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As Filed with the Securities and Exchange Commission on April 5, 1999.
Registration No. 333-31491
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 1
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
(formerly First North American Life Assurance Company)
(Exact Name of Registrant)
NEW YORK
(State or Other Jurisdiction of Incorporation or Organization)
555 Theodore Fremd Avenue, Rye, New York 10580
(914) 921-1020
(Address of Registrant's Principal Executive Offices and Telephone Number)
13-3646501 6355
(I.R.S. Employer Number) (Primary Standard Industrial Classification Code
Number)
A. Scott Logan, President Copy to:
The Manufacturers Life Insurance Company of J. Sumner Jones, Esq.
New York Jones & Blouch L.L.P.
555 Theodore Fremd Avenue 1025 Thomas Jefferson Street N.W.
Rye, New York 10580 Washington DC 20007
(914) 921-1020
(Name and Address of Agent for Service)
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THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
CROSS REFERENCE TO ITEMS REQUIRED BY FORM S-1
<TABLE>
<CAPTION>
Form S-1 Item No. and Caption Prospectus Heading
- ----------------------------- ------------------
<S> <C>
1. Forepart of the Registration Statement and Outside Cover Pages
Front Cover of Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus Cover Pages
3. Summary Information, Risk Factors and Ratio of Earnings Summary
to Fixed Charges
4. Use of Proceeds The Manufacturers Life Insurance Company of New York
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution The Manufacturers Life Insurance Company of New York -
Distribution of the Contract
9. Description of Securities to be Registered Description of the Contract and Guarantees, The
Manufacturers Life Insurance Company of New York
10. Interests of Named Experts and Counsel Not Applicable
11. Information with Respect to the Registrant The Manufacturers Life Insurance Company of New York
12. Disclosure of Commission Position on Indemnification Not Applicable
for Securities Act Liabilities
</TABLE>
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PART 1
INFORMATION REQUIRED IN A PROSPECTUS
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THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
Annuity Service Office
Corporate Center at Rye
555 Theodore Fremd Avenue
Rye, New York 10580
(800) 551-2078
Annuity Service Office Mailing Address
P.O. Box 9013
Boston, MA 02205-9013
VENTURE MVA
DEFERRED FIXED ANNUITY CONTRACT
NON-PARTICIPATING
This prospectus describes Venture Market Value Adjusted Annuity
("Venture MVA"), a single payment deferred fixed annuity contract designed to
provide retirement programs for eligible individuals and retirement plans. The
contract is offered by The Manufacturers Life Insurance Company of New York
("we," "us", or "Manulife New York"). As used herein, "you" refers to the owner
of a contract.
- - You make a single purchase payment for the contract.
-- The minimum purchase payment is $5,000.
-- The maximum purchase payment (without our prior approval) is
$500,000.
- - You may not make additional purchase payments for a contract but may
purchase additional contracts at the then prevailing rates and terms.
- - You designate the guarantee period to which we allocate your purchase
payment.
- - You select one or more annuity options or an alternate form of
settlement acceptable to us.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. IT
CONTAINS INFORMATION ABOUT THE FIXED ACCOUNT AND THE CONTRACT THAT A PROSPECTIVE
PURCHASER SHOULD KNOW BEFORE INVESTING.
BECAUSE OF THE MARKET VALUE ADJUSTMENT PROVISION OF THE CONTRACT, THE CONTRACT
OWNER BEARS THE INVESTMENT RISK THAT THE GUARANTEED INTEREST RATES OFFERED BY US
AT THE TIME OF WITHDRAWAL, TRANSFER OR THE START OF ANNUITY PAYMENTS MAY BE
HIGHER THAN THE GUARANTEED INTEREST RATE APPLIED TO THE CONTRACT WITH THE RESULT
THAT THE AMOUNT YOU RECEIVE UPON WITHDRAWAL, TRANSFER OR ANNUITIZATION MAY BE
REDUCED BY THE MARKET VALUE ADJUSTMENT AND MAY BE LESS THAN YOUR ORIGINAL
INVESTMENT IN THE CONTRACT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, (THE "SEC"). NEITHER THE SEC NOR ANY STATE HAS DETERMINED
WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE NOT DEPOSITS WITH, OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR ANY AFFILIATE THEREOF, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY.
The date of the prospectus is May 1, 1999.
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TABLE OF CONTENTS
SPECIAL TERMS...................................................................
SUMMARY.........................................................................
Description of the Contract............................................
Information About Manulife New York....................................
Available Information..................................................
DESCRIPTION OF THE CONTRACT.....................................................
ACCUMULATION PERIOD PROVISIONS.............................................
Purchase Payment.......................................................
Guarantee Periods......................................................
Transfers Among Guarantee Periods......................................
Telephone Transactions.................................................
Renewals...............................................................
Withdrawals............................................................
Death Benefit During Accumulation Period...............................
PAY-OUT PERIOD PROVISIONS..................................................
General................................................................
Annuity Options........................................................
Death Benefit During Pay-out Period....................................
OTHER CONTRACT PROVISIONS..................................................
Right to Review Contract...............................................
Ownership..............................................................
Beneficiary............................................................
Annuitant..............................................................
Modification...........................................................
Our Approval...........................................................
MARKET VALUE ADJUSTMENT....................................................
CHARGES AND DEDUCTIONS.....................................................
Withdrawal Charge......................................................
Reduction or Elimination of Withdrawal Charge..........................
Taxes..................................................................
ADDITIONAL INFORMATION ABOUT MANULIFE NEW YORK..................................
Description of Business................................................
Management Discussion & Analysis.......................................
Selected Financial Data................................................
Our Officers and Directors.............................................
Executive Compensation.................................................
Our Separate Account G.................................................
Distribution of the Contract ..........................................
Confirmation Statements................................................
Legal Proceedings......................................................
Legal Matters..........................................................
Independent Auditors...................................................
Notices and Reports to Contract Owners.................................
Contract Owner Inquiries...............................................
FEDERAL TAX MATTERS.............................................................
Introduction...........................................................
Our Tax Status.........................................................
Taxation of Annuities in General.......................................
Qualified Retirement Plans.............................................
Federal Income Tax Withholding.........................................
APPENDIX A - EXAMPLES OF CALCULATION OF WITHDRAWAL CHARGE.......................
APPENDIX B - MARKET VALUE ADJUSTMENT EXAMPLES...................................
APPENDIX C - STATE PREMIUM TAXES................................................
OUR FINANCIAL STATEMENTS........................................................
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SPECIAL TERMS
Annuitant Any individual person or persons to whom annuity payments
are made and whose life is used to determine the duration of
annuity payments involving life contingencies. The annuitant
is as designated on the contract or in the application,
unless changed.
Annuity Option One of several alternative methods by which payment
of the proceeds may be made.
Beneficiary The individual person, persons or entity to whom we pay the
death benefit proceeds following the death of the owner, or
in certain circumstances, an annuitant.
Contingent The individual person, persons or entity who becomes the
Beneficiary beneficiary if the beneficiary is not alive.
Contract The anniversary of the contract date.
Anniversary
Contract Date The date we issue the contract, as designated on the
contract specifications page.
Contract Value The sum of the net purchase payment for the contract and
accrued interest, less the sum of any withdrawals and any
administration fee, adjusted for any transfer market value
adjustment.
Contract Year The period of twelve consecutive months beginning on the
contract date or any anniversary thereafter.
Code The Internal Revenue Code of 1986, as amended.
Designated For purposes of section 72(s) of the Code, the "designated
Beneficiary beneficiary" under the contract is the individual who is
entitled to receive the amounts payable on death, or if any
owner is not an individual, on any change in (or death) of
the annuitant or co-annuitant.
Due Proof of Death Due proof of death is required upon the death of the owner
or annuitant, as applicable. One of the following must be
received at our Annuity Service Office:
(a) A certified copy of a death certificate;
(b) A certified copy of a decree of a court of
competent jurisdiction as to the finding of
death; or
(c) Any other proof satisfactory to us.
Death benefits will be paid within 7 days of receipt of due
proof of death and all required claim forms at our Annuity
Service Office.
Fixed Account The Manufacturers Life Insurance Company of New York
Separate Account G, which is one of our separate accounts.
Fixed Annuity An annuity option with payments which are predetermined and
guaranteed as to dollar amount.
General Account All of our assets other than assets in our separate
accounts.
Gross Withdrawal The portion of the contract value specified by the owner for
Value a full or partial withdrawal. Such amount is determined
prior to the application of any withdrawal charge, annual
administration fee and market value adjustment.
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Initial Guarantee The period of time during which the initial guaranteed
Period interest rate is in effect.
Initial Guaranteed The compound annual rate used to determine the interest
Interest Rate earned on the net purchase payment during the initial
guarantee period.
Market Value An adjustment to amounts that are withdrawn,
Adjustment transferred or annuitized prior to the end of the guarantee
period. It may increase or decrease the amount available for
transfer, withdrawal or annuitization.
Maturity Date The date on which annuity benefits commence. It is the date
specified on the contract specifications page, unless
changed. The date specified may not be later than the
annuitant's 90th birthday.
Net Purchase The purchase payment less the amount of premium tax, if any,
Payment deducted from the payment.
Non-Qualified Contracts which are not issued under Qualified Plans.
Contracts
Owner or The individual person, persons or entity entitled to the
Contract Owner ownership rights under the contract. The owner is as
designated on the contract specifications page or in the
application, unless changed.
Payment or An amount paid by a contract owner to us as consideration
Purchase Payment for the benefits provided by the contract.
Qualified Contracts issued under Qualified Plans.
Contracts
Qualified Plans Retirement plans which receive favorable tax treatment under
section 401, 403, 408 or 408A of the Code.
Renewal Amount The contract value at the end of the initial guarantee
period or at the end of a renewal guarantee period.
Renewal Guarantee The period of time during which a renewal guaranteed
Period interest rate is in effect.
Renewal Guaranteed The compound annual rate used to determine the interest
Interest Rate earned on a renewal amount during a renewal guarantee
period. In no event shall this rate be less than 3%.
Separate Account A segregated account that is not commingled with our
general assets and obligations.
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SUMMARY
DESCRIPTION OF THE CONTRACT
The Contract. The contract is a single purchase payment deferred fixed
annuity contract. It provides for the accumulation of the contract value and the
payment of annuity benefits on a fixed basis.
Retirement Plans. We may issue the contract pursuant to either
non-qualified retirement plans or plans qualifying for special income tax
treatment under the Internal Revenue Code of 1986, as amended, (the "Code")
("Qualified Plans"). Qualified Plans include individual retirement accounts and
annuities (including Roth IRAs), pension and profit-sharing plans for
corporations and sole proprietorships/partnerships ("H.R. 10" and "Keogh" plans)
and tax-sheltered annuities (see "QUALIFIED RETIREMENT PLANS"). If you are
considering purchasing a contract for use in connection with a Qualified Plan,
you should consider, in evaluating the suitability of the contract, that it
allows only a single premium purchase payment in an amount of at least $5,000.
Purchase Payments. You make your purchase payment to us at our Annuity
Service Office. We allocate your purchase payment to the guarantee period which
you designate.
- - The minimum purchase payment for a contract is $5,000.
- - The maximum purchase payment which you may make without our prior
approval is $500,000.
While we will not accept additional purchase payments for a contract,
you may purchase additional contracts at the then prevailing rates and terms.
Prior to the maturity date and at our option, we may cancel a contract
after the third contract anniversary if both (i) the total purchase payment
made, less any withdrawals, is less than $2,000; and (ii) the higher of the
contract value or the amount available upon total withdrawal is less than
$2,000. This cancellation privilege may vary in certain states to comply with
the requirements of their insurance laws and regulations (see "PURCHASE
PAYMENTS").
Guarantee Periods. We currently offer ten guarantee periods under the
contract: one year through ten years. We may offer additional guarantee periods
for any yearly period from one to twenty years (see "INVESTMENT OPTIONS").
Transfers Among Guarantee Periods. Before the maturity date, you may
transfer the entire contract value to a different guarantee period at any time
by giving us written notice or by telephone if you have authorized us in writing
to accept telephone transfer requests:
- - You may transfer amounts only once per contract year.
- - You must transfer the entire amount of the account.
Amounts transferred will be subject to a transfer market value
adjustment (see "TRANSFERS AMONG INVESTMENT OPTIONS").
Telephone Transfers. You may request transfers or withdrawals by
telephone (see "TELEPHONE TRANSACTIONS").
Renewals. At the end of a guarantee period, you may choose a renewal
guarantee period from any of the then existing guarantee period options, at the
then current interest rates (see "RENEWALS").
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Withdrawals. Before the earlier of the maturity date or the death of
the contract owner, you may withdraw all or a portion of the contract value.
- You must withdraw at least $300 or, if less, the entire
contract value.
- If a partial withdrawal (plus any applicable withdrawal charge
and after giving effect to any market value adjustment)
reduces the contract value to less than $300, we will treat
the partial withdrawal as a total withdrawal.
We may impose a withdrawal charge and market value adjustment (see
"WITHDRAWALS"). A withdrawal may be subject to income tax and a 10% penalty tax
(see "FEDERAL TAX MATTERS").
Confirmation Statements. We will send you confirmation statements for
certain transactions in your account. You should carefully review these
statements to verify their accuracy and should report any mistake immediately to
our Annuity Service Office. If you fail to report any mistake to our Annuity
Service Office within 60 days of the mailing of the confirmation statement, you
will be deemed to have ratified the transaction.
Death Benefits. We will pay the death benefit to the beneficiary if any
contract owner dies before the maturity date. The death benefit equals the
contract value. If there is a surviving contract owner, that contract owner will
be deemed to be the beneficiary. No death benefit is payable on the death of any
annuitant, except that if any contract owner is not a natural person, we will
treat the death of any annuitant as the death of an owner.
We will determine the death benefit as of the date we receive written
notice and proof of death and all required claim forms at our Annuity Service
Office.
Annuity Payments. We offer a variety of fixed annuity options. Periodic
annuity payments will begin on the maturity date. You select the maturity date,
frequency of payment and annuity option (see "PAY-OUT PERIOD PROVISIONS").
Ten Day Review. Within 10 days of your receipt of a contract, you may
cancel the contract by returning it to us or your registered representative (see
"RIGHT TO REVIEW CONTRACT").
Market Value Adjustment. We will adjust any amount withdrawn,
transferred or annuitized prior to the end of either the initial guarantee
period or a renewal guarantee period by the market value adjustment factor
described under "MARKET VALUE ADJUSTMENT."
Withdrawal Charge. If you make a withdrawal from the contract before
the maturity date and during the first seven contract years, we may assess a
withdrawal charge (contingent deferred sales charge) against amounts withdrawn.
There is never a withdrawal charge after seven complete contract years and for
certain amounts withdrawn during the first seven contract years. The amount of
the withdrawal charge and when it is assessed is discussed under "CHARGES AND
DEDUCTIONS - WITHDRAWAL CHARGE."
Tax Deferral. The status of the contract as an annuity generally allows
all earnings on the underlying investments to be tax-deferred until withdrawn or
until annuity payments begin (see "FEDERAL TAX MATTERS"). This tax deferred
treatment may be beneficial to you in building assets in a long-term investment
program.
INFORMATION ABOUT MANULIFE NEW YORK
Manulife New York (formerly First North American Life Assurance
Company) is a stock life insurance company organized under the laws of New York
in 1992. Our principal office is located at Corporate Center at Rye, 555
Theodore Fremd Avenue, Rye, New York 10580. We are a wholly-owned subsidiary of
The Manufacturers Life Insurance Company of North America ("Manulife North
America"). Manulife North America is a stock life insurance company organized
under the laws of Delaware in 1979 with its principal office located at 116
Huntington Avenue, Boston, Massachusetts 02116.
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Our ultimate parent is The Manufacturers Life Insurance Company
("Manulife"), a Canadian mutual life insurance company based in Toronto, Canada.
Prior to January 1, 1996, Manulife North America was a wholly owned subsidiary
of North American Life Assurance Company ("NAL"), a Canadian mutual life
insurance company. On January 1, 1996 NAL and Manulife merged, with the combined
company retaining the Manulife name. Effective January 1, 1996, immediately
following the merger of NAL and Manulife, Manulife North America experienced a
corporate restructuring resulting in the formation of a newly organized holding
corporation, Manulife-Wood Logan Holding Co., Inc. (formerly NAWL Holding
Company, Inc.) ("MWL"). MWL holds all of the outstanding shares of Manulife
North America and Wood Logan Associates, Inc. ("WLA"). MWL is 62.5% owned by The
Manufacturers Life Insurance Company (U.S.A.), 22.5% owned by MRL Holding, LLC
and 15% owned by the principals of WLA.
On January 20, 1998, the Board of Directors of Manulife announced that
it had asked the management of Manulife to prepare a plan for conversion of
Manulife from a mutual life insurance company to an investor-owned,
publicly-traded stock company. Any demutualization plan for Manulife is subject
to approval by the Manulife Board of Directors and policyholders as well as
regulatory approval.
Manulife New York's financial ratings are as follows:
A++ A.M. Best
Superior in financial strength; 1st category of 15
AAA Duff & Phelps
Highest in claims paying ability; 1st category of 18
AA+ Standard & Poor's
Very strong in financial strength; 2nd category of 21
These ratings, which are current as of the date of this prospectus and are
subject to change, are assigned as a measure of Manulife New York's ability to
honor the death benefit and life annuitization guarantees but not specifically
to its products, the performance (return) of these products, the value of any
investment in these products upon withdrawal or to individual securities held in
any portfolio.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934 as amended, (the "1934 Act"). Accordingly, we file reports
and other information with the SEC. You may read and copy such reports and other
information at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at its regional offices located at 75 Park Place, New
York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. The SEC maintains a Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
We have filed a registration statement with the SEC under the
Securities Exchange Act of 1933, as amended, (the "1933 Act") relating to the
contracts offered by this prospectus. This prospectus has been filed as part of
the registration statement but does not contain all the information included in
the registration statement and its exhibits. Additionally, statements in this
prospectus about the content of the contracts and other legal instruments are
only summaries. For a complete statement of the terms of these documents, you
should refer to the registration statement and its exhibits. You may inspect and
copy the registration statement and its exhibits at the offices of the SEC as
set forth in the preceding paragraph.
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DESCRIPTION OF THE CONTRACT
ACCUMULATION PERIOD PROVISIONS
PURCHASE PAYMENT
Purchase payments are paid to us at our Annuity Service Office. The
minimum purchase payment for a contract is $5,000. The maximum purchase payment
which you may make without our prior approval is $500,000. We allocate the
entire purchase payment to the guarantee period which you select. We will not
accept additional purchase payments for a contract. You may, however, purchase
additional contracts at the then prevailing rates and terms.
Prior to the maturity date and following the third contract
anniversary, we may, at our option, cancel a contract. We may cancel a contract
if both:
- the total purchase payment made, less any withdrawals, is less
than $2,000; and
- the higher of the contract value or the amount available upon
total withdrawal is less than $2,000.
This cancellation privilege may vary in certain states in order to
comply with the requirements of insurance laws and regulations in such states.
If we cancel a contract, we will pay you the higher of the contract value and
any annual administration fee or the amount available upon total withdrawal. The
amount paid will be treated as a withdrawal for federal tax purposes and thus
may be subject to income tax and to a 10% penalty tax. (See "FEDERAL TAX
MATTERS")
GUARANTEE PERIODS
Currently, we offer ten guarantee periods: one year through ten years.
We may offer additional guarantee periods for any yearly period from one to
twenty years. The contract provides for the accumulation of interest on the
purchase payment at guaranteed rates for the duration of the guarantee period.
We determine from time-to-time in accordance with market conditions the renewal
guaranteed interest rate on a renewal amount allocated or transferred to a
renewal guarantee period. Under certain circumstances, we may offer a rate in
excess of the renewal guaranteed rate for the first year only of a renewal
guarantee period. The renewal guaranteed interest rate will in no event be less
than 3%. We guarantee the interest rate for the duration of the guarantee period
and may not change it.
TRANSFERS AMONG GUARANTEE PERIODS
Before the maturity date and subject to the following conditions, you
may transfer the entire contract value to a different guarantee period at any
time by giving us written notice or by telephone if you authorized us in writing
to accept your telephone transfer requests:
- you may transfer amounts only once per contract year; and
- you must transfer the entire contract.
Amounts transferred will be subject to a transfer market value
adjustment. The amount which you request to transfer will be multiplied by the
market value adjustment factor to determine the transferred amount. There will
be no market value adjustment on amounts transferred within one month prior to
the end of a guarantee period. (See "MARKET VALUE ADJUSTMENT"). We may modify or
terminate the transfer privilege at any time in accordance with applicable law.
