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SECURITIES AND EXCHANGE COMMISSION 333-02347
Washington, DC 20549
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FORM S-1
POST-EFFECTIVE AMENDMENT NO.
Under
The Securities Act of 1933
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C.M. LIFE INSURANCE COMPANY
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(Exact name of registrant as specified in its charter)
Connecticut 06-101383
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(State or other jurisdiction of (I.R.S. Employer Number)
incorporation or organization)
63
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(Primary Standard Industrial Classification Code Number)
140 Garden Street
Hartford, Connecticut 06154
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1-800-234-5606
(Address, including zip code, and
telephone number, including area
code, of registrant's principal
executive offices)
Thomas J. Finnegan, Jr.
Vice President, Secretary and Associate General Counsel
C.M. Life Insurance Company
Hartford, Connecticut 06154
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1-800-234-5606
(Name, address and telephone number of agent for service of process)
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Approximate date of commencement
of proposed sale to the public: May 1, 1997
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 of the Securities Act of 1933
check the following box. [X]
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PROSPECTUS
MAY 1, 1997
C.M. Life Insurance Company
Fixed Account with Interest Rate Factor Adjustment
Offered through Panorama Plus Variable Annuity Contract
This prospectus (the "Prospectus") describes C.M. Life Insurance Company's
("C.M. Life" or the "Company") Fixed Account (the "Fixed Account") with Interest
Rate Factor Adjustment. The Fixed Account is available for use with the
Panorama Plus Variable Annuity Contract (the ``Contract'') issued by C.M. Life.
The Fixed Account constitutes an account to which a Contract Owner may allocate
purchase payments or Accumulated Value in accordance with the Contract's
transfer rules. Since the Fixed Account is available only through the Contract,
an investor should carefully review the discussion of the Contract contained in
that prospectus. The focus of this Prospectus is limited to the Fixed Account's
operations and features.
C.M. Life guarantees specified rates of interest for amounts allocated to the
Fixed Account for specified periods of time. The interest rate stipulated for a
particular period (the Guaranteed Rate) is an annual effective yield. Although
Guaranteed Rates will fluctuate, they will never go below 3%. C.M. Life's
assets, including amounts allocated to the Fixed Account, are available to meet
the guarantees associated with the Fixed Account. These assets are chargeable
with liabilities arising from other business of the Company. Purchase payments
and transfers of Accumulated Value may be made among the Fixed Account and to
the sub-accounts of the Panorama Plus Separate Account.
Please note that amounts taken from the Fixed Account by partial or full
redemption, other than during the Window Period are subject to an Interest Rate
Factor Adjustment. Therefore a Contract Owner may experience a negative
investment return.
The annuity benefits available under the Contract may be either fixed or
variable amounts or a combination of both. The Accumulated Value prior to
maturity and the amount of any variable annuity payments thereafter will vary
with the investment performance of the Sub-Accounts selected and the amounts
allocated to the Fixed Account.
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 PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
THIS PROSPECTUS MUST BE ACCOMPANIED BY THE PROSPECTUSES OF PANORAMA PLUS,
PANORAMA SERIES FUND, INC., AND OPPENHEIMER VARIABLE ACCOUNT FUNDS.
C.M. Life Insurance Company
140 Garden Street
Hartford, CT 06154
1-800-234-5606
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<TABLE>
<CAPTION>
Table of Contents
<S> <C> <C>
Definitions................................................................ 3
I. Product Description............................................... 4
The General Account............................................... 4
Transfers......................................................... 5
DCA............................................................... 5
Surrenders........................................................ 6
II. Interest Rate Factor Adjustment Calculation....................... 7
III. The Interest Rate Factor Adjustment's Applicability on Surrender.. 9
IV. Investments by C.M. Life.......................................... 10
V. Distributor of the Contracts...................................... 10
VI. Federal Taxation Discussion....................................... 10
VII. Accounting Practices.............................................. 10
VIII. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 11
Results of Operations............................................. 11
Liquidity and Capital Resources................................... 13
Inflation......................................................... 14
Investments....................................................... 14
IX. C.M. Life - Description of the Business........................... 18
Competition....................................................... 18
Regulation........................................................ 19
X. Directors and Officers of C.M. Life............................... 19
XI. Executive Compensation............................................ 20
XII. Experts, Legal Proceedings and Additional Information............. 20
XIII. Selected Historical Financial Data................................ 20
</TABLE>
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Definitions
Accumulation Period: The period from the Contract Issue Date through the day
preceding the Annuity Income Date.
Accumulation Unit: A unit of measure used to determine the value of the Separate
Account Balance during the Accumulation Period.
Annuitant: The person upon whose life the Annuity Income payments are to be
made. On or after the Annuity Income Date, the Annuitant shall also include any
Joint Annuitant selected in accordance with Annuity Income Options.
Annuity Income Date: The date on which the Annuity Income payments begin. The
earliest Annuity Income Date that may be elected is the fifth anniversary of the
Contract Issue Date. The latest Annuity Income Date that may be elected is the
Annuitant's 85th birthday.
Annuity Income: The payments that will begin on the Annuity Income Date. The
amount of Annuity Income payments will be based on the Contract Balance and the
age(s) and sex(es) of the Annuitant (and Joint Annuitant, if Annuity Option C or
D is elected), as well as on the Annuity Option selected.
Annuity Options: Options available for payment of Annuity Income.
Annuity Period: The period which begins on the Annuity Income Date and ends with
the last Annuity Income payment.
Annuity Service Center: Notices, Written Requests, and Purchase Payments under
the Contract must be sent to the Annuity Service Center, the address of which is
140 Garden Street, Mail Station H305, Hartford, CT 06123, telephone number 1-
800-234-5606. All sums payable by C.M. Life under the Contract are payable only
at the Annuity Service Center.
Annuity Unit: A unit of measure used to determine the amount of each Variable
Annuity Income payment.
Application: The document signed by the Contract Owner that evidences the
Contract Owner's application for the Contract.
Beneficiary: The person(s) designated to receive the Death Benefit provided
under the Contract.
Code: The Internal Revenue Code of 1986, as amended.
Contingent Annuitant: The person designated to receive all of the benefits
otherwise due the Annuitant if the Annuitant dies before the Annuity Income
Date, provided such person is less than 85 years of age on the Annuitant's date
of death.
Contract Balance(s): The sum of the General Account Balance and the Separate
Account Balance.
Contract: The Panorama Plus individual flexible premium deferred annuity
contract, or the individual certificate issued under a Panorama Plus group
flexible premium deferred annuity contract, that is described in this
Prospectus.
Contract Issue Date: The date on which the Contract becomes effective.
Contract Owner: The person or entity entitled to the ownership rights stated in
the Contract.
Contract Year: The first Contract Year is the annual period which begins on the
Contract Issue Date. Subsequent Contract Years begin on each anniversary of the
Contract Issue Date.
Five-Year Period: Any of the successive five-year periods which begin on the
date of the initial Purchase Payment to the General Account.
Fixed Annuity: An annuity with payments that do not vary as to dollar amount.
Funds: The Separate Account invests in shares of various investment Portfolios
of two mutual funds ("Funds"): the Panorama Series Fund, Inc. ("Panorama Fund")
and the Oppenheimer Variable Account Funds ("OVAF"). Both Funds are diversified,
open-end management investment companies. The following six (6) Portfolios are
available under the Contract: the Oppenheimer Money Fund ("Money Portfolio") and
the Oppenheimer Bond Fund ("Bond Portfolio") of OVAF, and the Government
Securities Portfolio, the Total Return Portfolio, the Growth Portfolio, and the
International Equity Portfolio of the Panorama Fund. Each Portfolio is managed
for investment purposes as if it were a separate investment company issuing its
own shares.
General Account: The portion of the Contract, if any, which is credited with a
specified interest rate, and which is held as part of the general assets of C.M.
Life and not as part of the Separate Account.
General Account Balance: The value of the General Account during the
Accumulation Period.
Guaranteed Interest Rate: The effective annual interest rate which C.M. Life
will credit on the General Account Balance. The Guaranteed Interest Rate will be
reset quarterly in the sole discretion of C.M. Life, and will never be less than
3%. Although this minimum interest rate is guaranteed, there is no guaranteed
Surrender Value.
Investment Accounts: The General Account and Separate Account available for
Purchase Payments under the Contract.
Net Purchase Payment: A Purchase Payment less any Premium Tax.
Premium Tax: A tax imposed by certain states when a Purchase Payment is made,
when Annuity Income begins, or when the Contract is Surrendered.
Purchase Payment: A deposit made to the Contract.
Revision Date: The date of any revised Contract schedule. A revised Contract
schedule bearing the latest Revision Date will supersede all previous Contract
schedules.
Separate Account: C.M. Life's Panorama Plus Separate Account, which consists of
assets set aside by C.M. Life, the
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investment performance of which is kept separate from that of the general assets
and all other separate account assets of C.M. Life.
Separate Account Balance: The value of the Separate Account during the
Accumulation Period.
Sub-Account: Separate Account assets are divided into Sub-Accounts which are
listed in the Contract Schedule. Assets of each Sub-Account will be invested in
shares of a corresponding Portfolio or Fund. C.M. Life reserves the right to
eliminate or add Sub-Accounts and to change investment companies, or to
substitute other investments for Fund shares, in accordance with the applicable
provisions of the Investment Company Act of 1940, as amended.
Surrender: An election in the form of a Written Request by the Contract Owner
made prior to the Annuity Income Date and before a Death Benefit has become
payable, to withdraw all or a portion of the Contract Balance in exchange for a
cash payment.
Surrender Value: The proceeds payable upon a Surrender of the Contract, equal to
the Contract Balance (a) minus any applicable Surrender Charge, (b) minus the
Contract Maintenance Fee, (c) minus any applicable Premium Tax, and (d) plus or
minus any applicable Interest Rate Factor Adjustment. There is no guaranteed or
minimum Surrender Value.
Treasury Index Rates: The annual interest rates payable on U.S. Treasury
securities with l-year, 2-year, 3-year, and 5-year maturities, published weekly
by the Federal Reserve. Index Rates for intermediate periods shall be
interpolated from the applicable interest rates.
Valuation Date: Every day on which C.M. Life and the New York Stock Exchange
("NYSE") are open for business, except any day on which trading on the NYSE is
restricted, or on which an emergency exists, as determined by the Securities and
Exchange Commission ("SEC"), or respective governing bodies of the NYSE so that
valuation or disposal of securities is not practicable.
Valuation Period: The period of time beginning on the day following any
Valuation Date and ending on the next Valuation Date. A Valuation Period may be
more than one day.
Variable Annuity: An annuity with payments which vary as to dollar amount in
relation to the investment performance of specified Sub-Accounts of the Separate
Account.
Window Period: The last thirty (30) days of each Five-Year Period. During a
Window Period, part or all of the General Account Balance may be transferred to
any Sub-Account of the Separate Account or surrendered without incurring a
Surrender Charge or an Interest Rate Factor Adjustment. Also, part or all of the
Separate Account Balance may be surrendered without incurring a Surrender Charge
during the Window Period.
Written Request: A request in writing, in a form satisfactory to C.M. Life,
which is received by the Annuity Service Center.
I. Product Description
The General Account
The General Account is made up of all of the assets of C.M. Life other than
those allocated to separate accounts. Purchase Payments will be allocated to the
General Account to the extent elected by the Contract Owner at the time of the
initial Purchase Payment or as subsequently elected. Subject to certain
limitations, all or part of the Separate Account Balance may be transferred to
the General Account as described under "Transfers." Assets supporting amounts
allocated to the General Account become part of C.M. Life's general account
assets and are available to fund the claims of all classes of customers, policy
owners and other creditors of C.M. Life. Interests under the Contract relating
to the General Account are registered under the Securities Act of 1933, as
amended, ("1933 Act") but the General Account is not registered under the 1940
Act.
Contract Balances in the General Account will not share in the investment
performance of the General Account. Instead, C.M. Life will pay a specified
rate of interest on such balance. The interest rate credited to General Account
Balances will vary at the sole discretion of C.M. Life. The Contract Owner
should check with his or her registered representative or the Annuity Service
Center for current availability. However, C.M. Life will credit interest at an
effective annual rate of not less than 3% per year, compounded annually, to
amounts allocated to the General Account under the Contract. C.M. Life is not
obligated to credit any interest in excess of 3%. There is no specific formula
for the determination of the interest rate. Some of the factors that C.M. Life
may consider in determining the interest rate are: general economic trends;
rates of return currently available and anticipated on C.M. Life's investments;
expected investment yields; regulatory and tax requirements; and competitive
factors. C.M. Life may, with respect to investments and average terms of
investments, use dedication (cash flow matching), and/or duration matching, or
other methods to minimize C.M. Life's risk in volatile interest rate
environments of not achieving the rates it is crediting. C.M. Life resets this
rate periodically. ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE GENERAL
ACCOUNT IN EXCESS OF 3% PER YEAR WILL BE DETERMINED AT THE SOLE DISCRETION OF
C.M. LIFE. THE CONTRACT OWNER ASSUMES THE RISK THAT INTEREST CREDITED ON AMOUNTS
ALLOCATED TO THE GENERAL ACCOUNT MAY NOT EXCEED 3% PER YEAR. It currently
resets the rate quarterly, but in the future the rate may be reset more or less
frequently. The Contract Owner also assumes the risk that the Surrender Value of
amounts allocated to the General Account will be less than the General Account
Balance, and less than the Net Purchase Payments allocated to the General
Account.
C.M. Life is aware of no statutory limitations on the maximum amount of interest
it may credit, and the Board of Directors has set no limitations. However,
inherent in C.M. Life's exercise of discretion in this regard is the equitable
allocation of distributable earnings and surplus among its various policyholders
and Contract Owners and to its sole stockholder.
Surrenders of General Account Balances may be subject to an Interest Rate Factor
Adjustment (as well as a Surrender Charge), so Surrender proceeds may be less
than Purchase Pay-
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ments. The Interest Rate Factor Adjustment may also apply to any General Account
Balance applied to Variable Annuity Income payments. The Adjustment does not
apply to Contracts issued to Pennsylvania residents. For more information, see
"Surrender Charge" and "Interest Rate Factor Adjustment."
C.M. Life will invest the assets of the General Account in those assets chosen
by C.M. Life and allowed by applicable state laws regarding the nature and
quality of investments that may be made by life insurance companies, and the
percentage of their assets that may be committed to any particular type of
investment. In general, these laws permit investments, within specified limits
and subject to certain qualifications, in federal, state and municipal
obligations, corporate bonds, preferred and common stocks, real estate
mortgages, real estate and certain other investments.
C.M. Life intends to invest assets of the General Account primarily in debt
instruments as follows: (1) securities issued by the United States Government or
its agencies or instrumentalities, which issues may or may not be guaranteed by
the United States Government; (2) debt securities which have an investment
grade, at the time of purchase, within the four highest grades assigned by
Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa, A or Baa), Standard &
Poor's Corporation ("Standard & Poor's") (AAA, AA, A or BBB) or any other
nationally recognized rating service; (3) other debt instruments, including, but
not limited to, issues of or guaranteed by banks or bank holding companies and
corporations, which obligations, although not rated by Moody's or Standard &
Poor's, are deemed by C.M. Life's management to have an investment quality
comparable to securities which may be purchased as stated above; (4) other
evidences of indebtedness secured by mortgages or deeds of trust representing
liens upon real estate; (5) private placements (i.e., securities not registered
with the SEC, and for which there may not be a liquid market); and (6) below
investment grade debt instruments. Instruments rated "Baa" and/or "BBB" or lower
normally involve a higher risk of default and are less liquid than higher rated
instruments. If the rating of an investment grade debt security held by C.M.
Life is subsequently downgraded to below investment grade, the decision to
retain or dispose of the security will be made based upon an individual
evaluation of the circumstances surrounding the downgrading, and the prospects
for continued deterioration, stabilization and/or improvement. C.M. Life is not
obligated to invest amounts allocated to the General Account according to any
particular strategy, except as may be required by applicable state insurance
laws. Investments not indicated herein may also be made.
C.M. Life may utilize a "segregated account" within its general asset account in
connection with the General Account Contract Balances. Nevertheless, Contract
Owners who allocate amounts to the General Account do not share in the
investment performance of that segregated account or any other portion of the
assets of C.M. Life. Accordingly, in contrast to the Panorama Plus Separate
Account, there are no "units" or calculation of "unit values" to measure the
investment performance of the General Account.
Transfers
The Contract Owner may transfer Contract Balance amounts to or from the General
Account and/or any Sub-Account of the Separate Account, within certain limits,
as described below. Although no fee is currently imposed on transfers, C.M. Life
reserves the right to charge such a fee in the future, and to otherwise restrict
the transfer privilege in any way, or to eliminate it entirely.
During the Accumulation Period, the Contract Owner (or the Beneficiary, if a
Death Benefit has become payable) may transfer Contract Balance amounts,
subject to the following provisions.
. The Contract Owner signs and submits a Written Request for a transfer which
is received by the Annuity Service Center.
. The minimum transfer amount is $100.
. The total amount of all transfers to or from the General Account during
each Contract Year is limited to the greater of: (i) 30% of the General
Account Balance as of the end of the immediately preceding Contract Year;
or (ii) $25,000.
. Transfers between the General Account and the Money Sub-Account (together,
the "Competing Accounts") are only permitted during a Window Period. In
addition, for a period of ninety (90) days following a transfer out of one
Competing Account, no transfers (i.e., from any Account) may be made into
the other Competing Account.
. Similarly, for a period of ninety (90) days following a transfer into either
Competing Account, no transfers (i.e., to any Account) may be made out of
the other Competing
During the Annuity Period, the Contract Owner (who may or may not be the
Annuitant) may not make any transfers to or from the General Account.
Dollar Cost Averaging
Except as otherwise provided, amounts from Sub-Accounts and the General Account
may be transferred at regular intervals. This election is called "Dollar Cost
Averaging."
Upon Written Request, a Contract Owner may elect Dollar Cost Averaging ("DCA")
to begin at any time during the Accumulation Period, except as otherwise
provided in DCA Option 2 - Fixed Dollar Amount Transfers described below. There
is currently no charge for DCA. However, the Company reserves the right to
charge for DCA in the future. The Contract Owner may not simultaneously
participate in both DCA and Systematic Withdrawals. (See "Systematic
Withdrawals".)
DCA will begin when a properly completed Written Request from the Contract Owner
is received by the Company at least five (5) business days prior to the transfer
start date selected by the Contract Owner. If the DCA start date is less than
five (5) days after the date the Written Request is received by the Company, the
Company may defer the DCA start date for one
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(1) month. If no start date has been selected, the Company will automatically
start DCA within five (5) business days after the Written Request is received.
If DCA is elected, the Contract Owner may direct the transfer of amounts at
regular intervals under one of the following options:
DCA OPTION 1 FROM THE SUB-ACCOUNTS - Transfers to the General Account are not
permitted.
DCA OPTION 2 - FIXED DOLLAR AMOUNT TRANSFERS - This option provides for the
transfer of fixed dollar amounts at regular intervals from the General Account
to one or more of the Sub-Accounts (other than the Money Market Sub-Account).
Transfers must be for at least $100 per transferee Sub-Account. Total transfers
from the General Account are limited in the Contract Year of the initial
Purchase Payment to the greater of: (i) 30% of the initial Purchase Payment; or
(ii) $25,000. In subsequent Contract Years total transfers from the General
Account are limited to the greater of: (i) 30% of the General Account Balance
as of the end of the immediately preceding Contract Year; or (ii) $25,000.
Election into this option may only be made during the Accumulation Period as
follows: at the time of the initial Purchase Payment into the General Account;
or, in subsequent years, on the Contract Year anniversary, provided that the
Company receives the Written Request for this election at least five (5)
business days in advance of such anniversary.
DCA OPTION 3 - INTEREST-ONLY TRANSFERS - This option provides for the transfer
of the credited interest of the General Account at regular intervals to one or
more of the Sub-Accounts (other than the Money Market Sub-Account). The
transferred amount is comprised of the credited interest for the selected
interval (e.g., monthly, quarterly). The $100 minimum transfer amount does not
apply to this option. To participate in this option, there is a $5,000 minimum
General Account Balance required at the time of each transfer.
DCA OPTIONS 2 & 3 FROM THE GENERAL ACCOUNT - These options provide for the
transfer of amounts at regular intervals from the General Account to one or
more of the Sub-Accounts (other than the Money Market Sub-Account). Except
during the Window Period, additional transfers from the General Account are not
permitted while a DCA option 2 or 3 is in effect.
