FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1995
--------------------
Commission File Number 33-85988
---------
C.M. LIFE INSURANCE COMPANY
---------------------------
(Exact name of registrant as specified in its charter)
Connecticut 06-1041383
----------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
140 Garden Street, Hartford, Connecticut 06154
----------------------------------------------
(Address of principal executive offices)
(Zip Code)
(203) 987-6500
--------------
(Registrant's telephone number, including area code)
None
----
(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
(1) Yes X No
----- --
(2) Yes X No
----- --
Registrant has 12,500 shares of common stock outstanding on September 30, 1995,
all of which are owned by Connecticut Mutual Life Insurance Company.
<PAGE>
C.M. LIFE INSURANCE COMPANY
INDEX
PART I: Financial Information
---------------------
Item 1:
Financial Statements:*
Balance Sheets
September 30, 1995 and December 31, 1994
Statements of Operations
Three Months Ended
September 30, 1995 and 1994
Statements of Operations
Nine Months Ended
September 30, 1995 and 1994
Statements of Stockholder's Equity
Nine Months Ended
September 30, 1995 and 1994
Statements of Cash Flows
Nine Months Ended
September 30, 1995 and 1994
Notes to Financial Statements
Item 2:
Management's Discussion and Analysis of
Financial Condition and Results of
Operations
PART II: Other Information
-----------------
Item 3: Not applicable.
Item 4: Not applicable.
Item 5: Not applicable.
Item 6: Financial Data Schedule
* The balance sheet at December 31, 1994 has been taken from the
audited financial statements at that date. All other statements are
unaudited.
<PAGE>
<TABLE>
C.M. LIFE INSURANCE COMPANY
BALANCE SHEETS
($ IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(see NOTE)
September 30, 1995 December 31, 1994
------------------ --------
<S> <C> <C>
ASSETS:
Investments:
Fixed maturities at cost $723,581 $717,291
Equity securities at cost 70,252 1,815
Mortgage loans on real estate
at
net realizable value 31,980 42,038
Real estate at cost 1,853 1,897
Policy loans at outstanding
balance 120,555 109,720
Cash and cash equivalents 1,466 3,025
------------ -----------------
Total investments 949,687 875,786
------------------ -----------------
Accrued investment income 17,097 14,023
Accounts receivable 4,111 5,330
Federal income tax receivable 1,881 -
Amounts due from reinsurers 240 1,162
Other assets 2,805 2,318
Assets of Separate Account 464,454 309,672
------------------ -----------------
TOTAL ASSETS $1,440,275 $1,208,291
================== =================
LIABILITIES AND STOCKHOLDER'S
EQUITY:
Liabilities:
Future policy benefits $802,050 $751,808
Policy claims and benefits
currently payable 755 1,772
Indebtedness to related 12,316 6,965
parties
Federal income tax payable - 2,446
Asset valuation reserve 16,011 6,640
Other liabilities 8.892 7,906
Other deposits 47,687 31,690
Transfers due from Separate
Account (20,035) (14,445)
Liabilities of Separate
Account
464,454 309,672
----------------- -----------------
Total liabilities 1,332,130 1,104,454
------------------ ----------------
STOCKHOLDER'S EQUITY:
Common stock, $200 par value -
50,000 shares authorized,
12,500 shares issued and
oustanding 2,500 2,500
Additional paid-in capital 43,759 43,759
Retained earnings 61,886 57,578
------------------ -----------------
Total stockholder's equity 108,145 103,837
------- ---------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $1,440,275 $1,208,291
========== ==========
<FN>
NOTE: The Balance Sheet at December 31, 1994 has been taken from the audited
financial statements at that date.
<FN>
The accompanying notes are an integral part of these unaudited financial
statements.