TELEPHONE TRANSACTIONS
Any person who can furnish proper account identification is permitted
to request transfers and withdrawals by telephone. The telephone transaction
privilege is made available automatically without the contract owner's election.
We will not be liable for following instructions communicated by telephone that
we reasonably believe to be genuine. We will employ reasonable procedures to
confirm that instructions
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communicated by telephone are genuine and may only be liable for any losses due
to unauthorized or fraudulent instructions where we fail to employ our
procedures properly. Such procedures include the following. Upon telephoning a
request, you will be asked to provide information that verifies that it is you
calling. For both your and our protection, we will tape record all conversations
with you. All telephone transactions will be followed by a confirmation
statement of the transaction. We reserve the right to impose maximum withdrawal
amounts and other new procedural requirements regarding transfer privileges.
RENEWALS
At the end of a guarantee period, you may choose a renewal guarantee
period from any of the then existing guarantee periods at the then current
interest rate, all without the imposition of any charge. You may not select a
guarantee period that would extend beyond the maturity date. For a renewal
within one year of the maturity date, the only option available to you is to
have interest accrued up to the maturity date at the then current interest rate
for one-year guarantee periods.
We will mail you a notice at least 15 days, but not more than 45 days,
before the end of any Initial Guaranteed Period or Renewal Guaranteed Period. If
you do not specify the renewal guarantee period you desire, we will select the
same guarantee period that has just expired, provided that such period does not
extend beyond the maturity date. If a renewal would extend beyond the maturity
date, we will select the longest period that will not extend beyond such date.
For a renewal within one year of the maturity date, we will credit interest up
to the maturity date at the then current interest rate for one-year guarantee
periods.
WITHDRAWALS
Prior to the earlier of the maturity date or the death of the contract
owner, you may withdraw all or a portion of the contract value by written
request, complete with all necessary information, to our Annuity Service Office.
You may make withdrawals by telephone as described above under "Telephone
Transactions." For certain qualified contracts, the Code may require the consent
of a Qualified Plan participant's spouse to an exercise of the withdrawal right.
If you request a total withdrawal of the contract value, we will, as of
the date we receive the request at our Annuity Service Office, cancel the
contract and pay the following amount:
C + [ (A - B - C) x D], where:
A = the gross withdrawal value reduced by any applicable
annual administration fee;
B = the withdrawal charge;
C = the amount available without the imposition of a
withdrawal charge; and
D = the market value adjustment factor.
(See "CHARGES AND DEDUCTIONS" and "MARKET VALUE ADJUSTMENT")
If you request a partial withdrawal, we will use the above formula and
the gross withdrawal value to determine the amount payable. Partial withdrawals
will be subject to market value adjustments and possible withdrawal charges. We
will deduct the gross withdrawal value from the contract value. The gross
withdrawal value may not exceed the contract value.
We may defer the payment of a full or partial withdrawal for not more
than six months (or the period permitted by applicable state law if shorter)
from the date we receive the withdrawal request. If we defer payments for ten
days or more, we will credit the amount deferred with interest at a rate not
less than 4% per year or as determined by applicable state law. We will not,
however, defer payment for more than 30 days for any withdrawal effective at the
end of any guarantee period.
There is no limit on the frequency of partial withdrawals. However, the
amount withdrawn must be at least $300 or, if less, the entire contract value.
If a partial withdrawal plus any applicable withdrawal charge, after giving
effect to any market value adjustment, would reduce the contract value to less
than $300, we will treat the partial withdrawal as a total withdrawal of the
contract value.
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Withdrawals from the contract may be subject to income tax and a 10%
penalty tax. Withdrawals are permitted from contracts issued in connection with
Section 403(b) Qualified Plans only under limited circumstances (see "FEDERAL
TAX MATTERS").
Telephone Redemptions. You may withdraw a portion of the contract value
by telephone as described above under "Telephone Transactions." We reserve the
right to impose maximum withdrawal amounts and other new procedural requirements
regarding transfer privileges.
DEATH BENEFIT DURING ACCUMULATION PERIOD
In General. The following discussion applies principally to contracts
that are not issued in connection with Qualified Plans, i.e., a "non-qualified
contract." The requirements of the tax law applicable to Qualified Plans, and
the tax treatment of amounts held and distributed under such plans, are quite
complex. Accordingly, if you are considering using the contract in connection
with a Qualified Plan, you should seek competent legal and tax advice regarding
the suitability of the contract for the particular situation and the
requirements governing the distribution of benefits, including death benefits,
from a contract used in the plan.
Determination of Death Benefit. We will determine the death benefit on
the date we receive written notice and proof of death, as well as all required
claims forms, at our Annuity Service Office. No person is entitled to the death
benefit until this time.
Amount and Payment of Death Benefit. We will pay a death benefit equal
to the contract value to the beneficiary if any contract owner dies before the
maturity date. This amount will not be subject to a market value adjustment. If
there is a surviving contract owner, that contract owner will be deemed to be
the beneficiary. No death benefit is payable on the death of any annuitant,
except that if any contract owner is not a natural person, the death of any
annuitant will be treated as the death of an owner. On the death of the last
surviving annuitant, the contract owner, if a natural person, will become the
annuitant unless the contract owner designates another person as the annuitant.
The death benefit may be taken immediately in the form of a lump sum.
If the death benefit is not taken immediately, the contract will continue
subject to the following:
(1) the beneficiary will become the contract owner;
(2) if the beneficiary is not the deceased owner's spouse, we will
distribute the contract owner's entire interest in the
contract within five years of the owner's death or,
alternatively, as an annuity (under one of the annuity options
described below) beginning within one year of the owner's
death and payable over the life of the beneficiary or over a
period not extending beyond the life expectancy of the
beneficiary.
If the beneficiary dies before distributions described in "(2)" above
are completed, we will distribute the entire remaining contract value in a lump
sum immediately. If the owner's spouse is the beneficiary, the spouse continues
the contract as the new owner. In such a case, the distribution rules described
in "(2)" which apply when a contract owner dies will apply when the spouse, as
the owner, dies.
If any annuitant is changed and any contract owner is not a natural
person, we will distribute the entire interest in the contract to the contract
owner within five years.
We will pay death benefits within seven days of the date we determine
the amount of the death benefit, as described above. We may postpone such
payment under the same circumstances that we may postpone the payment of
withdrawals (see "WITHDRAWALS").
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PAY-OUT PERIOD PROVISIONS
GENERAL
You may apply the proceeds of the contract payable on death, withdrawal
or the contract maturity date to the annuity options described below, subject to
the distribution of death benefit provisions (see "DEATH BENEFIT DURING
ACCUMULATION PERIOD").
Generally, annuity benefits under the contract will begin on the
maturity date. The maturity date is the date specified on the contract
specifications page, unless changed. If no date is specified, the maturity date
is the maximum maturity date. The maximum maturity date is the first day of the
month following the later of the 85th birthday of the annuitant or the tenth
contract anniversary. In no event will the maturity date exceed age 90. You may
specify a different maturity date at any time by written request at least one
month before both the previously specified and the new maturity date. Without
our consent, the new maturity date may not be later than the maximum maturity
date. The occurrence or scheduled occurrence of maturity dates when the
annuitant is at an advanced age, e.g., past age 85, may in some circumstances
have adverse income tax consequences (see "FEDERAL TAX MATTERS"). Distributions
from qualified contracts may be required before the maturity date.
You may select the frequency of annuity payments. However, if the
contract value at the maturity date is such that a monthly payment would be less
than $20, we may pay the higher of contract value and any annual administration
fee or the amount available upon total withdrawal in one lump sum to the
annuitant on the maturity date.
ANNUITY OPTIONS
Annuity benefits are available under the contract on a fixed basis.
When you purchase a contract, and on or before the maturity date, you may select
one or more of the annuity options described below or choose an alternate form
of settlement acceptable to us. If you do not select an annuity option, we will
provide as a default option that annuity payments be made for a period certain
of 10 years and continue thereafter during the lifetime of the annuitant.
Internal Revenue Service ("IRS") regulations may preclude the availability of
certain annuity options in connection with certain qualified contracts.
We guarantee the following annuity options in the contract.
- Option 1(a): Non-Refund Life Annuity - We will make annuity
payments during the lifetime of the annuitant. No payments are
due after the death of the annuitant. Since we do not
guarantee that any minimum number of payments will be made, an
annuitant may receive only one payment if the annuitant dies
prior to the date the second payment is due.
- Option 1(b): Life Annuity with Payments Guaranteed for 10
Years - We will make annuity payments for at least 10 years
and continuing thereafter during the lifetime of the
annuitant. Since we guarantee payments for 10 years, we will
make annuity payments to the end of such period even if the
annuitant dies prior to the end of the tenth year.
- Option 2(a): Joint & Survivor Non-Refund Life Annuity - We
will make annuity payments during the lifetimes of the
annuitant and a designated co-annuitant. No payments are due
after the death of the last survivor of the annuitant and
co-annuitant. Since we do not guarantee that any minimum
number of payments will be made, an annuitant or co-annuitant
may receive only one payment if the annuitant and co-annuitant
die prior to the date the second payment is due.
- Option 2(b): Joint & Survivor Life Annuity with Payments
Guaranteed for 10 Years - We will make annuity payments for at
least 10 years and continuing thereafter during the lifetimes
of the annuitant and a designated co-annuitant. Since we
guarantee payments for 10 years, we will make annuity payments
to the end of such period even if both the annuitant and the
co-annuitant die prior to the end of the tenth year.
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In addition to the foregoing annuity options which we are contractually
obligated to offer at all times, we currently offer the following annuity
options. We may cease offering the following annuity options at any time and may
offer other annuity options in the future.
- Option 3: Life Annuity with Payments Guaranteed for 5, 15 or
20 Years - We will make annuity payments guaranteed for 5, 15
or 20 years and continuing thereafter during the lifetime of
the annuitant. Since we guarantee payments for the specific
number of years, we will make annuity payments to the end of
the last year of the 5, 15 or 20 year period.
- Option 4: Joint & Two-Thirds Survivor Non-Refund Life Annuity
- We will make full annuity payments during the joint lifetime
of the annuitant and a designated co-annuitant and two-thirds
payments during the lifetime of the survivor. Since we do not
guarantee that any minimum number of payments will be made, an
annuitant or co-annuitant may receive only one payment if the
annuitant and co-annuitant die prior to the date the second
payment is due.
- Option 5: Period Certain Only Annuity for 5, 10, 15 or 20
years - We will make annuity payments for a 5, 10, 15 or 20
year period and no payments thereafter.
DEATH BENEFIT DURING PAY-OUT PERIOD
If you have selected an annuity option providing for payments for a
guaranteed period, and the annuitant dies on or after the maturity date, we will
make the remaining guaranteed payments to the beneficiary. We will make any
remaining payments as rapidly as under the method of distribution being used as
of the date of the annuitant's death. If no beneficiary is living, we will
commute any unpaid guaranteed payments to a single sum (on the basis of the
interest rate used in determining the payments) and pay that single sum to the
estate of the last to die of the annuitant and the beneficiary.
OTHER CONTRACT PROVISIONS
RIGHT TO REVIEW CONTRACT
You may cancel the contract by returning it to our Annuity Service
Office or to your registered representative within 10 days after receiving it.
Within 7 days of receiving a returned contract, we will refund the payment made
for the contract. When the contract is issued as an individual retirement
annuity under Sections 408 or 408A of the Code, during the first 7 days of the
10 day period we will return the contract value if this is greater than the
amount otherwise payable.
We do not impose any withdrawal charge upon return of the contract
within the 10 day right to review period. The 10 day right to review may vary in
certain states in order to comply with the requirements of insurance laws and
regulations in such states.
If the contract is purchased in connection with a replacement of an
existing annuity contract (as described below), you may also cancel the contract
by returning it to our Annuity Service Office or your registered representative
at any time within 60 days after receiving the contract. Within 10 days of
receiving a returned contract, we will pay you the contract value (minus any
unpaid loans) computed at the end of the business day on which we receive your
returned contract. In the case of a replacement of a contract issued by a New
York insurance company, you may have the right to reinstate the prior contract.
You should consult with your registered representative or attorney regarding
this matter prior to purchasing the new contract.
Replacement of an existing annuity contract generally is defined as the
purchase of a new annuity contract in connection with (a) the lapse, partial or
full surrender or change of, or borrowing from, an existing annuity or life
insurance contract or (b) the assignment to a new issuer of an existing annuity
contract. This description, however, does not necessarily cover all situations
which could be considered a replacement of an existing annuity contract.
Therefore, you should consult with your registered representative or attorney
regarding whether the purchase of a new annuity contract is a replacement of an
existing annuity or life insurance contract.
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OWNERSHIP
The contract owner is the person entitled to exercise all rights under
the contract. Prior to the maturity date, the contract owner is the person
designated in the contract specifications page or as subsequently named. On and
after the maturity date, the annuitant is the contract owner. If amounts become
payable to any beneficiary under the contract, the beneficiary is the contract
owner.
In the case of non-qualified contracts, you may change the ownership of
or collaterally assign the contract at any time prior to the maturity date,
subject to the rights of any irrevocable beneficiary. Assigning a contract, or
changing the ownership of a contract, may be treated as a distribution of the
contract value for Federal tax purposes (see "FEDERAL TAX MATTERS").
Any change of ownership or assignment must be in writing. We must
approve any change. Any assignment and any change, if approved, will be
effective as of the date we receive your request at our Annuity Service Office.
We assume no liability for any payments made or actions taken before a change is
approved or an assignment is accepted or responsibility for the validity or
sufficiency of any assignment. An absolute assignment will revoke the interest
of any revocable beneficiary.
In the case of qualified contracts, ownership of the contract generally
may be transferred only by the trustee of an exempt employees' trust which is
part of a retirement plan qualified under Section 401 of the Code or as
otherwise permitted by applicable IRS regulations. Subject to the foregoing, a
qualified contract may not be sold, assigned, transferred, discounted or pledged
as collateral for a loan or as security for the performance of an obligation or
for any other purpose to any person other than us.
BENEFICIARY
The beneficiary is the person, persons or entity designated in the
contract specifications page or as subsequently named. However, if there is a
surviving contract owner, that person will be treated as the beneficiary. You
may change the beneficiary subject to the rights of any irrevocable beneficiary.
You must make any request for a change in writing. We must approve such a
request and, if approved, the change will be effective as of the date on which
we received your request. We assume no liability for any payments made or
actions taken before we approve the change. If no beneficiary is living, the
contingent beneficiary will be the beneficiary. The interest of any beneficiary
is subject to that of any assignee. If no beneficiary or contingent beneficiary
is living, the beneficiary is the estate of the deceased contract owner. In the
case of certain qualified contracts, IRS regulations prescribe certain
limitations on the designation of a beneficiary.
ANNUITANT
The annuitant is any natural person or persons to whom we make annuity
payments and whose life is used to determine the duration of annuity payments
involving life contingencies. If you name more than one person as an
"annuitant," the second person named will be referred to as "co-annuitant." The
annuitant is as designated on the contract specifications page or in the
application, unless changed.
On the death of the annuitant prior to the maturity date, the
co-annuitant, if living, becomes the annuitant. If there is no living
co-annuitant, the owner becomes the annuitant. In the case of certain qualified
contracts, there are limitations on the ability to designate and change the
annuitant and the co-annuitant.
MODIFICATION
We will not change or modify the contract without your consent except
to the extent necessary to conform to any applicable law or regulation or any
ruling issued by a government agency. We will interpret the provisions of the
contract so as to comply with the requirements of Section 72(s) of the Code.
OUR APPROVAL
We reserve the right to accept or reject a contract application at our
sole discretion.
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MARKET VALUE ADJUSTMENT
If you withdraw, transfer or annuitize any amount prior to the end of
either the initial guarantee period or a renewal guarantee period, we will
adjust such amount by the market value adjustment factor described below.
The market value adjustment factor is determined by the following
formula: n/12 where:
((1+i)/(1+j))
i - the initial guaranteed interest rate or renewal
guaranteed interest rate currently being earned on the
contract.
j - the guaranteed interest rate available, on the date we
process the request, for a guarantee period with the
same length as the period remaining in the initial
guarantee period or renewal guarantee period. If the
guarantee period of this length is not available, we
will choose our guarantee period with the next highest
duration.
n - the number of complete months remaining to the end of
the initial guarantee period or renewal guarantee
period.
If we no longer issue the guaranteed interest contracts described in i
and j, then i and j are defined as follows:
i - the Moody's Corporate Bond Yield Average - Monthly
Average Corporates (for the applicable duration) as
published by Moody's Investors Service, Inc. for the
date that the initial guaranteed interest rate or
renewal guaranteed interest rate currently being earned
on the contract was set.
j - the Moody's Corporate Bond Yield Average - Monthly
Average Corporates (for the applicable duration) as
published by Moody's Investors Service, Inc. for the
date the request is processed.
We will make no market value adjustment in the following situations:
- the death of the contract owner;
- the withdrawal or transfer of amounts within one
month before the end of the guarantee period; and
- the withdrawal or transfer of amounts in any contract
year that do not exceed 10% of total purchase
payments less any prior partial withdrawals in that
year.
The market value adjustment reflects the relationship between the
initial guaranteed interest rate or the renewal guaranteed interest rate
applicable to the contract and the then current available guaranteed interest
rate. Generally, if the initial guaranteed interest rate or the renewal
guaranteed interest rate is lower than the then current available guaranteed
interest rate, then the effect of the market value adjustment will be to reduce
the amount withdrawn, transferred or annuitized. Similarly, if the initial
guaranteed interest rate or the renewal guaranteed interest rate is higher than
the then current available guaranteed interest rate, then the effect of the
market value adjustment will be to increase the amount withdrawn, transferred or
annuitized. The greater the difference in these interest rates the greater the
effect of the market value adjustment.
The market value adjustment is also affected by the amount of time
remaining in the guarantee period. Generally, the longer the time remaining in
the guarantee period, the greater the effect of the market value adjustment on
the amount withdrawn, transferred or annuitized. This is because the longer the
time remaining in the guarantee period, the higher the compounding factor `n' in
the market value adjustment factor.
The cumulative effect of the market value adjustment and withdrawal
charges could result in your receiving total withdrawal proceeds of less than
your purchase payment.
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BECAUSE OF THE MARKET VALUE ADJUSTMENT PROVISION OF THE CONTRACT, YOU
BEAR THE INVESTMENT RISK THAT THE CURRENT AVAILABLE GUARANTEED INTEREST RATE
OFFERED BY US AT THE TIME OF WITHDRAWAL, TRANSFER OR ANNUITIZATION MAY BE HIGHER
THAN THE INITIAL OR RENEWAL GUARANTEE INTEREST RATE APPLICABLE TO THE CONTRACT
WITH THE RESULT THAT THE AMOUNT YOU RECEIVE UPON A WITHDRAWAL, TRANSFER OR
ANNUITIZATION MAY BE SUBSTANTIALLY REDUCED.
For more information on the market value adjustment, including examples
of its calculation, see Appendix B.
CHARGES AND DEDUCTIONS
WITHDRAWAL CHARGE
If you make a withdrawal from the contract before the maturity date, we
may assess a withdrawal charge (contingent deferred sales charge) against
amounts withdrawn during the first seven contract years. There is never a
withdrawal charge after seven complete contract years and on certain amounts
withdrawn during the first seven contract years as described below. The amount
of the withdrawal charge and when it is assessed is discussed below:
1. In any contract year, the amount available without
the imposition of a withdrawal charge for that year is the
excess of (i) over (ii), where (i) is 10% of the purchase
payment and (ii) is all prior partial withdrawals in that
contract year.
2. If you make a withdrawal at the end of the initial
guarantee period, we will not apply a withdrawal charge
provided such withdrawal occurs on or after the end of the
third contract year. If you make a withdrawal at the end of
any other guarantee period, we will not apply a withdrawal
charge provided such withdrawal occurs on or after the end of
the fifth contract year. We must receive your written request
for withdrawal at the end of a guarantee period during the
30-day period preceding the end of that guarantee period.
3. We calculate the amount of the withdrawal charge
by multiplying the gross withdrawal value, less any
administration fee and the amount available without the
imposition of a withdrawal charge, by the applicable
withdrawal charge percentage obtained from the table below.
NUMBER OF COMPLETED WITHDRAWAL CHARGE
CONTRACT YEARS PERCENTAGE
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7+ 0%
4. We generally do not assess any withdrawal charge
on distributions made as a result of the death of the contract
owner or, if applicable, the annuitant, (see "Death Benefit
During Accumulation Period - Amount and Payment of Death
Benefit").
We will use the amount collected from the withdrawal charge to
reimburse us for the compensation paid to cover selling concessions to
broker-dealers, preparation of sales literature and other expenses related to
sales activity.
