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 June 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 June 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 Sheet -
June 30, 1995 and December 31, 1994 . . .3
Statement of Operations -
Three Months Ended
June 30, 1995 and 1994 . . . . . . 4
Statement of Operations -
Six Months Ended
June 30, 1995 and 1994 . . . . . . 5
Statement of Stockholder's Equity -
Six Months Ended
June 30, 1995 and 1994 . . . . . . 6
Statement of Cash Flows -
Six Months Ended
June 30, 1995 and 1994 . . . . . . 7
Notes to Financial Statements. . . . . .8
Item 2:
Management's Discussion and Analysis of
Financial Condition and Results of
Operations. . . . . . . . . . . . 9
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)
June 30, 1995 December 31,1994
-------------- -----------------
<S> <C> <C>
ASSETS:
Investments:
Fixed maturities at cost $723,307 $717,291
Equity securities at cost 56,034 1,815
Mortgage loans on real estate
at net realizable value 34,240 42,038
Real estate at cost 1,869 1,897
Policy loans at outstanding
balance 118,882 109,720
Cash and cash equivalents 6,345 3,025
------------- -----------------
Total investments 940,677 875,786
------------- -----------------
Accrued investment income 14,916 14,023
Accounts receivable 3,644 5,330
Federal income tax receivable 2,431 -
Amounts due from reinsurers 1,743 1,162
Other assets 2,599 2,318
Assets of Separate Account 408,879 309,672
------------- -----------------
TOTAL ASSETS $1,374,889 $1,208,291
------------- -----------------
LIABILITIES AND STOCKHOLDER'S
EQUITY:
Liabilities:
Future policy benefits $790,747 $751,808
Policy claims and benefits
currently payable 1,029 1,772
Indebtedness to related parties 24,513 6,965
Federal income tax payable - 2,446
Asset valuation reserve 12,655 6,640
Other liabilities 7,513 7,906
Other deposits 41,334 31,690
Transfers due from Separate
Account (18,148) (14,445)
Liabilities of Separate Account 408,879 309,672
------------- -----------------
Total liabilities 1,268,522 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 60,108 57,578
------------- -----------------
Total stockholder's equity 106,367 103,837
------------- -----------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $1,374,889 $1,208,291
============= =================
<FN>
NOTE: The Balance Sheet at December 31, 1994 has been taken from the audited
financial statements at that date.
<FN>
The accompanying notes are an integral part of these unaudited financial
statements.
3
</TABLE>
<PAGE>
<TABLE>
C.M. LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1994
($ IN THOUSANDS)
1995 1994
--------- ---------
<S> <C> <C>
REVENUES:
Premiums and annuity considerations $32,233 $22,102
Less: reinsurance ceded (12,291) (13,339)
---------- ----------
Net premiums and annuity considerations 19,942 8,763
Net investment income 17,283 15,126
Net realized capital losses
on investments (121) -
Other income 398 240
-------- --------
Total revenues 37,502 24,129
BENEFITS, LOSSES AND EXPENSES:
Benefits, claims and settlement expenses 35,753 20,164
Acquisition and insurance expenses 12,655 4,435
Other expenses 1,317 811
Less: reinsurance benefits and expenses (16,090) (10,629)
---------- ----------
Total benefits, losses and expenses 33,635 14,781
--------- -------
Income before income tax expense 3,867 9,348
FEDERAL INCOME TAX EXPENSE 973 2,068
--- --------
NET INCOME $2,894 $7,280
========= =========
<FN>
The accompanying notes are an integral part of these unaudited financial
statements.
