<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1997 Commission File Number 33-85988
---------------- ---------
C.M. LIFE INSURANCE COMPANY
---------------------------
(Exact name of registrant as specified in its charter)
Connecticut 06-1041383
----------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
140 Garden Street, Hartford, Connecticut 06154
----------------------------------------------
(Address of principal executive offices)
(Zip Code)
(860) 987-6500
--------------
(Registrant's telephone number, including area code)
None
----
(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
(1) Yes X No
--- ---
(2) Yes X No
--- ---
Registrant has 12,500 shares of common stock outstanding on March 31, 1997, all
of which are owned by Massachusetts Mutual Life Insurance Company.
The Registrant meets the conditions set forth in General Instruction (1) (a)
and (b) of Form 10Q and is therefore filing this form with the reduced
disclosure format.
<PAGE>
C.M. LIFE INSURANCE COMPANY
INDEX
PART I: Financial Information
---------------------
Item 1: Financial Statements:
Statutory Statement of Financial Position -
March 31, 1997 and December 31, 1996............ 3
Statutory Statement of Income -
Three Months Ended
March 31, 1997 and 1996......................... 4
Statutory Statement of Shareholder's Equity -
Three Months Ended
March 31, 1997 and 1996......................... 5
Statutory Statement of Cash Flows -
Three Months Ended
March 31, 1997 and 1996......................... 6
Notes to Financial Statements.................... 7
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of
Operations......................................... 9
PART II: Other Information
-----------------
Item 1: Not applicable.
Item 2: Not applicable.
Item 3: Not applicable.
Item 4: Not applicable.
Item 5: Not applicable.
Item 6: Not applicable.
2
<PAGE>
C.M. LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ---------
(In Thousands Except for
Share Information)
<S> <C> <C>
Assets:
Bonds $ 768,397 $ 736,524
Common stocks 54,996 55,642
Mortgage loans 45,085 33,791
Policy loans 137,126 132,942
Cash and short-term instruments 41,654 63,688
----------- -----------
Total invested assets 1,047,258 1,022,587
Investment and insurance amounts receivable 27,224 32,783
Transfer due from separate account 28,072 24,278
Federal income tax receivable 3,162 7,094
Other assets 87 87
Separate account assets 818,094 779,742
----------- -----------
$ 1,923,897 $ 1,866,571
=========== ===========
Liabilities:
Policyholders' reserves and funds $ 910,682 $ 907,492
Policy claims and other benefits 3,733 3,843
Payable to parent and affiliates 1,825 9,654
Asset valuation reserve 19,105 18,475
Investment reserves 3,290 3,329
Other liabilities 55,009 34,292
Separate account reserves and liabilities 818,094 779,742
----------- -----------
1,811,738 1,756,827
----------- -----------
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 65,900 63,485
----------- -----------
112,159 109,744
----------- -----------
$ 1,923,897 $ 1,866,571
=========== ===========
</TABLE>
The accompanying notes are an integral part of
these unaudited financial statements.
3
<PAGE>
C.M. LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF INCOME
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
-------- --------
(In Thousands)
<S> <C> <C>
Income:
Premium income $ 78,098 $ 81,633
Net investment and other income 16,825 18,479
-------- --------
94,923 100,112
-------- --------
Benefits and expenses:
Policy benefits and payments 27,013 21,769
Addition to policyholder's reserves, funds
and separate accounts 39,434 57,187
Operating expenses 11,663 6,083
Commissions 7,476 3,162
State taxes, licenses and fees 1,164 1,265
-------- --------
86,750 89,466
Net gain from operations before federal
income taxes 8,173 10,646
Federal income taxes 3,902 4,234
-------- --------
Net gain from operations 4,271 6,412
Net realized capital gain (loss) ( 10) 2,313
-------- --------
Net income $ 4,261 $ 8,725
======== ========
</TABLE>
The accompanying notes are an integral part of
these unaudited financial statements.
Certain prior year amounts have been reclassed
to conform with 1997 presentation.
4
<PAGE>
C.M. LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
-------- --------
(In Thousands)
<S> <C> <C>
Shareholder's equity, beginning of year $109,744 $113,199
Increases (decreases) due to:
Net income 4,261 8,725
Change in asset valuation and investment
reserves (591) (2,799)
Change in non-admitted assets (789) 100
Net unrealized capital gain (loss) (466) (1,268)
--------- ---------
2,415 4,758
--------- --------
Shareholder's equity, end of period $112,159 $117,957
========= ========
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements. Certain prior year amounts have been reclassed to conform with 1997
presentation.