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For examples of calculation of the withdrawal charge, see Appendix A.
We may subject withdrawals to a market value adjustment in addition to the
withdrawal charge described above (see "MARKET VALUE ADJUSTMENT").
REDUCTION OR ELIMINATION OF WITHDRAWAL CHARGE
We may from time to time reduce or eliminate the amount of the
withdrawal charge on a contract or the period to which it applies when contracts
are sold to certain individuals or groups of individuals in a manner that
results in savings of sales expenses. When considering whether to reduce or
eliminate the sales charge or the period to which it applies, we will consider
such factors as:
- the size and type of group,
- the amount of the single premium, and/or
- other transactions where sales expenses are reduced.
TAXES
We reserve the right to charge or provide for certain taxes against
purchase payments, contract values, death benefits or annuity payments. Such
taxes may include premium taxes or other taxes levied by any government entity
which we determine to have resulted from the:
- establishment or maintenance of the Fixed Account,
- receipt by us of purchase payments,
- issuance of the contracts,
- commencement or continuance of annuity payments under
the contracts, or
- death of the owner or annuitant.
In addition, we will withhold taxes to the extent required by
applicable law.
We will deduct premium taxes from the contract value used to provide
for annuity payments unless otherwise required by applicable law. The amount
deducted will depend on the premium tax assessed in the applicable state. State
premium taxes currently range from 0% to 3.5%, depending on the jurisdiction and
the tax status of the contract, and are subject to change by the legislature or
other authority (see "APPENDIX C: STATE PREMIUM TAXES").
ADDITIONAL INFORMATION ABOUT MANULIFE NEW YORK
DESCRIPTION OF BUSINESS
We issue fixed and variable annuity contracts, individual life
insurance, and group annuity products in the state of New York. We allocate
amounts invested in the fixed contracts and fixed portion of the variable
insurance products to our general account, or in the case of the contract
described in this prospectus, to a non-unitized separate account established by
us. We allocate amounts invested in the variable portions of contracts or
policies issued by us to our separate accounts. We invest the assets of our
separate accounts (other than the separate account described in this prospectus)
in shares of Manufacturers Investment Trust ("MIT"), formerly NASL Series Trust,
a no-load, open end management investment company organized as a Massachusetts
business trust, and, for separate accounts supporting the group annuity, in
shares of externally managed mutual funds.
Property and Office Location
Our offices are located at Corporate Center at Rye, 555 Theodore Fremd
Avenue, Rye, New York 10580 where we lease office space. We own no real property
used for business purposes.
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MANAGEMENT DISCUSSION & ANALYSIS
You should read the following analysis of our results from operations
and our financial condition in conjunction with our Financial Statements and the
related Notes to Financial Statements. We refer to ourselves as Manulife New
York in this "Management Discussion & Analysis" section.
Overview
The following analysis of the results of operations and financial
condition of Manulife New York should be read in conjunction with the financial
statements and the related notes to financial statements.
In 1998 and 1997, pursuant to an expanded plan of operations, Manulife
New York entered the Savings and Retirement Services and Life Insurance
segments. As a result, we now report three segments: Annuities; Savings and
Retirement Services; and Life Insurance. Because two of our segments were
recently introduced, the assets, revenues and operations of those segments are
not material to Manulife New York's 1998 financial position or, aside from the
effect of start up expenses, results of operations. As a result, the remainder
of this discussion will be limited to the Annuities segment except as noted.
Manulife New York's primary source of earnings from the annuities
segment are fees assessed against policyholder account balances held in Manulife
New York's separate accounts including: mortality and expense risk charges,
surrender charges and an annual administrative charge. In addition, the segment
earns a spread between the advisory fees charged to manage the separate account
assets invested in MIT and the subadvisory fees paid to external managers of
those assets. A key factor in Manulife New York's profitability is sustained
growth in the underlying assets through market performance coupled with the
ability to acquire and retain variable annuity deposits.
Basis of Presentation
During 1996, we adopted generally accepted accounting principles
("GAAP") in conformity with the requirements of the Financial Accounting
Standards Board. A description of accounting policies can be found in Note 2 to
the financial statements.
Review of Operating Results
1998 Compared to 1997
Manulife New York recorded net income of $1.1 million in 1998 versus
net income of $0.6 million in 1997, an increase of $0.5 million or 83%. Revenues
grew by 44% to $21.5 million as a result of growth in fee income earned on
additional separate account assets and in investment income from higher general
account assets. Separate account assets grew by 40% while total assets increased
by 32% during 1998. This growth is attributed to consistent annuity sales of
$191.6 million for 1998 compared to 1997 annuity sales of $190.7 million, strong
equity market performance since mid-1997, favorable contract persistency and
$5.5 million of Savings and Retirement Services assets associated with sales in
the 4th quarter of 1998. Total fees generated from separate accounts and
policyholder liabilities increased by $3.6 million or 48% in 1998. Net
investment income grew by $3.1 million or 46% due to additional fixed account
sales. In addition, we recognized additional net investment income for the full
year of 1998 associated with the $47.7 million capital infusion received in the
fourth quarter of 1997 to support expanded operations in New York.
Manulife New York incurred total benefits and expenses in 1998 of $19.8
million, an increase of $5.8 million, or 42% compared to 1997. The additional
expenses reflect an increase in non-capitalized acquisition expenses and other
costs associated with growth in our business, and additional start-up expenses
in 1998 of $1.4 million associated with expanding our operations in New York.
1997 Compared to 1996
Manulife New York recorded net income of $0.6 million in 1997 versus
net income of $1.5 million in
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1996, a decrease of $0.9 million. Manulife New York, however, recorded an
increase in revenues as a result of fee income earned on additional separate
account assets and higher investment income from growth in general account
assets. Separate account assets grew by 65% while total assets increased by 62%
during 1997. This growth is attributed to record sales of $190.7 million for
1997 compared to 1996 sales of $116.7 million, strong equity market performance
during 1997 and favorable contract persistency. The record sales for 1997 were
attributable to our implementation of the Efficient Frontier Investment model in
early 1997 and the addition of competitively performing funds, including
additional investment options. The latter includes five Lifestyle funds which
offer the buyer the opportunity to invest in a pre-determined "fund of funds".
Total fees generated by Separate accounts and policyholder funds increased by
$2.6 million or 55% in 1997. Net investment income grew by $1.5 million or 29%
due to higher fixed account sales and a $47.7 million capital infusion received
in the fourth quarter of 1997 to support expanded operations in New York.
Manulife New York incurred total benefits and expenses in 1997 of $14.0
million and $7.7 million in 1996, an increase of $6.3 million, or 82% compared
to 1996. The additional expenses reflect an increase in non-capitalized
acquisition expenses and other costs associated with growth in our business, and
additional operating expenses of $1.6 million associated with expanding our
operations in New York. The increase in expense levels had a direct impact on
the lower net income for 1997.
Financial Position
1998 Compared to 1997
Total assets increased from $769 million at December 31, 1997 to $1,017
million at December 31, 1998, an increase of $248 million or 32%. Separate
account assets increased by 40% in 1998 compared to 1997 and represent 82% of
total assets as Manulife New York continues to focus on its variable option
annuity products. Manulife New York continues to own high quality investment
grade fixed maturity investments to support its general account liabilities and
shareholder's equity. Manulife New York's deferred acquisition costs (DAC) asset
grew by 30% as we experienced consistent annuity sales volumes during 1998 and
1997 and deferred the related costs, net of current amortization, associated
with those sales.
Total liabilities have increased proportionately with the growth in the
related assets, primarily in our Separate accounts.
The growth in retained earnings is primarily due to net income from
operations of $1.1 million. In addition, shareholder's equity increased $0.4
million due to higher market values associated with invested assets at December
31, 1998.
1997 Compared to 1996
Total assets increased from $475 million at December 31, 1996 to $769
million at December 31, 1997, an increase of $294 million or 62%. Separate
account assets increased by 65% in 1997 compared to 1996 and represented 78% of
total assets as Manulife New York continued to focus on its variable option
insurance products. Fixed maturity and short-term investments increased by 59%
during 1997. This increase is a result of a $47.7 million capital infusion in
the fourth quarter of 1997 to support the expansion of operations to include
individual life insurance and pension products in the state of New York.
Manulife New York continues to own high quality investment grade fixed maturity
investments to support its General Account. Manulife New York's deferred
acquisition costs (DAC) asset grew by 40% as we experienced record sales volumes
during 1997 and deferred the related costs, net of current amortization,
associated with the sales.
Total liabilities have increased proportionately with the growth in the
related assets, primarily in the company's Separate accounts.
Manulife New York received $47.7 million of additional capital to
support expansion of its operations during 1997. The growth in retained earnings
is due to net income from operations of $0.6 million. In addition, shareholders
equity increased $0.6 million due to higher market values associated with
invested assets at December 31, 1997.
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Liquidity and capital resources
Liquidity describes the ability of a company to generate sufficient
cash flows to meet the cash requirements of business operations. Historically,
our principal cash flow sources have been deposits and charges on contracts,
investment income, maturing investments, and proceeds from sales of investment
assets. In addition to the need for cash flow to meet operating expenses, the
liquidity requirements of Manulife New York relate principally to its annuity
liabilities and to the funding of investments in new products, processes and
technologies. The liabilities mentioned above include the payment of benefits
under its annuity contracts along with contract withdrawals and policy loans.
The general account liabilities consist of policyholder funds whose
liquidity requirements do not fluctuate significantly from one year to the next.
Policyholder transactions related to separate accounts do not materially impact
the cash flow of Manulife New York.
Manulife New York maintains a prudent amount invested in cash and short
term investments. At the end of 1998, this amounted to $16.0 million or 12% of
total investments compared to $ 11.4 million in 1997 or 8%. In addition, our
liquidity is managed by maintaining through a highly liquid portfolio of fixed
maturity securities. The We look to Manulife North America for the necessary
capital and cash financing to support its operations. In 1997 we received $47.7
million to support the growth of Manulife New York over several years and to
enable us to expand operations. In 1996 Manulife New York received $13.3 million
to support its growth for that year.
Manulife New York's net cash flows from operating activities were ($4.7)
million, ($1.9) million and $2.0 million for the years ended December 31, 1998,
1997 and 1996, respectively. The negative cash flows from operations for 1998
and 1997 are primarily related to increased commissions and acquisition expenses
associated with sales volumes and additional start-up costs associated with
expanded operations in New York. During 1996, our sales volumes were
significantly lower (39%) than 1997 levels which results in a lower cash strain
related to new business. In addition, we did not incur any start-up costs
associated with expanded operations in New York.
Manulife New York's net cash flows from investing activities were $5.9
million, ($50.3) million and ($13.9) million for the years ended December 31,
1998, 1997 and 1996, respectively. The increase in cash flows for 1998 resulted
primarily from fixed maturity securities maturing or sold offset by an increase
in purchases of fixed maturity securities. The negative cash flows in 1997 and
1996 were attributable to purchases of fixed maturity securities associated with
capital infusions of $47.7 million and $13.3 million in 1997 and 1996,
respectively.
Net cash provided by financing activities was $3.3 million, $49.6
million, and $5.0 million, for the years ended December 31, 1998, 1997 and 1996,
respectively. The increases in net cash provided resulted primarily from net
deposits to policyholder funds for 1998 and 1997 and capital contributions in
1997 and 1996. Offsetting the 1996 capital contributions were net redemptions
from policyholder funds and the repayment in 1996 of Manulife New York's line of
credit.
Aside from the financing required to partially fund acquisition costs,
Manulife New York's cash flows are adequate to meet the general obligations on
all annuity contracts.
Capital requirements and solvency protection
In order to enhance the regulation of insurer solvency, the NAIC has
established minimum Risk Based Capital (RBC) requirements. The requirements are
designed to monitor capital adequacy and to raise the level of protection that
statutory surplus provides for policyholders. The RBC model law requires that
life insurance companies report on a formula-based RBC standard which is
calculated by applying various factors to asset, premium and reserve items. The
formula takes into account risk characteristics of the life insurer, including
asset risk, insurance risk, interest rate risk and business risk. If an
insurer's ratio falls below certain thresholds, regulators will be authorized,
and in some circumstance required, to take regulatory action.
Manulife New York's policy is to maintain capital and surplus balances
well in excess of the minimums required under government regulations in all
jurisdictions in which we do business. At December 31, 1998 Manulife New York's
capital and surplus balances exceeded all such required minimums.
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Impact of Year 2000
Manulife New York makes extensive use of information systems in the
operations of its various businesses, including for the exchange of financial
data and other information with customers, suppliers and other counterparties.
Manulife New York also uses software and information systems provided by third
parties in its accounting, business and investment systems.
The Year 2000 risk, as it is commonly known, is the result of computer
programs being written using two digits, rather than four, to define the
applicable year. Any of our computer programs that have date-sensitive software
may recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in systems failures or miscalculations causing disruptions of
operations, including among other things, a temporary inability to process
transactions, send premium billing notices, make claims payments or engage in
other normal business activities.
The systems used by Manulife New York have been assessed as part of a
comprehensive written plan conducted by our ultimate parent company, The
Manufacturers Life Insurance Company (collectively with its subsidiaries
"Manulife"), to ensure that computer systems and processes of Manulife will
continue to perform through the end of this century and into the next.
In 1996, in order to make Manulife's systems Year 2000 compliant, a
program was instituted to modify or replace both Manulife's information
technology systems ("IT systems") and embedded technology systems ("Non-IT
systems"). The phases of this program include (i) an inventory and assessment of
all systems to determine which are critical, (ii) planning and designing the
required modifications and replacements, (iii) making these modifications and
replacements, (iv) testing modified or replaced systems, (v) redeploying
modified or replaced systems and (vi) final management review and certification.
For most IT and non-IT systems identified as critical, Manulife New York has
completed certification. Of those systems classified as critical, management
believes that over 99% were Year 2000 compliant at the end of 1998. Management
continues to focus attention on the remaining 1% of critical systems. Those that
affect Manulife New York are expected to be compliant by the end of the second
quarter in 1999. Management believes that Manulife New York's non-critical
systems will be Year 2000 compliant by the end of the second quarter 1999.
In addition to efforts directed at Manulife's own systems, Manulife is
presently consulting vendors, customers, and other third parties with which it
deals in an effort to ensure that no material aspect of Manulife's operations
will be hindered by Year 2000 problems of these third parties. This process
includes providing third parties with questionnaires regarding the state of
their Year 2000 readiness and, where possible or where appropriate, conducting
further due diligence activities.
Manulife recognizes the importance of preparing for the change to the
Year 2000 and, in January 1999, commenced preparation of contingency plans, in
the event that Manulife's Year 2000 program has not fully resolved its Year 2000
issues. The Year 2000 Project Management Office for Manulife's U.S. Division is
coordinating the preparation of the Year 2000 contingency plan on behalf of U.S.
Division affiliates and subsidiaries, including Manulife New York. A contingency
plan concerning Manulife New York is targeted for completion by the end of the
first quarter of 1999.
Management currently believes that, with modifications to existing
software and conversions to new software, the Year 2000 risk will not pose
significant operational problems for Manulife's computer systems. As part of the
Year 2000 program, critical systems were "time-shift" tested in the Year 2000
and beyond to confirm that they will continue to function properly before,
during and after the change to the Year 2000. However, there can be no assurance
that Manulife's Year 2000 program, including consulting third parties and its
contingency planning, will avoid any material adverse effect on Manulife New
York's operations, customer relations or financial condition. Manulife estimates
the total cost of its Year 2000 program will be approximately $59 million, of
which $49.5 million has been incurred through December 31, 1998; however, there
can be no assurance that the actual cost incurred will not be materially higher
than such estimate. Most costs will be expensed as incurred; however, those
costs attributed to the purchase of new software and hardware will generally be
capitalized. A proportional amount of the total cost will be allocated to
Manulife New York and is not expected to have a material effect on Manulife New
York's net operating income.
19
<PAGE> 24
Quantitative and Qualitative Disclosure About Market Risk
Market risk is the risk that we will incur losses due to adverse
changes in market rates and prices. The primary market risk exposure for
Manulife New York is the impact of lower than expected equity market performance
on its asset-related fee revenue. Manulife New York also has certain exposures
to changes in interest rates.
Equity Risk
Manulife New York earns asset based fees based on the asset levels
invested in the separate accounts. As a result, Manulife New York is subject to
equity risk and the effect changes in equity market levels will have on the
amounts invested in the separate accounts. Manulife New York estimates that the
effect of a 10% decline in equity fair values in force at December 31, 1998, if
the decline existed throughout 1999, would adversely affect Manulife New York's
asset based fees for 1999 by $2.0 million.
Interest Rate Risk
Interest rate risk is the risk that Manulife New York will incur
economic losses due to adverse changes in interest rates. This risk arises from
the issuance of certain interest sensitive annuity products and the investing of
those proceeds in fixed rate investments. Manulife New York manages its interest
rate risk through an asset/liability management program. Manulife New York has
established a target portfolio mix which takes into account the risk attributes
of the liabilities supported by the assets, expectations of market performance,
and a generally conservative investment philosophy. Preservation of capital and
maintenance of income flows are key objectives of this program. In addition,
Manulife New York has diversified its product portfolio offerings to include
products that contain features that will protect it against fluctuations in
interest rates. Those features include adjustable crediting rates, policy
surrender charges, and market value adjustments on liquidations.
Based upon Manulife New York's investment strategy, asset-liability
management process, and the calculated durations of its assets and liabilities
at December 31, 1998, management estimates that a 100 basis point immediate,
parallel increase in interest rates for the entire year of 1999 would decrease
the fair value of its duration managed assets by approximately $1.2 million.
There would be no effect on the fair value of Manulife New York's liabilities
because of the features inherent in Manulife New York's products.
Regulation
Manulife New York is subject to the laws of the State of New York
governing insurance companies and to the regulation of the New York Insurance
Department. Regulation by the New York Insurance Department includes periodic
examination of Manulife New York's financial position and operations, including
contract liabilities and reserves. Regulation by supervisory agencies includes
licensing to transact business, overseeing trade practices, licensing agents,
approving policy forms, establishing reserve requirements, fixing maximum
interest rates on life insurance policy loans and minimum rates for accumulation
of surrender values, prescribing the form and content of required financial
statements and regulation of the type and amounts of permitted investments.
Manulife New York's books and accounts are subject to review by the New York
Insurance Department and other supervisory agencies at all times, and Manulife
New York files annual statements with these agencies.
Several insurers affiliated with Manulife New York are domiciled in
Michigan and therefore are subject to Michigan regulation. Consequently, the
Michigan Insurance Bureau has jurisdiction in applying its laws and regulations
to transactions which may occur between Manulife New York and any of Manulife's
United States subsidiaries. Under Michigan holding company laws and other laws
and regulations, intercompany transactions, transfers of assets and dividend
payments may be subject to prior notification or approval depending upon the
size of such transfers and payments in relation to the financial positions of
the companies. Transactions between Manulife New York and Manulife or any of its
subsidiaries are primarily regulated by New York but may also be subject to
Delaware or Michigan regulation.
Under insurance guaranty fund laws in most states, insurers doing
business therein can be assessed (up to prescribed limits) for policyholder
losses incurred by insolvent companies. The amount of any future assessments on
Manulife New York under these laws cannot be reasonably estimated. Most of these
laws do provide, however,
20
<PAGE> 25
that an assessment may be excused or deferred if it would threaten an insurer's
own financial strength.
Although the federal government generally does not directly regulate
the business of insurance, federal initiatives often have an impact on the
business in a variety of ways. Federal legislation that removed barriers
preventing banks from engaging in the insurance business or that changed the
Federal income tax treatment of insurance companies, insurance company products,
or employee benefit plans could significantly affect the insurance business.
On January 20, 1998, the Board of Directors of Manulife announced that
it had asked the management of Manulife to prepare a plan for conversion from a
mutual life insurance company to an investor-owned, publicly-traded stock
company. Any demutualization plan for Manulife is subject to the approval of its
Board of Directors and policyholders, as well as regulatory approval.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For the Years Ended December 31
------------------------------------------------------------------------------
1998 1997 1996 1995 1994*
---------- ---------- ---------- ---------- ----------
(in thousands)
Under Generally Accepted Accounting Principles:
<S> <C> <C> <C> <C>
Total Revenues $ 21,460 $ 14,881 $ 10,075 $ 8,373
Net Income 1,073 586 1,542 833
Total Separate Account Assets 833,693 597,193 361,310 216,808
Total Assets 1,017,224 769,167 474,936 320,716
Shareholder's Equity 79,367 77,762 28,769 15,212
</TABLE>
* Selected financial data under generally accepted accounting principles is not
available for 1994. Prior to 1996, the Company prepared its financial statements
in conformity with accounting practices prescribed or permitted by the New York
Insurance Department which practices were considered GAAP for mutual life
insurance companies. FASB Interpretation 40, Applicability of Generally Accepted
Accounting Principles to Mutual Life Insurance and other Enterprises (FIN 40),
as amended, which was effective for 1996 annual financial statements, no longer
permitted statutory-basis financial statements to be described as being prepared
in conformity with GAAP. Accordingly, the Company has adopted various accounting
pronouncements, principally Statement of Financial Accounting Standards No. 120,
Accounting and Reporting by Mutual Life Insurance Enterprises and by Insurance
Enterprises for Certain Long-Duration Participating Contracts (SFAS No. 120),
which addresses the accounting for long-duration insurance contracts.