Changes in the terms of any option elected (such as amount transferred or Sub-
Account designation) may be made by Written Request to terminate the existing
DCA, along with a Written Request providing new DCA elections.
DCA will terminate when any of the following occurs:
(1) the number of designated transfers has been completed;
(2) the value of the General Account or Sub-Account is insufficient to complete
the next transfer;
(3) a Written Request from the Contract Owner is received at least five (5)
business days prior date; to the next transfer
(4) for Option 3, where the General Account balance falls below $5,000;
(5) the Annuity Income Date arrives; or
(6) the Contract is terminated.
Except as otherwise provided, Dollar Cost Averaging is subject to the transfer
provisions of the Contract. (See "Transfers") Dollar Cost Averaging is not
currently available in all states.
Surrenders
The Contract Owner may surrender all or a portion of the Contract Balance in
exchange for a cash payment from C.M. Life. The proceeds payable upon a full
Surrender are the Contract Balance less any applicable Surrender Charge,
Contract Maintenance Fee, any applicable premium taxes, and plus or minus any
applicable Interest Rate Factor Adjustment. The net proceeds payable upon full
Surrender equal the "Surrender Value." There is no minimum or guaranteed
Surrender Value. The proceeds payable upon a partial Surrender are the Surrender
amount requested; any applicable Surrender Charge is subtracted from, and any
applicable Interest Rate Factor Adjustment is added to, or subtracted from, the
remaining Contract Balance. There is no Surrender Charge or Interest Rate Factor
Adjustment on Surrenders during a Window Period. Any Surrender Charge or
Contract Maintenance Fee imposed on Surrender will be allocated among the
General Account and the Sub-Accounts in the same manner (pro rata) as the
Contract Balance subject to Surrender is allocated among the General Account and
the Sub-Accounts. For Contracts issued to Pennsylvania residents, the Contract
Maintenance Fee will be allocated pro rata among the Sub-Accounts. Any
applicable Interest Rate Factor Adjustment imposed on a Surrender will be
imposed only on the amount of General Account Balance subject to Surrender. For
partial Surrenders, the Contract Owner must specify the Investment Account or
Sub-Account from which surrendered amounts should be taken.
The minimum amount that can be withdrawn from any Sub-Account or the General
Account is $100. In addition, following any partial Surrender, the remaining
Contract Balance must be at least $250. If the processing of a partial Surrender
request would result in a remaining Contract Balance of less than $250, C.M.
Life will treat the partial Surrender request as a full Surrender of the
Contract, and the Surrender Value will be paid. Following payment of the
Surrender Value, the Contract will be canceled.
The Contract Owner may request the Contract Balance at any time during the life
of the Annuitant and Contract Owner and prior to the Annuity Income Date, by
sending a Written Request to the Annuity Service Center. Surrenders are
permitted any time during the Accumulation Period. (See "Annuity Options," page
20.)
C.M. Life will process all partial Surrender and full Surrender requests within
seven (7) calendar days (unless a shorter period is required under applicable
law) following receipt by the Annuity Service Center of the Contract Owner's
Written Request, except in the following situations for the following Accounts.
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General Account - C.M. Life reserves the right to defer payment of any
Surrender from the General Account for up to six (6) months.
Separate Account - C.M. Life reserves the right to defer the payment of any
Surrender from the Separate Account as permitted by the 1940 Act. Such delay
may occur because: (i) the New York Stock Exchange is closed for trading; (ii)
the SEC determines that a state of emergency exists; or (iii) an order or
pronouncement of the SEC permits a delay for the protection of Contract Owners.
In addition, a Purchase Payment amount is not available to satisfy a Written
Request for Surrender until the check, or other instrument by which such
Purchase Payment was made, has been honored.
Beginning in the second Contract Year, the Contract Owner is entitled to an
annual Free Surrender Amount, which is exempt from a Surrender Charge and from
any Interest Rate Factor Adjustment. The Free Surrender Amount equals 10% of the
Contract Balance as of the end of the immediately preceding Contract Year, and
is allocated among the General Account and Sub-Accounts in the same proportion
as the partial Surrender or full Surrender requested. The Free Surrender amount
may be taken in multiple installments in each Contract Year. Any amount subject
to Surrender in excess of the Free Surrender Amount is subject to the Surrender
Charge and the Interest Rate Factor Adjustment, as applicable. (See "Interest
Rate Factor Adjustment," and "Surrender Charge".) Any unused Free Surrender
Amount cannot be accumulated and carried from one year to the next. (Surrenders
may result in tax liabilities. See "Certain Federal Income Tax Consequences".)
Since the Contract Owner assumes the entire investment risk with respect to
Purchase Payments and transfers allocated to the Separate Account, and certain
risks with respect to amounts allocated to the General Account, and because
Surrenders are subject to a Surrender Charge, an Interest Rate Factor
Adjustment, a Contract Maintenance Fee, and possibly Premium Taxes, the total
amount paid upon full Surrender may be more or less than the total Purchase
Payments made (taking any prior partial Surrenders into account). Following a
Surrender of the total Contract Balance, or at any time the Contract Balance is
zero, all rights of the Contract Owner and Annuitant will terminate.
II. Interest Rate Factor Adjustment Calculation
The amount of General Account Balance partially or fully Surrendered during the
Accumulation Period, and the total General Account Balance on the Annuity Income
Date (if and to the extent that the General Account Balance is applied to a
Variable Annuity Option), will be subject to an Interest Rate Factor Adjustment.
The Interest Rate Factor Adjustment is based on interest rates payable on U.S.
Treasury securities. In general, if rates on U.S. Treasury securities are higher
when you Surrender than when you made the applicable Purchase Payments, a
negative Interest Rate Factor Adjustment will generally be applied to the amount
Surrendered, and you could receive an amount lower than the amount of Purchase
Payments made. If rates on U.S. Treasury securities are lower when you Surrender
than when you made the applicable Purchase Payments, a positive Interest Rate
Factor Adjustment will generally be applied to the amount Surrendered, and you
could receive an amount higher than the amount of Purchase Payments made. No
Interest Rate Factor Adjustment will be applied during the Window Period. In
addition, no Interest Rate Factor Adjustment will be applied to the General
Account Free Surrender Amount or to Contracts issued to Pennsylvania residents.
The Interest Rate Factor Adjustment will reflect the relationship between (i)
the weighted average of U.S. Treasury Index Rates corresponding to aggregate
Purchase Payments and Transfers into the General Account during the current
Five-Year Period (as adjusted for partial Surrenders or Transfers out of the
General Account), (ii) the U.S. Treasury Index Rate which would be applicable
during the time remaining in the current Five-Year Period on the date of the
Surrender, and (iii) the time remaining in the current Five-Year Period. In
general, if the weighted average of U.S. Treasury Index Rates corresponding to
Purchase Payments and Transfers during the current Five-Year Period is lower
than the U.S. Treasury Index Rate which would be applicable during the time
remaining in the current Five-Year Period, then the application of the Interest
Rate Factor Adjustment will result in a lower payment upon Surrender.
The partial surrender Interest Rate Factor Adjustment Formula is:
(1 - 1/IRF) X (GAPS - GAF + GAPSC) = IRFA.
In the event of a Partial Surrender, there is no Interest Rate Factor Adjustment
if the General Account Free Surrender Amount exceeds the General Account portion
of such Partial Surrender.
The full surrender Interest Rate Factor Adjustment Formula is:
(IRF - 1) X (GAFS - GAF) = IRFA.
Where:
(GAPS) is the General Account Partial Surrender Amount.
(GAFS) is the General Account Full Surrender Amount.
(GAF) is the General Account Free Surrender Amount.
(GAPSC) is the General Account portion of the Partial
Surrender Charge Amount determined as follows:
GAPSC = (GAPS - GAF) X 5%/95%, but not less than zero.
(IRF) is the Interest Rate Factor.
(IRFA) is the Interest Rate Factor Adjustment.
The Interest Rate Factor is determined by the following formula:
(1 + Ta)/(N/12)/
------------------------------- = IRF
(1.003 + Tb)/(N/12)/
7
<PAGE>
Where:
(Ta) is the weighted average of the U.S. Treasury Index Rates which
correspond to the Purchase Payments and/or Transfers allocated to the
General Account during the current Five-Year Period. The U.S. Treasury
Index Rate corresponding to each such allocation is determined by the
number of full years and fractions thereof (but not less than one (1)
year) remaining from the date of the allocation until the end of the
current Five-Year Period. For purposes of determining the average of
these rates, each U.S. Treasury Index Rate is weighted by the amount of
the corresponding allocation (as adjusted to reflect any partial
Surrenders and/or transfers from the General Account subsequent to such
allocation). The General Account Balance at the beginning of any Five-
Year Period will be treated as a new allocation for purposes of this
calculation.
Each allocation made prior to a Partial Surrender and/or transfer
from the General Account (other than the current Surrender) shall be
adjusted by multiplying such allocation by the following fraction:
1 - PS/GAB
Where:
(PS) is the amount of the Partial Surrender and/or transfer from the
General Account made subsequent to the allocation,
(GAB) is the beginning General Account Balance on the date of such
Partial Surrender and/or transfer from the General Account, A
separate adjustment shall be calculated for each prior Partial
Surrender and/or transfer from the General Account.
(Tb) is the U.S. Treasury Index Rate with a maturity equal to the number
of full years and fractions thereof (but not less than one (1)
year) remaining in the current Five-Year Period on the date of the
Partial or Full Surrender,
(N) is the number of whole months remaining in the current Five-Year
Period as of the date of the Partial or Full Surrender (rounded
down),
1.003 builds into the formula a factor representing direct and indirect
costs to C.M. Life associated with liquidating General Account
assets in order to satisfy Surrender requests or to begin making
Annuity Income payments (to the extent the General Account Balance
is applied to purchase a Variable Annuity). This adjustment of .30%
has been added to the denominator of the formula because it is
anticipated that a substantial portion (more than half) of
applicable General Account portfolio assets will be in relatively
illiquid private placement securities. Thus, in addition to direct
transaction costs, if such securities must be sold (e.g., because
of Surrenders), the market price may be lower because they are not
registered securities. Accordingly, even if interest rates decline,
there will not be a positive adjustment until this factor is
overcome, and then any adjustment will be lower than otherwise, to
compensate for this factor. Similarly, if interest rates rise, any
negative adjustment will be greater than otherwise, to compensate
for this factor. If interest rates stay the same, this factor will
result in a small but negative Interest Rate Factor Adjustment.
(IRF) is the Interest Rate Factor.
Examples. The following examples illustrate the calculation of the Interest Rate
Factor and the Interest Rate Factor Adjustment.
In the following examples, the Interest Rate Factor Adjustment formula is
applied so as to produce only positive numbers, which are then added to, or
subtracted from, the Surrender proceeds (for Full General Account Balance
Surrenders) or the remaining General Account Balance (for Partial General
Account Balance Surrenders). For example, if the Interest Rate Factor is .7,
then the Interest Rate Factor Adjustment calculation illustrated below will show
1-.7, rather than .7-1, to result in a positive number.
8
<PAGE>
For examples 1 and 2, assume no change in interest rates.
1) Assume a $50,000 General Account Balance at the beginning of the second
Five-Year Period, and a Full Surrender at that time.
Also, assume the U.S. Treasury Index Rate at that time is 7%.
(1.07)/(5)/
THEN: IRF = ------------------ = .9861
(1.073)
Interest Rate Factor Adjustment
[deducted from proceeds] =
(1 - .9861) X ($50,000 - $5,000) = $625.50.
2) Assume a $50,000 General Account Balance at the beginning of the tenth
Contract Year with a Full Surrender at that time.
Also, assume the U.S. Treasury Index Rate remains at 7% for all
maturities:
1.07
THEN: IRF = ------------------ = .9972
1.073
Interest Rate Factor Adjustment
[deducted from proceeds] =
(1 - .9972) X ($50,000 - $5,000) = $126.00.
For examples 3 and 4, assume a General Account Balance of $50,000 at the
beginning of the seventh Contract Year.
3) Assume a Full Surrender at the beginning of the seventh Contract Year:
a) Assume that the beginning U.S. Treasury Index Rate was 7%,
and the current U.S. Treasury Index Rate is 5.40%.
(This is a decrease in rates of 1.60%). Then the IRF = 1.05.
Interest Rate Factor Adjustment =
(1.05 - 1) X ($50,000 - $5,000) = $2,250.
Thus, the actual amount of Surrender proceeds paid = $50,000 +
$2,250 - $30 = $52,220.
b) Assume that the beginning U.S. Treasury Index Rate was 7%, and
the current U.S. Treasury Index Rate is 8.08%.
(This is an increase in rates of 1.08%). Then the IRF = .95.
Interest Rate Factor Adjustment =
(1 - .95) X ($50,000 - $5,000) = $2,250.
Thus, the actual amount of Surrender proceeds
paid = $50,000 - $2,250 - $30 = $47,720.
Note: The contract maintenance fee ($30) applies to full surrenders.
4) Assume a partial Surrender of $10,000 at the beginning of the seventh
Contract Year:
a) Assume that the beginning U.S. Treasury Index Rate was 7%, and
the current U.S. Treasury Index Rate is 5.40%.
(This is a decrease in rates of 1.60%). Then the IRF = 1.05.
Interest Rate Factor Adjustment =
1
[ 1 - ----- ] X ($10,000 - $5,000) = $238.10.
1.05
Thus, the General Account Balance would be reduced by $10,000
- $238.10 = $9,761.90.
b) Assume that the beginning U.S. Treasury Index Rate was 7%, and
the current U.S. Treasury Index Rate is 8.08%.
(This is an increase in rates of 1.08%). Then the IRF = .95.
Interest Rate Factor Adjustment =
1
[ 1 - ----- ] X ($10,000 - $5,000) = $263.16.
.95
Thus, the General Account Balance would be reduced by $10,000 -
$236.16 = $10,263.16.
III. Interest Rate Factor Adjustment's Applicability on Surrender
Examples
The following examples illustrate the impact of the Interest Rate Factor
Adjustment together with the Surrender Charge (See Appendix I.) on Surrender
proceeds. For examples 1 and 2, assume a General Account Balance of $50,000 at
the beginning of the second Contract Year.
1) Assume a Full Surrender at the beginning of the second Contract Year.
a) Assume that the beginning U.S. Treasury Index Rate was 7%, and
the current U.S. Treasury Index Rate is 4.18%.
(This is a decrease in rates of 2.82%). Then the IRF = 1.10.
Surrender Charge =
($50,000 - $5,000) X .05 = $2,250.00.
Interest Rate Factor Adjustment =
(1.10 - 1) X ($50,000 - $5,000) = $4,500.00.
Thus, the actual amount of Surrender proceeds paid = $50,000 -
$2,250 + $4,500 - $30 = $52,220.00.
9
<PAGE>
b) Assume that the beginning U.S. Treasury Index Rate was 7%, and
the current U.S. Treasury Index Rate is 9.56%.
(This is an increase in rates of 2.56%). Then the IRF = .9.
Surrender Charge =
($50,000 - $5,000) X .05 = $2,250.00.
Interest Rate Factor Adjustment =
(1 - .9) X ($50,000 - $5,000) = $4,500.00.
Thus, the actual amount of Surrender proceeds paid = $50,000 -
$2,250 - $4,500 - $30 = $43,220.00.
Note: The contract maintenance fee ($30) applies to full surrenders.
2) Assume a partial Surrender of $10,000 at the beginning of the second
Contract Year.
a) Assume that the beginning U.S. Treasury Index Rate was 7%, and
the current U.S. Treasury Index Rate is 4.18%.
(This is a decrease in rates of 2.82%.) Then the IRF = 1.10.
Surrender Charge =
($10,000 - $5,000) X .05/.95 = $263.16.
Interest Rate Factor Adjustment =
1
[ 1 - ---- ] X ($10,000 - $5,000) = $478.47.
1.10
Thus, the General Account Balance will be reduced by $10,000 +
$263.16 - $478.47 = $9,784.69.
b) Assume that the beginning U.S. Treasury Index Rate was 7%, and
the current U.S. Treasury Index Rate is 9.56%.
(This is an increase in rates of 2.56%.) Then the IRF = .9.
Surrender Charge =
($10,000 - $5,000) X .05/.95 = $263.16.
Interest Rate Factor Adjustment =
(1 - 1.9) X ($10,000 - $5,000 + $263.16) = $584.80.
Thus, the General Account Balance will be reduced by $10,000 +
$263.16 + $584.80 = $10,847.96.
IV. Investments by C.M. Life
Assets of C.M. Life must be invested in accordance with the requirements
established by applicable state laws regarding the nature and quality of
investments that may be made by life insurance companies and the percentage of
their assets that may be committed to any particular type of investment. In
general, these laws permit investments, within specified limits and subject to
certain qualifications, in federal, state, and municipal obligations, corporate
bonds, preferred and common stocks, real estate mortgages, real estate and
certain other investments.
In establishing Guaranteed Rates, C.M. Life intends to take into account the
yields available on the instruments in which it intends to invest the proceeds
from the Contracts. C.M. Life's investment strategy with respect to the proceeds
attributable to allocations made to the Fixed Account will generally be to
invest in investment-grade debt instruments having durations tending to match
the applicable Guarantee Periods.
V. Distributor Of The Contracts
Effective May 1, 1996, MML Distributors, LLC ("MML Distributors") (formerly
known as Connecticut Mutual Financial Services, LLC), 1414 Main Street,
Springfield, MA 01144-1013, an affiliate of C.M. Life, became the principal
underwriter of the Contracts pursuant to an Underwriting and Servicing Agreement
to which MML Distributors and C.M. Life on behalf of the Separate Account are
parties. MML Distributors is registered with the Securities and Exchange
Commission ("SEC") as a broker-dealer under the Securities Exchange Act of 1934
and is a member of the National Association of Securities Dealers, Inc.
("NASD").
MML Distributors may enter into selling agreements with respect to the Contracts
with other broker-dealers that are registered with the SEC and are members of
the NASD ("selling brokers"). Contracts are sold through agents who are licensed
under applicable insurance law to sell the Contracts. These agents are also
registered representatives of selling brokers or of MMLISI.
MML Distributors does business as MML Distributors, L.L.C. in the states of
Illinois, Michigan, Oklahoma, South Dakota and Washington, and as MML
Distributors, Limited Liability Company in the states of Maine, Ohio and West
Virginia.
Commissions of up to 6.0% of Purchase Payments are paid on Contract sales.
VI. Federal Taxation Discussion
Please consult the Contract prospectus for a discussion of the tax status of the
Contracts.
VII. Accounting Practices
The accompanying statutory financial statements, except as to form, have been
prepared in conformity with the practices of the National Association of
Insurance Commissioners ("NAIC") and the accounting practices prescribed or
permitted by the Insurance Department of the State of Connecticut ("statutory
accounting practices"), which prior to 1996 were also considered to be in
conformity with generally accepted accounting principles ("GAAP"). In 1993, the
Financial Accounting Standards Board ("FASB") issued interpretation No. 40
("Fin. 40"),"Applicability of Generally Accepted Accounting Principles to Mutual
Life Insurance and Other Enterprises", which clarified that wholly-owned stock
life insurance subsidiaries of a mutual life company issuing financial
statements described as prepared in conformity with GAAP after 1995 are required
to apply all applicable GAAP pronouncements in preparing those financial
statements. In January 1995, the FASB issued Statement No. 120 ("SFAS 120"),
Accounting and Reporting by Mutual Life Insurance Enterprises and by Insurance
Enterprises for Certain Long-Duration Participating Contracts," which among
other things, extended the appli-
10
<PAGE>
cability of certain FASB statements to mutual life insurance subsidiaries of a
mutual life company and deferred the effective date of Fin. 40 to financial
statements issued or reissued after 1996. Accordingly, the financial statements
presented herein are no longer considered to be in conformity with GAAP.
The accompanying statutory financial statements are different in some respects
from GAAP financial statements. The more significant differences are as follows:
(a) acquisition costs, such as commissions and other costs in connection with
acquiring new business, are charged to current operations as incurred, whereas
under GAAP these expenses would be capitalized and recognized over the life of
the policies; (b) policy reserves are based upon statutory mortality and
interest requirements without consideration of withdrawals, whereas GAAP
reserves would be based upon reasonably conservative estimates of mortality,
morbidity, interest and withdrawals; (c) bonds are generally carried at
amortized cost whereas GAAP would value bonds at fair value and (d) deferred
income taxes are not provided for book-tax timing differences whereas GAAP would
record deferred income taxes.