</TABLE>
<PAGE>
<TABLE>
C.M. LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
($ IN THOUSANDS)
1995 1994
--------- --------
<S> <C> <C>
REVENUES:
Premiums and annuity considerations $28,457 $26,225
Less: reinsurance ceded (12,106) (12,755)
------- -------
Net premiums and annuity considerations 16,351 13,470
Net investment income 16,894 14,816
Net realized capital losses
on investments (870) (2,528)
Other income 419 280
----- ------
Total revenues 32,794 26,038
BENEFITS, LOSSES AND EXPENSES:
Benefits, claims and settlement expenses 27,701 25,368
Acquisition and insurance expenses 13,041 5,455
Other expenses 1,373 1,028
Less: reinsurance benefits and expenses (10,825) (9,140)
------- -------
Total benefits, losses and expenses 31,290 22,711
-------- -------
Income before income tax expense 1,504 3,327
FEDERAL INCOME TAX EXPENSE 87 1,689
---- --------
NET INCOME $1,417 $1,638
======== =======
<FN>
The accompanying notes are an integral part of these unaudited
financial statements.
</TABLE>
<PAGE>
<TABLE>
C.M. LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
($ IN THOUSANDS)
1995 1994
---------- --------
<S> <C> <C>
REVENUES:
Premiums and annuity considerations $97,491 $74,023
Less: reinsurance ceded (38,603) (41,000)
------- -------
Net premiums and annuity considerations 58,888 33,023
Net investment income 50,366 44,583
Net realized capital losses
on investments (1,243) (2,530)
Other income 1,166 667
------- ------
Total revenues 109,177 75,743
BENEFITS, LOSSES AND EXPENSES:
Benefits, claims and settlement expenses 100,817 67,617
Acquisition and insurance expenses 32,217 14,928
Other expenses 3,889 3,344
Less: reinsurance benefits and expenses (40,021) (31,044)
------- -------
Total benefits, losses and expenses 96,902 54,845
-------- -------
Income before income tax expense 12,275 20,898
FEDERAL INCOME TAX EXPENSE 3,740 7,025
------- --------
NET INCOME $8,535 $13,873
======== =======
<FN>
The accompanying notes are an integral part of these unaudited
financial statements.
</TABLE>
<PAGE>
<TABLE>
C.M. LIFE INSURANCE COMPANY
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
($ IN THOUSANDS)
1995 1994
--------- ----------
<S> <C> <C>
Common Stock $2,500 $2,500
Additional Paid-in Capital 43,759 43,759
Retained Earnings
Balance, beginning of year 57,578 41,639
Net income 8,535 13,873
Change in asset valuation reserve (9,371) (1,044)
Change in nonadmitted assets (980) 587
Net unrealized capital gain 6,124 1,300
--------- ---------
Balance, end of period 61,886 56,355
--------- ---------
TOTAL STOCKHOLDER'S EQUITY $108,145 $102,614
========= =========
<FN>
The accompanying notes are an integral part of these unaudited financial statements.
</TABLE>
<PAGE>
<TABLE>
C.M. LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
($ IN THOUSANDS)
1995 1994
-------- --------
<S> <C> <C>
CASH PROVIDED:
Premiums and annuity considerations,
net of reinsurance $59,267 $34,551
Other deposits 122,772 153,148
Net investment income 48,139 43,235
Commission and expense allowance and
reserve adjustment on reinsurance ceded 11,790 15,650
-------- --------
241,968 246,584
Benefits and interest to policyholders
and beneficiaries, net of reinsurance (34,544) (34,689)
Acquisition and insurance epxenses,
net of reinsurance (36,108) (17,351)
Transfers to Separate Account (91,935) (136,976)
Federal income taxes paid (8,007) (8,393)
Other payments, net (11,956) (6,819)
Net cash provided by operations 59,418 42,356
-------- --------
Proceeds from the the disposition of
fixed maturities and mortgage loans on
real estate 357,822 176,006
-------- --------
Total cash provided 417,240 218,362
-------- --------
CASH APPLIED:
Purchases of fixed maturities 349,073 215,240
Purchase of equity securities 69,720 -
Other applications 6 1,153
-------- --------
Total cash applied 418,799 216,393
-------- --------
Net increase (decrease) in cash and
cash equivalents (1,559) 1,969
CASH AND CASH EQUIVALENTS:
Beginning of year 3,025 5,589
-------- --------
End of period $1,466 $7,558
======== ========
<FN>
The accompanying notes are an integral part of these unaudited financial statements.
</TABLE>
<PAGE>
C.M. LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
1. General:
-------
C.M. Life Insurance Company (C.M. Life) is a wholly owned stock
life insurance subsidiary of Connecticut Mutual Life Insurance
Company (Connecticut Mutual). In the opinion of C.M. Life these
financial statements contain all adjustments, consisting of only
normal recurring adjustments, necessary to present fairly the
financial position as of September 30, 1995 and December 31, 1994,
the results of its operations for the three months and nine months
ended September 30, 1995 and 1994, and its cash flows for the nine
months ended September 30, 1995 and 1994.