5
<PAGE>
C.M. LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
-------- -------
(In Thousands)
<S> <C> <C>
Operating activities:
Net income $ 4,261 $ 8,725
Additions to policyholder's reserves, funds,
and other benefits 3,080 11,045
Net realized capital gain (loss) (10) 2,313
Change in payable from parent (7,828) 8,794
Other changes 13,961 3,885
--------- ---------
Net cash provided by operating activities 13,464 34,762
Investing activities:
Loans and purchases of investments (81,927) (40,900)
Sales or maturities of investments and
receipts from repayment of loans 34,223 37,204
---------- ---------
Net cash used in investing activities (47,704) (3,696)
Financing and miscellaneous activities:
Other, net 12,206 1,147
--------- ---------
Increase (decrease) in short-term investments (22,034) 32,213
Cash and short-term investments, beginning of
year 63,688 15,069
---------- ---------
Cash and short-term investments, end of period $ 41,654 $ 47,282
========== =========
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements. Certain prior year amounts have been reclassed to conform with 1997
presentation.
6
<PAGE>
C.M. Life Insurance Company
Notes to Financial Statements
March 31, 1997 and 1996
(Unaudited)
1. General:
-------
C.M. Life Insurance Company ("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.
In the opinion of C.M. Life these financial statements contain all
adjustments, consisting of only normal recurring adjustments, necessary
to present fairly its financial position in accordance with statutory
accounting principles, as of March 31, 1997 and December 31, 1996, and
its results of operations, shareholder's equity and cash flows for the
three months ended March 31, 1997 and 1996.
The accompanying unaudited interim financial statements have been
prepared in accordance with the instructions to Form 10-Q and the rules
and regulations of the Securities and Exchange Commission. These
financial statements have been prepared under the presumption that
users of the interim financial information have either read or have
access to C.M. Life's audited financial statements for the year ended
December 31, 1996. Accordingly, footnote disclosures which would
substantially duplicate the disclosures contained in C.M. Life's
December 31, 1996 audited financial statements have been omitted from
these interim financial statements. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with statutory accounting principles have been condensed or
omitted pursuant to instructions, rules and regulations. Although C.M.
Life believes that the disclosures are adequate to make the information
presented not misleading, it is suggested that these unaudited interim
financial statements be read in conjunction with the audited financial
statements and the notes thereto included in C.M. Life's annual report
on Form 10-K for the year ended December 31, 1996.
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.
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.
7
<PAGE>
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.
2. Related Party Transactions:
---------------------------
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 $10,158 thousand and
$6,019 thousand for the three months ended March 31, 1997 and 1996,
respectively. Similar arrangements were in place with Connecticut
Mutual Life Insurance Company, C.M. Life's former parent, prior to its
merger with MassMutual.
C.M. Life cedes a portion of its life insurance business to MassMutual
and other insurers in the normal course of business. C.M. Life's
retention limit per individual insured is $4,000 thousand and the
portion of the risk exceeding the retention limit is reinsured with
other insurers. C.M. Life is contingently liable with respect to ceded
reinsurance in the event any reinsurer is unable to fulfill its
contractual obligations.
C.M. Life has a modified coinsurance quota-share reinsurance agreement
with MassMutual whereby C.M. Life cedes 50% of the premiums on certain
universal life policies issued in 1985 and 75% of the premiums on
policies with issue dates on or after January 1, 1986. In return,
MassMutual pays C.M. Life 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 C.M.
Life.
3. Net Investment Income:
----------------------
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
---- ----
(In Thousands)
<S> <C> <C>
Gross Investment Income
Bonds $13,606 $14,129
Common and preferred stock 178 172
Mortgage loans 687 725
Policy loans 2,631 2,530
Cash and short-term investments 773 347
Other 2 (373)
------- -------
Total gross investment income 17,877 17,530
Less: investment expenses 258 161
------- -------
Net investment income $17,619 $17,368
======= =======
</TABLE>
8
<PAGE>
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
---------------------
For the Three Months Ended March 31, 1997
-----------------------------------------
Compared to the Three Months Ended March 31, 1996
-------------------------------------------------
For the three months ended March 31, 1997, C.M. Life had net income of
$4,261 thousand, as compared with net income of $8,725 thousand for the
three months ended March 31, 1996. The decrease in net income of $4,464
thousand is primarily attributable to increased sales of Universal Life
policies, which in the year of issuance, generate commissions and other
acquisition costs which exceed the revenues received, increased death
claims, and a decrease in realized capital gains.
