PAGE>
MBL VARIABLE CONTRACT ACCOUNT-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, 1996, as
filed with the Commission under the Investment Company Act
of 1940 on February 28, 1997 (Accession No. 0000728568-97-
000002):
MBL Variable Contract Account-7:
Report of Independent Accountants.
Statement of Assets and Liabilities, December 31, 1996.
Statement of Operations (year ended December 31, 1996).
Statements of Changes in Net Assets (two years ended
December 31, 1996).
Financial Highlights for Each of the Ten Years in the
Period Ended December 31, 1996.
The following Financial Statements are filed pursuant to
Item 23 of Part B of this Registration Statement:
MBL Life Assurance Corporation:
Report of Independent Accountants.
Balance Sheet as of December 31, 1996.
Statement of Operations (year ended December 31, 1996).
Statement of Changes in Capital and Surplus
(year ended December 31, 1996).
Statement of Cash Flows (year ended December 31, 1996).
(b) Exhibits *
(1)(A) Resolution of the Board of Directors
of 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
Amendment No. 12 of Form N-3 Registration
Statement.
(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].
(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;
(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, incorporated
by reference to earlier filing on April 5,
1997, SEC File No. 333-01151, Exhibit (17) of
Form N-3 Registration Statement.
(C) 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.
Item 29. Directors and Officers of MBL Life Assurance Corporation.
The Directors of MBL Life, their principal business
addresses and their positions and offices with MBL Life, are
as follows:
Name and Principal Position and Offices 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
Janine J. Akey Director
20 W. State Street
CN-325
Trenton, NJ 08625
Sheldon Brooks Director
The Prudential Asset
Management Company, Inc.
71 Hanover Road
Florham Park, NJ 07932
Donald Bryan Director
20 W. State Street
CN-325
Trenton, NJ 08625
Thomas Gallagher Director
20 W. State Street
CN-325
Trenton, NJ 08625
Harry D. Garber Director
76 Mulberry Avenue
Garden City, NY 11530
John C. Kerr, Jr. Director
20 W. State Street
CN-325
Trenton, NJ 08625
Richard W. Klipstein Director
National Organization of
Life and Health Insurance
Guaranty Association
13873 Park Center Road
Herndon, VA 22071
Felix Schirripa Director
The Metropolitan Life
Insurance Company
One Madison Avenue
New York, NY 10010-3690
___________________________________
Officers (Other than Directors) of MBL Life whose activities
relate to the Account are listed below.
Frank D. Casciano Executive Vice President,
General Counsel and Secretary
Robert T. Budwick Executive Vice President -
Chief Investment Officer
Kenneth A. Watson Executive Vice President
and Chief Financial Officer
Kathleen M. Koerber Executive Vice President -
Chief Operating Officer
Kenneth K. Schaefer Second Vice President
and Treasurer
David A. James Senior Vice President,
Securities Investment
Albert W. Leier Vice President
and Controller
William G. Clark Senior Vice President,
Pension and Investment Products
All of these Officers maintain a principal business address
at 520 Broad Street, Newark, New Jersey 07102.
Item 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. 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, and
named MBL Variable Contract Account-7 (the "Account").
The Account is under the general supervision of a Management
Committee ("Committee").
MBL Life is 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 Banking
and Insurance of the State of New Jersey as Trustee until
the end of the Rehabilitation Period, scheduled for not
later than December 31, 1999. Pursuant to a settlement
agreement, an Order was issued on January 9, 1997 ending all
Plan-related litigation, and awarding 30% of the value of
the Trust, at its termination, to eligible MBL Life
policyholders, and 70% to the Class Four Creditors (as
defined in the Plan) of Mutual Benefit Life.
As of April 1, 1997, those persons under common control with
the 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; MAP
Advisors, Inc., a registered adviser; 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 is
inactive. Markston Investment Management, a registered
investment adviser, is a partnership owned 51 percent by MBL
Sales Corporation; Hawaiian Macadamia Company, Inc., a
processing company; Tong Yang Benefit Life Insurance
Company, a foreign insurance company; 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.
As of March 31, 1997 Participants under the Long Island
Jewish Medical Center 403(b) Plan, New Hyde Park, New York,
owned 43.86% 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 March 31, 1997: 59
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 Committee 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 the Account's 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 the Account 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 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 an
Officer, or Committee Member of the Account in the
successful defense of any action, suit or proceeding) is
asserted by such 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 Account Officer or
Committee Member for any liability, the indemnification of
which has been determined to be prohibited under the Federal
securities laws.
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.
Other Substantial
Business Profession, and
Name and Principal Position with Vocation of Employment
Business Address* First Priority Within Past Two Years
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, and
Investment Officer Chief 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.
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, - - -
Operations
James Switlyk Second Vice President - - -
Marketing Support
Roger A. Vellekamp Assistant Secretary Second Vice President -
Tax, MBL Life.
_______________________________
* All of the Officers and Directors named maintain a principal
business address at 520 Broad Street, Newark, New Jersey 07102-3111.
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.
(f) MBL Life Assurance Corporation ("MBL Life") hereby
represents that the fees and charges deducted under the
annuity contracts described in this prospectus, in the
aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the
risks assumed by MBL Life.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets the
requirements of Securities Act Rule 485(b) for effectiveness of
the Post-Effective Amendment to the Registration Statement and
has caused this Post-Effective Amendment to the Registration
Statement to be signed on its behalf, in the City of Newark, and
State of New Jersey, on the 28th day of April, 1997.