C.M. Life's financial statements have been prepared in conformity
with accounting practices and procedures of the National
Association of Insurance Commissioners (NAIC) as prescribed or
permitted by the Insurance Department of the State of Connecticut,
which are considered to be generally accepted accounting
principles for wholly owned stock life insurance subsidiaries of
mutual life insurance companies.
The Financial Accounting Standards Board (FASB) has issued an
interpretation declaring that financial statements of mutual life
insurance companies, and their wholly owned subsidiaries, which
are prepared on the basis of statutory accounting principles, will
no longer be considered to be in conformity with GAAP. This
interpretation applies to financial statements issued for fiscal
years beginning after December 15, 1995. Certain accounting
principles for mutual life insurance companies, which will be
required to be in compliance with GAAP, were also issued by the
FASB and the American Institute of Certified Public Accountants in
January 1995. The financial statement impact of adopting these
accounting principles has not been determined by the Company. The
effect of initially adopting the FASB interpretation shall be
reported retroactively through restatement of all previously
issued financial statements presented for comparative purposes for
fiscal years beginning after December 15, 1992.
2. Related Party Transactions:
--------------------------
The Parent, Connecticut Mutual, allocates certain expenses to C.M.
Life for providing operating facilities, human resources, computer
software development and managerial services. Total expenses
allocated to C.M. Life were approximately $10,302 and $24,786 for
the three and nine month periods ended September 30, 1995 and
$3,746 and $11,306 for the same periods in 1994.
3. Net Investment Income:
---------------------
<TABLE>
Net investment income is comprised of the following:
Three Months Nine Months Ended
Ended
September 30, September 30,
------------------ --------------------
1995 1994 1995 1994
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Fixed Maturities $13,319 $11,958 $40,368 $35,291
Mortgage loans on 646 969 2,158 3,535
real estate
Policy loans 2,547 2,017 7,304 5,859
Amortization of IMR (22) (67) (170) 296
Other 489 332 1,393 1,155
------- ------- -------- --------
Total Investment
Income 16,979 15,209 51,053 46,136
Less: Applicable 85 393 687 1,553
------- ------- -------- --------
investment expense
Net Investment Income $16,894 $14,816 $50,366 $44,583
======= ======= ======== ========
</TABLE>
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations (dollar amounts in thousands)
---------------------------------------------------
Three Months Ended September 30, 1995 Compared with 1994
--------------------------------------------------------
For the three months ended September 30, 1995, C.M. Life had net
income of $1,417 as compared with net income of $1,638 for the
same period in 1994. The decrease in net income is attributable
to higher death claims and increased sales of insurance products
where first year acquisition costs and the increase in reserves
exceed the first year premium revenues.
Premiums and annuity considerations before reinsurance premiums
ceded, increased $2,232 to $28,457 in 1995 from $26,225 in 1994.
Premiums for CM Windows, a single premium deferred annuity,
decreased $1,515 to $664 in 1995. However, premiums for life
insurance products increased $3,746 to $27,792 in 1995 from
$24,064 in 1994, due primarily to higher universal life, and term
product sales.
Reinsurance premiums ceded decreased by $649 in 1995. The decrease
is attributable to the decrease in reinsured universal life
premiums.
Net investment income increased by $2,078 over 1994; this increase
is attributable to increased invested assets and policy loans as
well as a decrease in applicable investment expenses and higher
interest rates.
Benefits, claims and settlement expenses, before reinsurance
benefit reimbursements increased by $2,333 from 1994. The
increase was primarily attributable to a decrease in reserves for
future policy benefits of $1,874, offset by increases in death
claims of $854, other benefits of $725, ceded reserves for future
policy benefits of $1,222, and surrenders of $1,406.
Acquisition and insurance expenses before reinsurance commissions
and expense reimbursements increased by $7,586 from 1994 due to
increases in commissions as well as an increase in operating
expenses due to the increase in premium and annuity
considerations.