Premium income, net of reinsurance ceded, decreased $3,535 thousand to
$78,098 thousand for the three months ended March 31, 1997 from $81,633
thousand for the same period during 1996. The 4.3% decrease in premiums
is attributable to a decrease in variable annuity products of 14.9%
from the prior year, offset by a 42.7% increase in sales of the
Universal Life policies, the result is a change in C.M. Life's mix of
business in which Universal and other life products represented 30% of
total premium income during 1997 compared to 21% for 1996, while
annuity products represented 70% during 1997 compared to 79% in 1996.
The following table sets forth premium information for C.M. Life's
products.
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
---- ----
(In Thousands)
<S> <C> <C> <C> <C>
Premium income
Universal and other life $ 23,110 30% $ 17,038 21%
Annuities 54,988 70% 64,595 79%
------------- -------------
Total $ 78,098 $ 81,633
============= =============
</TABLE>
Net investment and other income decreased $1,654 thousand to $16,825
thousand in 1997 from $18,479 thousand in 1996. Other income, which is
primarily comprised of reserve adjustment and commission and expense
allowances on reinsurance ceded, decreased by $1,934 thousand, due to
little growth in the reinsured block of business. Net investment income
increased by $280 thousand which was primarily attributable to an
overall increase in C.M. Life's general investment account assets,
offset by a slight decline in the gross yield for the portfolio from
7.3% for 1996 to 7.2% for 1997.
Policy benefits and payments increased $5,244 thousand to $27,013
thousand in 1997 from $21,769 thousand in 1996. Surrender benefits
decreased by $3,618 thousand, essentially due to decreased variable and
fixed annuity withdrawals and contract surrenders. Death claims, net of
reinsurance, grew to $9,096 thousand in 1997 from $1,086 thousand in
1996, which is due to an increase in the life insurance in force and
worse than expected mortality. Although mortality experience declined
during the first three months of 1997, C.M. Life does not believe this
is an indication of future trends.
Addition to policyholder reserves, funds and separate accounts
decreased $17,753 thousand to $39,434 thousand in 1997 from $57,187
thousand in 1996. The decrease is primarily attributable to lower
annuity deposits and increased death claims.
Operating expenses and commissions increased $9,894 thousand to $19,139
thousand in 1997 from $9,245 thousand in 1996. The increase is
primarily related to the following factors; increased expenses
associated with the production of new business primarily resulting from
the change in the mix of business, increased fees from C.M. Life's
management services agreement with MassMutual resulting from the use of
estimated fees through the third quarter 1996, and the modification of
C.M. Life's variable annuity underwriting agreements with G.R. Phelps
and Co., Inc. ("G.R. Phelps") and MML Distributors, both affiliated
companies. Effective March 1, 1996, C.M. Life modified its
9
<PAGE>
underwriting agreements such that it would pay all future commissions
relating to variable annuity contracts and would also retain rights to
all future contract fees and charges related to these contracts. Prior
to the contract modification, G.R. 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 $331 thousand to $3,902 thousand
from $4,234 thousand as a result of decreased taxable income. Taxable
income decreased $942 thousand to $11,101 thousand in 1997 from $12,053
thousand in 1996. The change in taxable income is primarily
attributable to the $2,473 thousand decrease in net gain from
operations offset by book tax differences of $1,531 thousand. These
book tax differences include the timing of the deductibility of
acquisition costs and other items.
Realized capital losses of $10 thousand were recorded for the three
months ended March 31, 1997 as compared to realized capital gains of
$2,313 for the same period in 1996. The decrease of $2,323 thousand
from the prior year is primarily attributable to gains generated during
the first quarter of 1996 on the sale of common stock investments.
Statement of Financial Position
-------------------------------
Total assets increased by $57,326 thousand or 3.1% to $1,923,897
thousand at March 31, 1997 from $1,866,571 thousand at year end 1996.
Much of this growth was due to continued growth in C.M. Life's separate
investment accounts, which assets increased by $38,352 thousand.
Total liabilities increased in 1997 by $54,911 thousand or 3.1% to
$1,811,738 thousand from $1,756,827 thousand at year end 1996. 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 continued variable annuity sales and
deposits.