VIII. Management's Discussion and Analysis of Financial Condition and Results of
Operations
GENERAL
C.M. Life and MassMutual's priority has been to balance financial strength,
policyholders' value and growth with emphasis on financial strength. With regard
to profitability, management believes that net gain from operations, rather than
net income, is the most relevant measure of operating results for C.M. Life. Net
gain from operations represents the excess of income derived from C.M. Life's
business over the costs of business operations (after deducting taxes). Net
income is net gain from operations adjusted by any realized capital gains or
losses (net of taxes). Management's investment philosophy and practice do not
emphasize capital gains as a recurring source of income or capital and C.M. Life
does not manage its investment portfolio to realize gains for non-economic
purposes.
During 1996, 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 is not dependent upon any single customer and no single
customer accounted for more than 10% of revenues in 1996, 1995 and 1994.
MassMutual and C.M. Life have an agreement whereby MassMutual for a fee will
furnish C.M. Life, as required, operating facilities, human resources, computer
software development and managerial services. Investment and administrative
services are provided to C.M. Life pursuant to a management services agreement
with MassMutual. Fees incurred under the terms of the agreement were $45,914
thousand in 1996. Similar arrangements were in place with Connecticut Mutual
Life Insurance Company, C.M. Life's former parent, prior to its merger with
MassMutual. Fees incurred in 1995 and 1994 under the arrangement with
Connecticut Mutual Life Insurance Company were $34,008 thousand and $16,412
thousand, respectively.
RESULTS OF OPERATIONS
For the Year Ended December 31, 1996 Compared to the
Year Ended December 31, 1995
For the year ended December 31, 1996, C.M. Life had net income of $2,205
thousand, as compared with net income of $13,750 thousand in 1995. The decrease
in net income of $11,545 thousand is primarily attributable to increased sales
of Universal Life Enterprise Plus and variable annuity products, which in the
year of issuance, generate commissions and other acquisition costs which exceed
the revenues received. These products are priced to be profitable over the life
of the contract.
Premium income, net of reinsurance ceded, increased $53,525 thousand to $314,372
thousand in 1996 from $260,847 thousand in 1995. The 20.5% growth in premiums is
attributable to increased sales of the Universal Life Enterprise Plus product,
which increased by 41.0%, and variable annuity products which increased by
26.9%. Sales of single premium deferred annuity products decreased 90.5%, due to
less demand in the market place for fixed rate annuity products.
The following table sets forth premium, sales, and other information for C.M.
Life's products.
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995
---- ----
(In Thousands)
Premium income
<S> <C> <C>
Universal and other life $ 87,658 $ 64,652
Annuities 226,714 196,195
------- -------
Total $314,372 $260,847
======== ========
Life insurance sales -
face amount Universal
and other life $7,113,429 $5,024,440
Life insurance in force
Universal and other life $24,357,428 $19,132,954
Number of policies in force
Universal and other life 111,138 98,033
</TABLE>
Net investment and other income decreased $7,934 thousand to $76,456 thousand in
1996 from $84,390 thousand in 1995. Other income, which is primarily comprised
of reserve adjustment and commission and expense allowances on reinsurance
ceded, decreased by $14,316 thousand, due to little growth in the reinsured
block of business. Net investment income increased by $6,357 thousand primarily
attributable to the 4.3% growth in the general investment account assets. The
gross yield for the portfolio was 7.9% for 1996 compared to 7.8% for 1995. The
components of net investment income are set forth below.
11
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995
---- ----
(In Thousands)
Gross Investment Income:
<S> <C> <C>
Bonds $55,439 $54,683
Common and preferred stock 2,803 2,178
Mortgage loans 3,837 2,709
Real estate 0 456
Policy loans 10,035 9,905
Cash and short-term investments 3,969 399
------- -------
Total gross investment income 76,083 70,330
Less: investment expenses 850 1,454
------- --------
Net investment income $75,233 $68,876
======= =======
</TABLE>
Policy benefits and payments increased $40,053 thousand to $98,966 thousand in
1996 from $58,913 thousand in 1995. Surrender benefits increased by $30,054
thousand, essentially due to increased variable and fixed annuity withdrawals
and contract surrenders. The life insurance lapse rate, which is based upon
amount of insurance in force, remained at 7.1% for both 1996 and 1995. Death
claims, net of reinsurance, grew to $25,168 thousand in 1996 from $16,268
thousand in 1995, which is due to an increase in the life insurance in force and
worse than expected mortality. Although mortality experience declined during
1996, C.M. Life does not believe this is an indication of future trends.
Additions to policyholder reserves, funds and separate accounts decreased $1,079
thousand to $210,324 thousand in 1996 from $211,403 thousand in 1995. Reserve
decreases due to the release of reserves upon death, withdrawal or surrender of
contracts was largely offset by increases in reserves due to strong sales of
life and annuity products.
Operating expenses and commissions increased $24,197 thousand to $70,435
thousand in 1996 from $46,238 thousand in 1995. The increase is attributable to
increased expenses associated with the production of new business and the
modification of C.M. Life's variable annuity underwriting agreements with GR
Phelps and Co., Inc. ("GR Phelps") and MML Distributors, LLC., both affiliated
companies. Effective March 1, 1996, C.M. Life modified its underwriting
agreements such that it would pay all future commissions relating to variable
annuity contracts and would also retain all future contract fees and charges
related to these contracts. Prior to the contract modification, GR Phelps and
MML Distributors paid variable annuity commissions in exchange for the rights to
future contract fees and charges related to these contracts. C.M. Life expects
the future revenue on these contracts to exceed acquisition costs.
Federal income tax expense decreased $3,090 thousand to $6,286 thousand from
$9,376 thousand as a result of decreased taxable income. Taxable income
decreased $9,190 thousand to $18,536 thousand in 1996 from $27,725 thousand in
1995. The change in taxable income is primarily attributable to the $15,810
thousand decrease in net gain from operations offset by book tax differences of
$6,620 thousand. These book tax differences include the timing of the
deductibility of acquisition costs and other items.
RESULTS OF OPERATIONS
For the Year Ended December 31, 1995 Compared to the Year Ended December 31,
1994
For the year ended December 31, 1995, C.M. Life had net income of $13,750
thousand, as compared with net income of $17,788 thousand in 1994. The decrease
in net income of $4,038 thousand is attributable to increased policy benefits
and payments and increased acquisition and insurance expenses which exceeded the
increase in net premiums and net investment income.
Premium income, net of reinsurance ceded, increased $9,671 thousand to $260,847
thousand in 1995 from $251,176 thousand in 1994. Premiums for CM Windows, a
single premium deferred annuity product, increased $9,412 thousand or 99.3% to
$18,894 thousand in 1995 from $9,482 thousand in 1994. The increase is
attributable to higher interest rates and increased promotional efforts, which
increased demand for single premium deferred annuity products. Premiums for life
insurance products increased $16,928 thousand to $64,652 thousand in 1995 from
$47,724 thousand in 1994, due to higher sales of universal life policies,
primarily the Enterprise Plus product. Variable annuity premiums decreased
$16,669 thousand or 8.6%, due to less demand in the market place for variable
products in the first half of 1995.
The following table sets forth premium, sales and other information for the C.M.
Life's products.
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994
---- ----
(In Thousands)
<S> <C> <C>
Premium income
Universal and other life $ 64,652 $ 47,724
Annuities 196,195 203,452
----------- ----------
Total $ 260,847 $ 251,176
=========== ===========
Life insurance sales -
face amount Universal
and other life $ 5,024,440 $ 2,694,531
Life insurance in force
Universal and other life $19,132,954 $15,800,300
Number of policies in force
Universal and other life 98,033 89,043
</TABLE>
Net investment and other income increased by $1,036 thousand. Net investment
income increased by $9,298 thousand to $68,876 thousand in 1995 from $59,578
thousand in 1994. This increase is attributable to a 11.5% increase in general
investment account assets and policy loans and an increase in the portfolio
yield from 7.5% in 1994 to 7.8% in 1995. Other income, which is primarily
comprised of reserve adjustments and commission and expense allowances on
reinsurance ceded, decreased by $7,894 thousand, due to less growth in the
reinsured block of business in 1995 versus 1994. The components of net
investment income are set forth below.
12
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994
---- ----
(In Thousands)
Gross Investment Income:
<S> <C> <C>
Bonds $54,683 $47,704
Common and preferred stock 2,178 161
Mortgage loans 2,709 4,383
Real estate 456 733
Policy loans 9,905 7,925
Cash and short-term investments 399 509
--------- ---------
Total gross investment income 70,330 61,415
Less: investment expenses 1,454 1,837
-------- --------
Net investment income $68,876 $59,578
======= =======
</TABLE>
Policy benefits and payments, net of reinsurance ceded, increased by $14,880
thousand from $44,033 thousand in 1994 to $58,913 thousand in 1995. Surrender
benefits increased by $11,969 thousand, to $40,028 thousand in 1995 from $28,059
thousand in 1994. The increase in surrender benefits is primarily attributable
to variable annuity products. Death claims, net of reinsurance, increased $5,183
thousand over 1994 due to growth in the in force life insurance block of
business.
Operating expense and commissions increased $24,086 thousand or 108.7
% over 1994. This increase is primarily attributable to increased costs related
to the production of new business.
Income tax expense decreased by $4,873 thousand over 1994. This decrease is
attributable to lower taxable income in 1995 versus 1994. Taxable income was
$27,726 thousand and $38,660 thousand in 1995 and 1994 respectively. C.M. Life's
federal income tax expense is based on income which is currently taxable. The
differences between pre-tax book income and taxable income are primarily for
lower tax basis reserves for future policy benefits and other book tax
differences associated the timing of the deductibility of acquisition costs.
Net realized capital losses were $540 thousand in 1995 as compared to net
realized capital losses of $1,772 thousand in 1994. This loss is due to realized
net losses of $1,407 thousand, with $867 thousand being transferred to the
Interest Maintenance Reserve ("IMR") in 1995 as compared to realized net losses
of $5,163 thousand in 1994, with $3,391 thousand being transferred to the IMR.
STATEMENT OF FINANCIAL POSITION
Total assets increased by $306,785 thousand or 19.7% to $1,866,571 thousand at
December 31, 1996 from $1,559,786 thousand at year end 1995. Much of this growth
was due to continued growth in C.M. Life's separate investment accounts, which
assets increased by $248,310 thousand.
Total liabilities increased in 1996 by $310,240 thousand or 21.5% to $1,756,827
thousand from $1,446,587 thousand in 1995. As with assets, most of this growth
occurred in the separate investment accounts. Growth in the separate investment
account's assets and liabilities is attributable to increased variable annuity
sales and deposits and appreciation in the separate account's underlying
investments.
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.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $42,388 thousand, $97,916
thousand, and $81,148 thousand for the years ended 1996, 1995 and 1994,
respectively. In 1996, net cash provided by operating activities declined by
$55,528 thousand as compared to 1995, primarily due to increased surrender
benefits and strong sales growth which generates commissions and acquisition
costs which exceed revenues in the first contract year. The Board of Directors
of MassMutual has authorized the contribution of funds to C.M. Life sufficient
to meet the capital requirements of all states in which C.M. Life is licensed to
do business.
C.M. Life has structured its investment portfolio to ensure a strong liquidity
position in order to permit timely payment of policy and contract benefits
without requiring an untimely sale of assets. C.M. Life manages its liquidity
position by matching its exposure to cash demands with adequate sources of cash
and other liquid assets.
C.M. Life's principal sources of liquidity are cash flow and holdings of cash,
near cash and other readily marketable assets. The primary cash flow sources are
investment income and principal repayments on invested assets, life insurance
premiums, annuity considerations and deposits.
C.M. Life's liquid assets include substantial Treasury holdings, short-term
money market investments, stocks and marketable long-term fixed income
securities. Cash and short-term investments totaled $63,688 thousand at December
31, 1996.
The liquidity position of C.M. Life is proactively managed on an ongoing basis
to meet cash needs while minimizing adverse impacts on investments returns. A
variety of scenarios are analyzed modeling potential demands on liquidity,
taking into account the provisions of C.M. Life's policies and contracts in-
force, C.M. Life's cash flow position and the volume of cash and readily
marketable securities in C.M. Life's portfolio. C.M. Life also employs
sophisticated quantitative asset/liability cash flow management techniques to
optimize and control the investment return and liquidity for each portfolio,
taking into account the distinguishing liability characteristics of each
portfolio.
A primary liquidity concern for C.M. Life is the risk of early contractholder
and policyholder withdrawal. The most affected products are individual life
insurance and individual deferred annuities. Personal life insurance policies
are less susceptible to withdrawal than annuity contracts because annuities are
primarily used as investment vehicles, while personal life policies are used to
fulfill longer term financial planning needs. C.M. Life closely evaluates and
manages its liquidity risk.
C.M. Life's exposure to early withdrawal for annuity products as of the dates
indicated can be described as follows:
13
<PAGE>
Withdrawal Characteristics of Annuity Actuarial
Reserves and Deposit Fund Liabilities
<TABLE>
<CAPTION>
1996 1995
---- ----
% of % of
Amount Total Amount Total
------ ----- ------ -----
($ In Thousands)
<S> <C> <C> <C> <C>
Subject to discretionary
withdrawal with
adjustment:
At market value $755,387 87.1% $507,674 83.0%
At book value less
surrender charge 88,398 10.2 92,606 15.1
---------- ---- --------- ----
Subtotal 843,785 97.3 600,280 98.1
Subject to discretionary
withdrawal without
adjustment:
At book value
(minimal or no charge
or adjustment) 22,346 2.5 11,032 1.8
Not subject to
discretionary
withdrawal 1,446 0.2 215 0.1
-------- ------ -------- ----
Total annuity actuarial
reserves and deposit
fund liabilities (gross) 867,577 100.0% 611,527 100.0%
Less reinsurance 0 0
------- -------
Total annuity actuarial
reserves and deposit
fund liabilities $867,577 $611,527
======== ========
</TABLE>
Based on its ongoing monitoring and analysis of its liquidity sources and
demands, C.M. Life believes that it is in a strong liquidity position.
As of December 31, 1996, C.M. Life's total adjusted capital as defined by the
NAIC was $128,219 thousand. The NAIC has developed the "Risk Based Capital"
("RBC") model to compare the total adjusted capital with a standard design in
order to reflect C.M. Life's risk profile. Although C.M. Life believes that
there is no single appropriate means of measuring risk-based capital needs, it
feels that the NAIC approach to RBC measurement is reasonable, and will manage
its capital position with significant attention to maintaining adequate total
adjusted capital relative to RBC. C.M. Life's total adjusted capital was well in
excess of all RBC standards at December 31, 1996 and 1995. Management believes
that C.M. Life enjoys a strong capital position in light of the risks to which
it is subject and that it is well-positioned to meet policyholder and other
obligations.
INFLATION
C.M. Life's operating expenses are affected by inflation. A large portion of
C.M. Life's operating expenses consist of salaries which are subject to wage
increases, at least partially affected by the rate of inflation. C.M. Life's
continuing efforts to control expenses may reduce the impact of inflation on
operating expenses.
Inflation also has an indirect effect on C.M. Life. To the extent that the
government's economic policy to control the level of inflation results in
changes in interest rates, C.M. Life's new sales of insurance products and
investment income are affected. Changes in the level of interest rates also have
an effect on interest spreads, as investment earnings are reinvested.
INVESTMENTS
At December 31, 1996, C.M. Life had $1,022,587 thousand of invested assets in
its general investment account. The portfolio of invested assets is managed to
support the liabilities of the lines of business in light of yield, liquidity
and diversification considerations. The general investment account portfolio
does not include C.M. Life's separate account investment assets. The following
table sets forth C.M. Life's invested assets in the general investment account
and gross investment yield thereon (after deducting real estate operating
expenses and taxes) as of the dates indicated:
<TABLE>
<CAPTION>
December 31,
------------
1996 1995 1994
---- ---- ----
Carrying % of Carrying % of Carrying % of
Value Total Yield Value Total Yield Value Total Yield
----- ----- ----- ----- ----- ----- ----- ----- -----
($ In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bonds $ 736,524 72.0% 7.8% $736,099 75.1% 7.8% $717,291 81.9% 7.4%
Preferred stocks - - - 211 0.0 5.8 1,815 0.2 9.3
Common stocks 55,642 5.4 4.5 72,361 7.4 6.0 - - -
Mortgage loans 33,791 3.3 12.6 30,716 3.1 7.7 42,038 4.8 8.5
Real estate 0.0 0.0 0.0 0.0 0.0 23.7 1,897 0.2 6.1
Policy loans 132,942 13.0 8.1 126,014 12.9 8.8 109,720 12.5 7.9
Cash and short-term
investments 63,688 6.3 10.6 15,069 1.5 4.5 3,025 0.4 12.6
---------- ----- ---- -------- ----- ---- -------- ----- ----
Total investments $1,022,587 100.0% 7.9% $ 980,470 100.0% 7.8% $875,786 100.0% 7.5%
========== ===== ==== ======== ===== ==== ======== ===== ====
</TABLE>
The yield on total investments before indirect expenses was 7.9%, 7.8% and 7.5%
for the years ended December 31, 1996, 1995 and 1994, respectively. The yield on
each investment category before federal income taxes is calculated as: (a) gross
investment income (which for real estate deducts operating expenses and real
estate taxes) divided by (b) the average carrying value, which does not include
investment reserves.
C.M. Life carries its investments in accordance with methods and values
prescribed by the NAIC and adopted by state insurance authorities. Generally,
bonds are valued at amortized cost, preferred stocks in good standing at cost,
and common stocks at fair value. Mortgage loans are valued at principal less
impairments and unamortized discount. Real estate is valued at cost less
accumulated depreciation, impairments, and mortgage
14
<PAGE>
encumbrances. Depreciation on investment real estate is calculated using the
straight-line method. Policy loans are carried at the outstanding loan balance
less amounts unsecured by the cash surrender value of the policy. Short-term
investments are stated at amortized cost which approximates fair value.
Bonds
The following table provides certain information regarding the maturity
distribution of bonds (excluding short-term securities):
<TABLE>
<CAPTION>
Bond Maturities
December 31,
1996 1995
---- ----
Carrying % of Carrying % of
Value Total Value Total
------- ----- ------- -----
($ In Thousands)
<S> <C> <C> <C> <C>
Due in one year or less $76,698 10.9% $17,729 2.4%
Due after one year
through five years 284,200 15.3 306,539 41.6
Due after five years
through ten years 202,722 22.7 225,283 30.6
Due after ten years 84,515 16.3 35,854 4.9
Mortgage-backed
securities(1) 88,389 34.8 150,694 20.5
-------- ----- -------- -----
$736,524 100.0% $736,099 100.0%
======== ===== ======== =====
</TABLE>
(1)Including securities guaranteed by the U.S. Government.
The maturities of portfolio bonds are considered to be sufficiently diversified
and are carefully monitored and managed in light of C.M. Life's liquidity needs.
See "Liquidity and Capital Resources". Bonds consist primarily of government
securities and high-quality marketable corporate securities. At December 31,
1996 and 1995, publicly traded bonds comprised 66.0% and 57.2% of the bond
portfolio, respectively, and privately placed bonds comprised the remainder.
Substantially all of the publicly traded and privately placed bonds held by C.M.
Life are evaluated by the NAIC's Securities Valuation Office ("SVO") which
assigns securities to one of six NAIC investment categories, with Category 1
securities being the highest quality and Category 6 securities being the lowest
quality. Categories 1 and 2 are investment grade, Category 3 is medium quality
and Categories 4, 5 and 6 are non-investment grade. The table below sets forth,
as of the dates indicated, the NAIC SVO ratings for C.M. Life's bond portfolio
(including short-term securities) and the equivalent public rating agency
designations. The bond portfolio consists primarily of high grade securities. At
December 31, 1996 and 1995, 93.7% and 91.9%, respectively, of the portfolio was
invested in NAIC Categories 1 and 2 securities.