21
<PAGE> 26
Pursuant to the requirements of the above pronouncements, the effect of
the changes in accounting have been applied retroactively and the previously
issued 1995 financial statements have been restated for the change.
<TABLE>
<CAPTION>
For the Years Ended December 31
----------------------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
(in thousands)
On Statutory Basis **:
<S> <C> <C> <C> <C> <C>
Total Revenues $ 217,054 $ 204,226 $ 130,585 $ 99,077 $ 112,424
Net Income (Loss) (5,678) (1,562) 231 (579) (867)
Total Separate Account Assets 833,693 597,193 361,310 216,808 147,614
Total Assets 976,152 738,195 453,333 301,997 187,010
Capital and Surplus 62,881 68,336 22,265 8,822 8,104
</TABLE>
** Statutory accounting practices differ in certain respects from generally
accepted accounting principles. The significant differences relate to
consolidation accounting, investments, deferred acquisition costs, deferred
income taxes, non-admitted asset balances and reserve calculation assumptions.
Charges for investment management, administration and contract guarantees have
been reclassified from net transfers to total revenues for 1994-1997 to conform
to the current year statutory presentation.
All information presented elsewhere in this document is presented under
generally accepted accounting principles.
OUR OFFICERS AND DIRECTORS
The following table presents certain information regarding our
Directors and executive officers, including their age and principal occupations,
which, unless specific dates are shown, are of more than five years duration.
<TABLE>
<CAPTION>
Position with
Name Manulife New Principal Occupation
York
<S> <C> <C>
Bruce Avedon Director* Director, Manulife New York, March 1992 to present; Consultant
Age: 70 (self-employed) September 1983 to present.
Thomas Borshoff Director* Director, Manulife New York, February 1999 to present; Self-employed,
Age: 51 Real Estate Owner/Manager; Chief Executive Officer and Chairman,
First Federal Savings and Loan of Rochester, 1983 to 1997.
John D. DesPrez III Director* Executive Vice President, U.S. Operations, Manulife, January 1999 to
Age: 42 present; Director, WLA, October 1996 to present; Director, September
1996 to present and Chairman of the Board, January 1999 to present,
of Manulife North America; President, Manulife North America,
September 1996 to December 1998; President, MIT September 1996 to
present; Senior Vice President, U.S. Annuities, Manulife, September
1996 to December 1998; Vice President, Mutual Funds, Manulife,
January 1995 to September 1996; Director, MWL, December 1995 to
present; Director, Wood Logan Distributors, March 1993 to present;
President, North American Funds, March 1993 to September 1996;
Director, Manulife New York, March 1992 to present; Vice President,
Secretary and General Counsel, Manulife North America, January 1991
to June 1994.
</TABLE>
22
<PAGE> 27
23
<PAGE> 28
<TABLE>
<CAPTION>
Position with
Name Manulife New Principal Occupation
York
<S> <C> <C>
Ruth Ann Flemming Director* Director, Manulife New York, March 1992 to present; Attorney,
Age: 40 consulting services and pro bono activities.
Tracy A. Kane Secretary and Secretary and Counsel, Manulife New York, May 1994 to present;
Age: 37 Counsel Assistant Vice President and Senior Counsel, Manulife North America,
April 1993 to present; Counsel, Fidelity Investments, prior to April
1993.
Theodore F. Kilkuskie Director* Senior Vice President, U.S. Annuities, Manulife, January 1999 to
Age: 43 present; President, Manulife North America, January 1999 to present;
Director, Manulife New York, November 1997 to present; Senior Vice
President, U.S. Individual Insurance, Manulife, August 1998 to
December 1998; Director, ManAmerica, May 1996 to present; Director,
MWL, April 1996 to present; Vice President, U.S. Individual
Insurance, Manulife, June 1995 to February 1998; Executive Vice
President, Mutual Fund Sales & Marketing, State Street Research &
Management, March 1994 to June 1995.
David W. Libbey Treasurer Vice President, Treasurer and Chief Financial Officer, Manulife North
Age: 52 America, December 1997 to present; Treasurer, Manulife New York,
November 1997 to present; Vice President, Finance, Manulife North
America, June 1997 to December 1997; Vice President, Finance,
Annuities, Manulife, June 1997 to present; Vice President & Actuary,
Paul Revere Insurance Group, June 1970 to March 1997.
A. Scott Logan Director* and Director and President, Manulife New York, February 1998 to present;
Age: 59 President Director, MWL, December 1995 to present; Director, Wood Logan
Distributors, July 1990 to present; Director and President, WLA,
August 1986 to present.
James O'Malley Director* Senior Vice President, U.S. Pensions, Manulife, January 1999 to
Age: 52 present; Director, Manulife New York, November 1998 to present;
Director, ManAmerica, November 1998 to present; Vice President,
Systems New Business Pensions, Manulife, 1984 to December 1998.
Neil M. Merkl, Esq. Director* Director, Manulife New York, December 1995 to present; Attorney
Age: 67 (self-employed), April 1994 to present; Attorney, Wilson Elser, 1979
to 1994.
John Richardson Director and Senior Executive Vice President, Manulife, January 1999 to present;
Age: 61 Chairman of Executive Vice President, U.S. Operations, Manulife, November 1997 to
the Board of December 1998; Chairman of the Board, MWL, April 1997 to present;
Directors* Director, March 1997 to present and Chairman of the Board, March 1997
to December 1998, Manulife North America; Director and Chairman of
the Board, Manulife New York, November 1996 to present; Director,
MWL, December 1995 to present; Director and Chairman of the Board,
ManAmerica, January 1995 to present; Senior Vice President and
General Manager, U.S. Operations, Manulife, January 1995 to October
1997; Senior Vice President and General Manager, Canadian Operations,
Manulife, June 1992 to December 1994.
James K. Robinson Director* Director, Manulife New York, March 1992 to present; Retired; Attorney
Age: 71 and Assistant Secretary, Eastman Kodak Company, 1958 to 1991.
</TABLE>
24
<PAGE> 29
<TABLE>
<CAPTION>
Position with
Name Manulife New Principal Occupation
York
<S> <C> <C>
John G. Vrysen Vice Chief Financial Officer and Treasurer, MWL, January 1996 to present;
Age: 43 President and Vice President and Chief Financial Officer, U.S. Operations,
Chief Actuary Manulife, January 1996 to present; Appointed Actuary, Man
America, May 1996 to present; Director, MWL, December 1995 to
present; Vice President and Chief Actuary, Manulife New York, March
1992 to present; Director, Manulife New York, March 1992 to February
1998; Vice President and Chief Actuary, Manulife North America,
January 1986 to present.
</TABLE>
*Each Director is elected to serve until the next annual meeting of shareholders
or until his or her successor is elected and qualified.
EXECUTIVE COMPENSATION
Manulife New York's executive officers may also serve as officers of
one or more of Manulife's affiliates. Allocations have been made as to such
officers' time devoted to duties as executive officers of Manulife New York. The
following table shows the allocated compensation paid or awarded to or earned by
Manulife New York's Chief Executive Officer for services provided to Manulife
New York. No other executive officer had allocated cash compensation in excess
of $100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
- -------------------- ------- ---------- --------- ------------- ------------ ----------------- --------- -------------
Name and Principal Year Salary Bonus Other Restricted Securities LTIP All Other
Position Annual Stock Underlying Payout Compensation
Compensation Award(s) Options/SARs
- -------------------- ------- ---------- --------- ------------- ------------ ----------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A. Scott Logan, 1998 $95,219 N/A N/A N/A N/A N/A N/A
President(1)
- -------------------- ------- ---------- --------- ------------- ------------ ----------------- --------- -------------
</TABLE>
(1) Mr. Logan is an employee of Wood Logan Associates Inc. which is a partially
owned subsidiary of Manulife and a portion of his salary is allocated to
Manulife New York which is disclosed above. Therefore, Mr. Logan does not
participate in Manulife's compensation programs or The Manufacturer's Life
Insurance Company (U.S.A.) retirement plans. Employees of Manulife New York
participate in the compensation programs described below.
Our Directors, who are also officers or employees of us or our
affiliates, receive no compensation in addition to their compensation as
officers or employees of us or our affiliates. Our Directors who are not
officers and employees of us or our affiliates receive the following
compensation: $5,000 annual retainer, paid quarterly, $1,000 per meeting
attended in person, and $200 per meeting attended by telephone. Our Chief
Executive Officer is a minority owner of our affiliated company, MWL.
The Management Resources and Compensation Committee (the "Committee")
of the Board of Directors is comprised of six external directors. The
Committee's principal mandate is to approve the appointment, succession and
remuneration of Manulife's Executive Vice Presidents and Senior Vice Presidents,
including the Named Executive Officers. For the President and Chief Executive
Officer of Manulife, the Committee makes compensation recommendations that are
then approved by the entire Board. The Committee also approves the compensation
programs for all other officers as well as the annual review of the Annual
Incentive Plan awards and Long-Term Incentive Plan grants for all officers of
Manulife and it's subsidiaries.
In addition to the annual reviews, the Committee approves any major
changes to all policies which are designed to attract, retain, develop and
motivate employees and all pension plans of Manulife and it's subsidiaries.
25
<PAGE> 30
Manulife's executive compensation policies are designed to recognize
and reward individual performance as well as provide a total compensation
package which is competitive with the median of Manulife's comparator group,
which is comprised of Schedule I banks and major life insurance companies.
Further, Manulife ensures that its compensation levels are competitive within
local markets outside of Canada.
Manulife's executive compensation program is comprised of three key
components; base salary, annual incentives and long-term incentives. Officers of
Manulife New York participate in the following Manulife compensation programs.
Salary
The Committee approves the salary ranges and salary increase levels for
all of Manulife's Executive and Senior Vice Presidents individually, and all
Vice Presidents as a group, based on competitive industry data for all markets
in which Manulife operates. Salary increases for Manulife's officers have been
consistent with the salary increase programs approved for all employees.
In establishing Manulife's competitive position and developing annual
salary increase programs, Manulife uses several annual surveys as prepared by
independent compensation consulting firms with reference to publicly disclosed
information.
Annual Incentive Plan
Manulife's Annual Incentive Plan ("AIP") provides executive officers of
Manulife with the opportunity to earn incentive bonuses based on the achievement
of pre-established corporate and divisional earnings objectives and divisional
and individual performance objectives.
The Committee and management periodically review the design of the
incentive plan to ensure that it:
(i) is competitive with Manulife's comparator groups;
(ii) supports, and aligns, with Manulife's strategic
objectives; and
(iii) recognizes and rewards individual contributions and
value creation.
In conducting these reviews, Manulife obtains advice from independent, external
consultants.
The AIP uses earnings and performance measures to determine awards with
predetermined thresholds for each component as approved by the Committee
annually. Incentive awards are established for each participant based on
organizational level. Incentive award levels range from 12% to 60% of base
salary assuming achievement of targeted performance objectives. When corporate
and divisional performance objectives are significantly exceeded, a participant
can receive incentive awards ranging from 30% to 150% of base salary. If
corporate and divisional performance objectives are below targeted performance,
the incentive awards are adjusted downward according to plan guidelines. The
Named Executive Officers participate in the AIP on the same basis as all other
officers.
Long-Term Incentive Plan
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Estimated Future Payouts Under
Non-Securities-Price-Based Plans (US $)
-----------------------------------------------------
Name Securities Units Performance or Other Threshold Target Maximum
or Other Rights Period Until ($ or #) ($ or #) ($ or #)
(#) Maturation or Payout
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
A. Scott Logan N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Manulife's Board of Directors approved the implementation of a
Long-Term Incentive Plan ("LTIP") effective April 1, 1994. All employees at the
Vice President level and above are eligible to participate in the LTIP.
26
<PAGE> 31
The purpose of the LTIP is to encourage executive officers to act in
the long-term interests of Manulife and to provide an opportunity to share in
value creation as measured by changes in Manulife's statutory surplus. The LTIP
is an appreciation rights plan which requires that a substantial portion of any
accumulated gain remain invested with Manulife during the participant's career
with Manulife
The Committee reviews the LTIP on an annual basis having regard to
Manulife's performance, targeted growth and competitive position. The Committee
approves grants on a prospective basis considering management's recommendations
for participation, size and terms of grant.
Grants of appreciation rights are generally made to participants in the
LTIP each year. The number of appreciation rights granted to participants is
determined based on the net present value of the potential payout represented by
the appreciation rights, assuming that Manulife's surplus grows at a targeted
rate. Appreciation rights are granted such that this net present value
represents between 20% and 115% of the participant's salary level on the date of
grant
Perquisites
In addition to cash compensation, all officers are entitled to a
standard benefit package including medical, dental, basic and dependent life
insurance, long and short-term disability coverage and defined contribution or
defined benefit plan.
US domiciled officers at the Vice President levels and above are
provided with an automobile and parking benefit, cellular telephone and
computer. The automobile benefit covers insurance and maintenance. There are no
other benefit packages which currently enhance overall compensation by more than
10%.
Canadian domiciled officers at the Vice President levels and above are
eligible to receive the Executive Flexible Spending Account. The objective of
the program is to assist and encourage the executive officers to represent the
interests and high standards of Manulife, both from a business and a personal
perspective. The program's flexibility allows use of the allowance for benefit
choices from a comprehensive list of options, including: car, mortgage subsidy
and club memberships.
Us Retirement Plans
With the integration of the Manulife and North American Life
operations, a review of the retirement programs for the employees in the United
States was conducted in 1998. As a result of this review, effective July 1,
1998, (i) the two defined benefit pension plans (The Manulife Financial United
States Salaried Employees Pension Plan and the North American Life Staff Pension
Fund 1948 for United States Members) were merged and converted to a Cash Balance
Plan, entitled "The Manulife Financial U.S. Cash Balance Plan"; (ii) the
Supplemental Pension Plan for United States Salaried Employees of Manufacturers
Life Insurance Company was converted into a Cash Balance Supplemental Plan,
entitled "The Manulife Financial U.S. Supplemental Cash Balance Plan"; and,
(iii) the two 401(k) plans (The Manulife Financial 401(k) Savings Plan and the
North American Security Life 401(k) Savings Plans) were merged and restated into
The Manulife Financial U.S. 401(k) Savings Plan.
The executives of Manulife New York are eligible to participate in the
three restated retirement plans as sponsored by The Manufacturer's Life
Insurance Company (U.S.A.).
The Manulife Financial Cash Balance Plan
To implement the conversion to the Cash Balance Plan, participants in
the two former defined benefit plans were provided with opening account balances
equal to the value of their accrued benefit under their respective prior plan
participation as at June 30, 1998, using interest rate assumption equal to the
Pension Benefit Guaranty Corporation (PBGC) rate for 1998.
Under this plan, which is a defined benefit plan, a separate account is
established for each participant. The account receives company contribution
credits based on vesting service and earnings as outlined in the table below.
The account earns semi-annual interest credits based on the yield of one-year
Treasury bills plus half a
27
<PAGE> 32
percentage point, subject to a minimum interest credit of 5.25%. The yearly
maximum amount of eligible pay allowed under the qualified plan is $160,000 for
1998. Employees are vested after 3 years of vesting service. Normal retirement
age is 65. Pension benefits are provided to those who terminate after three
years of vesting service, and the normal retirement benefit is actuarially
equivalent to the cash balance account at normal retirement date. Early benefits
are actuarially equivalent to the normal retirement benefits but are subsidized
for participants who were age 45 and 5 or more years of vesting service on July
1, 1998 and who terminate employment after attaining age 50 and completing 10
years of service. For these grandfathered participants, the prior early
retirement factors under the Manulife Plan apply. The normal form of payment
under the Cash Balance Plan is a life annuity, with various optional forms
available, including a lump sum equal to the cash balance account.
COMPANY CONTRIBUTION CREDITS
YEARS OF VESTING SERVICE PERCENTAGE OF ELIGIBLE PAY
Less than 6 4%
6, but less than 11 5%
11, but less than 16 7%
16, but less than 21 9%
21 or more 11%
Projected Cash Balance Plan pension benefits at age 65 payable as an annual life
annuity.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Years of Service
- ---------------------------------------------------------------------------------------------------------------------
Renumeration ($) 15 20 25 30 35
- ---------------------------------------------------------------------------------------------------------------------
$ $ $ $ $
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$150,000 16,960 30,178 49,664 76,018 111,659
- ---------------------------------------------------------------------------------------------------------------------
175,000 18,090 32,190 52,975 81,086 119,103
- ---------------------------------------------------------------------------------------------------------------------
200,000 18,090 32,190 52,975 81,086 119,103
- ---------------------------------------------------------------------------------------------------------------------
225,000 18,090 32,190 52,975 81,086 119,103
- ---------------------------------------------------------------------------------------------------------------------
250,000 18,090 32,190 52,975 81,086 119,103
- ---------------------------------------------------------------------------------------------------------------------
300,000 18,090 32,190 52,975 81,086 119,103
- ---------------------------------------------------------------------------------------------------------------------
400,000 18,090 32,190 52,975 81,086 119,103
- ---------------------------------------------------------------------------------------------------------------------
500,000 18,090 32,190 52,975 81,086 119,103
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The Manulife Financial U.S. Supplemental Cash Balance Plan
In addition to their pension plan benefits, executives are eligible for
benefits under The Manulife Financial U.S. Supplemental Cash Balance Plan. This
is a non-contributory, non-qualified plan, the purpose of which is to provide
the executives with the same level of retirement benefits they would have been
entitled to but for the limitations prescribed for qualified plans under the
Internal Revenue Code. Opening account balances were established using the same
method as The Manulife Financial U.S. Cash Balance Plan. During the period of an
executive's active participation in the plan, annual company contributions are
made with respect to the portion of the executives earnings which is in excess
of $160,000 for 1998 as outlined below with interest credited under this plan at
the same rate as provided under the Cash Balance Plan. In addition, a one time
contribution may be made for a participant if it is determined at the time of
their termination of employment, that the participant's pension benefit under
the Cash Balance Plan is limited by Internal Revenue Code Section 415. Together,
these contributions serve to restore to the participant the benefit that they
would have been entitled to under the Cash Balance Plan's benefit formula but
for the limitations, in Internal Revenue Code Sections 401(a)(17) and 415.
Benefits are provided to those who terminate after three years. The default form
of payment under the plan is a lump sum, although participants may elect to
receive payment in the form of an annuity provided that such election is made
within the time period prescribed in the plan.
28
<PAGE> 33
<TABLE>
<CAPTION>
COMPLETE YEARS OF CASH BALANCE SERVICE PERCENTAGE OF ELIGIBLE PAY UP TO PERCENTAGE OF ELIGIBLE PAY OVER
CREDITS AS OF $200,000 $200,000
DECEMBER 31ST
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Less than 6 4% 4%
6, but less than 11 5% 5%
11, but less than 16 7% 5%
16, but less than 21 9% 5%
21 or more 11% 5%
</TABLE>
Projected Supplemental pension benefits at age 65 payable as an annual life
annuity.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Years of Service
- --------------------------------------------------------------------------------------------------------------------
Renumeration ($) 15 20 25 30 35
- --------------------------------------------------------------------------------------------------------------------
$ $ $ $ $
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$150,000 0 0 0 0 0
- --------------------------------------------------------------------------------------------------------------------
175,000 1,696 3,018 4,966 7,602 11,166
- --------------------------------------------------------------------------------------------------------------------
200,000 4,523 8,048 13,244 20,271 29,776
- --------------------------------------------------------------------------------------------------------------------
225,000 7,081 12,178 19,501 29,404 42,797
- --------------------------------------------------------------------------------------------------------------------
250,000 9,639 16,309 25,757 38,536 55,818
- --------------------------------------------------------------------------------------------------------------------
300,000 14,756 24,570 38,271 56,801 81,861
- --------------------------------------------------------------------------------------------------------------------
400,000 24,990 41,092 63,298 93,330 133,946
- --------------------------------------------------------------------------------------------------------------------
500,000 35,224 57,615 88,325 129,859 186,031
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Projected Cash Balance and Supplemental pension benefits at age 65 payable as an
annual annuity.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Years of Service
- --------------------------------------------------------------------------------------------------------------------
Renumeration ($) 15 20 25 30 35
- --------------------------------------------------------------------------------------------------------------------
$ $ $ $ $
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$150,000 16,960 30,178 49,664 76,018 111,659
- --------------------------------------------------------------------------------------------------------------------
175,000 19,786 35,208 57,941 88,688 130,269
- --------------------------------------------------------------------------------------------------------------------
200,000 22,613 40,238 66,219 101,357 148,879
- --------------------------------------------------------------------------------------------------------------------
225,000 25,171 44,368 72,476 110,490 161,900
- --------------------------------------------------------------------------------------------------------------------
250,000 27,729 48,499 78,732 119,622 174,921
- --------------------------------------------------------------------------------------------------------------------
300,000 32,846 56,760 91,246 137,887 200,964
- --------------------------------------------------------------------------------------------------------------------
400,000 43,080 73,282 116,273 174,416 253,049
- --------------------------------------------------------------------------------------------------------------------
500,000 53,314 89,805 141,300 210,945 305,134
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
The Manulife Financial U.S. 401(k) Savings Plan
In addition to the above, plans a 401(k) Savings Plan is also offered.