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 Post-
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 28, 1997
David A. James Member
GORDON BOYD Member April 28, 1997
Gordon Boyd
WILLIAM G. CLARK Member April 28, 1997
William G. Clark
JOSEPH LINDNER, JR. Member April 28, 1997
Joseph Lindner, Jr.
JEROME M. SCHECKMAN Member April 28, 1997
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
Post-Effective Amendment to the Registration Statement to be
signed on its behalf, in the City of Newark, and State of New
Jersey, on the day of April 29, 1997.
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 29, 1997
Alan J. Bowers Director, President
KENNETH A. WATSON Chief Financial Officer April 29, 1997
Kenneth A. Watson
ALBERT W. LEIER Chief Accounting April 29, 1997
Albert W. Leier Officer
Directors:
Elizabeth E. Randall **
Sheldon Brooks *
Donald Bryan *
Harry D. Garber *
John Kerr *
Richard W. Klipstein *
Felix Schirripa *
Janine J. Akey **
Thomas Gallagher
By: FRANK D. CASCIANO Date: April 29, 1997
Frank D. Casciano
Attorney-in-Fact
* Executed by Frank D. Casciano, Attorney-in-Fact, on behalf
of those indicated pursuant to the Powers of Attorney
incorporated into previous filings.
** 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;
(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 incorporation by reference in this Post-
Effective Amendment No. 1 to the Registration Statement of MBL
Variable Contract Account-7 on Form N-3 (File No. 333-01151) of
our report dated February 10, 1997, on our audit of the financial
statements and financial highlights of MBL Variable Contract
Account-7 and the inclusion of our report dated February 11,
1997, except for Note 14, which is dated February 24, 1997, on
our audit on the financial statements of MBL Life Assurance
Corporation.
We also consent to the reference of our firm under the caption
"Financial Statements" in the Statement of Additional
Information.
COOPERS & LYBRAND L.L.P.
Parsippany, New Jersey
April 28, 1997
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
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 29, 1997
Exhibit (12)
[MBL Life Assurance Corporation Letterhead]
April 23, 1997
MBL Life Assurance Corporation
520 Broad Street
Newark, NJ 07102-3111
Gentlemen:
This opinion is furnished in connection with the Registration
Statement, File No. 333-01151 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 originally
established pursuant to a resolution of the Board of
Directors of The Mutual Benefit Life Insurance Company
("Mutual Benefit Life") and in accordance with the
provisions of New Jersey Insurance Law.
On July 16, 1991, the Superior Court of New Jersey
entered an Order appointing the Insurance Commissioner of
the State of New Jersey as Rehabilitator of Mutual Benefit
Life, thereby granting the Rehabilitator immediate
exclusive possession 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.
3. The assets of the Variable Contract Account are the
property of MBL Life and are held separately from all
other assets of MBL Life. Under New Jersey law, any
income, gains and losses, whether realized or not, from
the Variable Contract Account's investment operations must
be credited to or charged against the Variable Contract
Account without regard to any other income, gains or
losses of MBL Life. MBL Life maintains the assets of the
Variable Contract Account in an amount at least equal to
the amount required for MBL Life to meet its obligations
under the Contracts, as determined at least once each
year.
4. The New Jersey Insurance Law provides that to the
extent provided in the applicable contract or contracts,
assets held in a Variable Contract Account shall not be
chargeable with liabilities arising out of any other
business of an insurance company, but makes no explicit
provision as to whether or not the assets of a Variable
Contract Account are as a matter of law absolutely
insulated from the claims of other policyholders or
creditors of the insurance company. Accordingly, no
representation can be made that, in all possible
contingencies, the assets held in the Variable Contract
Account cannot, as a matter of law, be subject to such
claims. However, it is my opinion that any such claims
could be made only upon insolvency of MBL Life, in which
event equitable principles would be applied by the
Commissioner of Banking and Insurance of New Jersey or by
a court dealing with any resulting liquidation or
rehabilitation of MBL Life under New Jersey Insurance Law
and should afford appropriate protection to Contract
Holders participating in the Variable Contract Account.
5. When executed, the Contracts, as amended, and the Units
have been duly authorized and each of the Contracts
(including any Units when duly credited thereunder)
constitutes a validly issued and binding obligation of MBL
Life in accordance with the terms of such Contracts.
Individuals having an interest under a Contract are
subject only to the deductions, charges and fees set forth
in the Prospectus included in the Registration Statement,
including any Amendments thereto.
6. The discussion of tax matters set forth in the
Prospectus included in the Registration Statement is an
accurate summary of the effect of applicable Federal
income tax laws, but no representation is made that such
discussion is exhaustive or that it purports to cover all
situations.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
MBL LIFE ASSURANCE CORPORATION
By: FRANK D. CASCIANO
Frank D. Casciano
Executive Vice President and
General Counsel, and Secretary
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
12/31/96 12/24/96 Change / 12/24/96 Return Yield
$18.706 $18.689 .017 / $18.689 .0009096 = 4.74%
Item: 28(b)(16)(B) Schedule of Computation for Effective
Yield Quotation
Effective Yield = [(Base Period Return + 1) 365/7 ] - 1
= [(.0009096 + 1) 365/7 ] - 1
= 4.86%
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
ELIZABETH E. RANDALL Director April 28, 1997
Elizabeth E. Randall
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints Alan J. Bowers,
Frank D. Casciano, Kathleen M. Koerber, and Kenneth A. Watson,
his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign the
Registration Statement and any and all amendments to the
Registration Statement for MBL Variable Contract Account-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
JANINE J. AKEY Director April 24, 1997
Janine J. Akey
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE ANNUAL REPORT OF MBL VARIABLE CONTRACT ACCOUNT-7 DATED
DECEMBER 31, 1996 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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