Bond Credit Quality
(includes short-term securities)
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------------------
1996 1995
------------------------------------- -------------------------------------
($ In Thousands)
NAIC
Bond Rating Agency Carrying % of Carrying % of
Rating Equivalent Designation Value Total Value Total
- ------ ---------------------- ----- ----- ------- -----
<S> <C> <C> <C> <C> <C>
1 Aaa/Aa/A $452,615 56.7% $425,073 56.6%
2 Baa 295,314 37.0 265,117 35.3
3 Ba 36,082 4.5 50,302 6.7
4 B 11,802 1.5 9,929 1.3
5 Caa and lower 0 0.0 0 0.0
6 In or near default 2,017 0.3 18 0.1
-------- ------ -------- ------
Total $797,830 100.0% $750,439 100.0%
======== ===== ======== =====
</TABLE>
C.M. Life invests a significant portion of its investment funds in high quality
publicly traded bonds in order to maintain and manage liquidity and reduce the
risk of default in the portfolio. As of December 31, 1996, 96.8% of the publicly
traded bonds were rated as NAIC Categories 1 and 2, as illustrated by the
following chart:
<TABLE>
<CAPTION>
Publicly Traded Bond Credit Quality
(includes short-term securities)
December 31,
--------------------------------------------------------------------------------
1996 1995
------------------------------------- -------------------------------------
($ In Thousands)
NAIC
Bond Rating Agency Carrying % of Carrying % of
Rating Equivalent Designation Value Total Value Total
- ------ ---------------------- ----- ----- ------- -----
<S> <C> <C> <C> <C> <C>
1 Aaa/Aa/A $364,432 69.2% $310,593 72.4%
2 Baa 145,368 27.6 92,078 21.5
3 Ba 11,515 2.2 17,818 4.2
4 B 5,520 1.0 8,436 1.9
5 Caa and lower 0 0.0 0 0.0
6 In or near default 0 0.0 0 0.0
-------- ----- -------- -----
Total $526,835 100.0% $428,925 100.0%
======== ===== ======== =====
</TABLE>
15
<PAGE>
C.M. Life utilizes its investments in the privately placed bond portfolio to
enhance the value of the overall portfolio, increase diversification and obtain
higher yields than are possible with comparable quality public market
securities. To control risk, C.M. Life relies upon broader access to management
information, strengthened negotiated protective covenants, call protection
features, and a higher level of collateralization. The strength of the privately
placed bond portfolio is demonstrated by the predominance of NAIC Categories 1
and 2 securities.
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------------------
1996 1995
------------------------------------- -------------------------------------
($ In Thousands)
NAIC
Bond Rating Agency Carrying % of Carrying % of
Rating Equivalent Designation Value Total Value Total
- ------ ---------------------- ----- ----- ------- -----
<S> <C> <C> <C> <C> <C>
1 Aaa/Aa/A $ 88,183 32.6% $114,480 35.6%
2 Baa 149,946 55.3 173,039 53.8
3 Ba 24,567 9.1 32,485 10.1
4 B 6,281 2.3 1,493 0.5
5 Caa and lower 0 0 0 0
6 In or near default 2,018 0.7 17 0
-------- ----- -------- -----
Total $270,995 100.0% $321,514 100.0%
======== ===== ======== =====
</TABLE>
The following table sets forth by industry category the carrying value and
percent of total of the bond portfolio, including short-term securities, as of
December 31, 1996.
<TABLE>
<CAPTION>
Bond Portfolio By Industry
December 31, 1996
-------------------------------------------------------------------------------------------------
Private Public (1) Total
-------------------------- --------------------------------- --------------------------
Carrying % of Carrying % of Carrying % of
Industry Category Value Total Value Total Value Total
----- ----- ----- ----- ----- -----
($ In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Aerospace $ 517 0.2% $ 8,217 1.6% $ 8,734 1.1%
Banking 6,497 2.4 38,863 7.4 45,360 5.7
Consumer Goods 28,375 10.5 23,628 4.5 52,003 6.5
Finance & Leasing Co. 14,740 5.4 20,258 3.8 34,998 4.4
Governments 3,052 1.1 103,463 19.6 106,515 13.4
Health Care 1,500 0.6 1,001 0.2 2,501 0.3
Insurance & other financial
services 11,500 4.2 44,268 8.4 55,768 7.0
Media 17,216 6.4 5,447 1.0 22,663 2.8
Merchandise retailers 4,500 1.7 0 0.0 4,500 0.6
Natural resources 18,000 6.6 31,041 5.9 49,041 6.1
Other Services 7,250 2.7 983 0.2 8,233 1.0
Others 65,297 24.1 52,326 9.9 117,623 14.7
Producer goods 35,963 13.3 22,259 4.2 58,222 7.3
Securitized 40,422 14.9 99,693 18.9 140,115 17.6
Transportation 1,000 0.3 15,034 2.9 16,034 2.0
Utilities 15,166 5.6 60,354 11.5 75,520 9.5
-------- ----- -------- ----- -------- -----
Total $270,995 100.0% $526,835 100.0% $797,830 100.0%
======== ===== ======== ===== ======== =====
</TABLE>
(1) Includes short-term securities.
The estimated fair value of bonds is based upon quoted market prices for
actively traded securities. C.M. Life subscribes to commercial pricing services
that provide estimated fair values of fixed income securities that are not
actively traded. Estimated fair values for privately placed bonds are generally
determined by applying interest rate spreads based on quality and asset type to
the appropriate duration on the Treasury yield curve. The tables below set forth
the carrying value, gross unrealized gains and losses, net unrealized gains and
loses and estimated fair value of the bond portfolio (excluding short-term
securities) at December 31, 1996 and 1995.
16
<PAGE>
<TABLE>
<CAPTION>
December 31, 1996
-----------------
Gross Gross Net Estimated
Carrying Unrealized Unrealized Unrealized Fair
Value Gains Losses Gain (Loss) Value
----- ----- ------ ----------- -----
($ In Thousands)
<S> <C> <C> <C> <C> <C>
U.S. Treasury Securities
and Obligations of U.S.
Government Corporations
and Agencies $138,751 $ 2,175 $ 964 $ 1,211 $139,962
Debt Securities issued by
Foreign Governments 3,953 53 22 31 3,984
Mortgage-backed securities 37,395 745 725 20 37,415
State and local governments 10,263 244 101 143 10,406
Industrial securities 509,227 11,643 3,700 7,943 517,170
Utilities 36,935 1,168 159 1,009 37,944
-------- ------- ------ ------- --------
$736,524 $16,028 $5,671 $10,357 $746,881
======== ======= ====== ======= ========
<CAPTION>
December 31, 1995
-----------------
Gross Gross Net Estimated
Carrying Unrealized Unrealized Unrealized Fair
Value Gains Losses Gain (Loss) Value
----- ----- ------ ----------- -----
($ In Thousands)
<S> <C> <C> <C> <C> <C>
U.S. Treasury Securities
and Obligations of U.S.
Government Corporations
and Agencies $ 27,817 $ 1,764 $ 8 $ 1,756 $ 29,573
Debt Securities issued by
Foreign Governments 11,186 483 295 188 11,374
Mortgage-backed securities 150,694 7,144 347 6,797 157,491
Industrial securities 501,252 21,472 711 20,761 522,013
Utilities 45,150 2,303 16 2,287 47,437
-------- ------- ------ --------- --------
$736,099 $33,166 $1,377 $ 31,789 $767,888
======== ======= ====== ========= ========
</TABLE>
Common Stocks
The common stock portfolio comprised 5.4% and 7.4% of C.M. Life's investments at
December 31, 1996 and 1995, respectively. Common stock had a cost of $47,195
thousand in 1996 and $64,255 thousand in 1995; the fair value was $55,642
thousand and $73,361 thousand at December 31, 1996 and 1995, respectively.
Mortgage Loans
All mortgage loans are fixed rate commercial mortgages on completed, income
producing properties.
The following table provides certain information regarding the maturity
distribution of commercial mortgage loans:
<TABLE>
<CAPTION>
Mortgage Loan Maturities
December 31, 1996
-----------------
Carrying % of
Value Total
----- -----
($ In Thousands)
<S> <C> <C>
Due in one year or less $ 4,387 13.0%
Due after one year
through five years 23,915 70.8
Due after five years
through ten years 5,489 16.2
------- -----
Total $33,791 100.0%
======= =====
</TABLE>
At December 31, 1996, 99.6% of the mortgage loan portfolio consisted of bullet
loans (loans that do not fully amortize over their term). Scheduled bullet
maturities at December 31, 1996 of $4,387 thousand, $6,003 thousand, $1,886
thousand in 1997, 1998 and 1999 and represent 13.0%, 17.8% and 5.6%,
respectively, of the mortgage loan portfolio. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without prepayment penalties.
During 1996 and 1995, all renewed bullet loans were performing assets prior to
renewal and all loan renewals reflected market conditions. Past experience with
regard to bullet maturities, however, is not necessarily indicative of future
results.
The maturities of commercial mortgage loans are considered by C.M. Life to be
sufficiently diversified and are carefully monitored and managed in light of
C.M. Life's liquidity needs. See "Liquidity and Capital Resources."
The mortgage loan portfolio comprised 3.3% and 3.1% of C.M. Life's investments
at December 31, 1996 and 1995, respectively. The mortgage loan average
investment yield was 12.6% and 7.7% for the years ending December 31, 1996 and
1995, respectively.
17
<PAGE>
The following tables set forth by property type and geographic distribution the
carrying value of mortgage loan balances as a percentage of the portfolio as of
the dates indicated:
<TABLE>
<CAPTION>
Mortgage Loans by Property Type
December 31,
-----------
1996 1995
---- ----
Carrying % of Carrying % of
Value Total Value Total
----- ----- ----- -----
($ In Thousands)
<S> <C> <C> <C> <C>
Office $16,321 48.3% $11,796 38.4%
Retail 5,332 15.8 4,507 14.7
Industrial & Other 8,030 23.7 7,479 24.4
Apartments 4,108 12.2 6,934 22.5
------- ----- ------- -----
$33,791 100.0% $30,716 100.0%
======= ===== ======= =====
<CAPTION>
Mortgage Loans by Geographic Distribution
1996 1995
---- ----
Carrying % of Carrying % of
Value Total Value Total
----- ----- ----- -----
($ In Thousands)
<S> <C> <C> <C> <C>
West $ 3,643 10.8% $ 3,770 12.3%
Northeast 12,833 38.0 17,530 57.1
Mid-Atlantic 3,446 10.2 0 0
Southeast 8,633 25.6 9,416 30.6
Midwest 1,990 6.0 0 0
Southwest 3,246 9.4 0 0
------- ----- ------- -----
$33,791 100.0% $30,716 100.0%
======= ===== ======= =====
</TABLE>
C.M. Life actively monitors and manages its mortgage loan portfolio and also
directly services the portfolio. Company personnel perform or review all aspects
of loan origination and portfolio management, including lease analysis, property
transfer analysis, economic and financial reviews, tenant analysis and oversight
of default and bankruptcy proceedings. All properties are revalued each year and
reinspected either each year or every other year based on internal quality
ratings. C.M. Life uses the following criteria to determine whether a current or
potential problem exists: (i) borrower bankruptcies, (ii) major tenant
bankruptcies, (iii) requests for restructuring, (iv) delinquent tax payments,
(v) late payments, (vi) loan-to-value or debt service coverage deficiencies and
(vii) overall vacancy levels.
POLICY LOANS
As of December 31, 1996 and 1995, C.M. Life's policy loans were $132,942 and
$126,014, respectively. Policy loans, as a percentage of invested assets, were
13.0% and 12.9% at December 31, 1996 and 1995, respectively. Variable interest
rate policy loans were 98.6% of total policy loans at December 31, 1996 and
1995. For loans with variable interest rates, the rates are adjusted annually
based upon changes in a corporate bond index.
IX. C.M. Life - Description of the Business
C.M. Life, 140 Garden Street, Hartford, Connecticut, 06154, is a stock life
insurance company. It was chartered by a Special Act of the Connecticut General
Assembly on April 25, 1980. It is principally engaged in the sale of life
insurance and annuities, primarily flexible premium universal life insurance and
variable annuity products, and is licensed to sell life insurance and annuities
in Puerto Rico, the District of Columbia and all 50 states, except New York.
Effective March 1, 1996, C.M. Life became a wholly owned stock life insurance
subsidiary of Massachusetts Mutual Life Insurance Company ("MassMutual") when
the operations of C.M. Life's former parent, Connecticut Mutual Life Insurance
Company were merged with and into MassMutual.
MassMutual is a mutual life insurance company organized as a Massachusetts
corporation which was originally chartered in 1851. As a mutual life insurance
company, MassMutual has no shareholders. MassMutual's primary business is
ordinary life insurance. MassMutual also provides, directly or through its
subsidiaries, a wide range of annuity and disability products, and pension and
pension-related products and services, as well as investment services to
individuals, and corporations and other institutions in all 50 states of the
United States, and the District of Columbia. MassMutual is also licensed to
transact business in Puerto Rico, and six provinces of Canada, but has no export
sales.
MassMutual's principal lines of business are (i) Individual Line of Business,
which provides life insurance including variable and universal life insurance,
annuities and disability insurance to individuals and small businesses; (ii)
Pension Management, which provides group pension investment products and
administrative services, primarily to sponsors of tax qualified retirement
plans; (iii) MassMutual Investment Management Group, which provides advisory
services for MassMutual's general investment account and separate investment
accounts, as well as for various closed-end and open-end investment companies
and external institutional clients.
The direction and operations of MassMutual's three lines of business are guided
by a statement of corporate vision. Under this vision, MassMutual's operations
are managed so as to maintain a financially strong and efficient enterprise for
the benefit of policyholders. MassMutual's long-term objectives are to maintain
corporate financial strength, enhance policyholder value, and generate and
sustain growth.
COMPETITION
The life insurance industry is highly competitive. There are more than 1,700
life insurance companies in the United States, many of which offer insurance
products similar to those marketed by C.M. Life. In addition to competition
within the industry, insurers are increasingly facing competition from non-
traditional sources in the financial services business, including mutual funds,
banks, securities brokerage houses and other financial services entities, many
of which provide alternative investment and savings vehicles for consumers.
Legislative initiatives proposed at the federal level would, if enacted, reorder
the financial services industry, thereby changing the environment in which C.M.
Life competes.
C.M. Life's management believes its financial strength, agent skill and
historical product performance provide competitive advantages for the products
it offers in these markets. In early 1996, after the merger of MassMutual and
Connecticut Mutual Life Insurance Company, C.M. Life received the following
ratings from the various rating agencies, A.M. Best Company, Inc. (A++),
Standard and Poor's Corporation (AAA) and Duff & Phelps Credit Rating Company
(AAA).
18
<PAGE>
MassMutual, C.M. Life's parent, has received the highest ratings from A.M. Best
Company, Inc. (A++), Standard & Poor's Corporation (AAA), and Duff & Phelps
Credit Rating Company (AAA), as well as a rating of Aa1 by Moody's Investors
Service, Inc. (the highest in its "excellent" category). In late 1995 and early
1996, all four of these agencies conducted thorough reviews of MassMutual's
ratings in light of the Connecticut Mutual Life Insurance Company merger. In
all four cases, the 1995 ratings for MassMutual were reaffirmed.
REGULATION
C.M. Life is organized as a Connecticut stock life insurance company, and is
subject to Connecticut laws governing insurance companies. C.M. Life is
regulated and supervised by the State of Connecticut Insurance Commissioner. By
March 1 of every year, C.M. Life must prepare and file an annual statement, in a
form prescribed by the State of Connecticut Insurance Department, as of December
31 of the preceding year. The Commissioner and his or her agents have the right
at all times to review or examine C.M. Life's books and assets. A full
examination of C.M. Life's operations is conducted periodically according to the
rules and practices of the NAIC. C.M. Life is also subject to the insurance
laws of the states in which it is authorized to do business, to various federal
and state securities laws and regulations, and to regulatory agencies which
administer those laws and regulations.
C.M. Life is licensed to transact its insurance business in, and is subject to
regulation and supervision by the Commonwealth of Puerto Rico, the District of
Columbia and all 50 states, except New York. C.M. Life's insurance subsidiaries
are licensed, regulated and supervised in all jurisdictions where they conduct
an insurance business. The extent of such regulation varies, but most
jurisdictions have laws and regulations requiring the licensing of insurers and
their agents and setting standards of solvency and business conduct to be
maintained by licensed insurance companies, and may regulate withdrawal from
certain markets. In addition, statutes and regulations usually require the
approval of policy forms and, for certain lines of insurance, the approval of
rates. Such statutes and regulations also prescribe the permitted types and
concentration of investments. C.M. Life is also subject to regulation of its
accounting methodologies and is required to file detailed annual financial
statements with supervisory agencies in each of the jurisdictions in which it
does business. Each of its operations and accounts is also subject to
examination by such agencies at regular intervals.
C.M. Life is subject to guaranty fund assessments in all states in which it does
business. The guaranty associations are organized to pay contractual
obligations under insurance policies issued by impaired or insolvent insurers.
C.M. Life believes such assessments in excess of amounts accrued will not
materially affect its financial position, results of operations or liquidity.
In 1996, C.M. Life elected not to admit $1,621 thousand of guarantee fund
premium tax offset receivable relating to prior assessments.
C.M. Life is also subject to risk-based capital ("RBC") requirements promulgated
by the NAIC. The RBC Model Act will give state insurance commissioners explicit
regulatory authority to require various actions by, or take various actions
against, insurance companies whose total adjusted capital does not meet the RBC
standards. C.M. Life's total adjusted capital was well in excess of all RBC
standards at December 31, 1996 and December 31, 1995.
In addition to regulation of its insurance business, C.M. Life is subject to
various types of federal and state laws and regulations affecting the conduct,
taxation and other aspects of its businesses. Certain policies and contracts
offered by C.M. Life are subject to various levels of regulation under the
federal securities laws administered by the Securities and Exchange Commission.
C.M. Life's management believes it is in compliance in all material respects
with all applicable regulations.
X. Directors and Officers of C.M. Life
Directors:
Lawrence V. Burkett, Jr., Director, President and Chief Executive Officer
Director, President and Chief Executive Officer, C.M. Life, since 1996;
Executive Vice President and General Counsel, MassMutual, since 1993; Senior
Vice President and Deputy General Counsel, 1992-1993. Age 51.
John B. Davies, Director
Director, C.M. Life, since 1996; Executive Vice President, MassMutual, since
1994; Associate Executive Vice President, 1994-1994; General Agent, 1982-
1993. Age 47.
Daniel J. Fitzgerald, Director
Director, C.M. Life, since 1996; Executive Vice President, Corporate
Financial Operations, MassMutual, since 1994; Senior Vice President, 1991-
1994. Age 48.
Stuart H. Reese, Director and Senior Vice President-Investments
Director and Senior Vice President-Investments, C.M. Life, since 1996; Senior
Vice President, MassMutual, since 1993; Investment Manager, Aetna Life and
Casualty and Affiliates, 1979-1993. Age 41.
PRINCIPAL OFFICERS (other than those who are also Directors):
Paul D. Adornato
Senior Vice President-Operations, C.M. Life, since 1996; Senior Vice
President, MassMutual, since 1986. Age 58.
Anne Melissa Dowling
Senior Vice President-Large Corporate Marketing, C.M. Life, since 1996;
Senior Vice President, MassMutual, since 1996; Chief Investment Officer,
Connecticut Mutual Life Insurance Company, 1994-1996; Senior Vice President-
International, Travelers Insurance Co., 1987-1993. Age 38.
19
<PAGE>
Maureen R. Ford
Senior Vice President-Annuity Marketing, C.M. Life, since 1996; Senior Vice
President, MassMutual, since 1996; Marketing Officer, Connecticut Mutual Life
Insurance Company, 1989-1996. Age 41.
Isadore Jermyn
Senior Vice President and Actuary, C.M. Life, since 1996; Senior Vice
President and Actuary, MassMutual, since 1995; Vice President and Actuary,
1980-1995. Age 46.
Ann Iseley
Treasurer, C.M. Life, since 1996; Vice President and Treasurer, MassMutual,
since 1996; Chief Financial and Operations Officer, Connecticut Mutual
Financial Services, 1994-1996; Controller, The Mack Company, 1993-1994; Vice
President-Finance, Mutual of New York, 1988-1993. Age 40.
Ann F. Lomeli
Secretary, C.M. Life, since 1988; Vice President, Associate Secretary and
Associate General Counsel, MassMutual, since 1996; Corporate Secretary and
Counsel, Connecticut Mutual Life Insurance Company, 1988-1996. Age 40.