The plan allows employees of Manulife New York to contribute on a pre-tax basis
1% to 15% of their earnings up to the yearly limit of $160,000 for 1998. The
yearly maximum an employee can contribute is $10,000 for 1998. The company
matches 50% of the first 6% of contributions. Employees become 100% vested in
the employer matching contributions as outlined in the vesting schedule below.
Additionally they become 100% vested if they retire on or after age 65, become
disabled or die.
YEARS OF VESTING SERVICE VESTED PERCENTAGE
Less than 2 years 0%
2 years but less than 3 50%
3 years and thereafter 100%
29
<PAGE> 34
Canadian Retirement Plan
Executive officers domiciled in Canada, and certain executive officers
formerly domiciled in Canada, are eligible to participate in Manulife's Canadian
Staff Pension Plan and to receive supplemental pension benefits under Manulife's
supplemental retirement income program. Under these plans, income is payable for
the life of the executive officer, with a guarantee of a minimum of 120 monthly
payments. If the executive officer is married, the income is actuarially
adjusted to a joint and survivor pension which pays a set amount during the life
of the executive officer. Upon the death of the executive officer, this amount
is reduced by one-third and is payable for the life of the spouse (provided that
in no event is this amount reduced prior to 60 months from the date of
retirement).
Pensionable earnings for this purpose are calculated as the highest
average of the base earnings and bonuses earned over any 36 consecutive months.
The pension benefit is determined by years of service multiplied by the sum of
1.3% of pensionable earnings up to the average of the last three years maximum
pensionable earnings ("YMPE") plus 2.0% of the excess of pensionable earnings
over the average YMPE, without regard to the maximum pension limit for
registered pension plans imposed by Revenue Canada.
Employees hired after the age of 40 who become executive officers at
the vice president level and above within one year of hire may also receive
additional service credits equal to their actual period of service, to a maximum
of 10 years.
The following table sets forth the aggregate standard annual benefits
payable to executive officers under Manulife's Canadian Staff Pension Plan and
supplemental retirement income program.
<TABLE>
<CAPTION>
Years of Service
Remuneration 15 20 25 30 35
- ------------------------------------- --------------- ---------------- --------------- -------------- --------------
$ $ $ $ $ $
- ------------------------------------- --------------- ---------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
125,000 34,978 46,637 58,296 69,955 81,615
- ------------------------------------- --------------- ---------------- --------------- -------------- --------------
150,000 42,478 56,637 70,796 84,955 99,115
- ------------------------------------- --------------- ---------------- --------------- -------------- --------------
175,000 49,978 66,637 83,296 99,955 116,615
- ------------------------------------- --------------- ---------------- --------------- -------------- --------------
200,000 57,478 76,637 95,796 114,955 134,115
- ------------------------------------- --------------- ---------------- --------------- -------------- --------------
225,000 64,978 86,637 108,296 129,955 151,615
- ------------------------------------- --------------- ---------------- --------------- -------------- --------------
250,000 72,478 96,637 120,796 144,955 169,115
- ------------------------------------- --------------- ---------------- --------------- -------------- --------------
300,000 87,478 116,637 145,796 174,955 204,115
- ------------------------------------- --------------- ---------------- --------------- -------------- --------------
400,000 117,478 156,637 195,796 234,955 274,115
- ------------------------------------- --------------- ---------------- --------------- -------------- --------------
450,000 132,478 176,637 220,796 264,955 309,115
- ------------------------------------- --------------- ---------------- --------------- -------------- --------------
500,000 147,478 196,637 245,796 294,955 344,115
- ------------------------------------- --------------- ---------------- --------------- -------------- --------------
600,000 177,478 236,637 295,796 354,955 414,115
- ------------------------------------- --------------- ---------------- --------------- -------------- --------------
700,000 207,478 276,637 345,796 414,955 484,115
- ------------------------------------- --------------- ---------------- --------------- -------------- --------------
800,000 237,478 316,637 395,796 474,955 554,115
- ------------------------------------- --------------- ---------------- --------------- -------------- --------------
900,000 267,478 356,637 445,796 534,955 624,115
- ------------------------------------- --------------- ---------------- --------------- -------------- --------------
1,000,000 297,478 396,637 495,796 594,955 694,115
- ------------------------------------- --------------- ---------------- --------------- -------------- --------------
</TABLE>
OUR SEPARATE ACCOUNT G
In 1997 we established The Manufacturers Life Insurance Company of New
York Separate Account G, formerly FNAL Fixed Separate Account (the "Fixed
Account"), as a separate account under the laws of New York. The Fixed Account
holds assets that are segregated from all of our other assets. We currently use
the Fixed Account only to support the obligations under the contracts offered by
this prospectus. These obligations are based on interest rates credited to the
contracts and do not depend on the investment performance of the Fixed Account.
Any gain or loss in the Fixed Account accrues solely to us, and we assume any
risk associated with the possibility that the value of the assets in the Fixed
Account might fall below the reserves and other liabilities that we must
maintain. Should the value of the assets in the Fixed Account fall below
reserves and other liabilities, we will transfer assets from our general account
to the Fixed Account to make up the shortfall. We reserve the right to transfer
to our general account any assets of the Fixed Account in excess of such
reserves and other liabilities and
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<PAGE> 35
to maintain assets in the Fixed Account which support any number of annuities
which we offer or may offer. The assets of the Fixed Account are not insulated
from the claims of our creditors and may be charged with liabilities which arise
from other business conducted by us. Thus, we may, at our discretion if
permitted by applicable state law, transfer existing Fixed Account assets to, or
place future Fixed Account allocations in, our general account for purposes of
administration.
We will invest the assets of the Fixed Account in those assets chosen
by us and permitted by applicable New York State laws for separate account
investment.
DISTRIBUTION OF THE CONTRACT
Manufacturers Securities Services, LLC ("MSS"), the successor to NASL
Financial Services, Inc., is a Delaware limited liability company that is
controlled by Manulife North America. We own a 10% ownership interest in MSS.
MSS is the principal underwriter and exclusive distributor of the contracts. MSS
also is the investment adviser to MIT. MSS is a broker-dealer registered under
the 1934 Act and a member of the National Association of Securities Dealers,
Inc. (the "NASD") and is duly appointed and licensed as our insurance agent. MSS
is located at 73 Tremont Street, Boston, Massachusetts 02108.
We have entered into an Underwriting Distribution Agreement with MSS
where we appointed MSS the principal underwriter and exclusive representative
for the distribution of all insurance products and authorized MSS to enter into
agreements with selling broker-dealers and general agents for the distribution
of the products. Sales of the contracts will be made by registered
representatives of broker-dealers authorized by us and MSS to sell the
contracts. Those registered representatives will also be our licensed insurance
agents. MSS will pay distribution compensation to selling brokers in varying
amounts which under normal circumstances are not expected to exceed 1% of
purchase payments plus 0.80% of the contract value per year commencing one year
after each initial purchase payment.
CONFIRMATION STATEMENTS
You will be sent confirmation statements for certain transactions in
your account. You should carefully review these statements to verify their
accuracy and should immediately report any mistake to our Annuity Service
Office. If you fail to notify our Annuity Service Office of any mistake within
60 days of the mailing of the confirmation statement, you will be deemed to have
ratified the transaction.
LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary
routine litigation, to which we are a party or to which any of our property is
subject and, to the best of our knowledge, no such proceedings are contemplated
by any governmental authority.
LEGAL MATTERS
Tracy A. Kane, Esq., our Secretary and Counsel, has passed upon all
matters of applicable state law pertaining to the contract, including our right
to issue the contract thereunder.
INDEPENDENT AUDITORS
The consolidated financial statements at December 31, 1998 and 1997,
and for each of the three years in the period ended December 31, 1998 appearing
in this Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
NOTICES AND REPORTS TO CONTRACT OWNERS
At least once each contract year, we will send you a statement showing
the contract value of the contract as of the date of the statement. The
statement will also show premium payments and any other information required by
any applicable law or regulation.
31
<PAGE> 36
CONTRACT OWNER INQUIRIES
You should direct inquiries to our Annuity Service Office mailing
address at Annuity Service Office, P.O. Box 9013, Boston, MA 02205-9013.
FEDERAL TAX MATTERS
INTRODUCTION
The following discussion of the federal income tax treatment of the
contracts is not exhaustive, does not purport to cover all situations, and is
not intended as tax advice. The federal income tax treatment of the contracts is
unclear in certain circumstances, and you should consult a qualified tax adviser
with regard to the application of law to individual circumstances. This
discussion is based on the Code, IRS regulations, and interpretations existing
on the date of this prospectus. These authorities, however, are subject to
change by Congress, IRS, and judicial decisions. This discussion does not
address state or local tax consequences associated with the purchase of the
contracts.
WE MAKE NO GUARANTEE REGARDING ANY TAX TREATMENT, FEDERAL, STATE OR
LOCAL, OF ANY CONTRACT OR OF ANY TRANSACTION INVOLVING A CONTRACT.
OUR TAX STATUS
We are taxed as a life insurance company under the Code. The assets in
the separate accounts are owned by us, and the income derived from such assets
is includible as income for federal income tax purposes.
TAXATION OF ANNUITIES IN GENERAL
Tax Deferral During Accumulation Period
Under existing provisions of the Code, except as described below, any
increase in contract value is generally not taxable to you as the contract owner
or to the annuitant until received, either in the form of annuity payments as
contemplated by the contracts or in some other form of distribution. However,
this rule applies only if the contract owner is an individual.
As a general rule, deferred annuity contracts held by "non-natural
persons," such as a corporation, trust or other similar entity, as opposed to a
natural person, are not treated as annuity contracts for federal income tax
purposes. The income on such contracts (as defined in the tax law) is taxed as
ordinary income that is received or accrued by the owner during the taxable
year. There are several exceptions to this general rule for non-natural contract
owners. First, annuity contracts will generally be treated as held by a natural
person if the nominal owner is a trust or other entity which holds the contract
as an agent for a natural person. However, this exception will not apply in the
case of any employer which is the nominal owner of an annuity contract under a
non-qualified deferred compensation arrangement for its employees.
Other exceptions to the general rule for non-natural contract owners
will apply with respect to:
- annuity contracts acquired by an estate of a decedent
by reason of the death of the decedent,
- annuity contracts issued in connection with certain
qualified retirement plans,
- annuity contracts purchased by employers upon the
termination of certain qualified retirement plans,
- certain annuity contracts used in connection with
structured settlement agreements, and
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<PAGE> 37
- annuity contracts purchased with a single premium
when the annuity starting date is no later than a
year from purchase of the annuity and substantially
equal periodic payments are made, not less frequently
than annually, during the annuity period.
In addition to the foregoing, if the contract's maturity date occurs,
or is scheduled to occur, at a time when the annuitant is at an advanced age,
such as over age 85, it is possible that the owner will be taxable currently on
the annual increase in the contract value.
The remainder of this discussion assumes that the contract will
constitute an annuity for federal tax purposes.
Taxation of Partial and Total Withdrawals
In the case of a partial withdrawal, amounts received generally are
includible in income to the extent the owner's contract value before the
withdrawal exceeds his or her "investment in the contract." In the case of a
total withdrawal, amounts received are includible in income to the extent they
exceed the "investment in the contract." For these purposes, the investment in
the contract at any time equals the total of the purchase payments made under
the contract to that time (to the extent such payments were neither deductible
when made nor excludable from income as, for example, in the case of certain
employer contributions to Qualified Contracts) less any amounts previously
received from the contract which were not included in income.
Other than in the case of Qualified Contracts (which generally cannot
be assigned or pledged), any assignment or pledge (or agreement to assign or
pledge) any portion of the contract value is treated as a withdrawal of such
amount or portion. The investment in the contract is increased by the amount
includible in income with respect to such assignment or pledge, though it is not
affected by any other aspect of the assignment or pledge (including its
release). If you transfer your interest in a contract without adequate
consideration to a person other than your spouse (or a former spouse incident to
divorce), you will be taxed on the difference between your contract value and
the investment in the contract at the time of transfer. In such case, the
transferee's investment in the contract will be increased to reflect the
increase in the transferor's income.
There is some uncertainty regarding the treatment of the market value
adjustment for purposes of determining the amount includible in income as a
result of any partial withdrawal or transfer without adequate consideration.
Congress has given the IRS regulatory authority to address this uncertainty.
However, as of the date of this prospectus, the IRS has not issued any
regulations addressing these determinations.
Taxation of Annuity Payments
Normally, the portion of each annuity payment taxable as ordinary
income is equal to the excess of the payment over the exclusion amount. The
exclusion amount is the amount determined by multiplying (1) the payment by (2)
the ratio of the investment in the contract, adjusted for any period certain or
refund feature, to the total expected value of annuity payments for the term of
the contract (determined under IRS regulations). A simplified method of
determining the taxable portion of annuity payments applies to contracts issued
in connection with certain Qualified Plans other than IRAs.
Once the total amount of the investment in the contract is excluded
using this ratio, annuity payments will be fully taxable. If annuity payments
cease because of the death of the annuitant and before the total amount of the
investment in the contract is recovered, the unrecovered amount generally will
be allowed as a deduction to the annuitant in his or her last taxable year.
There may be special income tax issues present in situations where the
owner and the annuitant are not the same person or are not married. You should
consult a tax adviser in those situations.
Taxation of Death Benefit Proceeds
Amounts may be distributed from a contract because of the death of an
owner or the annuitant. Prior to the maturity date, such death benefit proceeds
are includible in income as follows:
33
<PAGE> 38
- if distributed in a lump sum, they are taxed in the
same manner as a full withdrawal, as described above,
or
- if distributed under an annuity option, they are
taxed in the same manner as annuity payments, as
described above.
After the maturity date, where a guaranteed period exists under an
annuity option and the annuitant dies before the end of that period, payments
made to the beneficiary for the remainder of that period are includible in
income as follows:
- if received in a lump sum, they are includible in
income to the extent that they exceed the unrecovered
investment in the contract at that time, or
- if distributed in accordance with the existing
annuity option selected, they are fully excludable
from income until the remaining investment in the
contract is deemed to be recovered, and all annuity
payments thereafter are fully includible in income.
Penalty Tax on Premature Distributions
Where a contract has not been issued in connection with a Qualified
Plan, there generally is a 10% penalty tax on the taxable amount of any payment
from the contract. Exceptions to this penalty tax include distributions:
- received on or after the owner reaches age 59 1/2;
- attributable to the owner becoming disabled (as
defined in the tax law);
- made on or after the death of the owner or, if the
owner is not an individual, on or after the death of
the primary annuitant (as defined in the tax law);
- made as a series of substantially equal periodic
payments (not less frequently than annually) for the
life (or life expectancy) of the owner or the joint
lives (or joint life expectancies) of the owner and a
"designated beneficiary" (as defined in the tax law),
or
- made under a contract purchased with a single premium
when the maturity date is no later than a year from
purchase of the contract and substantially equal
periodic payments are made, not less frequently than
annually, during the annuity period.
Aggregation of Contracts
In certain circumstances, the IRS may determine the amount of an
annuity payment or a withdrawal from a contract that is includible in income by
combining some or all of the annuity contracts owned by an individual which are
not issued in connection with a Qualified Plan. For example, if you purchases a
contract offered by this prospectus and also purchases at approximately the same
time an immediate annuity, the IRS may treat the two contracts as one contract.
In addition, if you purchase two or more deferred annuity contracts
from the same insurance company (or its affiliates) during any calendar year,
all such contracts will be treated as one contract for purposes of determining
whether any payment not received as an annuity (including withdrawals prior to
the maturity date) is includible in income. Thus, if during a calendar year you
buy two or more of the contracts offered by this prospectus (which might be
done, for example, in order to invest amounts in different guarantee periods),
all of such contracts would be treated as one contract in determining whether
withdrawals from any of such contracts are includible in income.
The effects of such aggregation are not clear and depend on the
circumstances. However, aggregation could affect the amount of a withdrawal that
is taxable and the amount that might be subject to the 10% penalty tax described
above.
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<PAGE> 39
Loss of Interest Deduction Where Contracts are Held by or for the
Benefit of Certain Non-Natural Persons
In the case of contracts issued after June 8, 1997 to a
non-natural taxpayer (such as a corporation or a trust) or held for the benefit
of such an entity, recent changes in the tax law may result in a portion of
otherwise deductible interest no longer being deductible by the entity,
regardless of whether the interest relates to debt used to purchase or carry the
contract. However, this interest deduction disallowance does not affect
contracts where the income on such contracts is treated as ordinary income that
is received or accrued by the owner during the taxable year. Entities that are
considering purchasing the contract, or entities that will be beneficiaries
under a contract, should consult a tax adviser.
QUALIFIED RETIREMENT PLANS
In General
The contracts are also designed for use in connection with
certain types of qualified retirement plans which receive favorable treatment
under the Code. Numerous special tax rules apply to participants in such
Qualified Plans and to contracts used in connection with such Qualified Plans.
In this prospectus we provide only general information about the use of the
contract with the various types of Qualified Plans. Persons intending to use the
contract in connection with a qualified plan should seek competent advice.
The tax rules applicable to Qualified Plans vary according to
the type of plan and the terms and conditions of the plan itself. For example,
for both withdrawals and annuity payments under certain qualified contracts,
there may be no "investment in the contract" and the total amount received may
be taxable. Both the amount of the contribution that may be made, and the tax
deduction or exclusion that the owner may claim for such contribution, are
limited under Qualified Plans. If you are considering purchasing a contract for
use in connection with a qualified retirement plan, you should consider, in
evaluating the suitability of the contract, that the contract allows only a
single premium purchase payment in an amount of at least $5,000. If this
contract is used in connection with a Qualified Plan, the owner and annuitant
must be the same individual. If a co-annuitant is named, all distributions made
while the annuitant is alive must be made to the annuitant. Also, if a
co-annuitant is named who is not the annuitant's spouse, the annuity options
which are available may be limited, depending on the difference in ages between
the annuitant and co-annuitant. Furthermore, the length of any guarantee period
may be limited in some circumstances. Additionally, for contracts issued in
connection with Qualified Plans subject to the Employee Retirement Income
Security Act, the spouse or ex-spouse of the owner will have rights in the
contract. In such a case, the owner may need the consent of the spouse or
ex-spouse to change annuity options or make a withdrawal from the contract.
In addition, special rules apply to the time at which
distributions must commence and the form in which the distributions must be
paid. For example, failure to comply with minimum distribution requirements
applicable to Qualified Plans will result in the imposition of an excise tax.
This excise tax generally equals 50% of the amount by which a minimum required
distribution exceeds the actual distribution from the Qualified Plan. In the
case of Individual Retirement Accounts ("IRAs") (other than Roth IRAs),
distributions of minimum amounts (as specified in the tax law) must generally
commence by April 1 of the calendar year following the calendar year in which
the owner attains age 70 1/2. In the case of certain other Qualified Plans,
distributions of such minimum amounts generally must commence by the later of
this date or April 1 of the calendar year following the calendar year in which
the employee retires.
