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 March 31, 1996
----------------
Commission File Number 33-85988
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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 March 31, 1996, all
of which are owned by Massachusetts Mutual Life Insurance Company.
<PAGE>
C.M. LIFE INSURANCE COMPANY
INDEX
PART I: Financial Information
---------------------
Item 1:
Financial Statements:
Balance Sheet -
March 31, 1996 and December 31, 1995
Statement of Operations -
Three Months Ended
March 31, 1996 and 1995
Statement of Stockholder's Equity -
Three Months Ended
March 31, 1996 and 1995
Statement of Cash Flows -
Three Months Ended
March 31, 1996 and 1995
Notes to Financial Statements
Item 2:
Management's Discussion and Analysis of
Financial Condition and Results of
Operations
PART II: Other Information
-----------------
Item 1: Not applicable.
Item 2: Not applicable.
Item 3: Not applicable.
Item 4: Not applicable.
Item 5: Not applicable.
Item 6: Exhibits and Reports on Form 8-K
<PAGE>
<TABLE>
C.M. LIFE INSURANCE COMPANY
BALANCE SHEETS
($ IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
March 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
ASSETS:
Investments:
Fixed maturities at cost $745,146.1 $736,099.0
Equity securities at cost 52,470.6 72,571.7
Mortgage loans on real estate at 30,388.7 26,705.4
net realizable value
Policy loans at outstanding balance 127,352.0 126,014.3
Cash and cash equivalents 47,282.0 15,068.5
----------------- -----------------
Total investments 1,002,639.4 976,458.9
----------------- -----------------
Investment and insurance amounts 27,642.4 22,514.7
receivable
Other assets 818.9 3,068.6
Assets of Separate Account 597,421.6 531,432.2
----------------- -----------------
TOTAL ASSETS $1,628,522.3 $1,533,474.4
----------------- -----------------
LIABILITIES AND STOCKHOLDER'S
EQUITY:
Liabilities:
Policyholders' reserves and funds $873,631.6 $867,672.0
Policy claims and benefits
currently payable 7,132.1 2,085.9
Federal income tax payable 8,700.7 2,820.9
Asset valuation reserve 16,949.1 15,868.5
Remittances and items not allocated 9,304.5 3,861.2
Transfers due from Separate Account (23,832.4) (22,300.5)
Liabilities of Separate Account 597,421.6 531,432.2
Other liabilities 21,258.7 18,835.0
----------------- -----------------
Total liabilities 1,510,565.9 1,420,275.2
----------------- -----------------
STOCKHOLDER'S EQUITY:
Common stock, $200 par value -
50,000 shares authorized,
12,500 shares issued and 2,500.0 2,500.0
oustanding
Additional paid-in capital 43,759.0 43,759.0
Retained earnings 71,697.5 66,940.2
----------------- -----------------
Total stockholder's equity 117,956.5 113,199.2
----------------- -----------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $1,628,522.3 $1,533,474.4
================= =================
<FN>
The accompanying notes are an integral part of these unaudited financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
C.M. LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
($ IN THOUSANDS)
1996 1995
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<S> <C> <C>
REVENUES:
Premiums and annuity considerations $85,922.9 $58,365.1
Net investment income and other income 17,982.9 16,538.0
----------- ---------
Total revenues 103,905.8 74,903.1
DISPOSITION OF REVENUE:
Policy payments and benefits 22,375.5 15,825.3
Additions to policyholders' reserves and 60,377.0 44,308.9
funds
Operating expenses 6,080.6 3,701.5
Commissions 3,162.3 2,712.4
State taxes, licenses and fees 1,214.9 1,199.6
Total disposition of revenue 93,210.4 67,747.7
----------- ---------
Net gain before federal taxes 10,695.4 7,155.4
FEDERAL INCOME TAX EXPENSE 4,232.9 2,625.0
Net gain from operations 6,462.5 4,530.4
NET REALIZED CAPITAL (LOSS) GAIN 2,262.6 (306.5)
---------- ----------
NET INCOME $8,725.1 $4,223.9
=========== =========
<FN>
The accompanying notes are an integral part of these unaudited financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
C.M. LIFE INSURANCE COMPANY
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
($ IN THOUSANDS)
1996 1995
------------ -----------
<S> <C> <C>
Stockholder's equity beginning of year $113,199.2 $103,837.4
Increases (decreases) due to:
Net gain from operations 8,725.1 4,223.9
Net unrealized capital loss (1,267.8) -
Change in asset valuation reserve (1,080.6) (1,276.5)