XI. Executive Compensation
The officers and directors of C.M. Life are employees of MassMutual and perform
their duties for C.M. Life as part of their employment with MassMutual. Many of
them serve as directors and officers of other companies that are also wholly
owned by MassMutual. Although applicable expense allocation agreements between
and among MassMutual and its subsidiaries (such as C.M. Life) do not
specifically allocate to the subsidiaries, portions of the salaries paid by
MassMutual, the amount of compensation received by any one director or officer
of C.M. Life from MassMutual for services performed for C.M. Life would not
exceed $100,000 annually. The directors of C.M. Life do not receive fees (or
expenses) for serving as directors of C.M. Life or for attending directors'
meetings. None of the officers or directors of C.M. Life owns shares of capital
stock of C.M. Life, which is wholly owned by MassMutual. The officers and
directors of C.M. Life, individually and as a group, hold (by virtue of their
ownership of insurance policies issued by MassMutual) interests in MassMutual of
less than one percent.
XII. Experts, Legal Proceedings and Available Information
Experts
The audited statement of statutory financial position of C.M. Life as of
December 31, 1996 and the related statutory statements of income, changes in
shareholder's equity and cash flows for the year ended December 31, 1996
included in this prospectus have been so included in reliance on the reports of
Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
The audited statement of statutory financial position of C.M. Life as of
December 31, 1995 and the related statutory statements of income, changes in
shareholder's equity and cash flows for each of the years in the two year period
ended December 31, 1995 included in this prospectus have been so included in
reliance on the reports of Arthur Andersen LLP, C.M. Life's former independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
Legal Proceedings
C.M. Life is a defendant in actions arising out of its insurance and investment
operations and is from time to time involved as a party in various governmental
and administrative proceedings. C.M. Life does not believe that any liability
which may result from these actions is likely to have a material adverse effect
on the financial position of C.M. Life.
C.M. Life is not involved in any litigation that is of material importance in
relation to its financial statements.
Available Information
C.M. Life files registration statements, reports and informational statements
with the SEC under the Securities Act of 1933 and the Securities Exchange Act of
1934. These filings contain information not contained in this Prospectus. Such
registration statements, reports, information statements and other information
can be reviewed and copied at the public reference facilities maintained by the
Securities and Exchange Commission, at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 or at the Commission's New York and Chicago regional
offices located at the following addresses: northeast Regional Office, 7 World
Trade Center, Suite 1300, New York, New York, 10046; and Midwest Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The SEC
also maintains a Web site that contains these filings. The SEC's Internet
address is http://www.sec.gov.
XIII. Selected Historical Financial Data
The following summary financial information has been derived from the audited
statutory financial statements. The results for past accounting periods are not
necessarily indicative of the results to be expected for any future period.
The information presented below should be read in conjunction with the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", the audited statutory financial statements and other information
included elsewhere in this filing.
The accompanying statutory financial statements, from which the summary
financial information has been derived, have been prepared in conformity with
the practices of the NAIC and the accounting practices prescribed or permitted
by the Insurance Department of the State of Connecticut. These statutory
financial statements are not in conformity with GAAP. See notes to statutory
financial statements.
20
<PAGE>
C.M. Life Insurance Company
Selected Statutory Financial Data
For the Years Ended December 31,
($ In Thousands)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income:
Premium income $314,372 $260,847 $251,176 $180,372 $82,122
Net investment and other income 76,456 84,390 83,354 87,399 92,482
-------- -------- -------- -------- --------
390,828 345,237 334,530 267,771 174,604
-------- -------- -------- -------- --------
Benefits and expenses:
Policy benefits and payments $98,966 $58,913 $44,033 $31,657 $35,059
Additions to policyholder reserves, funds
and separate accounts 210,324 211,403 230,338 175,934 83,269
Operating expenses 45,448 32,146 14,786 17,525 22,831
Commissions 24,987 14,092 7,365 7,776 8,846
State taxes, licenses and fees 3,247 5,017 4,199 3,003 3,633
-------- -------- -------- -------- --------
382,972 321,571 300,721 235,895 153,638
-------- -------- -------- -------- --------
Net gain from operations before federal
Income taxes 7,856 23,666 33,809 31,876 20,966
Federal income taxes 6,286 9,376 14,249 11,016 9,187
-------- -------- -------- -------- --------
Net gain from operations 1,570 14,290 19,560 20,860 11,779
Net realized capital gain (loss) 635 (540) (1,772) 234 (248)
-------- --------- --------- -------- ---------
Net income $2,205 $13,750 $17,788 $21,094 $11,531
======== ======== ======== ======== ========
Assets:
General account $1,086,829 $1,028,354 $912,583 $831,469 $746,888
Separate account 779,742 531,432 309,672 145,661 22,591
---------- ---------- ---------- -------- --------
Total assets $1,866,571 $1,559,786 $1,222,255 $977,130 $769,479
========== ========== ========== ======== ========
Liabilities:
Policyholders' reserves and funds $907,492 $867,672 $783,768 $715,018 $647,831
Investment reserves 21,804 19,880 6,640 8,085 5,221
Separate account reserves and liabilities 779,742 531,432 309,672 145,661 22,591
Other liabilities 47,789 27,603 18,338 20,468 26,414
--------- --------- --------- -------- --------
Total liabilities 1,756,827 1,446,587 1,118,418 889,232 702,057
--------- --------- --------- -------- --------
Stockholders' equity:
Common stock 2,500 2,500 2,500 2,500 2,500
Paid in capital and contributed surplus 43,759 43,759 43,759 43,759 43,759
Unassigned surplus 63,485 66,940 57,578 41,639 21,163
---------- ---------- ---------- -------- --------
Total stockholders' equity 109,744 113,199 103,837 87,898 67,422
---------- ---------- ---------- -------- --------
Total liabilities and stockholders' equity $1,866,571 $1,559,786 $1,222,255 $977,130 $769,479
========== ========== ========== ======== ========
Total adjusted capital data (1)
Total stockholders' equity $109,744 $113,199 $103,837 $87,898 $67,422
Asset valuation reserve 18,475 15,869 6,640 6,534 5,221
-------- -------- -------- ------- -------
Total adjusted capital $128,219 $129,068 $110,477 $94,432 $72,643
======== ======== ======== ======= =======
</TABLE>
(1) Defined by the NAIC as surplus plus AVR.
Certain prior year amounts have been reclassified to conform with current year
presentation. The preceding selected financial data of C.M. Life should be read
in conjunction with the statutory financial statements and notes thereto and the
related management's discussion and analysis.
21
<PAGE>
Report Of Independent Public Accountants
To the Board of Directors and Policyholders of
C.M. Life Insurance Company
We have audited the 1996 statutory financial statements and the financial
statement schedules of C.M. Life Insurance Company, listed in Item XIII of this
Form S-1. The 1996 financial statements and the financial statement schedules
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and the financial statement
schedules based on our audit.
We conducted our audit 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 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 audit provides a reasonable basis for our opinion.
As described in Note 1 to the financial statements, the Company prepared these
financial statements using statutory accounting practices of the National
Association of Insurance Commissioners and the accounting practices prescribed
or permitted by the Department of Insurance of the State of Connecticut, which
practices differ from generally accepted accounting principles. The effects on
the financial statements of the variances between the statutory basis of
accounting and generally accepted accounting principles, although not
determinable at this time, are presumed to be material.
In our opinion, because of the effects of the matter discussed in the third
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of C.M. Life Insurance Company at December 31, 1996 and the results of its
operations and its cash flows for the year then ended.
In our opinion, the 1996 financial statements referred to above present fairly,
in all material respects, the financial position of C.M. Life Insurance Company
at December 31, 1996, and the results of its operations and its cash flows for
the year then ended, on the statutory basis of accounting described in Note 1.
In addition, in our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial statements taken as a
whole, present fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND, L.L.P.
Springfield, Massachusetts
February 7, 1997
22
<PAGE>
Report Of Independent Public Accountants
To C.M. Life Insurance Company:
We have audited the accompanying statutory statement of financial position of
C.M. Life Insurance Company (a Connecticut corporation and a wholly-owned
subsidiary of Connecticut Mutual Life Insurance Company) as of December 31,
1995, and the related statutory statements of income, changes in shareholder's
equity and cash flows for each of the two years in the period ended December 31,
1995. These financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
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 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 our audits provide a reasonable basis for our opinion.
In our originally issued report dated February 15, 1996, we expressed an opinion
that the 1995 financial statements, prepared using accounting practices
prescribed or permitted by the Insurance Department of the State of Connecticut,
present fairly, in all material respects, the financial position of C.M. Life
Insurance Company as of December 31, 1995, and the results of its operations,
and its cash flows for each of the two years in the period ended December 31,
1995 in conformity with generally accepted accounting principles. As described
in Note 1 to the financial statements, pursuant to the provisions of Statement
of Financial Accounting Standards No. 120 (SFAS No. 120), Accounting and
Reporting by Mutual Life Insurance Enterprises and by Insurance Enterprises for
Certain Long-Duration Participating Contracts, financial statements of mutual
life insurance enterprises for periods ending on or before December 15, 1996,
prepared using accounting practices prescribed or permitted by insurance
regulators (statutory financial statements) are no longer considered
presentations in conformity with generally accepted accounting principles when
presented for comparative purposes with the enterprise's financial statements
for periods subsequent to the effective date of SFAS No. 120. Accordingly, our
present opinion on the presentation of the 1995 financial statements in
accordance with generally accepted accounting principles, 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 preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of C.M. Life Insurance Company as of December 31, 1995, or the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1995.
In our opinion, the financial statements referred to above do present fairly, in
all material respects, the financial position of C.M. Life Insurance Company as
of December 31, 1995 and the results of its operations and its cash flows for
each of the two years in the period ended December 31, 1995 in conformity with
accounting practices prescribed or permitted by the Insurance Department of the
State of Connecticut.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as whole. Schedule VI is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 15, 1996
(Except with respect to the matter discussed in
Note 1, as to which the date is March 4, 1996)
23
<PAGE>
C.M. Life Insurance Company
STATUTORY STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31,
1996 1995
---- ----
(In Thousands Except for
Share Information)
Assets:
<S> <C> <C>
Bonds............................................................ $ 736,524 $ 736,099
Preferred stocks................................................. -- 211
Common stocks.................................................... 55,642 72,361
Mortgage loans................................................... 33,791 30,716
Policy loans..................................................... 132,942 126,014
Cash and short-term instruments.................................. 63,688 15,069
Investment and insurance amounts receivable...................... 32,783 23,765
Transfer due from separate account............................... 24,278 22,300
Federal income tax receivable.................................... 7,094 --
Other assets..................................................... 87 1,819
Separate account assets.......................................... 779,742 531,432
------------- ------------
$1,866,571 $1,559,786
============= ============
Liabilities:
Policyholders' reserves and funds................................ $ 907,492 $ 867,672
Policy claims and other benefits................................. 3,843 2,086
Payable to parent and affiliates................................. 9,654 10,823
Federal income taxes............................................. -- 2,820
Asset valuation reserve.......................................... 18,475 15,868
Investment reserves.............................................. 3,329 4,011
Other liabilities................................................ 34,292 11,875
Separate account reserves and liabilities........................ 779,742 531,432
------------- ------------
1,756,827 1,446,587
------------- ------------
Shareholder's equity:
Common stock, $200 par value
50,000 shares authorized
12,500 shares issued and outstanding...................... 2,500 2,500
Paid-in capital and contributed surplus.......................... 43,759 43,759
Shareholder's equity............................................. 63,485 66,940
------------- ------------
109,744 113,199
------------- ------------
$1,866,571 $1,559,786
============= ============
</TABLE>
See notes to statutory financial statements.
24
<PAGE>
C.M. Life Insurance Company
STATUTORY STATEMENT OF INCOME
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995 1994
----- ---- ----
<S> <C> <C> <C>
(In Thousands)
Income:
Premium income.............................................. $ 314,372 $ 260,847 $ 251,176
Net investment and other income............................. 76,456 84,390 83,354
---------- ---------- ---------
390,828 345,237 334,530
---------- ---------- ---------
Benefits and expenses:
Policy benefits and payments................................ 98,966 58,913 44,033
Addition to policyholders' reserves, funds
and separate accounts..................................... 210,324 211,403 230,338
Operating expenses.......................................... 45,448 32,146 14,786
Commissions................................................. 24,987 14,092 7,365
State taxes, licenses and fees.............................. 3,247 5,017 4,199
---------- ---------- ---------
382,972 321,571 300,721
Net gain from operations before federal
income taxes.............................................. 7,856 23,666 33,809
Federal income taxes........................................ 6,286 9,376 14,249
---------- ---------- ---------
Net gain from operations.................................... 1,570 14,290 19,560
Net realized capital gain (loss)............................ 635 (540) (1,772)
---------- ---------- ---------
Net income.................................................. $ 2,205 $ 13,750 $ 17,788
========== ========== =========
</TABLE>
See notes to statutory financial statements.
25
<PAGE>
C.M. Life Insurance Company
STATUTORY STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995 1994
----- ---- ----
(In Thousands)
<S> <C> <C> <C>
Shareholder's equity, beginning of year........................ $ 113,199 $ 103,837 $ 87,898
Increases (decreases) due to:
Net income..................................................... 2,205 13,750 17,788
Change in asset valuation and investment reserves.............. (1,923) (9,228) (106)
Change in non-admitted assets.................................. (2,765) (1,157) (1,761)
Net unrealized capital gain (loss)............................. (972) 5,997 18
---------- ---------- ---------
(3,455) 9,362 15,939
---------- ---------- ---------
Shareholder's equity, end of year.............................. $ 109,744 $ 113,199 $ 103,837
========= ========== =========
</TABLE>
See notes to statutory financial statements.
26
<PAGE>
C.M. Life Insurance Company
STATUTORY STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995 1994
---- ---- ----
(In Thousands)
Operating activities:
<S> <C> <C> <C>
Net income (loss).............................................. $ 2,205 $ 13,750 $ 17,788
Additions to policyholders' reserves, funds, and net of
transfers to separate accounts............................... 41,578 84,218 68,764
Net realized capital gain (loss)............................... (635) 540 1,772
Change in receivable (payable) from parent..................... (1,169) 5,711 (3,870)
Other changes.................................................. 409 (6,303) (3,306)
---------- ---------- ----------
Net cash provided by operating activities...................... 42,388 97,916 81,148
Investing activities:
Loans and purchases of investments............................. (184,900) (491,893) (332,750)
Sales or maturities of investments and receipts from
repayment of loans........................................... 191,131 406,021 249,038
---------- ---------- ----------
Net cash provided by (used in) investing activities............ 6,231 (85,872) (83,712)
Financing activities:
Net cash provided by financing activities..................... -- -- --
Increase (decrease) in short-term investments...................... 48,619 12,044 (2,564)
Cash and short-term investments, beginning of year................. 15,069 3,025 5,589
---------- ---------- ----------
Cash and short-term investments, end of year....................... $ 63,688 $ 15,069 $ 3,025
========== ========== ==========
</TABLE>
See notes to statutory financial statements.
27
<PAGE>
Notes to Statutory Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
C.M. Life Insurance Company (the Company) is a wholly owned stock life insurance
subsidiary of Massachusetts Mutual Life Insurance Company ("MassMutual"). On
March 1, 1996, the operations of the Company's former parent, Connecticut Mutual
Life Insurance Company, were merged into MassMutual. The Company is primarily
engaged in the sale of flexible premium universal life insurance and variable
annuity products. The Company is licensed to transact business in all states
except New York.
The accompanying statutory financial statements, except as to form, have been
prepared in conformity with the practices of the National Association of
Insurance Commissioners and the accounting practices prescribed or permitted by
the Insurance Department of the State of Connecticut ("statutory accounting
practices"), which prior to 1996 were considered to be in conformity with
generally accepted accounting principles ("GAAP"). In 1993, the Financial
Accounting Standards Board ("FASB") issued interpretation No. 40 ("Fin. 40"),
"Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises", which clarified that wholly owned stock life
insurance subsidiaries of mutual life insurance companies issuing financial
statements described as prepared in conformity with GAAP after 1995 are required
to apply all applicable GAAP pronouncements in preparing those financial
statements. In January 1995, the FASB issued Statement No. 120 ("SFAS 120"),
Accounting and Reporting by Mutual Life Insurance Enterprises and by Insurance
Enterprises for Certain Long-Duration Participating Contracts," which among
other things, extended the applicability of certain FASB statements to mutual
life insurance companies and deferred the effective date of Fin. 40 to financial
statements issued or reissued after 1996. As required by generally accepted
auditing standards, the opinion expressed by our former independent accountants
on the 1995 and 1994 financial statements is different from that expressed in
their previous report.
The accompanying statutory financial statements are different in some respects
from GAAP financial statements. The more significant differences are as
follows: (a) acquisition costs, such as commissions and other costs in
connection with acquiring new business, are charged to current operations as
incurred, whereas GAAP would require these expenses to be capitalized and
recognized over the life of the policies; (b) policy reserves are based upon
statutory mortality and interest requirements without consideration of
withdrawals, whereas GAAP reserves would be based upon reasonably conservative
estimates of mortality, morbidity, interest and withdrawals; (c) bonds are
generally carried at amortized cost whereas GAAP would value bonds at fair value
and (d) deferred income taxes are not provided for book-tax timing differences
whereas GAAP would record deferred income taxes. Management has not yet
completed GAAP financial statements, but believes that shareholder's equity
based upon GAAP will be higher than shareholder's equity based upon statutory
accounting practices.
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, as
well as disclosures of contingent assets and liabilities, at the date of the
financial statements. Management must also make estimates and assumptions that
affect the amounts of revenues and expenses during the reporting period. Future
events, including changes in the levels of mortality, morbidity, interest rates
and asset valuations, could cause actual results to differ from the estimates
used in the financial statements.
The following is a description of the Company's current principal accounting
policies and practices.
A. Investments
Bonds and stocks are valued in accordance with rules established by the National
Association of Insurance Commissioners. Generally, bonds are valued at
amortized cost, preferred stocks in good standing at cost, and common stocks at
fair value.
Mortgage loans are valued at principal less unamortized discount.
Policy loans are carried at the outstanding loan balance less amounts unsecured
by the cash surrender value of the policy.
Short-term investments are stated at amortized cost, which approximates fair
value.
In compliance with regulatory requirements, the Company maintains an Asset
Valuation Reserve and an Interest Maintenance Reserve. The Asset Valuation
Reserve and other investment reserves, as prescribed and permitted by the
Connecticut Insurance Department, stabilize the policyholders' contingency
reserves against fluctuations in the value of stocks, as well as declines in the
value of bonds and mortgage loans.
The Interest Maintenance Reserve captures after-tax realized capital gains and
losses which result from changes in the overall level of interest rates for all
types of fixed income investments. This reserve is amortized into income using
the grouped method over the remaining life of the investment sold or over the
remaining life of the underlying asset. Net realized after tax capital gains of
$425 thousand in 1996 and net realized after tax capital losses of $867 thousand
in 1995 and $3,391 thousand in 1994 were transferred to the Interest Maintenance
Reserve. Amortization of the Interest Maintenance Reserve into net investment
income amounted to $37 thousand in 1996, $61 thousand in 1995, and $309 thousand
in 1994. In 1996, 1995 and 1994, the Interest Maintenance Reserve resulted in
net loss deferral. In accordance with the practices of the National Association
of Insurance Commissioners, the balance was recorded as a reduction of
shareholder's equity.
28
<PAGE>
Notes To Statutory Financial Statements (Continued)
Realized capital gains and losses, less taxes, not includable in the Interest
Maintenance Reserve, are recognized in net income. Realized capital gains and
losses are determined using the specific identification method. Unrealized
capital gains and losses are included in shareholder's equity.
B. Separate Accounts
Separate account assets and liabilities represent segregated funds administered
and invested by the Company for the benefit of variable annuity and variable
life insurance contract holders. The assets consist principally of marketable
securities reported at fair value. Transfers due from separate account
represents the separate account assets in excess of statutory benefit reserves.
Premiums, benefits and expenses of the separate accounts are reported in the
statutory statement of income. Reserves for these life and annuity contracts
have been established using assumed interest rates and valuation methods that
will provide reserves at least as great as those required by law and contract
provisions. The Company receives administrative and investment advisory fees
from these accounts.
C. Non-admitted Assets
Assets designated as "non-admitted" (principally prepaid agent commissions,
other prepaid expenses and Interest Maintenance Reserve, when in a net loss
deferral position) are excluded from the statutory statement of financial
position. These amounted to $6,604 thousand and $3,839 thousand as of December
31, 1996 and 1995, respectively and changes therein are charged directly to
shareholder's equity.