35
<PAGE> 40
There is also a 10% penalty tax on the taxable amount of any payment
from certain qualified contracts. (The amount of the penalty tax is 25% of the
taxable amount of any payment received from a "SIMPLE retirement account" during
the 2-year period beginning on the date the individual first participated in any
qualified salary reduction agreement (as defined in the tax law) maintained by
the individual's employer.) There are exceptions to this penalty tax which vary
depending on the type of Qualified Plan. In the case of an IRA, including a
"SIMPLE IRA," exceptions provide that the penalty tax does not apply to a
payment (a) received on or after the owner reaches age 59 1/2, (b) received on
or after the owner's death or because of the owner's disability (as defined in
the tax law), or (c) made as a series of substantially equal periodic payments
(not less frequently than annually) for the life (or life expectancy) of the
owner or for the joint lives (or joint life expectancies) of the owner and
designated beneficiary (as defined in the tax law). These exceptions, as well as
certain others not described herein, generally apply to taxable distributions
from other Qualified Plans (although, in the case of plans qualified under
sections 401 and 403, exception "c" above for substantially equal periodic
payments applies only if the owner has separated from service). In addition, the
penalty tax does not apply to certain distributions from IRAs which are used for
qualified first time home purchases or for higher education expenses. Special
conditions must be met to qualify for these two exceptions to the penalty tax.
If you wish to take a distribution from an IRA for these purposes, you should
consult your tax adviser.
When issued in connection with a Qualified Plan, a contract will be
amended as generally necessary to conform to the requirements of the plan.
However, owners, annuitants, and beneficiaries are cautioned that the rights of
any person to any benefits under Qualified Plans may be subject to the terms and
conditions of the plans themselves, regardless of the terms and conditions of
the contract. In addition, we will not be bound by terms and conditions of
Qualified Plans to the extent such terms and conditions contradict the contract,
unless we consent.
Qualified Plan Types
Following are brief descriptions of various types of Qualified Plans in
connection with which we may issue a contract.
Individual Retirement Annuities. Section 408 of the Code permits
eligible individuals to contribute to an individual retirement program known as
an IRA. IRAs are subject to limits on the amounts that may be contributed and
deducted, the persons who may be eligible and on the time when distributions may
commence. Also, distributions from certain Qualified Plans may be "rolled over"
on a tax-deferred basis into an IRA. The contract may not be used in connection
with an "Education IRA" under Section 530 of the Code.
Simplified Employee Pensions (SEP-IRAs). Section 408(k) of the Code
allows employers to establish simplified employee pension plans for their
employees, using the employees' IRAs for such purposes, if certain criteria are
met. Under these plans the employer may, within specified limits, make
deductible contributions on behalf of the employees to IRAs.
SIMPLE IRAs. Section 408(p) of the Code permits certain small employers
to establish "SIMPLE retirement accounts," including SIMPLE IRAs, for their
employees. Under SIMPLE IRAs, certain deductible contributions are made by both
employees and employers. SIMPLE IRAs are subject to various requirements,
including limits on the amounts that may be contributed, the persons who may be
eligible, and the time when distributions may commence.
Roth IRAs. Section 408A of the Code permits eligible individuals to
contribute to a type of IRA known as a "Roth IRA." Roth IRAs are generally
subject to the same rules as non-Roth IRAs, but differ in certain respects.
Among the differences are that contributions to a Roth IRA are not
deductible and "qualified distributions" from a Roth IRA are excluded from
income. A qualified distribution is a distribution that satisfies two
requirements. First, the distribution must be made in a taxable year that is at
least five years after the first taxable year for which a contribution to any
Roth IRA established for the owner was made. Second, the distribution must be:
- made after the owner attains age 59 1/2;
- made after the owner's death;
- attributable to the owner being disable; or
36
<PAGE> 41
- - a qualified first-time homebuyer distribution within the meaning of
Section 72(t)(2)(F) of the Code.
In addition, distributions from Roth IRAs need not commence when the
owner attains age 70 1/2. A Roth IRA may accept a "qualified rollover
contribution" from a non-Roth IRA, but a Roth IRA may not accept rollover
contributions from other Qualified Plans.
Corporate and Self-Employed ("H.R. 10" and "Keogh") Pension and
Profit-Sharing Plans. Sections 401(a) and 403(a) of the Code permit corporate
employers to establish various types of tax-favored retirement plans for
employees. The Self-Employed Individuals' Tax Retirement Act of 1962, as
amended, commonly referred to as "H.R. 10" or "Keogh," permits self-employed
individuals also to establish such tax-favored retirement plans for themselves
and their employees. Such retirement plans may permit the purchase of the
contract in order to provide benefits under the plans.
Tax-Sheltered Annuities. Section 403(b) of the Code permits public
school employees and employees of certain types of charitable, educational and
scientific organizations specified in Section 501(c)(3) of the Code to have
their employers purchase annuity contracts for them and, subject to certain
limitations, to exclude the amount of purchase payments from gross income for
tax purposes. These annuity contracts are commonly referred to as "tax-sheltered
annuities."
Section 403(b) policies contain restrictions on withdrawals of (i)
contributions made pursuant to a salary reduction agreement in years beginning
after December 31, 1988, (ii) earnings on those contributions, and (iii)
earnings in such years on amounts held as of the last year beginning before
January 1, 1989. These amounts can be paid only if the employee has reached age
59 1/2, separated from service, died, become disabled, or in the case of
hardship. Amounts permitted to be distributed in the event of hardship are
limited to actual contributions; earnings thereon cannot be distributed on
account of hardship. Amounts subject to the withdrawal restrictions applicable
to Section 403(b)(7) custodial accounts may be subject to more stringent
restrictions. (These limitations on withdrawals do not apply to the extent we
are directed to transfer some or all of the contract value to the issuer of
another tax-sheltered annuity or into a Section 403(b)(7) custodial account.)
Direct Rollover Rules
In the case of contracts used in connection with a pension,
profit-sharing, or annuity plan qualified under Sections 401(a) or 403(a) of the
Code, or in the case of a Section 403(b) tax sheltered annuity, any "eligible
rollover distribution" from the contract will be subject to direct rollover and
mandatory withholding requirements. An eligible rollover distribution generally
is any taxable distribution from a qualified pension plan under Section 401(a)
of the Code, qualified annuity plan under Section 403(a) of the Code, or Section
403(b) tax sheltered annuity or custodial account, excluding certain amounts
(such as minimum distributions required under Section 401(a)(9) of the Code,
distributions which are part of a "series of substantially equal periodic
payments" made for life or a specified period of 10 years or more, and hardship
distributions).
Under these requirements, withholding at a rate of 20% will be imposed
on any eligible rollover distribution. In addition, the participant in these
qualified retirement plans cannot elect out of withholding with respect to an
eligible rollover distribution. However, this 20% withholding will not apply if,
instead of receiving the eligible rollover distribution, the participant elects
to have amounts directly transferred to certain Qualified Plans or Contracts
(such as to an IRA). Prior to receiving an eligible rollover distribution, a
notice will be provided explaining generally the direct rollover and mandatory
withholding requirements and how to avoid the 20% withholding by electing a
direct rollover.
FEDERAL INCOME TAX WITHHOLDING
We will withhold and remit to the U.S. government a part of the taxable
portion of each distribution made under a contract unless the distributee
notifies us at or before the time of the distribution that he or she elects not
to have any amounts withheld. In certain circumstances, we may be required to
withhold tax. The withholding rates applicable to the taxable portion of
periodic annuity payments are the same as the withholding rates generally
applicable to payments of wages. The withholding rate applicable to the taxable
portion of non-periodic payments (including withdrawals prior to the maturity
date and rollovers from non-Roth IRAs to Roth IRAs) is 10%. As described above,
the withholding rate applicable to eligible rollover distributions is 20%.
37
<PAGE> 42
APPENDIX A
EXAMPLES OF CALCULATION OF WITHDRAWAL CHARGE
EXAMPLE 1 - Assume you make a single payment of $50,000 into the contract, there
are no transfers or partial withdrawals and your withdrawal is not made at the
end of a guarantee period. The table below illustrates three examples of the
withdrawal charges that we would impose if the contract were completely
withdrawn during the contract year shown, based on hypothetical contract values
and assuming no market value adjustment.
<TABLE>
<CAPTION>
AMOUNT
AVAILABLE
WITHOUT
HYPOTHETICAL IMPOSITION OF AMOUNT SUBJECT TO
CONTRACT CONTRACT WITHDRAWAL WITHDRAWAL WITHDRAWAL
YEAR VALUE CHARGE CHARGE CHARGE
--------------------------
PERCENT AMOUNT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2 55,000 5,000(a) 50,000 6% 3,000
6 60,000 5,000(b) 55,000 2% 1,100
8 70,000 5,000 0(c) 0% 0
</TABLE>
(a) During any contract year the amount available without the imposition of
a withdrawal charge is 10% of the single payment made under the
contract less any prior partial withdrawals in that contract year. Ten
percent of payments less prior withdrawals equals $5,000 ($5,000-0).
Consequently, on total withdrawal, you withdraw $5,000 without
imposition of the withdrawal charge, and we assess the withdrawal
charge against the remaining balance of $50,000 (contract value less
amount available without imposition of a withdrawal charge).
(b) The amount available without imposition of a withdrawal charge again
equals $5,000, and we apply the withdrawal charge to the remaining
balance of $55,000 (contract value less amount available without
imposition of a withdrawal charge).
(c) We do not assess a withdrawal charge after 7 contract years.
EXAMPLE 2 - Assume you make a single payment of $50,000 into the contract and
that no transfers are made. The table below illustrates two partial withdrawals
of $2,000 and $7,000 made during the third contract year and assumes no market
value adjustment applies.
<TABLE>
<CAPTION>
AMOUNT
AVAILABLE
WITHOUT
HYPOTHETICAL PARTIAL IMPOSITION OF AMOUNT SUBJECT TO
CONTRACT WITHDRAWAL WITHDRAWAL WITHDRAWAL WITHDRAWAL
VALUE REQUESTED CHARGE CHARGE CHARGE
---------------------------
PERCENTAGE AMOUNT
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
65,000 2,000 5,000(a) 0 5% 0
63,000 7,000 3,000(b) 4,000 5% 200
</TABLE>
(a) The amount you may withdraw without imposition of a withdrawal charge
during any contract year is 10% of the single payment made under the
contract less any prior withdrawals in that contract year. Ten percent
of the payment less prior withdrawals equals $5,000 ($5,000-0). The
amount requested ($2,000) is less than the amount available without
imposition of a withdrawal charge; therefore, no withdrawal charge
applies.
38
<PAGE> 43
(b) Since $2,000 has already been withdrawn in the current contract year,
the remaining amount available without imposition of a withdrawal
charge during the third contract year is $3,000. The $7,000 partial
withdrawal will consist of $3,000 without imposition of withdrawal
charge, and the remaining $4,000 will be subject to a withdrawal
charge.
We may subject withdrawals to a market value adjustment in addition to the
withdrawal charge described above (see "MARKET VALUE ADJUSTMENT.")
39
<PAGE> 44
APPENDIX B
MARKET VALUE ADJUSTMENT EXAMPLES
We determine the market value adjustment factor by the following formula:
((1+i)/(1+j)) [to the power of n/12] where:
i - The initial guaranteed interest rate or renewal guaranteed interest
rate currently being earned on the contract.
j - The guaranteed interest rate available, on the date we process the
request, for a guarantee period with the same length as the period
remaining in the initial guarantee period or renewal guarantee period.
If the guarantee period of this length is not available, we will choose
the guarantee period with the next highest duration which we maintain.
n - The number of complete months remaining to the end of the initial
guarantee period or renewal guarantee period.
<TABLE>
Example 1
<S> <C>
Payment $100,000
Initial guarantee period 5 years
Initial guaranteed interest rate 5.00% per annum
Guaranteed interest rate for three 6.00% per annum
year guarantee period
Transfer to a different guarantee period middle of contract year 3
Contract value at middle of contract year 3 =$100,000 x 1.05 [to the power of 2.5] = $112,972.63
Amount transferred to a different =$112,972.63 x market value adjustment factor
guarantee period
Market value adjustment factor =((1+i)/(1+j))[to the power of n/12]
i = .05
j = .06
n = 30
=(1.05/1.06)[to the power of 30/12]
=0.9765817
Amount transferred to a different =$112,972.63 x 0.9765817
guarantee period =$110,327.00
</TABLE>
40
<PAGE> 45
<TABLE>
Example 2
<S> <C>
Payment $100,000
Initial guarantee period 5 years
Initial guaranteed interest rate 5.00% per annum
Guaranteed interest rate for three 4.00% per annum
year guarantee period
Transfer to a different guarantee period middle of contract year 3
Contract value at middle of contract year 3 =$100,000 x 1.05[to the power of 2.5] = $112,972.63
Amount transferred to a different =$112,972.63 x market value adjustment factor
guarantee period
Market value adjustment factor =((1+i)/(1+j))[ to the power of n/12]
i = .05
j = .04
n = 30
=(1.05/1.04)[to the power of 30/12]
=1.0242121
Amount transferred to a different =$112,972.63 x 1.0242121
guarantee period =$115,707.93
</TABLE>
41
<PAGE> 46
APPENDIX C
STATE PREMIUM TAXES
Premium taxes vary according to the state and are subject to change. In
many jurisdictions there is no tax at all. For current information, a tax
adviser should be consulted.
<TABLE>
<CAPTION>
TAX RATE
QUALIFIED NON-QUALIFIED
STATE CONTRACTS CONTRACTS
<S> <C> <C>
CALIFORNIA........................................... .50% 2.35%
DISTRICT OF COLUMBIA................................. 2.25% 2.25%
KENTUCKY............................................. 2.00% 2.00%
MAINE................................................ .00% 2.00%
NEVADA............................................... .00% 3.50%
PUERTO RICO.......................................... 1.00% 1.00%
SOUTH DAKOTA*........................................ .00% 1.25%
WEST VIRGINIA........................................ 1.00% 1.00%
WYOMING.............................................. .00% 1.00%
</TABLE>
* Premium tax paid upon receipt of premium (no tax at annuitization if tax paid
on premium at issue).
42
<PAGE> 47
OUR FINANCIAL STATEMENTS
43
<PAGE> 48
AUDITED FINANCIAL STATEMENTS
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
Years ended December 31, 1998, 1997 and 1996
44
<PAGE> 49
The Manufacturers Life Insurance Company of New York
Audited Financial Statements
Years ended December 31, 1998, 1997 and 1996
CONTENTS
Report of Independent Auditors................................................1
Audited Financial Statements
Balance Sheets................................................................2
Statements of Income..........................................................3
Statements of Changes in Shareholder's Equity.................................4
Statements of Cash Flows......................................................5
Notes to Financial Statements.................................................6
45
<PAGE> 50
Report of Independent Auditors
The Board of Directors and Shareholder
The Manufacturers Life Insurance Company of New York
We have audited the accompanying balance sheets of The Manufacturers Life
Insurance Company of New York (formerly First North American Life Assurance
Company and hereinafter referred to as the Company) as of December 31, 1998 and
1997, and the related statements of income, changes in shareholder's equity, and
cash flows for each of the three years in the period ended December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements 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 that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Manufacturers Life
Insurance Company of New York at December 31, 1998 and 1997, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
February 22, 1999
46
<PAGE> 51
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
BALANCE SHEETS
<TABLE>
<CAPTION>
As at December 31
ASSETS ($ thousands) 1998 1997
- --------------------------------------------------------------------------------------------------------------------
Investments
Fixed maturity securities available-for-sale, at fair value
<S> <C> <C>
(note 3) $ 125,088 $ 129,151
(amortized cost: 1998 $120,902; 1997 $126,714)
Investment in unconsolidated affiliate 175 -
Policy loans 552 398
Short-term investments 10,032 9,998
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $ 135,847 $ 139,547
- --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents $ 5,946 $ 1,431
Accrued investment income 3,073 2,401
Deferred acquisition costs (note 4) 36,831 28,364
Other assets 1,834 231
Separate account assets 833,693 597,193
- --------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 1,017,224 $ 769,167
- --------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDER'S EQUITY ($ thousands)
- --------------------------------------------------------------------------------------------------------------------
Liabilities:
Policyholder liabilities and accruals $ 94,492 $ 86,611
Payable to affiliates 4,114 4,345
Deferred income taxes (note 5) 3,615 2,269
Other liabilities 1,943 987
Separate account liabilities 833,693 597,193
- --------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES $ 937,857 $ 691,405
- --------------------------------------------------------------------------------------------------------------------
Shareholder's equity:
Common stock (note 6) $ 2,000 $ 2,000
Additional paid-in capital 72,706 72,531
Retained earnings 3,209 2,136
Accumulated other comprehensive income 1,452 1,095
- --------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDER'S EQUITY $ 79,367 $ 77,762
- --------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 1,017,224 $ 769,167
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
47
<PAGE> 52
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the years ended December 31
($ thousands) 1998 1997 1996
- --------------------------------------------------------------- ------------------- ---------------- ----------------
REVENUES:
<S> <C> <C> <C>
Fees from separate accounts and policyholder liabilities $ 10,961 $ 7,395 $ 4,762
Net investment income (note 3) 9,786 6,717 5,224
Net realized investment gains 713 769 89
- --------------------------------------------------------------- ------------------- ---------------- ----------------
TOTAL REVENUE $ 21,460 $ 14,881 $ 10,075
- --------------------------------------------------------------- ------------------- ---------------- ----------------
BENEFITS AND EXPENSES:
Policyholder benefits and claims $ 4,603 $ 4,747 $ 4,189
Amortization of deferred acquisition costs (note 4) 4,849 3,393 2,319
Other insurance expenses 10,359 5,845 1,192
- --------------------------------------------------------------- ------------------- ---------------- ----------------
TOTAL BENEFITS AND EXPENSES $ 19,811 $ 13,985 $ 7,700
- --------------------------------------------------------------- ------------------- ---------------- ----------------
INCOME BEFORE INCOME TAXES $ 1,649 $ 896 $ 2,375
- --------------------------------------------------------------- ------------------- ---------------- ----------------
INCOME TAXES (note 5) $ 576 $ 310 $ 833
- --------------------------------------------------------------- ------------------- ---------------- ----------------
NET INCOME $ 1,073 $ 586 $ 1,542
- --------------------------------------------------------------- ------------------- ---------------- ----------------
</TABLE>
See accompanying notes.
48
<PAGE> 53
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
Accumulated
Other Total
Common Additional Retained Comprehensive Shareholder's
($ thousands) Stock Paid-in Capital Earnings Income Equity
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1996 $2,000 $ 11,500 $ 8 $ 1,704 $ 15,212
Capital contribution 13,300 13,300
Comprehensive income (note 2) 1,542 (1,285) 257
-------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 $2,000 $ 24,800 $ 1,550 $ 419 $ 28,769
Capital contribution 47,731 47,731
Comprehensive income (note 2) 586 676 1,262
-------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 $2,000 $ 72,531 $ 2,136 $ 1,095 $ 77,762
Capital contribution 175 175
Comprehensive income (note 2) 1,073 357 1,430
-------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 $2,000 $ 72,706 $ 3,209 $ 1,452 $ 79,367
-------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
49
<PAGE> 54
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended December 31
($ thousands) 1998 1997 1996
- ---------------------------------------------------------------------------- --------------- ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,073 $ 586 $ 1,542
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Amortization of bond discount and premium 434 333 141
Net realized investment gains (713) (769) (89)
Provision for deferred income tax 1,153 (29) 220
Amortization of deferred acquisition costs 4,849 3,393 2,319
Policy acquisition costs deferred (14,515) (11,684) (7,224)
Return credited to policyholders and other benefits 4,603 4,747 4,189
Changes in assets and liabilities:
Accrued investment income (672) (873) (7)
Other assets (1,603) (80) 196
Payable to affiliates (231) 2,328 865
Other liabilities 956 115 (153)
- ---------------------------------------------------------------------------- --------------- ------------ ------------
Net cash (used in) provided by operating activities $ (4,666) $ (1,933) $ 1,999
- ---------------------------------------------------------------------------- --------------- ------------ ------------
INVESTING ACTIVITIES:
Fixed maturity securities sold, matured or repaid $ 30,591 $ 59,307 $ 31,659
Fixed maturity securities purchased (24,500) (103,383) (41,409)
Net change in short-term investments (34) (6,011) (3,985)
Policy loans advanced, net (154) (215) (116)
- ---------------------------------------------------------------------------- --------------- ------------ ------------
Cash provided by (used in) investing activities $ 5,903 $ (50,302) $ (13,851)
- ---------------------------------------------------------------------------- --------------- ------------ ------------
FINANCING ACTIVITIES:
Deposits and interest credited to policyholder funds 14,212 17,212 18,408
Return of policyholder funds (10,934) (15,382) (24,676)
Change in notes payable - - (2,000)
Capital contribution by parent - 47,731 13,300
- ---------------------------------------------------------------------------- --------------- ------------ ------------
CASH PROVIDED BY FINANCING ACTIVITIES $ 3,278 $ 49,561 $ 5,032
- ---------------------------------------------------------------------------- --------------- ------------ ------------
Cash and cash equivalents:
Increase (decrease) during the year 4,515 (2,674) (6,820)
Balance, beginning of year 1,431 4,105 10,925
- ---------------------------------------------------------------------------- --------------- ------------ ------------
BALANCE, END OF YEAR $ 5,946 $ 1,431 $ 4,105
- ---------------------------------------------------------------------------- --------------- ------------ ------------
</TABLE>
See accompanying notes
50
<PAGE> 55
The Manufacturers Life Insurance Company of New York
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(In Thousands of Dollars)
1. ORGANIZATION
The Manufacturers Life Insurance Company of New York (First North
American Life Assurance Company prior to October 1, 1997, and
hereinafter referred to as "the Company"), is a stock life insurance
company which was organized on February 10, 1992 under the laws of the
State of New York. The New York Insurance Department ("the Department")
granted the Company a license to operate on July 22, 1992. The Company
is a wholly-owned subsidiary of The Manufacturers Life Insurance
Company of North America (formerly North American Security Life
Insurance Company and hereinafter referred to as "MNA"), which is in
turn a wholly-owned subsidiary of Manulife-Wood Logan Holding Co., Inc.