Liquidity
---------
Net cash provided by operating activities was $25,670 thousand and
$35,909 thousand for the three months ended March 31, 1997 and 1996,
respectively. In 1997, net cash provided by operating activities
declined by $10,239 thousand as compared to 1996, primarily due to
increased surrender benefits and sales growth which generates
commissions and acquisition costs in excess of 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 proceeds from maturities 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
$41,654 thousand at March 31, 1997.
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 by 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.
10
<PAGE>
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.
Capital Resources
-----------------
As of March 31, 1997, C.M. Life's total adjusted capital as defined by
the NAIC was $131,264 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 March 31, 1997 and 1996. 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.
Segment Information
-------------------
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 for the three months
ended March 31, 1997 and 1996.
Reserves
--------
In accordance with the life insurance laws and regulations under which
C.M. Life operates, it is obligated to carry on its books, as
liabilities, actuarially determined reserves to meet its obligations on
outstanding contracts. Reserves are based on mortality tables in
general use in the United States and are computed to equal amounts
that, with additions from premiums to be received, and with interest on
such reserves computed annually at certain assumed rates, will be
sufficient to meet C.M. Life's policy obligations at their maturities
or in the event of an insured's death. In the accompanying financial
statements, these reserves are determined in accordance with statutory
regulations.
Investments
-----------
March 31, 1997, C.M. Life had $1,047,258 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.
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). In April 1997, Duff & Phelps
Credit Rating Company reaffirmed C.M. Life's AAA rating.
11
<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. In April 1997 Duff &
Phelps Credit Rating Company and Moody's Investor Service, Inc. again
reaffirmed their previous ratings.
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 of the United States,
except New York. 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. At March 31, 1997, C.M. Life
elected not to admit $1,628 thousand of guaranty fund premium tax
offset receivable relating to prior assessments.
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 their 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 laws and regulations.
New Accounting Pronouncements
-----------------------------
The accompanying statutory financial statements, except as to form,
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 ("statutory accounting
practices"). Prior to 1996 financial statements prepared using
statutory accounting practices were considered to be in conformity with
GAAP for wholly-owned stock life insurance subsidiaries of mutual life
insurance companies. In accordance with the Financial Accounting
Standards Board ("FASB") interpretation No. 40 ("Fin. 40"),
"Applicability of Generally Accepted Accounting Principles to Mutual
Life Insurance and Other Enterprises", 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
12
<PAGE>
certain FASB statements to mutual life insurance companies 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 NAIC recently issued an exposure draft on codification changes to
existing statutory accounting practices. At this time, C.M. Life has
not determine the impact of these changes.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
C.M. LIFE INSURANCE COMPANY
(Registrant)
Date: May 12, 1997 By: /s/ Lawrence V. Burkett, Jr.
------------------------------
Lawrence V. Burkett, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 12, 1997 By: /s/ John Miller, Jr.
----------------------
John Miller, Jr.
Comptroller
(Chief Accounting Officer)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM C.M. LIFE'S
MARCH 31, 1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000883232
<NAME> C.M. LIFE INSURANCE COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<DEBT-HELD-FOR-SALE> 768,397
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 54,996
<MORTGAGE> 45,085
<REAL-ESTATE> 0
<TOTAL-INVEST> 1,047,258
<CASH> 41,654
<RECOVER-REINSURE> 2,248
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 1,923,897
<POLICY-LOSSES> 910,682
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 3,733
<POLICY-HOLDER-FUNDS> 878,218
<NOTES-PAYABLE> 0
0
0
<COMMON> 2,500
<OTHER-SE> 109,659
<TOTAL-LIABILITY-AND-EQUITY> 1,923,897
78,098
<INVESTMENT-INCOME> 17,649
<INVESTMENT-GAINS> (10)
<OTHER-INCOME> (824)
<BENEFITS> 66,447
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 20,303
<INCOME-PRETAX> 8,173
<INCOME-TAX> 3,902
<INCOME-CONTINUING> 4,261
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,261
<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<F1>
<FN>
<F1>C.M. LIFE'S FINANCIAL STATEMENTS HAVE BEEN PREPARED IN CONFORMITY WITH
ACCOUNTING PRACTICES AND PROCEDURES OF THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS AS PRESCRIBED OR PERMITTED BY THE INSURANCE DEPARTMENT OF THE
STATE OF CONNECTICUT, UNDER THESE ACCOUNTING PRACTICES, FIXED MATURITIES
ELIGIBLE FOR AMORTIZATION ARE REPORTED AT AMORTIZED COST.
</FN>
</TABLE>