4
</TABLE>
<PAGE>
<TABLE>
C.M. LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
($ IN THOUSANDS)
1995 1994
--------- --------
<S> <C> <C>
REVENUES:
Premiums and annuity considerations $69,034 $47,798
Less: reinsurance ceded (26,497) (28,245)
----------- -----------
Net premiums and annuity considerations 42,537 19,553
Net investment income 33,472 29,767
Net realized capital losses
on investments (373) (2)
Other income 747 387
------ ------
Total revenues 76,383 49,705
BENEFITS, LOSSES AND EXPENSES:
Benefits, claims and settlement expenses 73,116 42,249
Acquisition and insurance expenses 19,176 9,473
Other expenses 2,516 2,316
Less: reinsurance benefits and expenses (29,196) (21,904)
----------- -----------
Total benefits, losses and expenses 65,612 32,134
----------- -----------
Income before income tax expense 10,771 17,571
FEDERAL INCOME TAX EXPENSE 3,653 5,336
-------- --------
NET INCOME $7,118 $12,235
========= ==========
<FN>
The accompanying notes are an integral part of these unaudited financial
statements.
5
</TABLE>
<PAGE>
<TABLE>
C.M. LIFE INSURANCE COMPANY
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
($ 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 7,118 12,235
Change in asset valuation reserve (6,015) (1,703)
Change in nonadmitted assets (834) 526
Net unrealized capital gain 2,261 -
--------- ---------
Balance, end of period 60,108 52,697
--------- ---------
TOTAL STOCKHOLDER'S EQUITY $106,367 $98,956
========= =========
<FN>
The accompanying notes are an integral part of these unaudited financial
statements.
6
</TABLE>
<PAGE>
<TABLE>
C.M. LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
($ IN THOUSANDS)
1995 1994
----------- -----------
<S> <C> <C>
CASH PROVIDED:
Premiums and annuity considerations,
net of reinsurance $43,459 $21,545
Other deposits 76,903 114,165
Net investment income 33,365 29,249
Commission and expense allowance and
reserve adjustment on reinsurance ceded 9,627 11,627
----------- ----------
163,354 176,586
Benefits and interest to policyholders
and beneficiaries, net of reinsurance (15,928) (19,307)
Acquisition and insurance expenses,
net of reinsurance (21,741) (11,480)
Transfers to Separate Account (57,326 (103,685)
Federal income taxes paid (8,287) (6,617)
Other payments, net (9,759) (7,933)
Net cash provided by operations 50,313 27,564
----------- ----------
Proceeds from the the disposition of
fixed maturities and mortgage loans on
real estate 261,326 103,457
Other cash provided 4,860 -
----------- ----------
Total cash provided 316,499 131,021
----------- ----------
CASH APPLIED:
Purchases of fixed maturities 258,338 130,609
Purchase of equity securities 54,835 -
Other applications 6 823
----------- ----------
Total cash applied 313,179 131,432
----------- ----------
Net increase (decrease) in cash and cash
equivalents 3,320 (411)
CASH AND CASH EQUIVALENTS:
Beginning of year 3,025 5,589
----------- ----------
End of period $6,345 $5,178
=========== ==========
<FN>
The accompanying notes are an integral part of these unaudited financial
statements.
7
</TABLE>
<PAGE>
C.M. LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
JUNE 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 June 30, 1995 and December 31, 1994, the
results of its operations for the three months and six months
ended June 30, 1995 and 1994, and its cash flows for the six
months ended June 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 $9,958 and $14,484 for
the three and six month periods ended June 30, 1995 and $3,695 and
$7,560 for the same periods in 1994.
3. Net Investment Income:
---------------------
<TABLE>
Net investment income is comprised of the following:
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- -----------------
1995 1994 1995 1994
-------- --------- -------- --------
<S> <C> <C> <C> <C>
Fixed Maturities $13,598 $11,879 $27,049 $23,333
Mortgage loans on real estate 750 1,297 1,512 2,566
Policy loans 2,480 1,944 4,757 3,842
Amortization of IMR 288 129 (148) 363
Other 603 422 904 823
------- --------- -------- --------
Total Investment Income 17,719 15,671 34,074 30,927
Less: Applicable investment expense 436 545 602 1,160
------- --------- -------- --------
Net Investment Income $17,283 $15,126 $33,472 $29,767
======= ========= ======== ========
</TABLE>
8
<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 June 30, 1995 Compared with 1994
---------------------------------------------------
For the three months ended June 30, 1995, C.M. Life had net income
of $2,894 as compared with net income of $7,280 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 increase in reserves
exceed the first year premium revenues.