Change in nonadmitted assets 99.5 44.9
Change in mortgage investment reserve (1,718.9) -
------------ - -----------
Net increase (decrease) 4,757.3 2,992.3
------------ -----------
TOTAL STOCKHOLDER'S EQUITY, end of year $117,956.5 $106,829.7
============ ===========
<FN>
The accompanying notes are an integral part of these unaudited financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
C.M. LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
($ IN THOUSANDS)
1996 1995
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<S> <C> <C>
CASH PROVIDED:
Premiums and annuity considerations,
net of reinsurance $94,584.8 $53,271.6
Net investment and other income 15,969.0 19,128.1
------------- ------------
110,553.8 72,399.7
Benefits and interest to policyholders
and beneficiaries, net of reinsurance (69,379.7) (34,758.2)
Operating expenses, commissions,
other expenses and taxes paid (4,053.9) (7,502.8)
Other payments, net (902.4) (4,101.9)
Net cash provided by operations 36,217.8 26,036.8
------------- ------------
Proceeds from the the disposition of
fixed maturities, equities and
mortgage loans on real estate 35,557.2 121,888.9
------------- ------------
Total cash provided 71,775.0 147,925.6
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CASH APPLIED:
Purchases of fixed maturities 39,561.5 148,895.9
Other applications - 6.7
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Total cash applied 39,561.5 148,903.0
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Net increase (decrease) in cash and cash
equivalents 32,213.5 (977.4)
CASH AND CASH EQUIVALENTS:
Beginning of year 15,068.5 3,025.0
------------- ------------
End of period $47,282.0 $2,047.6
============= ============
<FN>
The accompanying notes are an integral part of these unaudited financial
statements.
</FN>
</TABLE>
<PAGE>
C.M. LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
1. General:
-------
C.M. Life Insurance Company (C.M. Life) is a wholly owned stock
life insurance subsidiary of Massachusetts Mutual Life Insurance
Company (MassMutual).
On September 8, 1995, the Board of Directors of Connecticut Mutual
Life Insurance Company, (Connecticut Mutual) approved the merger
of Connecticut Mutual and Massachusetts Mutual Life Insurance
Company. Thereafter, a definitive agreement was
signed by both companies. On January 27, 1996, Connecticut Mutual
and insurance subsidiary policyholders and other insureds and
annuitants approved the merger. The merger was reviewed by the
insurance regulatory authorities in Massachusetts and Connecticut,
and approved. The merger was effective February 29, 1996.
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 March 31,
1996 and December 31, 1995, the results of its operations, stockholder's
equity, and its cash flows for the three months ended March 31, 1996
and 1995.
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.
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, MassMutual, 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 $6,281 and $4,121 for
the three month period ended March 31, 1996 and 1995.
<PAGE>
3. Net Investment and Other Income:
-------------------------------
<TABLE>
Net investment and other income is comprised of the following:
Three Months Ended
March 31,
-----------------------------
1996 1995
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<S> <C> <C>
Fixed Maturities $13,983 $13,451
Mortgage loans on real estate 725 762
Policy loans 2,530 2,277
Amortization of IMR (15) (238)
Other 308 301
------------ ----------
Total Investment Income 17,531 16,553
Less: Applicable investment expense 164 326
------------ ----------
Net Investment Income 17,367 $16,227
Other Income 616 311
------------ ----------
Net Investment and Other Income $17,983 $16,538
============ ==========
</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 March 31, 1996 Compared with 1995
----------------------------------------------------
For the three months ended March 31, 1996, C.M. Life had net
income of $8,725 as compared with net income of $4,224 for the
same period in 1995. The increase in net income of $4,501was
attributable to increased premium income of $27,558 partially
offset by increased insurance and acquisition expenses of $25,462
and the increase in net realized capital gains of $2,569 to $2,263
in 1996 from a loss of $306 in 1995.