D. Policyholders' Reserves and Funds
Policyholders' reserves for life contracts are developed using accepted
actuarial methods computed principally on the net level premium and the
Commissioners' Reserve Valuation Method bases using the American Experience and
1980 Commissioners' Standard Ordinary mortality tables with assumed interest
rates ranging from 4.0 to 4.5 percent.
Reserves for single premium deferred annuities are calculated based on the
Commissioners' Annuity Reserve Valuation Method utilizing the change in fund
method and assuming interest on changes in funds of 7.0%, 8.0% and 7.0% in 1996,
1995 and 1994, respectively. Additional reserves are maintained for contracts
where the cash surrender value exceeds the actuarially determined reserve.
Reserves for policies and contracts considered investment contracts have a
carrying value and fair value of $113,670 thousand (fair value is determined by
discounted cash flow projections).
E. Premium and Related Expense Recognition
Life insurance premium income is recognized annually on the anniversary date of
the policy. Annuity premium is recognized when received. Commissions and other
costs related to the issuance of new policies, maintenance and settlement costs
are charged to current operations.
F. Cash and Short-term Investments
For purposes of the statutory Statement of Cash Flows, the Company considers all
highly liquid short-term investments with a maturity of twelve months or less
from the date of purchase to be cash and short-term investments.
2. FEDERAL INCOME TAXES
Provision for federal income taxes is based upon the Company's best estimate of
its tax liability. No deferred tax effect is recognized for temporary
differences that may exist between financial reporting and taxable income.
Accordingly, the reporting of miscellaneous temporary differences, such as
reserves and acquisition costs, resulted in an effective tax rate which is other
than the statutory tax rate.
3. STOCKHOLDER'S EQUITY
The Board of Directors of MassMutual has authorized the contribution of funds to
the Company sufficient to meet the capital requirements of all states in which
the Company is licensed to do business. Substantially all of the statutory
stockholder's equity is subject to dividend restrictions relating to various
state regulations which limit the payment of dividends without prior approval.
Under these regulations, $11,320 thousand of stockholder's equity is available
for distribution to shareholders in 1997 without prior regulatory approval.
29
<PAGE>
Notes To Statutory Financial Statements (Continued)
4. RELATED PARTY TRANSACTIONS
Investment and administrative services are provided to the Company pursuant to a
management services agreement with MassMutual. Fees incurred under the terms of
the agreement were $45,914 thousand, $34,008 thousand and $16,412 thousand in
1996, 1995 and 1994, respectively.
Effective March 1, 1996, the Company modified its underwriting agreement with
its affiliates, GR Phelps and MassMutual Distributors, whereby the Company will
pay all future commissions relating to variable annuity business in exchange for
the rights to retain all future policy administration fees and charges.
The Company cedes a portion of its life insurance business to MassMutual and
other insurers in the normal course of business. The Company's retention limit
per individual insured is $4 million; the portion of the risk exceeding the
retention limit is reinsured with other insurers. The Company is contingently
liable with respect to ceded reinsurance in the event any reinsurer is unable to
fulfill its contractual obligations.
The Company has a modified coinsurance quota-share reinsurance agreement with
Mass Mutual whereby the Company cedes 50% of the premiums on certain universal
life policies issued in 1985 and 75% of the premiums with issue dates on or
after January 1, 1986. In return Mass Mutual pays the Company a stipulated
expense allowance, death and surrender benefits, and a modified coinsurance
adjustment. Reserves for payment of future benefits for the ceded policies are
retained by the Company.
The Company also has a stop-loss agreement with MassMutual, with maximum
coverage at $25,000 thousand, under which the Company cedes claims which, in
aggregate, exceed $28,080 thousand in 1996, $24,245 thousand in 1995, and
$18,348 thousand in 1994. For each of the years, the limit was not exceeded.
The Company paid approximately $400 thousand, $602 thousand, and $435 thousand
in premiums under the agreement in 1996, 1995 and 1994, respectively.
5. INVESTMENTS
The Company maintains a diversified investment portfolio. Investment policies
limit concentration in any asset class, geographic region, industry group,
economic characteristic, investment quality or individual investment.
A. Bonds
The carrying value and estimated fair value of investments in bonds as of
December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
December 31, 1996
-----------------------
Gross Gross Gross
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
---------- ---------- ---------- ---------
(In Thousands)
<S> <C> <C> <C> <C>
U.S. Treasury Securities
and Obligations of U.S.
Government Corporations
and Agencies $138,751 $ 2,175 $ 964 $139,962
Debt Securities issued by
Foreign Governments 3,953 53 22 3,984
Mortgage-backed securities 37,395 745 725 37,415
State and local governments 10,263 244 101 10,406
Industrial securities 509,227 11,643 3,700 517,170
Utilities 36,935 1,168 159 37,944
-------- --------- --------- --------
TOTAL $736,524 $ 16,028 $ 5,671 $746,881
======== ========= ========= ========
<CAPTION>
December 31, 1995
-----------------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
-------- ---------- ---------- --------
(In Thousands)
<S> <C> <C> <C> <C>
U.S. Treasury Securities
and Obligations of U.S.
Government Corporations
and Agencies $ 27,817 $ 1,764 $ 8 $ 29,573
Debt Securities issued by
Foreign Governments 11,186 483 295 11,374
Mortgage-backed securities 150,694 7,144 347 157,491
Industrial securities 501,252 21,472 711 522,013
Utilities 45,150 2,303 16 47,437
-------- --------- --------- --------
TOTAL $736,099 $ 33,166 $ 1,377 $767,888
======== ========= ========= ========
</TABLE>
30
<PAGE>
Notes To Statutory Financial Statements (Continued)
The carrying value and estimated fair value of bonds at December 31, 1996, by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Carrying Fair
Value Value
--------- --------
(In Thousands)
<S> <C> <C>
Due in one year or less $ 76,698 $ 77,009
Due after one year through five years 284,200 287,363
Due after five years through ten years 202,722 206,317
Due after ten years 84,515 86,874
-------- --------
subtotal 648,135 657,563
Mortgage-backed securities, including securities
guaranteed by the U.S. Government 88,389 89,318
-------- --------
Total $736,524 $746,881
======== ========
</TABLE>
Proceeds from sales of investments in bonds were $162,934 thousand during 1996,
$380,567 thousand during 1995 and $224,884 thousand during 1994. Gross capital
gains of $1,608 thousand in 1996, $3,598 thousand in 1995 and $1,358 thousand
in 1994 and gross capital losses of $876 thousand in 1996, $4,658 thousand, in
1995 and $4,439 thousand in 1994 were realized on those sales, a portion of
which were included in the Interest Maintenance Reserve. Estimated fair value
of non-publicly traded bonds is determined by the Company using a pricing
matrix.
B. Stocks
Common stocks had a cost of $47,195 thousand in 1996 and $64,225 thousand in
1995.
C. Mortgages
The fair value of mortgage loans, as determined from a pricing matrix for
performing loans and the estimated underlying real estate value for non-
performing loans, approximated carrying value less valuation reserves held.
D. Other
The carrying value of investments which were non-income producing for the
preceding twelve months was $2,774 thousand at December 31, 1996. The Company
had restructured loans with book values of $21,867 thousand and $17,128 thousand
at December 31, 1996 and 1995, respectively. The loans typically have been
modified to defer a portion of the contracted interest payments to future
periods. Interest deferred to future periods totaled $178 thousand in 1996,
$171 thousand in 1995 and $183 thousand in 1994.
It is not practicable to determine the fair value of policy loans as they do not
have a stated maturity.
6. PORTFOLIO RISK MANAGEMENT
The Company manages its investment risks to reduce interest rate and duration
imbalances determined in asset/liability analyses. The fair values of these
instruments, which are not recorded in the financial statements, are based upon
market prices or prices obtained from brokers. The Company does not hold or
issue financial instruments for trading purposes.
The Company utilizes interest rate swap agreements and options to reduce
interest rate exposures arising from mismatches between assets and liabilities
and to modify portfolio profiles to manage other risks identified. Under
interest rate swaps, the Company agrees to exchange, at specified intervals, the
difference between fixed and floating interest rates calculated by reference to
an agreed-upon notional principal amount. Net amounts receivable and payable
are accrued as adjustments to interest income and included in investment and
insurance amounts receivable on the Statutory Statement of Financial Position.
Gains and losses realized on the termination of contracts are amortized through
the Interest Maintenance Reserve over the remaining life of the associated
contract. At December 31, 1996 and 1995, the Company had swaps with notional
amounts of $13,000 thousand. The fair value of these instruments was $103
thousand at December 31, 1996 and $491 thousand at December 31, 1995. During
1996 options (protective puts) were utilized to hedge equity exposures. The net
1996 realized losses from this activity were $837 thousand. The notional amount
of options totaled $34,700 thousand as of December 31, 1996.
31
<PAGE>
Notes To Statutory Financial Statements (Continued)
During 1994 interest rate futures were acquired to hedge the reinvestment of
anticipated proceeds from a bulk mortgage sale. The actual gain of $95 thousand
was amortized over the expected term of the assets acquired with the mortgage
sale proceeds. No interest rate futures were held as of December 31, 1996 and
1995.
7. LIQUIDITY
The withdrawal characteristics of the policyholder's reserves and funds,
including separate accounts, and the invested assets which support them at
December 31, 1996 are illustrated below:
<TABLE>
<CAPTION>
(In Thousands)
<S> <C>
Total policyholders' reserves and funds and
separate account liabilities $1,687,234
Not subject to discretionary withdrawal (1,446)
Policy loans (132,941)
----------
Subject to discretionary withdrawal $1,552,847
==========
Total invested assets, including separate
investment accounts $1,802,416
Policy loans and other invested assets (216,721)
----------
Readily available marketable instruments $1,585,695
==========
</TABLE>
8. BUSINESS RISKS AND CONTINGENCIES
The Company is subject to insurance guaranty fund laws in the states in which it
does business. These laws assess insurance companies amounts to be used to pay
benefits to policyholders and claimants of insolvent insurance companies. Many
states allow these assessments to be credited against future premium taxes. The
Company believes such assessments in excess of amounts accrued will not
materially affect its financial position, results of operations or liquidity.
In 1996, the Company elected not to admit $1,621 thousand of guaranty fund
premium tax offset receivable relating to prior assessments.
The Company is involved in regulatory proceedings and various litigation in the
ordinary course of business. In the opinion of management, the ultimate
resolution of such proceedings and litigation will not result in fines or
judgments which, in the aggregate, would materially affect the Company's
financial position.
9. RECLASSIFICATIONS
Certain 1995 and 1994 amounts have been reclassified to conform with the current
year presentation.
10. AFFILIATED COMPANIES
The relationship of the Company, its parent and affiliated companies as of
December 31, 1996 is illustrated below. Subsidiaries are wholly-owned by the
parent, except as noted.
Parent
------
Massachusetts Mutual Life Insurance Company
Subsidiaries of Massachusetts Mutual Life Insurance Company
-----------------------------------------------------------
C.M. Assurance Company
C.M. Benefit Insurance Company
C.M. Life Insurance Company
MassMutual Holding Company
MassMutual Holding Company Two, Inc. (Sold in March 1996)
MassMutual of Ireland, Limited
MML Bay State Life Insurance Company
MML Distributors, LLC
Subsidiaries of MassMutual Holding Company
------------------------------------------
GR Phelps, Inc.
MassMutual Holding Trust I
MassMutual Holding Trust II
MassMutual Holding MSC, Inc.
MassMutual International, Inc.
MassMutual Reinsurance Bermuda (Sold in December 1996)
MML Investor Services, Inc.
State House One (Liquidated in December 1996)
32
<PAGE>
Notes To Statutory Financial Statements (Continued)
Subsidiaries of MassMutual Holding Trust I
------------------------------------------
Antares Leveraged Capital Corporation
Charter Oak Capital Management, Inc.
Cornerstone Real Estate Advisors, Inc.
DLB Acquisition Corporation
Oppenheimer Acquisition Corporation - 86.15%
Subsidiaries of MassMutual Holding Trust II
-------------------------------------------
CM Advantage, Inc.
CM International, Inc.
CM Property Management, Inc.
High Yield Management, Inc.
MMHC Investments, Inc.
MML Realty Management
Urban Properties, Inc.
Westheimer 335 Suites, Inc.
Subsidiaries of MassMutual International
----------------------------------------
MassLife Seguros de Vida (Argentina) S. A.
MassMutual International (Bermuda) Ltd.
Mass Seguros de Vida (Chile) S. A.
MassMutual International (Luxemburg) S. A.
MassMutual Holding MSC, Incorporated
------------------------------------
MassMutual/Carlson CBO N. V. - 50%
MassMutual Corporate Value Limited - 46%
Affiliates of Massachusetts Mutual Life Insurance Company
---------------------------------------------------------
MML Series Investment Fund
MassMutual Institutional Funds
Oppenheimer Value Stock Fund
33
<PAGE>
PART II. INFORMATION NOT REQUIRED IN A PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
-------------------------------------------
Not applicable.
Item 14. Indemnification of Directors and Officers
-----------------------------------------
C.M. Life directors and officers are indemnified under its by-laws. C.M. Life
indemnifies each person who was or is a party to any threatened, pending or
completed action, suit or to any liability to any entity which is registered as
an investment company under the Investment Company Act of 1940 or to the
security holders thereof provided that:
(a) Such person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation;
(b) With respect to any criminal action or proceeding, such person had no
reasonable cause to believe their conduct was unlawful;
(c) Unless ordered by a court, indemnification shall be made only as
authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances set
forth in subparagraphs (a) and (b) above, such determination to be made (i)
by the Board of Directors of the C.M. Life by a majority vote of a quorum
consisting of Directors who were not parties to such action, suit or
proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable
a quorum of disinterested Directors so directs, by independent legal counsel
in a written opinion, or (iii) by the stockholders of the corporation.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
C.M. Life pursuant to the foregoing provisions, or otherwise, C.M. Life has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by C.M. Life
of expenses incurred or paid by a director, officer or controlling person of
C.M. Life in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, C.M. Life will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act of 1933 and
will be governed by the final adjudication of such issues.
Item 15. Recent Sales of Unregistered Securities
---------------------------------------
Not applicable.
Item 16. Exhibits and Financial Statement Schedules
------------------------------------------
<TABLE>
Exhibit Number Description Method of Filing
- -------------- ----------- ----------------
<S> <C> <C>
(1) Form of Underwriting Agreement....... Filed herewith
</TABLE>
4
<PAGE>
<TABLE>
<S> <C> <C>
(3)(i) C.M. Life Articles of
Incorporation...................... *
(3)(ii) C.M. Life Bylaws................... *
4 Individual Annuity Contract........ *
5 Opinion re legality................ Filed herewith
23 Consent of Coopers & Lybrand L.L.P.
& Arthur Andersen LLP
independent accountants............ Filed herewith
Financial Statement
Schedules.......................... Filed herewith
24 Powers of Attorney................. Filed herewith
27 Financial Data Schedule............ Filed herewith
</TABLE>
*Incorporated by reference pursuant to Rule 411 of the Securities Act of 1933
from the Registrant's Registration Statement No. 333-02347 filed on June 6,
1994.
Item 17. Undertakings
------------
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i.) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii.) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii.) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement, including (but not limited to) any
addition or deletion of a managing underwriter;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
5
<PAGE>
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
6
<PAGE>
C.M. LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NAME AND POSITION Age as of PRINCIPAL OCCUPATION(S) DURING
12/31/96 PAST FIVE YEARS
- --------------------------------------------------------------------------------
<S> <C> <C>
Lawrence V. Burkett, Jr., Director, President and Chief
Director, President and 51 Executive Officer, C.M. Life,
Chief Executive Officer since 1996; Executive Vice
President and General Counsel,
MassMutual, since 1993; Senior
Vice President and Deputy
General Counsel, 1992-1993
- --------------------------------------------------------------------------------
Director, C.M. Life, since
John B. Davies, Director 47 1996; Executive Vice President,
MassMutual, since 1994;
Associate Executive Vice
President, 1994-1994; General
Agent, 1982-1993
- --------------------------------------------------------------------------------
Director, C.M. Life, since
Daniel J. Fitzgerald, 48 1996; Executive Vice President,
Director Corporate Financial Operations,
MassMutual, since 1994; Senior
Vice President, 1991-1994
- --------------------------------------------------------------------------------
Stuart H. Reese, Director Director and Senior Vice
and Senior Vice 41 President-Investments, C.M.
President-Investments Life, since 1996; Senior Vice
President, MassMutual, since
1993; Investment Manager, Aetna
Life and Casualty and
Affiliates, 1979-1993
- --------------------------------------------------------------------------------
PRINCIPAL OFFICERS (other than those who are also Directors):
- --------------------------------------------------------------------------------
Paul D. Adornato 58 Senior Vice
President-Operations, C.M.
Life, since 1996; Senior Vice
President, MassMutual, since
1986
- --------------------------------------------------------------------------------
Senior Vice President-Large
Anne Melissa Dowling 38 Corporate Marketing, C.M. Life,
since 1996; Senior Vice
President, MassMutual, since
1996; Chief Investment Officer,
Connecticut Mutual Life
Insurance Company, 1994-1996;
Senior Vice
President-International,
Travelers Insurance Co.,
1987-1993
- --------------------------------------------------------------------------------
Senior Vice President-Annuity
Maureen R. Ford 41 Marketing, C.M. Life, since
1996; Senior Vice President,
MassMutual, since 1996;
Marketing Officer, Connecticut
Mutual Life Insurance Company,
1989-1996
- --------------------------------------------------------------------------------
Senior Vice President and
Isadore Jermyn 46 Actuary, C.M. Life, since 1996;
Senior Vice President and
Actuary, MassMutual, since
1995; Vice President and
Actuary, 1980-1995
- --------------------------------------------------------------------------------
Treasurer, C.M. Life, since
Ann Iseley 40 1996; Vice President and
Treasurer, MassMutual, since
1996; Chief Financial and
Operations Officer, Connecticut
Mutual Financial Services,
1994-1996; Controller, The Mack
Company, 1993-1994; Vice
President-Finance, Mutual of
New York, 1988-1993
- --------------------------------------------------------------------------------
Secretary, C.M. Life, since
Ann F. Lomeli 40 1988; Vice President, Associate
Secretary and Associate General
Counsel, MassMutual, since
1996; Corporate Secretary and
Counsel, Connecticut Mutual
Life Insurance Company,
1988-1996
- --------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
caused this Post-Effective Amendment No. 3 to Registration Statement No. 333-
2347 (formerly 33-85988) to be signed on its behalf by the undersigned thereunto
duly authorized, all in the city of Springfield and the Commonwealth of
Massachusetts, on the 3rd day of April, 1997.
C.M. LIFE INSURANCE COMPANY
By: /s/ Lawrence V. Burkett, Jr.*
---------------------------------------------------------
Lawrence V. Burkett, Jr., President and Chief Executive Officer
C.M. Life Insurance Company
/s/ Richard M. Howe On April 3, 1997, as Attorney-in-Fact pursuant to
- ---------------------- powers of attorney filed herewith.
*Richard M. Howe
As required by the Securities Act of 1933, this Post-Effective Amendment
No. 3 to Registration Statement No. 333-2347 (formerly 33-85988) has been signed
by the following persons in the capacities and on the duties indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Lawrence V. Burkett, Jr.* President, Chief Executive April 3, 1997
- ----------------------------- and Director
Lawrence V. Burkett, Jr.
/s/ Ann Iseley* Treasurer (Principal April 3, 1997
- ------------------------------ Financial Officer)
Ann Iseley
/s/ John Miller, Jr.* Second Vice President April 3, 1997
- ------------------------------- Comptroller
(Principal Accounting
John Miller, Jr. Officer)
/s/ John B. Davies* Director April 3, 1997
- ----------------------
John B. Davies
/s/ Daniel F. Fitzgerald* Director April 3, 1997
- ----------------------------
Daniel F. Fitzgerald
/s/ Stuart H. Reese* Director April 3, 1997
- --------------------------------
Stuart H. Reese
/s/ Richard M. Howe On April 3, 1997, as Attorney-in-Fact pursuant
- ------------------------------ to powers of attorney filed herewith.