Premiums and annuity considerations before reinsurance premiums
ceded, increased $10,131 to $32,233 in 1995 from $22,102 in 1994.
Premiums for CM Windows, a single premium deferred annuity,
increased $4,414 to $5,386 in 1995. Premiums for life insurance
products increased $5,717 to $26,847 in 1995 from $21,130 in 1994,
due primarily to higher universal life, and term product sales.
Reinsurance premiums ceded decreased by $1,048 in 1995. The
decrease is attributable to the decrease in reinsured universal
life premiums.
Net investment income increased by $2,315 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 $15,589 from 1994. The
increase was primarily attributable to an increase in reserves for
future policy benefits of $8,360, an increase in death claims of
$7,967, increases in other benefits of $182, and increased ceded
reserves for future policy benefits of $863, partially offset by
decreased surrenders of $1,783.
Acquisition and insurance expenses before reinsurance commissions
and expense reimbursements increased by $8,349 from 1994 due to
increases in commissions as well as an increase in operating
expenses allocated from Connecticut Mutual due to the increase in
premium and annuity considerations.
Income tax expense decreased by $1,095 from 1994. Taxable income
decreased by $2,481 for the three months ended June 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.
Six Months Ended June 30, 1995 Compared with 1994
-------------------------------------------------
For the six months ended June 30, 1995, C.M. Life had net income
of $7,118 as compared with net income of $12,235 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 increase in reserves
exceeds the first year premium revenues.
9
<PAGE>
Premiums and annuity considerations before reinsurance premiums
ceded, increased $21,236 to $69,034 in 1995 from $47,798 in 1994.
Premiums for CM Windows, a single premium deferred annuity,
increased $16,464 to $17,636 in 1995. Premiums for life insurance
products increased $4,772 to $51,398 in 1995 from $46,626 in 1994,
due primarily to increased universal life and term product sales.
Reinsurance premiums ceded decreased by $1,748 in 1995. The
decrease is attributable to the decrease in reinsured universal
life premiums.
Net investment income increased by $3,836 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 $30,867 from 1994. The
increase was primarily attributable to an increase in reserves for
future policy benefits of $20,212, an increase in death claims of
$10,313, increases in other benefits of $890, and increased ceded
reserves for future policy benefits of $1,832, partially offset by
decreased surrenders of $2,380.
Acquisition and insurance expenses before reinsurance commissions
and expense reimbursements increased by $9,832 from 1994 due to
increases in commissions as well as an increase in operating
expenses allocated from Connecticut Mutual due to the increase in
premium and annuity considerations.
Income tax expense decreased by $1,683 from 1994. Taxable income
decreased by $4,306 for the six months ended June 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.
10
<PAGE>
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.
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 6%
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 June 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 $9,958 and $14,484 for the three and
six month periods ended June 30, 1995 and $3,695 and $7,560 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.
11
<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 August 14, 1995
---------------
s/ David E. Sams, Jr.
---------------------
David E. Sams
Director and President
Date August 14, 1995
---------------
s/ J. Brinke Marcuccilli
------------------------
J. Brinke Marcuccilli
Director and Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM C.M. LIFE'S
JUNE 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<DEBT-HELD-FOR-SALE> 723307<F1>
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 56034
<MORTGAGE> 34240
<REAL-ESTATE> 1869
<TOTAL-INVEST> 934332
<CASH> 6345
<RECOVER-REINSURE> 1743
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 1374889
<POLICY-LOSSES> 790747
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 1029
<POLICY-HOLDER-FUNDS> 450213
<NOTES-PAYABLE> 0
<COMMON> 2500
0
0
<OTHER-SE> 103867
<TOTAL-LIABILITY-AND-EQUITY> 1374889
42537<F2>
<INVESTMENT-INCOME> 33472
<INVESTMENT-GAINS> (373)
<OTHER-INCOME> 747
<BENEFITS> 73116
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 19176
<INCOME-PRETAX> 10771
<INCOME-TAX> 3653
<INCOME-CONTINUING> 7118
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7118
<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 HAVE 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 $26,497 IN REINSURANCE CEDED.
</FN>
</TABLE>