Income tax expense decreased by $1,602 from 1994. Taxable income
decreased by $5,019 for the three months ended September 30, 1995
compared with the same period in 1994. C.M. Life's Federal income
tax expense is based on income which is currently taxable. The
difference between pre-tax book income and taxable income are
primarily taxable deferred acquisition costs, and other book/tax
differences associated with gross investment income.
Nine Months Ended September 30, 1995 Compared with 1994
-------------------------------------------------------
For the six months ended September 30, 1995, C.M. Life had net
income of $8,535 as compared with net income of $13,873 for the
same period in 1994. The decrease in net income is attributable to
higher death claims and increased sales of insurance products
where first year acquisition costs and the increase in reserves
exceeds the first year premium revenues.
Premiums and annuity considerations before reinsurance premiums
ceded, increased $23,468 to $97,491 in 1995 from $74,023 in 1994.
Premiums for CM Windows, a single premium deferred annuity,
increased $14,949 to $18,300 in 1995. Premiums for life insurance
products increased $8,518 to $79,190 in 1995 from $70,672 in 1994,
due primarily to increased universal life and term product sales.
<PAGE>
Reinsurance premiums ceded decreased by $2,397 in 1995. The
decrease is attributable to the decrease in reinsured universal
life premiums.
Net investment income increased by $5,783 over 1994; this increase
was attributable to increased invested assets and policy loans as
well as a decrease in applicable investment expenses and higher
interest rates.
Benefits, claims and settlement expenses, before reinsurance
benefit reimbursements increased by $33,200 from 1994. The
increase was primarily attributable to an increase in reserves for
future policy benefits of $18,338, an increase in death claims of
$11,167, increases in other benefits of $1,615, and increased
ceded reserves for future policy benefits of $3,054, partially
offset by decreased surrenders of $974.
Acquisition and insurance expenses before reinsurance commissions
and expense reimbursements increased by $17,289 from 1994 due to
increases in commissions as well as an increase in operating
expenses due to the increase in premium and annuity
considerations.
Income tax expense decreased by $3,285 from 1994. Taxable income
decreased by $9,350 for the nine months ended September 30, 1995
compared with the same period in 1994. C.M. Life's Federal income
tax expense is based on income which is currently taxable. The
difference between pre-tax book income and taxable income are
primarily taxable deferred acquisition costs, and other book/tax
differences associated with gross investment income.
Liquidity and Capital Resources
-------------------------------
C.M. Life's operations have historically provided substantial cash
flow. The majority of the Company's cash is invested in
investment-grade securities to provide ample protection for
policyholders. The liabilities of the Company are predominantly
long-term in nature and, therefore, the Company primarily invests
in long-term fixed maturity investments such as bonds.
C.M. Life's liquidity requirements were met by funds provided from
operations and investment activity. The primary uses of funds
were to purchase investments and to pay commissions, insurance
operating expenses and policy benefits.
Funds necessary to meet the capital requirements of all states in
which C.M. Life does business have been provided principally from
Connecticut Mutual's operations and investment activity.
Segment Information
-------------------
During 1995 and 1994, C.M. Life's operations consisted of one
business segment which was principally the sale of universal life
insurance and annuity products. C.M. Life was not dependent upon
any single customer and no single customer accounted for more than
10% of revenues in 1995 and 1994.
Reserves
--------
In accordance with the life insurance laws and regulations under
which C.M. Life operates, it is obligated to carry on its books,
as liabilities, actuarially determined reserves to meet its
obligations on outstanding contracts. Reserves are based on
mortality tables in general use in the United States and are
computed to equal amounts that, with additions from premiums to be
received, and with interest on such reserves computed annually at
certain assumed rates, will be sufficient to meet C.M. Life's
policy obligations at their maturities or in the event of an
insured's death. In the accompanying financial statements, these
reserves are determined in accordance with statutory regulations
which are generally accepted accounting principles for wholly
owned stock life insurance subsidiaries of mutual life insurance
companies.
<PAGE>
Investments
-----------
During the second quarter C.M. Life purchased $53 million in
equity securities of which $34.7 million was invested in mutual
funds managed by an affilliate of the company and $18.3 was
invested in unaffilliated common stocks for long term capital
appreciation. Currently the investment in equity securities is
approximately 7% of the total invested assets.