*Richard M. Howe
</TABLE>
8
<PAGE>
Exhibit 1
Underwriting Agreements
Form of Underwriting with MML Distributors, LLC
9
<PAGE>
FORM OF UNDERWRITING AND
SERVICING AGREEMENT
This UNDERWRITING AND SERVICING AGREEMENT is made this 1st day of May, 1996, by
and between MML Distributors, LLC ("MML DISTRIBUTORS") and C.M. Life Insurance
Company ("C.M. Life"), on its own behalf and on behalf of _______________
Separate Account (the "Separate Account"), a separate account of C.M. Life, as
follows:
WHEREAS, the Separate Account was established on _____________ pursuant to
authority of the Board of Directors of C.M. Life in order to set aside and
invest assets attributable to certain variable annuity contracts (the
"Contracts") issued by C.M. Life; and
WHEREAS, C.M. Life has registered the Separate Account under the Investment
Company Act of 1940, as amended, (the "1940 Act") and has registered the
Contracts under the Securities Act of 1933, as amended, (the "1933 Act"); and
WHEREAS, C.M. Life will continue the effectiveness of the registrations of the
Separate Account under the 1940 Act and the Contracts under the 1933 Act; and
WHEREAS, C.M. Life intends for the Contracts to be sold by agents and brokers
who are required to be registered representatives of a broker-dealer that is
registered with the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934 ("1934 Act") and a member of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, C.M. Life desires to engage MML DISTRIBUTORS, a broker-dealer
registered with the SEC under the 1934 Act and a member of the NASD, to act as
the principal underwriter ("Underwriter") of the Contracts, and to otherwise
perform certain duties and functions that are necessary and proper for the
distribution of the Contracts as required under applicable federal and state
securities laws and NASD regulations, and MML DISTRIBUTORS desires to act as
Underwriter for the sale of the Contracts and to assume such responsibilities;
NOW, THEREFORE, the parties hereto agree as follows:
1. Underwriter. C.M. Life hereby appoints MML DISTRIBUTORS as, and MML
DISTRIBUTORS agrees to serve as, Underwriter of the Contracts during the
term of this Agreement for purposes of federal and state securities laws.
C.M. Life reserves the right, however, to refuse at any time or times to
sell any Contracts hereunder for any reason, and C.M. Life maintains
ultimate responsibility for the sales of the Contracts.
MML DISTRIBUTORS shall use reasonable efforts to sell the Contracts but
does not agree hereby to sell any specific number of Contracts and shall be
free to act as underwriter of other securities. MML DISTRIBUTORS agrees to
offer the Contracts for sale in accordance with the prospectus then in
effect for the Contracts.
2. Services. MML DISTRIBUTORS agrees, on behalf of C.M. Life and the Separate
Account, and in its capacity as Underwriter, to undertake at its own
expense except as otherwise provided herein, to provide certain sales,
administrative and supervisory services relative to the Contracts as
described below, and otherwise to perform all duties that are necessary
and proper for the distribution of the Contracts as required under
applicable federal and state securities laws and NASD regulations.
3. Selling Group. MML DISTRIBUTORS may enter into sales agreements for the
sale of the Contracts with independent broker-dealer firms ("Independent
Brokers") whose registered representatives have been or shall be licensed
and appointed as life insurance agents of C.M. Life. All such agreements
shall be in a form agreed to by C.M. Life. All such agreements shall
provide that the Independent Brokers must assume
10
<PAGE>
full responsibility for continued compliance by itself and its associated
persons with the NASD Rules of Fair Practice (the "Rules") and all
applicable federal and state securities and insurance laws. All associated
persons of such Independent Brokers soliciting applications for the
Contracts shall be duly and appropriately licensed and appointed for the
sale of the Contracts under the Rules and applicable federal and state
securities and insurance laws.
4. Compliance and Supervision. All persons who are engaged directly or
indirectly in the operations of MML DISTRIBUTORS and C.M. Life in
connection with the offer or sale of the Contracts shall be considered a
"person associated" with MML DISTRIBUTORS as defined in Section 3(a)(18) of
the 1934 Act. MML DISTRIBUTORS shall have full responsibility for the
securities activities of each such person as contemplated by Section 15 of
the 1934 Act.
MML DISTRIBUTORS shall be fully responsible for carrying out all
compliance, supervisory and other obligations hereunder with respect to the
activities of its registered representatives as required by the Rules and
applicable federal and state securities laws. Without limiting the
generality of the foregoing, MML DISTRIBUTORS agrees that it shall be fully
responsible for:
(a) ensuring that no representative of MML DISTRIBUTORS shall offer or
sell the Contracts until such person is appropriately licensed,
registered, or otherwise qualified to offer and sell such Contracts
under the federal securities laws and any applicable securities laws
of each state or other jurisdiction in which such Contracts may be
lawfully sold, in which C.M. Life is licensed to sell the Contracts,
and in which such person shall offer or sell the Contracts; and
(b) training and supervising C.M. Life's agents and brokers who are also
registered representatives of MML DISTRIBUTORS for purposes of
complying on a continuous basis with the Rules and with federal and
state securities laws applicable in connection with the offering and
sale of the Contracts. In this connection, MML DISTRIBUTORS shall:
(i) jointly conduct with C.M. Life such training (including the
preparation and utilization of training materials) as in the
opinion of MML DISTRIBUTORS and C.M. Life is necessary to
accomplish the purposes of this Agreement;
(ii) establish and implement reasonable written procedures for
supervision of sales practices of registered representatives of
MML DISTRIBUTORS who sell the Contracts;
(iii) provide a sufficient number of registered principals and an
adequately staffed compliance department to carry out the
responsibilities as set forth herein;
(iv) take reasonable steps to ensure that C.M. Life agents and
brokers who are also registered representatives of MML
DISTRIBUTORS recommend the purchase of the Contracts only upon
reasonable grounds to believe that the purchase of the Contracts
is suitable for such applicant; and
(v) impose disciplinary measures on agents of C.M. Life who are also
registered representatives of MML DISTRIBUTORS as required.
The parties hereto recognize that any registered representative of MML
DISTRIBUTORS or Independent Broker selling the Contracts as
contemplated by this Agreement shall also be acting as an insurance
agent of C.M. Life or as an insurance broker, and that the rights of
MML DISTRIBUTORS and Independent Broker to supervise such persons
shall be limited to the extent specifically described herein or
required under applicable federal or state securities laws or NASD
regulations.
11
<PAGE>
5. Registration and Qualification of Contracts. C.M. Life has prepared or
caused to be prepared a registration statement describing the Contracts,
together with exhibits thereto (hereinafter referred to as the
"Registration Statement"). The Registration Statement includes a
prospectus (the "Prospectus") for the Contracts.
C.M. Life agrees to execute such papers and to do such acts and things as
shall from time-to-time be reasonably requested by MML DISTRIBUTORS for the
purpose of qualifying and maintaining qualification of the Contracts for
sale under applicable state law and for maintaining the registration of the
Separate Account and interests therein under the 1933 Act and the 1940 Act,
to the end that there will be available for sale from time-to-time such
amounts of the Contracts as MML DISTRIBUTORS may reasonably request. C.M.
Life shall advise MML DISTRIBUTORS promptly of any action of the SEC or any
authorities of any state or territory, of which it is aware, affecting
registration or qualification of the Separate Account, or rights to offer
the Contracts for sale.
If any event shall occur as a result of which it is necessary to amend or
supplement the Registration Statement in order to make the statements
therein, in light of the circumstances under which they were or are made,
true, complete or not misleading, C.M. Life will forthwith prepare and
furnish to MML DISTRIBUTORS, without charge, amendments or supplements to
the Registration Statement sufficient to make the statements made in the
Registration Statement as so amended or supplemented true, complete and not
misleading in light of the circumstances under which they were made.
6. Representations of C.M. Life. C.M. Life represents and warrants to MML
DISTRIBUTORS and to the Independent Brokers as follows:
(a) C.M. Life is an insurance company duly organized under the laws of the
Commonwealth of Massachusetts and is in good standing and is
authorized to conduct business under the laws of each state in which
the Contracts are sold, that the Separate Account was legally and
validly established as a segregated asset account under the Insurance
Code of Massachusetts, and that the Separate Account has been properly
registered as a unit investment trust in accordance with the
provisions of the 1940 Act to serve as a segregated investment account
for the Contracts.
(b) All persons that will be engaging in the offer or sale of the
Contracts will be authorized insurance agents of C.M. Life.
(c) The Registration Statement does not and will not contain any
misstatements of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were or are
made, not materially misleading.
(d) C.M. Life shall make available to MML DISTRIBUTORS copies of all
financial statements that MML DISTRIBUTORS reasonably requests for use
in connection with the offer and sale of the Contracts.
(e) No federal or state agency or bureau has issued an order preventing or
suspending the offer of the Contracts or the use of the Registration
Statement, or of any part thereof, with respect to the sale of the
Contracts.
(f) The offer and sale of the Contracts is not subject to registration, or
if necessary, is registered, under the Blue Sky laws of the states in
which the Contracts will be offered and sold.
(g) The Contracts are qualified for offer and sale under the applicable
state insurance laws in those states in which the Contracts shall be
offered for sale. In each state where such qualification is effected,
C.M. Life shall file and make such statements or reports as are or may
be required by the laws of such state.
12
<PAGE>
(h) This Agreement has been duly authorized, executed and delivered by
C.M. Life and constitutes the valid and legally binding obligation of
C.M. Life. Neither the execution and delivery of this Agreement by
C.M. Life nor the consummation of the transactions contemplated herein
will result in a breach or violation of any provision of the state
insurance laws applicable to C.M. Life, any judicial or administrative
orders in which it is named or any material agreement or instrument to
which it is a party or by which it is bound.
7. Representations of MML DISTRIBUTORS. MML DISTRIBUTORS represents and
warrants to C.M. Life as follows:
(a) MML DISTRIBUTORS is duly registered as a broker-dealer under the 1934
Act and is a member in good standing of the NASD and, to the extent
necessary to perform the activities contemplated hereunder, is duly
registered, or otherwise qualified, under the applicable securities
laws of every state or other jurisdiction in which the Contracts are
available for sale.
(b) This Agreement has been duly authorized, executed and delivered by MML
DISTRIBUTORS and constitutes the valid and legally binding obligation
of MML DISTRIBUTORS. Neither the execution and delivery of this
Agreement by MML DISTRIBUTORS nor the consummation of the transactions
contemplated herein will result in a breach or violation of any
provision of the federal or state securities laws or the Rules,
applicable to MML DISTRIBUTORS, or any judicial or administrative
orders in which it is named or any material agreement or instrument to
which it is a party or by which it is bound.
(c) MML DISTRIBUTORS shall comply with the Rules and the securities laws
of any jurisdiction in which it sells, directly or indirectly, any
Contracts.
8. Expenses. MML DISTRIBUTORS shall be responsible for all expenses incurred
in connection with its provision of services and the performance of its
obligations hereunder, except as otherwise provided herein.
C.M. Life shall be responsible for all expenses of printing and
distributing the Prospectuses, and all other expenses of preparing,
printing and distributing all other sales literature or material for use in
connection with offering the Contracts for sale.
9. Sales Literature and Advertising. MML DISTRIBUTORS agrees to ensure that
it uses and distributes only the Prospectus, statements of additional
information, or other applicable and authorized sales literature then in
effect in selling the Contracts. MML DISTRIBUTORS is not authorized to
give any information or to make any representations concerning the
Contracts other than those contained in the current Registration Statement
filed with the SEC or in such sales literature as may be authorized by C.M.
Life.
MML DISTRIBUTORS agrees to make timely filings with the SEC, the NASD, and
such other regulatory authorities as may be required of any sales
literature or advertising materials relating to the Contracts and intended
for distribution to prospective investors. C.M. Life shall review and
approve all advertising and sales literature concerning the Contracts
utilized by MML DISTRIBUTORS. MML DISTRIBUTORS also agrees to furnish to
C.M. Life copies of all agreements and plans it intends to use in
connection with any sales of the Contracts.
10. Applications. All applications for Contracts shall be made on application
forms supplied by C.M. Life, and shall be remitted by MML DISTRIBUTORS or
Independent Brokers promptly, together with such forms and any other
required documentation, directly to C.M. Life at the address indicated on
such application or to such other address as C.M. Life may, from time to
time, designate in writing. All applications are subject to acceptance or
rejection by C.M. Life at its sole discretion.
13
<PAGE>
11. Payments. All money payable in connection with any of the Contracts,
whether as premiums, purchase payments or otherwise, and whether paid by,
or on behalf of any applicant or Contract owner, is the property of C.M.
Life and shall be transmitted immediately in accordance with the
administrative procedures of C.M. Life without any deduction or offset for
any reason, including by example but not limitation, any deduction or
offset for compensation claimed by MML DISTRIBUTORS. Checks or money
orders as payment on any Contract shall be drawn to the order of "C.M.
Life Insurance Company." No cash payments shall be accepted by MML
DISTRIBUTORS in connection with the Contracts. Unless otherwise agreed to
by C.M. Life in writing, neither MML DISTRIBUTORS nor any of C.M. Life's
agents nor any broker shall have an interest in any surrender charges,
deductions or other fees payable to C.M. Life as set forth herein.
12. Insurance Licenses. C.M. Life shall apply for and maintain the proper
insurance licenses and appointments for each of the agents and brokers
selling the Contracts in all states or jurisdictions in which the Contracts
are offered for sale by such person. C.M. Life reserves the right to
refuse to appoint any proposed agent or broker, and to terminate an agent
or broker once appointed. C.M. Life agrees to be responsible for all
licensing or other fees required under pertinent state insurance laws to
properly authorize agents or brokers for the sale of the Contracts;
however, the foregoing shall not limit C.M. Life's right to collect such
amount from any person or entity other than MML DISTRIBUTORS.
13. Agent/Broker Compensation. Commissions or other fees due all brokers and
agents in connection with the sale of Contracts shall be paid by C.M. Life,
on behalf of MML DISTRIBUTORS, to the persons entitled thereto in
accordance with the applicable agreement between each such broker or agent
and C.M. Life or a general agent thereof. MML DISTRIBUTORS shall assist
C.M. Life in the payment of such amounts as C.M. Life shall reasonably
request, provided that MML DISTRIBUTORS shall not be required to perform
any acts that would subject it to registration under the insurance laws of
any state. The responsibility of MML DISTRIBUTORS shall include the
performance of all activities by MML DISTRIBUTORS necessary in order that
the payment of such amounts fully complies with all applicable federal and
state securities laws. Unless applicable federal or state securities law
shall require, C.M. Life retains the ultimate right to determine the
commission rate paid to its agents.
14. MML DISTRIBUTORS Compensation. As payment for its services hereunder, MML
DISTRIBUTORS shall receive an annual fee that has the following components:
(1) a fixed fee in the amount of $_____ per year, and (2) a variable fee
in the amount of ___ basis points (.000x) per year of new sales of the
Contracts. Payments shall commence and be made no later than December 31
of the year in which a Contract is issued. The variable component of the
fee shall be paid to MML DISTRIBUTORS' affiliate, MML Insurance Agency,
Inc. ("MMLIAI"). The fixed component shall be renegotiated annually
commencing in 1997. The last agreed-to amounts for each of these fees
shall remain in effect until the new fees are mutually agreed upon and are
set forth in schedules attached hereto.
15. Books and Records. MML DISTRIBUTORS and C.M. Life shall each cause to be
maintained and preserved for the period prescribed such accounts, books,
and other documents as are required of it by the 1934 Act and any other
applicable laws and regulations. In particular, without limiting the
foregoing, MML DISTRIBUTORS shall cause all the books and records in
connection with the offer and sale of the Contracts by its registered
representatives to be maintained and preserved in conformity with the
requirements of Rules 17a-3 and 17a-4 under the 1934 Act, to the extent
that such requirements are applicable to the Contracts. The books,
accounts, and records of MML DISTRIBUTORS and C.M. Life as to all
transactions hereunder shall be maintained so as to disclose clearly and
accurately the nature and details of the transactions. The payment of
premiums, purchase payments, commissions and other fees and payments in
connection with the Contracts by its registered representatives shall be
reflected on the books and records of MML DISTRIBUTORS as required under
applicable NASD regulations and federal and state securities laws
requirements.
14
<PAGE>
MML DISTRIBUTORS and C.M. Life, from time to time during the term of this
Agreement, shall divide the administrative responsibility for maintaining
and preserving the books, records and accounts kept in connection with the
Contracts; provided, however, in the case of books, records and accounts
kept pursuant to a requirement of applicable law or regulation, the
ultimate and legal responsibility for maintaining and preserving such
books, records and accounts shall be that of the party which is required to
maintain or preserve such books, records and accounts under the applicable
law or regulation, and such books, records and accounts shall be maintained
and preserved under the supervision of that party. MML DISTRIBUTORS and
C.M. Life shall each cause the other to be furnished with such reports as
it may reasonably request for the purpose of meeting its reporting and
recordkeeping requirements under such regulations and laws, and under the
insurance laws of the Commonwealth of Massachusetts and any other
applicable states or jurisdictions.
MML DISTRIBUTORS and C.M. Life each agree and understand that all
documents, reports, records, books, files and other materials required
under applicable Rules and federal and state securities laws shall be the
property of MML DISTRIBUTORS, unless such documents, reports, records,
books, files and other materials are required by applicable regulation or
law to be also maintained by C.M. Life, in which case such material shall
be the joint property of MML DISTRIBUTORS and C.M. Life. All other
documents, reports, records, books, files and other materials maintained
relative to this Agreement shall be the property of C.M. Life. Upon
termination of this Agreement, all said material shall be returned to the
applicable party.
MML DISTRIBUTORS and C.M. Life shall establish and maintain facilities and
procedures for the safekeeping of all books, accounts, records, files, and
other materials related to this Agreement. Such books, accounts, records,
files, and other materials shall remain confidential and shall not be
voluntarily disclosed to any other person or entity except as described
below in section 16..
16. Availability of Records. MML DISTRIBUTORS and C.M. Life shall each submit
to all regulatory and administrative bodies having jurisdiction over the
sales of the Contracts, present or future, any information, reports, or
other material that any such body by reason of this Agreement may request
or require pursuant to applicable laws or regulations. In particular,
without limiting the foregoing, C.M. Life agrees that any books and records
it maintains pursuant to paragraph 15 of this Agreement which are required
to be maintained under Rule 17a-3 or 17a-4 of the 1934 Act shall be subject
to inspection by the SEC in accordance with Section 17(a) of the 1934 Act
and Sections 30 and 31 of the 1940 Act.
17. Confirmations. C.M. Life agrees to prepare and mail a confirmation for
each transaction in connection with the Contracts at or before the
completion thereof as required by the 1934 Act and applicable
interpretations thereof, including Rule 10b-10 thereunder.
Each such confirmation shall reflect the facts of the transaction, and the
form thereof will show that it is being sent on behalf of MML DISTRIBUTORS
or Independent Broker acting in the capacity of agent for C.M. Life.
18. Indemnification. C.M. Life shall indemnify MML DISTRIBUTORS, Independent
Brokers, their registered representatives, officers, directors, employees,
agents and controlling persons and hold such persons harmless, from and
against any and all losses, damages, liabilities, claims, demands,
judgments, settlements, costs and expenses of any nature whatsoever
(including reasonable attorneys' fees and disbursements) resulting or
arising out of or based upon an allegation or finding that: (i) the
Registration Statement or any application or other document or written
information provided by or on behalf of C.M. Life includes any untrue
statement of a material fact or omits to state a material fact necessary to
make the statements therein, in light of the circumstances under which
they are made, not misleading, unless such statement or omission was made
in reliance upon, and in conformity with, written information furnished to
C.M. Life by MML DISTRIBUTORS, Independent Brokers, or their registered
representatives specifically for use in the preparation thereof, or (ii)
there is a misrepresentation, breach of warranty or failure to fulfill any
covenant or warranty made or undertaken by C.M. Life hereunder.
15
<PAGE>
MML DISTRIBUTORS will indemnify C.M. Life, its officers, directors,
employees, agents and controlling persons and hold such persons harmless,
from and against any and all losses, damages, liabilities, claims, demands,
judgments, settlements, costs and expenses of any nature whatsoever
(including reasonable attorneys' fees and disbursements) resulting or
arising out of or based upon an allegation or finding that: (i) MML
DISTRIBUTORS or its registered representatives offered or sold or engaged
in any activity relating to the offer and sale of the Contracts which was
in violation of any provision of the federal securities laws or, (ii) there
is a material misrepresentation, material breach of warranty or material
failure to fulfill any covenant or warranty made or undertaken by MML
DISTRIBUTORS hereunder.