Premium income increased $27,558 to $85,923 in 1996 from $58,365
in 1995. This increase is due to the introduction of the Universal
Life Enterprise Plus product in March of 1995 with excellent sales
results.
Reinsurance ceded decreased $1,572 from $14,206 in 1995 to $12,634
in 1996, due to lower direct premiums for the reinsured block of
business.
Net investment income increased by $1,140 from 1995; this increase
was attributable to increased invested assets, especially fixed
maturities and policy loans.
Expenses related to benefits, claims, settlements, insurance
operations, acquisitions and state taxes and fees increased
$25,463 to $93,210 in 1996 from $67,748 in 1995. This increase is
attributed to the 47% increase in premiums offset by decreased
death claims and reserve changes. Surrenders increased $8,457 from
$7,993 in 1995 to $16,450 in 1996 while death claims decreased
$7,540 from $9,338 in 1995 to $1,798 in 1996. Reserves ceded
increased $2,676 to $3,190 in 1996 up from $514 in 1995.
<PAGE>
Reinsurance benefits and expenses decreased $147 to $12,959 in 1996
from $13,106 in 1995.
Income tax expense increased by $1,608 from 1995. Taxable income
increased $4,537 from $7,500 in 1995 to $12,037 in 1996 with most of the
increase being attributable to the $3,540 increase in net gain from
operations.
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 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.
Segment Information
-------------------
During 1996 and 1995, 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 1996 and 1995.
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.
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.
MassMutual has over $52 billion in life insurance assets and $103
billion in total assets under management. Best's Insurance
Reports, Life-Health Edition, upgraded C.M. Life's rating on March
4, 1996 to the highest possible rating of A++. MassMutual's
ratings were the highest possible from A.M. Best (A++), Duff &
Phelps (AAA), and the second-highest rating from Moody's Investors
Service (Aa1).
<PAGE>
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.
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
Form 8-K was filed on February 29, 1996 to disclose a Change in
Control of Registrant. The Registrant's sole shareholder,
Connecticut Mutual Life Insurance Company was merged with and into
Massachusetts Mutual Life Insurance Company with MassMutual as the
surviving company on February 29, 1996 at 11:59 pm.
<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 May 15, 1996
------------
s/ David E. Sams, Jr.
- ---------------------
David E. Sams
Director and President
Date May 15, 1996
------------
s/ J. Brinke Marcuccilli
- ------------------------
J. Brinke Marcuccilli
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM C.M. LIFE'S
MARCH 31, 1996 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 745146<F1>
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 52471
<MORTGAGE> 30389
<REAL-ESTATE> 0
<TOTAL-INVEST> 1002639
<CASH> (603)
<RECOVER-REINSURE> 1069
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 1628522
<POLICY-LOSSES> 873632
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 7111
<POLICY-HOLDER-FUNDS> 655506
<NOTES-PAYABLE> 0
0
0
<COMMON> 2500
<OTHER-SE> 115457
<TOTAL-LIABILITY-AND-EQUITY> 1628522
85922
<INVESTMENT-INCOME> 17382
<INVESTMENT-GAINS> 2263
<OTHER-INCOME> 616
<BENEFITS> 82753
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 10458
<INCOME-PRETAX> 10695
<INCOME-TAX> 4234
<INCOME-CONTINUING> 8725
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8725
<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 HTE 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 FRO AMORTIZATION ARE REPORTED AT AMORTIZED COST.
</FN>
</TABLE>