("MWL"). MWL is 62.5% owned by The Manufacturers Life Insurance Company
(USA) (ManUSA), 22.5% by MRL Holding, LLC, ("MRL") and 15% by minority
interest shareholders. ManUSA and MRL are indirectly wholly-owned
subsidiaries of The Manufacturers Life Insurance Company ("Manulife
Financial"), a federally chartered Canadian mutual life insurance
company.
The Company issues individual and group annuity and individual life
insurance contracts (collectively, the contracts) in the State of New
York. Amounts invested in the fixed portion of the contracts are
allocated to the general account or a non-insulated separate account of
the Company. Amounts invested in the variable portion of the contracts
are allocated to the separate accounts of the Company. Each of these
separate accounts invests in shares of the various portfolios of the
Manufacturers Investment Trust (formerly NASL Series Trust and
hereinafter referred to as "MIT"), a no-load, open-end investment
management company organized as a Massachusetts business trust, or in
open-end investment management companies offered and managed by
unaffiliated third parties.
Prior to October 1, 1997, the Company sold and administered only
combination fixed and variable annuity products. On October 21, 1997,
the Company received approval from the Department for a revised plan of
operations which expanded its product offerings. MNA contributed
$47,731 to the Company in support of the revised plan of operations.
Prior to October 1, 1997, NASL Financial Services Inc. ("NASL
Financial"), an affiliate of the Company, acted as investment adviser
to MIT and as principal underwriter of the annuity contracts issued by
the Company. Effective October 1, 1997, Manufacturers Securities
Services, LLC ("MSS"), the successor to NASL Financial and an affiliate
of the Company, replaced NASL Financial as the investment advisor to
MIT and as the principal underwriter for the variable contracts and
exclusive distributor of all contracts issued by the Company.
51
<PAGE> 56
1. ORGANIZATION (CONTINUED)
Prior to October 1, 1997, Wood Logan Associates Inc. ("WLA"), a
subsidiary of MWL, acted as the promotional agent for the sale of the
Company's contracts. Since October 1, 1997, marketing services for the
sale of all contracts issued by the Company and other services are
provided by certain affiliates of the Company pursuant to an
Administrative Services Agreement and an Investment Services Agreement
between the Company and Manulife Financial. Currently, services are
provided by Manulife Financial, WLA, MNA, and ManUSA.
On October 31, 1998, the Company received a 10% interest in the
members' equity of MSS from MNA, the managing member of MSS. The
Company treated the receipt of its equity interest as a contribution to
paid-in capital of $175.
2. SIGNIFICANT ACCOUNTING POLICIES
a) BASIS OF PRESENTATION
The accompanying financial statements of the Company have been prepared
in conformity with generally accepted accounting principles ("GAAP").
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes.
Actual results could differ from reported results using those
estimates.
b) RECENT ACCOUNTING STANDARDS
i) During 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and
displaying comprehensive income and its components in a full set
of general-purpose annual financial statements. Comprehensive
income includes all changes in shareholder's equity during a
period except those resulting from investments by and
distributions to shareholders. The adoption of SFAS No. 130
resulted in revised and additional disclosures but had no effect
on the financial position, results of operations, or liquidity of
the Company.
52
<PAGE> 57
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Total comprehensive income was as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1998 1997 1996
---------------------------------------------------------------- -------------- ------------ -------------
<S> <C> <C> <C>
NET INCOME $ 1,073 $ 586 $ 1,542
---------------------------------------------------------------- -------------- ------------ -------------
Other comprehensive income, net of tax:
Unrealized holding gains (losses) arising during the year 820 1,176 (1,227)
Less:
Reclassification adjustment for realized gains included in
net Income 463 500 58
---------------------------------------------------------------- -------------- ------------ -------------
Other comprehensive income (loss) 357 676 (1,285)
---------------------------------------------------------------- -------------- ------------ -------------
COMPREHENSIVE INCOME $ 1,430 $ 1,262 $ 257
---------------------------------------------------------------- -------------- ------------ -------------
</TABLE>
Other comprehensive income (loss) is reported net of taxes of $192,
$364, and ($692) for 1998, 1997, and 1996, respectively.
ii) During 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No. 131
establishes standards for the disclosure of information about the
Company's operating segments, including disclosures about products
and services, geographic areas, and major customers. The adoption
of SFAS No. 131 did not affect results of operations or financial
position, nor did it affect the manner in which the Company defines
its operating segments. The Company reports three business segments:
Annuities, Savings and Retirement Services, and Life Insurance. The
Annuities segment consists of annuity contracts that provide the
customer with the opportunity to invest in mutual funds managed by
independent investment managers and the Company or in the general
account of the Company, with investment returns accumulating on a
tax-deferred basis. The Savings and Retirement Services segment
offers 401(k) products to customers in the State of New York. The
Individual Life Insurance segment offers traditional non-
participating life insurance to the New York market. The Savings
and Retirement Services segment was launched in mid - 1998 and
the Individual Life Insurance segment was launched in late 1997.
Both these segments are considered to be in the start-up phase.
No significant assets or revenues have been generated to date in
these two segments. Start-up costs, on a pre-tax basis, reported
for these two segments totaled approximately $534 and $2,399,
respectively in 1998 and $1,551 for the Individual Life Insurance
segment in 1997. The following is a summary of the contribution
to net income of the three business segments:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1998 1997 1996
-------------------------------------------------------- ----------------- --------------- ---------------
<S> <C> <C> <C>
Annuities $ 2,623 $ 1,594 $ 1,542
Savings and Retirement Services - -
(318)
Life Insurance (1,008) -
(1,232)
-------------------------------------------------------- ----------------- --------------- ---------------
NET INCOME (LOSS) $ 1,073 $ 586 $ 1,542
-------------------------------------------------------- ----------------- --------------- ---------------
</TABLE>
53
<PAGE> 58
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
c) INVESTMENTS
The Company classifies all of its fixed maturity securities as
available-for-sale and records these securities at fair value. Realized
gains and losses on sales of securities classified as
available-for-sale are recognized in net income using the specific
identification method. Changes in the fair value of securities
available-for-sale are reflected directly in accumulated other
comprehensive income after adjustments for deferred taxes and deferred
acquisition costs. Discounts and premiums on investments are amortized
using the effective interest method.
The cost of fixed maturity securities is adjusted for the amortization
of premiums and accretion of discounts using the interest method. This
amortization or accretion is included in net investment income.
For the mortgage-backed bond portion of the fixed maturity securities
portfolio, the Company recognizes amortization using a constant
effective yield based on anticipated prepayments and the estimated
economic life of the securities. When actual prepayments differ
significantly from anticipated prepayments, the effective yield is
recalculated to reflect actual payments to date and anticipated future
payments. The net investment in the security is adjusted to the amount
that would have existed had the new effective yield been applied since
the acquisition of the security. That adjustment is included in net
investment income.
Policy loans are reported at aggregate unpaid balances which
approximate fair value.
Short-term investments which include investments with maturities of
less than one year and greater than 90 days at the date of acquisition,
are reported at amortized cost which approximates fair value.
d) CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with
an original maturity date of three months or less to be cash
equivalents. Cash equivalents are stated at cost plus accrued interest,
which approximates fair value.
54
<PAGE> 59
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
e) DEFERRED ACQUISITION COSTS (DAC)
Commissions and other expenses which vary with and are primarily
related to the production of new business are deferred to the extent
recoverable and included as an asset. Acquisition costs associated with
annuity contracts and investment pension contracts are being amortized
generally in proportion to the present value of expected gross profits
from surrender charges and investment, mortality and expense margins.
The amortization is adjusted retrospectively when estimates of current
or future gross profits are revised. DAC associated with traditional
non-participating individual insurance policies is charged to expense
over the premium paying period of the related policies. DAC is adjusted
for the impact on estimated future gross profits assuming the
unrealized gains or losses on securities had been realized at year-end.
The impact of any such adjustments is included in net unrealized gains
(losses) in accumulated other comprehensive income. DAC is reviewed
annually to determine recoverability from future income and, if not
recoverable, it is immediately expensed.
f) POLICYHOLDER LIABILITIES AND ACCRUALS
Policyholder liabilities equal the policyholder account value for the
fixed portion of annuity contracts and for investment pension contracts
with no substantial mortality risk. Account values are increased for
deposits received and interest credited and are reduced by withdrawals.
For traditional non-participating life insurance policies, policyholder
liabilities are computed using the net level premium method and are
based upon estimates as to future mortality, persistency, maintenance
expenses and interest rate yields that are applicable in the year of
issue. The assumptions include a provision for the risk of adverse
deviation.
g) SEPARATE ACCOUNTS
Separate account assets and liabilities that are reported in the
accompanying balance sheets represent investments in MIT, which are
mutual funds that are separately administered for the exclusive benefit
of the policyholders of the Company and its affiliates, or open-end
investment management companies offered and managed by unaffiliated
third parties, which are mutual funds that are separately administered
for the benefit of the Company's policyholders and other shareholders.
These assets and liabilities are reported at fair value. The
policyholders, rather than the Company, bear the investment risk. The
operations of the separate accounts are not included in the
accompanying financial statements. Fees charged on separate account
policyholder funds are included in revenues.
55
<PAGE> 60
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
h) REVENUE RECOGNITION
Fee income from separate accounts, annuity contracts and investment
pension contracts consists of charges for mortality, expenses and
surrender and administration charges that have been assessed against
the policyholder account balances. Premiums on traditional
non-participating life insurance policies are recognized as revenue
when due and currently are included in Fees from Separate Accounts and
Policyholder Liabilities in the statements of income. Investment income
is recorded as revenue when due.
i) POLICYHOLDER BENEFITS AND CLAIMS
Benefits for annuity contracts and investment pension contracts include
interest credited to policyholder account balances and benefit claims
incurred during the period in excess of policyholder account balances.
j) INCOME TAXES
Income taxes have been provided using the liability method in
accordance with SFAS No. 109, "Accounting for Income Taxes." Under this
method, deferred tax assets and liabilities are determined based on
differences between the financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that
likely will be in effect when the differences are expected to reverse.
The measurement of deferred tax assets is reduced by a valuation
allowance if, based upon the available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized.
3. INVESTMENTS AND INVESTMENT INCOME
a) FIXED MATURITY SECURITIES
At December 31, 1998 and 1997, all fixed maturity securities have been
classified as available-for-sale and reported at fair value. The
amortized cost and fair value are summarized as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED COST UNREALIZED UNREALIZED FAIR VALUE
AS AT DECEMBER 31, GAINS LOSSES
($ thousands) 1998 1997 1998 1997 1998 1997 1998 1997
------------------------------- ----------- ---------- -------- ------- ------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. government $ 11,018 $ 7,422 $ 591 $ 284 ($15) $ $ 11,594 $ 7,706
-
Corporate securities 99,696 108,682 3,321 1,879 (35) (23) 102,982 110,538
Mortgage-backed securities 6,680 5,016 125 69 (21) - 6,784 5,085
Foreign governments 2,449 - 111 - - - 2,560 -
States/political subdivisions 1,059 5,594 109 228 - - 1,168 5,822
------------------------------- ----------- ---------- -------- ------- ------- ------- ---------- ---------
Total fixed maturity securities $ 120,902 $126,714 $ 4,257 $2,460 ($71) ($23) $ 125,088 $129,151
------------------------------- ----------- ---------- -------- ------- ------- ------- ---------- ---------
</TABLE>
56
<PAGE> 61
3. INVESTMENTS AND INVESTMENT INCOME (CONTINUED)
Proceeds from sales of fixed maturity securities during 1998 were
$17,985 (1997 $45,217; 1996 $6,559). Gross gains of $715 and gross
losses of $2 were realized on those sales (1997 $772 and $6; 1996 $91
and $2 respectively).
The contractual maturities of fixed maturity securities at December 31,
1998 are shown below. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or prepay
obligations with or without prepayment penalties. Corporate
requirements and investment strategies may result in the sale of
investments before maturity.
<TABLE>
<CAPTION>
($ thousands) AMORTIZED COST FAIR VALUE
-----------------------------------------------------------------------------------------------------------
FIXED MATURITY SECURITIES
<S> <C> <C>
One year or less $ 13,083 $13,117
Greater than 1; up to 5 years 61,861 63,525
Greater than 5; up to 10 years 21,812 22,807
Due after 10 years 17,466 18,855
Mortgage-backed securities 6,680 6,784
-----------------------------------------------------------------------------------------------------------
TOTAL FIXED MATURITY SECURITIES $120,902 $125,088
-----------------------------------------------------------------------------------------------------------
</TABLE>
Fixed maturity securities with a fair value of $410 and $414 at December
31, 1998 and 1997, respectively, were on deposit with, or in custody
accounts on behalf of, New York State Insurance Department to satisfy
regulatory requirements.
b) Investment Income
Income by type of investment was as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1998 1997 1996
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturity securities $8,338 $ 6,343 $4,476
Other invested assets 830
Short-term investments 762 477 873
-----------------------------------------------------------------------------------------------------------
Gross investment income 9,930 6,819 5,349
-----------------------------------------------------------------------------------------------------------
Investment expenses (144) (102) (125)
-----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME $9,786 $ 6,717 $5,224
-----------------------------------------------------------------------------------------------------------
</TABLE>
57
<PAGE> 62
4. DEFERRED ACQUISITION COSTS
The components of the change in DAC were as follows:
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
($ thousands) 1998 1997 1996
----------------------------------------------- -------------------- ------------------- ------------------
<S> <C> <C> <C>
Balance at January 1, $ 28,364 $ 20,208 $ 15,919
Capitalization 14,515 11,684 7,224
Amortization (4,849) (3,393) (2,319)
Effect of net unrealized gains
on securities available for sale (1,199) (135) (616)
----------------------------------------------- -------------------- ------------------- ------------------
BALANCE AT DECEMBER 31 $ 36,831 $ 28,364 $ 20,208
----------------------------------------------- -------------------- ------------------- ------------------
</TABLE>
To date, the DAC balance is primarily attributable to the Annuities
segment.
5. INCOME TAXES
The components of income tax expense were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
($ thousands) 1998 1997 1996
----------------------------------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Current expense (benefit) $ (577) $339 $613
Deferred expense (benefit) 1,153 (29) 220
----------------------------------------------------- ----------------- ----------------- -----------------
TOTAL EXPENSE $ 576 $310 $833
----------------------------------------------------- ----------------- ----------------- -----------------
</TABLE>
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's net deferred tax
liability are as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
AS AT DECEMBER 31
($ thousands) 1998 1997
-----------------------------------------------------------------------------------------------------------
DEFERRED TAX ASSETS:
<S> <C> <C>
Asset reserves $ 389 $ 92
-----------------------------------------------------------------------------------------------------------
Total deferred tax assets 389 92
-----------------------------------------------------------------------------------------------------------
DEFERRED TAX LIABILITIES:
Deferred acquisition costs (2,203) (1,135)
Reserves (4)
Unrealized gains on securities available-for-sale (784) (589)
Other (1,017) (633)
-----------------------------------------------------------------------------------------------------------
Total deferred tax liabilities (4,004) (2,361)
-----------------------------------------------------------------------------------------------------------
NET DEFERRED TAX LIABILITY $ (3,615) $ (2,269)
-----------------------------------------------------------------------------------------------------------
</TABLE>
58
<PAGE> 63
5. INCOME TAXES (CONTINUED)
The Company participates as a member of the MWL affiliated group,
filing a consolidated federal income tax return. The Company files a
separate New York State return.
The method of allocation between the companies is subject to a tax
sharing agreement under which the tax liability is allocated to each
member of the group on a pro-rata basis based on the relationship that
the member's tax liability (computed on a separate return basis) bears
to the tax liability of the consolidated group. The tax charge to the
Company will not be more than the Company would have paid on a separate
return basis. Settlement of taxes are made through an increase or
reduction to the payable to parent, subsidiaries and affiliates which
is settled periodically.
The Company made estimated tax payments of $1,121 in 1998 and $531 and
$0 in 1997 and 1996, respectively.
6. Shareholder's Equity
The Company has one class of common stock:
<TABLE>
<CAPTION>
AS AT DECEMBER 31:
($ thousands) 1998 1997
--------------------------------------------------------------------- ------------------- -----------------
Authorized, issued and outstanding:
<S> <C> <C> <C>
2,000,000 Common shares, Par value $1 $2,000 $2,000
--------------------------------------------------------------------- ------------------- -----------------
</TABLE>
The net assets of the Company available for the Parent as dividends are
generally limited to and cannot be made except from earned
statutory-basis profits. The maximum amount of dividends that may be
paid by life insurance companies without prior approval of the New York
Insurance Commissioner is subject to restrictions relating to statutory
surplus and net gain from operations on a statutory basis.
The aggregate statutory capital and surplus of the Company at December
31, 1998 was $62,881 (1997 $68,336). The aggregate statutory net income
(loss) of the Company for the year ended 1998 was ($5,678) (1997
($1,562); 1996 $231). State regulatory authorities prescribe statutory
accounting practices that differ in certain respects from generally
accepted accounting principles followed by stock life insurance
companies. The significant differences relate to investments, deferred
acquisition costs, deferred income taxes, non-admitted asset balances
and reserves.
59
<PAGE> 64
7. REINSURANCE
The Company has entered into reinsurance agreements with various
reinsurers to reinsure any face amounts in excess of $100 for its
traditional non-participating insurance products. The Company remains
liable for amounts ceded in the event that reinsurers do not meet their
obligations. To date, there have been no reinsurance recoveries under
these agreements.
8. RELATED-PARTY TRANSACTIONS
The Company utilizes various services administered by Manulife
Financial and affiliates such as legal, personnel, investment
accounting and other corporate services. Prior to October 1, 1997,
Manulife Financial and MNA charged the Company for those services. In
the first nine months of 1997 and for the full year 1996, Manulife
Financial and MNA charged the Company approximately $623 and $661,
respectively. Effective October 1, 1997, pursuant to a revised plan of
operations, all intercompany expenses were billed through Manulife
Financial. For the year ended December 31, 1998 and for the fourth
quarter of 1997, Manulife Financial billed the Company expenses of
$4,685 and $869, respectively. At December 31, 1998 and 1997, the
Company had a net liability to Manulife Financial of $2,372 and $2,977,
respectively, for those services.
For the nine months ended September 30, 1997 and for the full year
1996, the Company paid underwriting commissions to NASL Financial of
$8,421 and $7,050, respectively. NASL Financial then reimbursed WLA for
promotional agent services. Effective October 1, 1997, MSS replaced
NASL Financial as underwriter. Thereafter, all commissions were paid to
MSS by the Company, and WLA marketing services expenses were paid by
Manulife Financial who was then reimbursed by the Company. Underwriting
commissions and marketing services expense of $17,838 and $4,431,
respectively, were incurred during the year ended December 31, 1998 and
the fourth quarter of 1997. At December 31, 1998 and 1997, the Company
had a net liability of $799 and $1,368, respectively, for these
services.
The financial statements have been prepared from the records maintained
by the Company and may not necessarily be indicative of the financial
conditions or results of operations that would have occurred if the
Company had been operated as an unaffiliated corporation (see also
Notes 1, 5, 10 and 13 for additional related-party transactions).
9. BORROWED MONEY
The Company has an unsecured line of credit with State Street Bank and
Trust in the amount of $5,000, bearing interest at the bank's money
market rate plus 50 basis points. There were no outstanding
advancements under the line of credit at December 31, 1998 and 1997.