Promptly after receipt by an indemnified party under this paragraph 18 of
notice of the commencement of any action by a third party, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this paragraph 18, notify the indemnifying party
of the commencement thereof; but the omission to notify the indemnifying
party will not relieve the indemnifying party from liability which the
indemnifying party may have to any indemnified party otherwise than under
this paragraph. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof,
the indemnifying party will be entitled to participate therein and, to the
extent that it may wish, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election to assume the
defense thereof, the indemnifying party will not be liable to such
indemnified party under this paragraph for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation.
19. Independent Contractor. MML DISTRIBUTORS shall be an independent
contractor. MML DISTRIBUTORS is responsible for its own conduct and the
employment, control and conduct of its agents and employees and for injury
to such agents or employees or to others through its agents or employees.
MML DISTRIBUTORS assumes full responsibility for its agents and employees
under applicable statutes and agrees to pay all employer taxes thereunder.
20. Termination. Subject to termination as hereinafter provided, this
Agreement shall remain in full force and effect for the initial term of the
Agreement, which shall be for a two year period commencing on the date
first above written, and this Agreement shall continue in full force and
effect from year to year thereafter, until terminated as herein provided.
This Agreement may be terminated by either party hereto upon 30 days
written notice to the other party, or at any time upon the mutual written
consent of the parties hereto. This Agreement shall automatically be
terminated in the event of its assignment. Subject to C.M. Life's
approval, however, MML DISTRIBUTORS may delegate any duty or function
assigned to it in this agreement provided that such delegation is
permissible under applicable law. Upon termination of this Agreement, all
authorizations, rights and obligations shall cease except the obligations
to settle accounts hereunder, including the settlement of monies due in
connection with the Contracts in effect at the time of termination or
issued pursuant to applications received by C.M. Life prior to termination.
21. Interpretation. This Agreement shall be subject to the provisions of the
1934 Act and the rules, regulations, and rulings thereunder and of the
NASD, from time to time in effect, and the terms hereof shall be
interpreted and construed in accordance therewith. If any provision of
this Agreement shall be held or made invalid by a court decision, statute,
rule, or otherwise, the remainder of this Agreement shall not be affected
thereby. This Agreement shall be interpreted in accordance with the laws
of the Commonwealth of Massachusetts.
22. Non-exclusivity. The services of MML DISTRIBUTORS and C.M. Life to the
Separate Account hereunder are not to be deemed exclusive and MML
DISTRIBUTORS and C.M. Life shall be free to
16
<PAGE>
render similar services to others so long as their services hereunder are
not impaired or interfered with hereby.
23. Amendment. This Agreement constitutes the entire Agreement between the
parties hereto and may not be modified except in a written instrument
executed by all parties hereto.
24. Interests in and of MML DISTRIBUTORS. It is understood that any of the
policyholders, directors, officers, employees and agents of C.M. Life may
be a shareholder, director, officer, employee, or agent of, or be otherwise
interested in, MML DISTRIBUTORS, any affiliated person of MML DISTRIBUTORS,
any organization in which MML DISTRIBUTORS may have an interest, or any
organization which may have an interest in MML DISTRIBUTORS; that MML
DISTRIBUTORS, any such affiliated person or any such organization may have
an interest in C.M. Life; and that the existence of any such dual interest
shall not affect the validity hereof or of any transaction hereunder except
as otherwise provided in the Charter, Articles of Incorporation, or By-Laws
of C.M. Life and MML DISTRIBUTORS, respectively, or by specific provision
of applicable law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officials thereunto duly authorized and seals to
be affixed, as of the day and year first above written.
17
<PAGE>
ATTEST: C.M. LIFE
INSURANCE COMPANY, on its behalf
and on behalf of _______________
SEPARATE ACCOUNT
By:
-----------------------------
ATTEST: MML DISTRIBUTORS, LLC
By:
---------------------------------
18
<PAGE>
EXHIBIT 5
OPINION RE LEGALITY
19
<PAGE>
C.M. Life
140 Garden Street
Hartford, CT
RE: C.M. Life Fixed Account with Interest Rate Factor Adjustment;
Commission File No. 333-2347
Ladies and Gentlemen:
This opinion is furnished in connection with the filing of Post-Effective
Amendment No. 3 to the Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act of 1933 for C.M. Life Fixed Account with
Interest Rate Factor Adjustment (the "Fixed Account") offered in connection with
the Panorama Plus variable annuity contract, issued by C.M. Life.
The Fixed Account offers investors the choice among various guarantee periods to
which account value may be allocated. If such amounts remain in the Fixed
Account for the chosen guarantee period, then a guaranteed rate of interest will
be paid. If, however, amounts are withdrawn prior to the expiration of the
selected guarantee period, such withdrawal will be subject to a market value
adjustment.
As Chief Legal Officer and Assistant Secretary for C.M. Life Insurance Company,
("CM Life"), I provide legal advice to CM Life in connection with the operation
of its variable products. In such role I have participated in the preparation
of Post-Effective Amendment No. 3 to the Registration Statement for the Fixed
Account. In so acting, I have made such examination of the law and examined
such records and documents as in my judgment are necessary or appropriate to
enable me to render the opinion expressed below. I am of the following opinion:
1. CM Life is a valid and subsisting corporation, organized and operated under
Connecticut law, and subject to regulation by the Connecticut Commissioner of
Insurance.
2. The securities being registered, when sold will be legally issued, fully
paid and non-assessable.
I hereby consent to the use of this opinion as an exhibit to the Post-Effective
Amendment.
Very truly yours,
Thomas F. English
-----------------
Thomas F. English
Chief Legal Officer and
Assistant Secretary
20
<PAGE>
EXHIBIT 23
CONSENT OF EXPERTS
(a) CONSENT OF COOPERS & LYBRAND L.L.P.
(b) CONSENT OF ARTHUR ANDERSEN LLP
21
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
C.M. Life Insurance Company
We consent to the inclusion in this registration statement on Form S-1 (File No.
333-02347) of our report, which includes explanatory paragraphs relating to the
use of statutory accounting practices, which practices are not considered to be
in accordance with generally accepted accounting principles, dated February 7,
1997 on our audit of the financial statements and financial statement schedules
of C.M. Life Insurance Company. We also consent to the reference to our Firm
under the caption "Experts".
COOPERS & LYBRAND, L.L.P.
Springfield, Massachusetts
April 7, 1997
22
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
registration statement for C.M. Life Insurance Company.
ARTHUR ANDERSEN LLP
Hartford, Connecticut
April 7, 1997
23
<PAGE>
EXHIBIT 23 (i)
FINANCIAL STATEMENT SCHEDULES
24
<PAGE>
C.M. Life Insurance Company
Schedule I - Summary of Investments Other Than Investments in Related Parties
As of December 31, 1996
($ In Thousands)
<TABLE>
<CAPTION>
Fair Balance
Cost or Value Sheet
Type of Investment Other Basis (see note) Amount
----------- ---------- ----------
<S> <C> <C> <C>
Bonds
U.S. Treasury Securities and obligations of
U.S. Government Corporations
and Agencies $138,751 $139,962 $ 138,751
Debt Securities issued by Foreign
Governments 3,953 3,984 3,953
Mortgage-backed securities 37,395 37,415 37,395
State and local governments 10,263 10,406 10,263
Industrial securities 509,227 517,170 509,227
Utilities 36,935 37,944 36,935
-------- -------- ----------
Total Bonds 736,524 746,881 736,524
Common Stocks 47,195 55,642 55,642
-------- -------- ----------
Total Bonds and
Common Stock 783,719 $802,523 792,166
Other Investments:
Mortgage Loans N/A 33,791
Policy Loans 132,942 (see note) 132,942
Cash and Cash Equivalents 63,688 63,688 63,688
-------- ----------
Total Other Investments 196,630 230,421
-------- ----------
Total Investments $980,349 $1,022,587
======== ==========
</TABLE>
Note: Fair values for equity securities and fixed maturities approximate those
quotations published by applicable stock exchanges or are received from other
reliable sources. Approximately 98% of policy loans are comprised of variable
interest rate loans whose carrying value approximate fair value.
25
<PAGE>
C.M. LIFE INSURANCE COMPANY
SCHEDULE VI: REINSURANCE
(In Thousands)
<TABLE>
<CAPTION>
Ceded Assumed Percentage of
Gross to Other from Other Net Amount Assumed
Year ended December 31, 1996 Amount Companies Companies Amount to Net
- ---------------------------- ------ --------- --------- ------ ------
<S> <C> <C> <C> <C> <C>
Life Insurance in Force $24,357,428 $7,812,837 $0.0 $16,544,591 0.0%
=========== ========== ==== =========== ====
Premiums and other considerations
Individual life & annuities $ 125,996 $ 46,512 $0.0 $ 79,484 0.0%
Group life 8,606 0 0.0 8,606 0.0
----------- ---------- ---- ----------- ---
Total Premium and other considerations $ 134,602 $ 46,512 $0.0 $ 88,090 0.0%
=========== ========== ==== =========== ====
Year ended December 31, 1995
- ----------------------------
Life Insurance in Force $19,132,954 $7,323,441 $0.0 $11,809,513 0.0%
=========== ========== ==== =========== ====
Premiums and other considerations
Individual life & annuities $ 134,278 $ 50,732 $0.0 $ 83,546 $0.0
=========== ========== ==== =========== ====
Year ended December 31, 1994
- ----------------------------
Life Insurance in Force $15,800,300 $7,310,290 $0.0 $ 8,490,010 0.0%
=========== ========== ==== =========== ====
Premiums and other considerations
Individual life & annuities $ 111,238 $ 54,032 $0.0 $ 57,206 0.0%
=========== ========== ==== =========== ====
</TABLE>
26
<PAGE>
EXHIBIT 24
POWERS OF ATTORNEY
28
<PAGE>
POWER OF ATTORNEY
C.M. LIFE SEPARATE INVESTMENT ACCOUNTS
The Undersigned, Lawrence V. Burkett, Jr., President, Chief Executive Officer
and member of the Board of Directors of C.M. Life Insurance Company ("CM Life"),
does hereby constitute and appoint Thomas F. English, Richard M. Howe, and
Michael Berenson, and each of them individually, as his true and lawful
attorneys and agents.
The attorneys and agents shall have full power of substitution and to take any
and all action and execute any and all instruments on the Undersigned's behalf
as President, Chief Executive Officer and member of the Board of Directors of CM
Life that said attorneys and agents may deem necessary or advisable to enable CM
Life to comply with the Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act of 1940, as amended (the "1940 Act"), and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission (the "Commission") thereunder. This power of attorney applies to the
registration, under the 1933 Act and the 1940 Act, of shares of beneficial
interest of CM Life separate investment accounts (the "CM Life Separate
Accounts"). This power of attorney authorizes such attorneys and agents to sign
the Undersigned's name on his behalf as President, Chief Executive Officer and
member of Board of Directors of CM Life to the Registration Statements and to
any instruments or documents filed or to be filed with the Commission under the
1933 Act and the 1940 Act in connection with such Registration Statements,
including any and all amendments to such statements, documents or instruments of
any CM Life Separate Account, including but not limited to those listed below.
Panorama Plus Separate Account
C.M. Multi-Account A
C.M. Life Variable Life Separate Account I
The Undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 26th day of February,
1997.
/s/ Lawrence V. Burkett, Jr. -----------------------------------
Lawrence V. Burkett, Jr. Witness
President, Chief Executive Officer
and Member, Board of Directors
29
<PAGE>
POWER OF ATTORNEY
C.M. LIFE SEPARATE INVESTMENT ACCOUNTS
--------------------------------------
The Undersigned, John B. Davies, member of the Board of Directors of C.M. Life
Insurance Company ("CM Life"), does hereby constitute and appoint Lawrence V.
Burkett, Jr., Thomas F. English, Richard M. Howe, and Michael Berenson, and each
of them individually, as his true and lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take any
and all action and execute any and all instruments on the Undersigned's behalf
as member of the Board of Directors of CM Life that said attorneys and agents
may deem necessary or advisable to enable CM Life to comply with the Securities
Act of 1933, as amended (the "1933 Act"), the Investment Company Act of 1940, as
amended (the "1940 Act"), and any rules, regulations, orders or other
requirements of the Securities and Exchange Commission (the "Commission")
thereunder. This power of attorney applies to the registration, under the 1933
Act and the 1940 Act, of shares of beneficial interest of CM Life separate
investment accounts (the "CM Life Separate Accounts"). This power of attorney
authorizes such attorneys and agents to sign the Undersigned's name on his
behalf as member of Board of Directors of CM Life to the Registration Statements
and to any instruments or documents filed or to be filed with the Commission
under the 1933 Act and the 1940 Act in connection with such Registration
Statements, including any and all amendments to such statements, documents or
instruments of any CM Life Separate Account, including but not limited to those
listed below.
Panorama Plus Separate Account
C.M. Multi-Account A
C.M. Life Variable Life Separate Account I
The Undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 25th day of
February, 1997.
/s/ John B. Davies
- ---------------------------------- ----------------------------------
John B. Davies Witness
Member, Board of Directors
31
<PAGE>
POWER OF ATTORNEY
C.M. LIFE SEPARATE INVESTMENT ACCOUNTS
--------------------------------------
The Undersigned, Daniel J. Fitzgerald, member of the Board of Directors of C.M.
Life Insurance Company ("CM Life"), does hereby constitute and appoint Lawrence
V. Burkett, Jr., Thomas F. English, Richard M. Howe, and Michael Berenson, and
each of them individually, as his true and lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take any
and all action and execute any and all instruments on the Undersigned's behalf
as member of the Board of Directors of CM Life that said attorneys and agents
may deem necessary or advisable to enable CM Life to comply with the Securities
Act of 1933, as amended (the "1933 Act"), the Investment Company Act of 1940, as
amended (the "1940 Act"), and any rules, regulations, orders or other
requirements of the Securities and Exchange Commission (the "Commission")
thereunder. This power of attorney applies to the registration, under the 1933
Act and the 1940 Act, of shares of beneficial interest of CM Life separate
investment accounts (the "CM Life Separate Accounts"). This power of attorney
authorizes such attorneys and agents to sign the Undersigned's name on his
behalf as member of Board of Directors of CM Life to the Registration Statements
and to any instruments or documents filed or to be filed with the Commission
under the 1933 Act and the 1940 Act in connection with such Registration
Statements, including any and all amendments to such statements, documents or
instruments of any CM Life Separate Account, including but not limited to those
listed below.
Panorama Plus Separate Account
C.M. Multi-Account A
C.M. Life Variable Life Separate Account I
The Undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 25th day of
February, 1997.
/s/ Daniel J. Fitzgerald
- ---------------------------------- ----------------------------------
Daniel J. Fitzgerald Witness
Member, Board of Directors
32
<PAGE>
POWER OF ATTORNEY
C.M. LIFE SEPARATE INVESTMENT ACCOUNTS
--------------------------------------
The Undersigned, Stuart H. Reese, member of the Board of Directors of C.M. Life
Insurance Company ("CM Life"), does hereby constitute and appoint Lawrence V.
Burkett, Jr., Thomas F. English, Richard M. Howe, and Michael Berenson, and each
of them individually, as his true and lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take any
and all action and execute any and all instruments on the Undersigned's behalf
as member of the Board of Directors of CM Life that said attorneys and agents
may deem necessary or advisable to enable CM Life to comply with the Securities
Act of 1933, as amended (the "1933 Act"), the Investment Company Act of 1940, as
amended (the "1940 Act"), and any rules, regulations, orders or other
requirements of the Securities and Exchange Commission (the "Commission")
thereunder. This power of attorney applies to the registration, under the 1933
Act and the 1940 Act, of shares of beneficial interest of CM Life separate
investment accounts (the "CM Life Separate Accounts"). This power of attorney
authorizes such attorneys and agents to sign the Undersigned's name on his
behalf as member of Board of Directors of CM Life to the Registration Statements
and to any instruments or documents filed or to be filed with the Commission
under the 1933 Act and the 1940 Act in connection with such Registration
Statements, including any and all amendments to such statements, documents or
instruments of any CM Life Separate Account, including but not limited to those
listed below.
Panorama Plus Separate Account
C.M. Multi-Account A
C.M. Life Variable Life Separate Account I
The Undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 25th day of
February, 1997.
/s/ Stuart H. Reese
- ----------------------------------- -----------------------------------
Stuart H. Reese Witness
Member, Board of Directors
33
<PAGE>
POWER OF ATTORNEY
C.M. LIFE SEPARATE INVESTMENT ACCOUNTS
--------------------------------------
The Undersigned, Ann Iseley, Treasurer of C.M. Life Insurance Company ("CM
Life"), does hereby constitute and appoint Lawrence V. Burkett, Jr., Thomas F.
English, Richard M. Howe, and Michael Berenson, and each of them individually,
as her true and lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take any
and all action and execute any and all instruments on the Undersigned's behalf
as Treasurer of CM Life that said attorneys and agents may deem necessary or
advisable to enable CM Life to comply with the Securities Act of 1933, as
amended (the "1933 Act"), the Investment Company Act of 1940, as amended (the
"1940 Act"), and any rules, regulations, orders or other requirements of the
Securities and Exchange Commission (the "Commission") thereunder. This power of
attorney applies to the registration, under the 1933 Act and the 1940 Act, of
shares of beneficial interest of CM Life separate investment accounts (the "CM
Life Separate Accounts"). This power of attorney authorizes such attorneys and
agents to sign the Undersigned's name on her behalf as Treasurer of CM Life to
the Registration Statements and to any instruments or documents filed or to be
filed with the Commission under the 1933 Act and the 1940 Act in connection with
such Registration Statements, including any and all amendments to such
statements, documents or instruments of any CM Life Separate Account, including
but not limited to those listed below.
Panorama Plus Separate Account
C.M. Multi-Account A
C.M. Life Variable Life Separate Account I
The Undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set her hand this 25th day of
February, 1997.
/s/ Ann Iseley
- ----------------------------------- -----------------------------------
Ann Iseley Witness
Treasurer
34
<PAGE>
POWER OF ATTORNEY
C.M. LIFE SEPARATE INVESTMENT ACCOUNTS
--------------------------------------
The Undersigned, John Miller, Jr., Second Vice President and Comptroller of C.M.
Life Insurance Company ("CM Life"), does hereby constitute and appoint Lawrence
V. Burkett, Jr., Thomas F. English, Richard M. Howe, and Michael Berenson, and
each of them individually, as his true and lawful attorneys and agents.
The attorneys and agents shall have full power of substitution and to take any
and all action and execute any and all instruments on the Undersigned's behalf
as Second Vice President and Comptroller of CM Life that said attorneys and
agents may deem necessary or advisable to enable CM Life to comply with the
Securities Act of 1933, as amended (the "1933 Act"), the Investment Company Act
of 1940, as amended (the "1940 Act"), and any rules, regulations, orders or
other requirements of the Securities and Exchange Commission (the "Commission")
thereunder. This power of attorney applies to the registration, under the 1933
Act and the 1940 Act, of shares of beneficial interest of CM Life separate
investment accounts (the "CM Life Separate Accounts"). This power of attorney
authorizes such attorneys and agents to sign the Undersigned's name on his
behalf as Second Vice President and Comptroller of CM Life to the Registration
Statements and to any instruments or documents filed or to be filed with the
Commission under the 1933 Act and the 1940 Act in connection with such
Registration Statements, including any and all amendments to such statements,
documents or instruments of any CM Life Separate Account, including but not
limited to those listed below.
Panorama Plus Separate Account
C.M. Multi-Account A
C.M. Life Variable Life Separate Account I
The Undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 26th day of
February, 1997.
/s/ John Miller, Jr.
- ---------------------------------- ----------------------------------
John Miller, Jr. Witness
Second Vice President
and Comptroller
35
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of C.M. Life Insurance Company and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<DEBT-HELD-FOR-SALE> 736,524
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 55,642
<MORTGAGE> 33,791
<REAL-ESTATE> 0
<TOTAL-INVEST> 958,899
<CASH> 63,688
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 1,866,751
<POLICY-LOSSES> 907,492
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 3,843
<POLICY-HOLDER-FUNDS> 779,742
<NOTES-PAYABLE> 0
2,500
0
<COMMON> 0
<OTHER-SE> 107,244
<TOTAL-LIABILITY-AND-EQUITY> 1,866,571
314,372
<INVESTMENT-INCOME> 76,456
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 0
<BENEFITS> 309,290
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 73,682
<INCOME-PRETAX> 7,856
<INCOME-TAX> 6,286
<INCOME-CONTINUING> 2,205
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,205
<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
</TABLE>