Competition
-----------
C.M. Life is engaged in a business that is highly competitive
because of the large number of stock and mutual life insurance
companies and other entities marketing insurance products
comparable to those of C.M. Life. Mortality fees for Panorama
Plus, the Company's variable annuity product, are among the lowest
in the industry.
There are approximately 2,000 stock, mutual and other types of
insurers in the life insurance business in the United States
according to the American Council of Life Insurance. According to
the most recent Best's Review, Life-Health Edition, as of December
31, 1993, Connecticut Mutual, C.M. Life's parent, ranked 30th
among all life insurance companies in the United States based on
total assets. As of September 30, 1995, Best's Insurance Reports,
Life-Health Edition, 1994, had assigned Connecticut Mutual and
C.M. Life an A (excellent) rating .
Transactions with Connecticut Mutual
------------------------------------
Connecticut Mutual allocates certain expenses to C.M. Life for
providing operating facilities, human resources, computer software
development and managerial services. Total expenses allocated to
C.M. Life were approximately $10,302 and $24,786 for the three and
nine month periods ended September 30, 1995 and $3,746 and $11,306
for the same periods in 1994.
Regulation
----------
Currently, the Federal government does not directly regulate the
business of insurance. However, Federal legislative, regulatory
and judicial decisions and initiatives often have significant
effects on C.M. Life's business. Types of changes that are most
likely to affect C.M. Life's business include changes to: (a) the
taxation of life insurance companies; (b) the tax treatment of
insurance products; (c) the securities laws, particularly as they
relate to insurance and annuity products; (d) the "business of
insurance" exemption from any of the provisions of the anti-trust
laws; and (e) declining barriers which prevent most banks from
selling or underwriting insurance. C.M. Life could also be
affected by federal initiatives that have impact on the ownership
of or investment in United States companies by foreign companies
or investors.
Merger of Connecticut Mutual
----------------------------
The Board of Directors of Connecticut Mutual, and Massachusetts
Mutual Life Insurance Company (MassMutual) have approved a plan of
merger pursuant to which Connecticut Mutual would merge with and
into MassMutual. The agreement was signed on September 13, 1995.
The merger is expected to be consummated early in the first
quarter of 1996, subject to the approval of certain policyholders
and insureds of Connecticut Mutual and MassMutual and applicable
regulatory authorities.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
C.M. Life Insurance Company
Date November 10, 1995
-----------------
s/ David E. Sams, Jr.
- ---------------------
David E. Sams
Director and President
Date November 10, 1995
-----------------
s/ J. Brinke Marcuccilli
- ------------------------
J. Brinke Marcuccilli
Director and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM C.M. LIFE'S
SEPTEMBER 30, 1995 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000883232
<NAME> C.M. LIFE INSURANCE COMPANY
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<DEBT-HELD-FOR-SALE> 723581<F1>
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 70252
<MORTGAGE> 31980
<REAL-ESTATE> 1853
<TOTAL-INVEST> 949687
<CASH> 1466
<RECOVER-REINSURE> 240
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 1440275
<POLICY-LOSSES> 802050
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 755
<POLICY-HOLDER-FUNDS> 464454
<NOTES-PAYABLE> 0
<COMMON> 2500
0
0
<OTHER-SE> 105645
<TOTAL-LIABILITY-AND-EQUITY> 1440275
58888<F2>
<INVESTMENT-INCOME> 50366
<INVESTMENT-GAINS> (1243)
<OTHER-INCOME> 1166
<BENEFITS> 100817
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 32217
<INCOME-PRETAX> 12275
<INCOME-TAX> 3740
<INCOME-CONTINUING> 8535
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8535
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>C.M. LIFE'S FINANCIAL STATEMENTS HEVE BEEN PREPARED IN CONFORMITY WITH
ACCOUNTING PRACTICES AND PROCEDURES OF THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS AS PRESCRIBED OR PERMITTED BY THE INSURANCE DEPARTMENT OF THE
STATE OF CONNECTICUT. UNDER THESE ACCOUNTING PRACTICES, FIXED MATURITIES
ELIGIBLE FOR AMORTIZATION ARE REPORTED AT AMORTIZED COST.
<F2>PREMIUMS ARE REPORTED NET OF $38603 IN REINSURANCE CEDED.
</FN>
</TABLE>