60
<PAGE> 65
10. EMPLOYEE BENEFITS
a) RETIREMENT PLAN
Prior to July 1, 1998, the Company and MNA participated in a
non-contributory defined benefit pension plan (the " Nalaco Plan")
sponsored by Manulife Financial, covering its employees. A similar plan
(the "Manulife Plan") also existed for ManUSA. Both plans provided
pension benefits based on length of service and final average earnings.
Vested benefits are fully funded; current pension costs are funded as
they accrue.
Effective July 1, 1998, the Nalaco Plan was merged into the Manulife
Plan as approved by the Board of Directors of Manulife Financial. The
merged plan was then restated as a cash balance pension plan entitled,
"The Manulife Financial U.S. Cash Balance Pension Plan" ("Cash Balance
Plan"). Participants in the two prior plans ceased accruing benefits
under the old plan effective June 30, 1998, and became participants in
the Cash Balance Plan on July 1, 1998. Also effective July 1, ManUSA
became the sponsor of the Cash Balance Plan. Each participant who was a
participant in one of the prior plans received an opening account
balance equal to the present value of their June 30, 1998 accrued
benefit under the prior plan, using Pension Benefit Guaranty
Corporation rates. Future contribution credits under the Cash Balance
Plan vary by service, and interest credits are a function of interest
rate levels. Pension benefits are provided to participants after three
years of vesting service, and the normal retirement benefit is
actuarially equivalent to the cash balance account at normal retirement
date. The normal form of payment under the Cash Balance Plan is a life
annuity with various optional forms available.
Actuarial valuation of accumulated plan benefits are based on projected
salaries and best estimates of investment yields on plan assets,
mortality of participants, employee termination and ages at retirement.
Pension costs relating to current service and amortization of
experience gains and losses are amortized to income over the estimated
average remaining service lives of the participants. No pension expense
was recognized by the sponsor in 1998, 1997, or 1996 because the plan
was subject to the full funding limitation under the Internal Revenue
Code.
At December 31, 1998, the projected benefit obligation based on an
assumed interest rate of 6.5% was $51,757. The fair value of plan
assets invested in ManUSA's general fund deposit administration
insurance contracts and in an investment portfolio of equities and
fixed income securities managed by an affiliate were $52,541 and
$32,145, respectively.
61
<PAGE> 66
10. EMPLOYEE BENEFITS (CONTINUED)
b) 401(k) PLAN
Prior to July 1, 1998, the Company also participated in a defined
contribution plan sponsored by MNA, the North American Security Life
401(k) Savings Plan, which was subject to the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA"). A similar
plan, the Manulife Financial 401k Savings Plan, also existed for
employees of ManUSA. These two plans were effectively merged on July 1,
1998 into one defined contribution plan sponsored by ManUSA, as
approved by the Board of Directors on March 26, 1998. The Company's
costs associated with the plan were charged to the Company and were not
material.
c) POSTRETIREMENT BENEFIT PLAN
In addition to the retirement plan, the Company participates in the
postretirement benefit plan of ManUSA which provides retiree medical
and life insurance benefits to those who have attained age 55 with 10
or more years of service. The plan provides the medical coverage for
retirees and spouses under age 65. When the retirees or the covered
dependents reach age 65, Medicare provides primary coverage and the
plan provides secondary coverage. There is no contribution for post-age
65 coverage, and no contributions are required for retirees for life
insurance coverage. The plan is unfunded.
The postretirement benefit cost to the Company, which includes the
expected cost of postretirement benefits for newly eligible employees
and for vested employees, interest cost, and gains and losses arising
from differences between actuarial assumptions and actual experience,
is accounted for by the plan sponsor, ManUSA.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values and estimated fair values of the Company's
financial instruments at December 31, 1998 were as follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
-----------------------------------------------------------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-----------------------------------------------------------------------------
Assets:
<S> <C> <C> <C> <C>
Fixed maturity securities $125,088 $125,088 $129,151 $129,151
Short-term investments 10,032 10,032 9,998 9,998
Policy loans 552 552 398 398
Cash and cash equivalents 5,946 5,946 1,431 1,431
Liabilities:
Policyholder liabilities and
accruals 94,492 91,113 86,611 81,715
</TABLE>
62
<PAGE> 67
11. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The following methods and assumptions were used by the Company in
estimating the fair value disclosures for financial instruments:
Fixed Maturity Securities: Fair values for fixed maturity securities
are obtained from an independent pricing service.
Short-Term Investment and Cash and Cash Equivalents: Carrying values
approximate fair values.
Policy Loans: Carrying values approximate fair values.
Policyholder Liabilities and Accruals: Fair values of the Company's
liabilities under contracts not involving significant mortality risk
(deferred annuities) are estimated to be the cash surrender value, or
the cost the Company would incur to extinguish the liability.
12. LEASES
The Company leases office space under an operating lease agreement
which expires in 1999 and is subject to a renewal option at market
rates prevailing at the time of renewal. For the years ended December
31, 1998 and 1997, the Company incurred rent expense of $95 and $84,
respectively. The minimum lease payments associated with the office
space are $61 in 1999.
13. CAPITAL MAINTENANCE AGREEMENT
Pursuant to a capital maintenance agreement and subject to regulatory
approval, Manulife Financial has agreed to maintain the Company's
statutory capital and surplus at a specified level and to ensure that
sufficient funds are available for the timely payment of contractual
obligations.
14. CONTINGENCIES
The Company is subject to various lawsuits that have arisen in the
course of its business. Contingent liabilities arising from litigation,
income taxes and other matters are not considered material in relation
to the financial position of the Company.
63
<PAGE> 68
15. UNCERTAINTY DUE TO THE YEAR 2000 RISK (UNAUDITED)
The Year 2000 risk is the result of computer programs being written
using two digits, rather than four, to define the applicable year. Any
of the Company's computer programs that have date-sensitive software
may recognize a date using "00" as the year 1900 rather than the year
2000. The effects of the Year 2000 risk may be experienced before, on,
or after January 1, 2000 and, if not addressed, could result in systems
failures or miscalculations causing disruptions of normal business
operations. It is not possible to be certain that the Company's Year
2000 program will fully resolve all aspects of the Year 2000 risk,
including those related to third parties.
A full discussion of the Company's Year 2000 program and Year 2000
review is contained in the Management's Discussion and Analysis Section
of the Company's Annual Report on Form 10-K.
64
<PAGE> 69
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
<PAGE> 70
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee $ 2,950
Printing $ 5,000*
Edgarization Expenses $ 4,000*
Accounting fees and expenses $ 20,000*
Legal fees and expenses $ 5,000*
</TABLE>
*Estimates
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 10 of the Charter of the Company provides as follows:
TENTH: No director of the Corporation shall be personally liable to the
Corporation or any of its shareholders for damages for any breach of duty as a
director; provided, however, the foregoing provision shall not eliminate or
limit (i) the liability of a director if a judgment or other final adjudication
adverse to such director established his or her such acts or omissions were in
bad faith or involved intentional misconduct or were acts or omissions (a) which
he or she knew or reasonably should have known violated the New York Insurance
Law or (b) which violated a specific standard of care imposed on directors
directly, and not by reference, by a provision of the New York Insurance Law (or
any regulations promulgated thereunder) or (c) which constituted a knowing
violation of any other law, or establishes that the director personally gained
in fact a financial profit or other advantage to which the director was not
legally entitled or (ii) the liability of a director for any act or omission
prior to the adoption of this Article by the shareholders of the Corporation.
Any repeal or modification of this Article by the shareholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification.
Article VII of the By-laws of the Company provides as follows:
Section VII.1. Indemnification of Directors and Officers. The Corporation may
indemnify any person made, or threatened to be made, a party to an action by or
in the right of the corporation to procure a judgment in its favor by reason of
the fact that he or she, his or her testator, testatrix or intestate, is or was
a director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of any other corporation of any type or
kind, domestic or foreign, of any partnership, joint venture, trust, employee
benefit plan or other enterprise, against amounts paid in settlement and
reasonable expenses, including attorneys' fees, actually and necessarily
incurred by him or her in connection with the defense or settlement of such
action, or in connection with an appeal therein, if such director or officer
acted, in good faith, for a purpose which he or she reasonably believed to be
in, or, in the case of service for any other corporation or any partnership,
joint venture, trust, employee benefit plan or other enterprise, not opposed to,
the best interests of the Corporation, except that no indemnification under this
Section shall be made in respect of (1) a threatened action, or a pending action
which is settled or is otherwise disposed of, or (2) any claim, issue or matter
as to which such person shall have been adjudged to be liable to the
Corporation, unless and only to the extent that the court in
<PAGE> 71
which the action was brought, or , if no action was brought, any court of
competent jurisdiction, determines upon application that, in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such portion of the settlement amount and expenses as the court
deems proper.
The Corporation may indemnify any person made, or threatened to be made, a party
to an action or proceeding (other than one by or in the right of the Corporation
to procure a judgment in its favor), whether civil or criminal, including an
action by or in the right of any other corporation of any type or kind, domestic
or foreign, or any partnership, joint venture, trust, employee benefit plan or
other enterprise, which any director or officer of the Corporation served in any
capacity at the request of the Corporation, by reason of the fact that he or
she, his or her testator, testatrix or intestate, was a director or officer of
the Corporation, or served such other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees actually and necessarily incurred as a result of such action or
proceeding, or any appeal therein, if such director or officer acted, in good
faith, for a purpose which he or she reasonably believed to be in, or, in the
case of service for any other corporation or any partnership, joint venture,
trust, employee benefit plan or other enterprise, not opposed to, the best
interests of the Corporation and, in criminal actions or proceedings, in
addition, had no reasonable cause to believe that his or her conduct was
unlawful.
The termination of any such civil or criminal action or proceeding by judgment,
settlement, conviction or upon a plea of nolo contendere, of its equivalent,
shall not in itself create a presumption that any such director or officer did
not act, in good faith, for a purpose which he or she reasonably believed to be
in, or, in the case of service for any other corporation or any partnership,
joint venture, trust, employee benefit plan or other enterprise, not opposed to,
the best interest of the Corporation or that he or she had reasonable cause to
believe that his or her conduct was unlawful.
Notwithstanding the foregoing, Registrant hereby makes the following undertaking
pursuant to Rule 484 under the Securities Act of 1933:
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant 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, the registrant 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 Act and will be governed by the final adjudication of
such issue.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The Company currently sells an unallocated group annuity to retirement plans
that qualify for special tax treatment under Section 401(a) of the Internal
Revenue Code. Sales of these securities are not required to be registered under
the Securities Act of 1933 (Section 3(a)(2) of this Act). Manufacturers
Securities Services, LLC, the successor to NASL Financial Services, Inc., is
<PAGE> 72
the principal underwriter of the contracts. There is a minimum annualized
contribution by each plan of $35,000 to maintain the contract. The value of a
contract will vary according to the investment performance, charges and expenses
of the subaccounts in which the contract is invested. As of December 31, 1998
the total variable assets in the unallocated group annuity was $5,549,966.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
Exhibit No. Description
1(a) Underwriting and Distribution Agreement between The
Manufacturers Life Insurance Company of New York (the
"Company") and Manufacturers Securities Services, LLC.
(Underwriter) --Incorporated by reference to Exhibit
(b)(3)(a) to post effective amendment no. 7 on Form N-4,
file number 33-46217, filed February 25, 1998.
1(b) Selling Agreement between The Manufacturers Life Insurance
Company of New York, Manufactures Securities Services, LLC
(Underwriter), Selling Broker Dealers and General Agent --
Incorporated by reference to Exhibit (b)(3)(b) to post
effective amendment no. 7 on Form N-4, file number 33-46217,
filed February 25, 1998.
2 Not Applicable
3(i)(a) Declaration of Intention and Charter of the Company --
Incorporated by reference to Exhibit (b)(6)(a)(i) to post
effective amendment no. 7 on Form N-4, file number 33-46217,
filed February 25, 1998.
3(i)(b) Certificate of amendment of the Declaration of Intention and
Charter of the Company Incorporated by reference to Exhibit
(b)(6)(a)(ii) to post effective amendment no. 7 on Form N-4,
file number 33-46217, filed February 25, 1998.
3(i)(c) Certificate of amendment of the Declaration of Intention and
Charter of the Company Incorporated by reference to Exhibit
(b)(6)(a)(iii) to post effective amendment no. 7 on Form
N-4, file number 33-46217, filed February 25, 1998.
3(ii) By-laws of the Company Incorporated by reference to Exhibit
(b)(6)(b) to post effective amendment no. 7 on Form N-4,
file number 33-46217, filed February 25, 1998
4(i) Form of Individual Single Payment Deferred Fixed Annuity
Non-Participating Contract --Previously filed as Exhibit
4(i) to the initial registration statement on Form S-1 filed
July 17, 1997.
4(ii) Individual Retirement Annuity Endorsement -- Previously
filed as Exhibit 4(ii) to the initial registration statement
on Form S-1 filed July 17, 1997.
4(iii) ERISA Tax-Sheltered Annuity Endorsement -- Previously filed
as Exhibit 4(iii) to the initial registration statement on
Form S-1 filed July 17, 1997.
4(iv) Tax-Sheltered Annuity Endorsement -- Previously filed as
Exhibit 4(iv) to the initial registration statement on Form
S-1 filed July 17, 1997.
<PAGE> 73
Exhibit No. Description
4(v) Section 401 Plans Endorsement -- Previously filed as Exhibit
4(vi) to the initial registration statement on Form S-1
filed July 17, 1997.
5 Opinion and Consent of Tracy A. Kane, Esq. - Filed herein.
6 Not Applicable
7 Not Applicable
8 Not Applicable
9 Not Applicable
10 Administrative Agreement between The Manufacturers Life
Insurance Company of New York and The Manufacturers Life
Insurance Company -- Incorporated by reference to Exhibit
(b)(8)(a) to post-effective amendment no. 7 to Form N-4,
File No.33-46217, filed February 25, 1998.
Investment Services Agreement between The Manufacturers Life
Insurance Company and The Manufacturers Life Insurance
Company of New York -- Incorporated by reference to Exhibit
1(A)(8)(c) to pre-effective amendment no. 1 to The
Manufacturers Life Insurance Company of New York Separate
Account B Registration Statement on Form S-6, filed March
16, 1998.
11 Not Applicable
12 Not Applicable
13 Not Applicable
14 Not Applicable
15 Not Applicable
16 Not Applicable
17 Not Applicable
18 Not Applicable
19 Not Applicable
20 Not Applicable
21 Not Applicable
22 Not Applicable
23 Consent of Ernst & Young LLP-- Filed herein.
<PAGE> 74
Exhibit No. Description
24 Power of Attorney -- The Manufacturers Life Insurance
Company of New York Directors -- Incorporated by reference
to Exhibit 7 to pre-effective amendment no. 1 on Form S-6,
file number 333-33351, filed March 16, 1998.
Power of Attorney, James O'Malley and Thomas Borshoff -
Incorporated by reference to Exhibit 14 to post-effective
amendment no. 6 on Form N-4, file number 33-79112, filed
March 2, 1999.
25 Not Applicable
26 Not Applicable
27 Financial Data Schedule -- Filed herein.
28 Not Applicable
(b) FINANCIAL STATEMENT SCHEDULES
Schedule I - Summary of Investments
Schedule III - Supplementary Insurance Information
Schedule IV - Reinsurance
<PAGE> 75
The Manufacturers Life Insurance Company of New York
Schedule I - Summary of Investments
December 31, 1998
($ Thousands)
<TABLE>
<CAPTION>
Amounts At Which
Fair Shown In The Balance
Type of Investment Cost Value Sheet
- ------------------------------------------- ---------------------- ------------------------ ---------------------
<S> <C> <C> <C>
Fixed maturity securities:
United States Government $ 11,018 $ 11,594 $ 11,594
Corporate debt securities 99,696 102,982 102,982
Mortgage-backed securities 6,680 6,784 6,784
Foreign Governments 2,449 2,560 2,560
States / Political subdivisions 1,059 1,168 1,168
====================== ====================== =====================
Total fixed maturity securities $ 120,902 $ 125,088 $ 125,088
====================== ====================== =====================
Investment in unconsolidated affiliate 175 175
Policy loans 552 552
Short-term investments 10,032 10,032
====================== =====================
Total investments $131,661 $135,847
====================== =====================
</TABLE>
<PAGE> 76
The Manufacturers Life Insurance Company Of New York
Schedule III - Supplementary Insurance Information
($ Thousands)
<TABLE>
<CAPTION>
Future Policy Benefits, Amortization
Deferred Benefits Other Claims of Deferred
Policy Losses, Claims Policy Net Losses and Policy
Segment Acquisition and Loss Unearned Claims and Premium Investment Settlement Acquisition
Costs Expenses Premiums Benefits Revenue Income Expenses Costs Expenses
Payable
1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Annuities $ 36,780 $ 93,960 - - - $ 9,756 $ 4,595 $ 4,843 $ 7,426
Savings and
Retirement
Services - 525 - - - 28 8 - 534
Life Insurance 51 7 - - - 2 - 6 2,399
===================================================================================================================
Total $ 36,831 $ 94,492 - - - $ 9,786 $ 4,603 $ 4,849 $ 10,359
===================================================================================================================
1997
Annuities $28,364 $ 86,611 - - - $ 6,717 $ 4,747 $ 3,393 $ 5,845
===================================================================================================================
Total $28,364 $ 86,611 - - - $ 6,717 $ 4,747 $ 3,393 $ 5,845
===================================================================================================================
1996
Annuities $20,208 $ 80,033 - - - $ 5,224 $ 4,189 $ 2,319 $ 1,192
===================================================================================================================
Total $20,208 $ 80,033 - - - $ 5,224 $ 4,189 $ 2,319 $ 1,192
===================================================================================================================
</TABLE>
<PAGE> 77
The Manufacturers Life Insurance Company Of New York
Schedule IV -- Reinsurance
($ Thousands)
<TABLE>
<CAPTION>
Assumed Percentage of
Ceded to From Amount
Gross Other Other Net Assumed
Segment Amount Companies Companies Amount to Net
Year ended December 31, 1998
<S> <C> <C> <C> <C> <C>
Life insurance inforce $ 67,955 $ 60,155 - $ 7,800 0%
Premiums-Life Insurance 108 93 - 15 0%
===========================================================================
Total $ 108 $ 93 - $ 15 0%
===========================================================================
Year ended December 31, 1997
Life insurance inforce $ 3,000 $ 2,800 - $ 200 0%
Premiums-Life Insurance - - - - 0%
===========================================================================
Total - - - - 0%
===========================================================================
Year ended December 31, 1996
Life insurance inforce - - - - 0%
Premiums-Life Insurance - - - - 0%
===========================================================================
Total
- - - - 0%
===========================================================================
</TABLE>
<PAGE> 78
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;
(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.
(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.
<PAGE> 79
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has caused this amended Registration Statement to be signed on its
behalf, by the undersigned, thereunto duly authorized in the City of Boston and
Commonwealth of Massachusetts on this 1st day of April, 1999.
THE MANUFACTURERS LIFE
INSURANCE COMPANY OF NEW YORK
(Registrant)
By: /s/ A. Scott Logan
A. Scott Logan, President
Attest:
/s/Tracy A. Kane
<PAGE> 80
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed by the following persons in the
capacities with the Registrant as indicated on this 1st day of April, 1999.
SIGNATURE TITLE
/s/ A. Scott Logan Director, and President
______________________ (Principal Executive Officer)
A. Scott Logan
*____________________ Chairman of the Board
John D. Richardson of Directors
*_____________________ Director
Bruce Avedon
*_____________________ Director
John D. DesPrez, III
*_____________________ Director
Ruth Ann Flemming
*_____________________ Director
Theodore Kilkuskie
*_____________________ Director
Neil M. Merkl
*_____________________ Director
James K. Robinson
*_____________________ Director
James O'Malley
*_____________________ Director
Thomas Borshoff
/s/David W. Libbey Treasurer (Principal
______________________ Financial and Accounting
David W. Libbey Officer)
*By: /s/Tracy A. Kane
_________________________
Tracy A. Kane
Attorney-in-Fact Pursuant
to Powers of Attorney
<PAGE> 81
EXHIBIT INDEX
Exhibit No. Description
5 Opinion and Consent of Tracy A. Kane, Esq.
23 Consent of Ernst & Young LLP
27 Financial Data Schedule
<PAGE> 1
Exhibit 5
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
International Corporate Center at Rye
555 Theodore Fremd Avenue, Suite C-209
Rye, New York 10580
April 1, 1999
To whom it may concern,
I consent to the reference to my name under the caption "Legal Matters" in the
prospectus contained in Post-Effective Amendment No. 1 to the Registration
Statement on Form S-1 of The Manufacturers Life Insurance Company of New York,
File No. 333-31491, to be filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933.
Very truly yours,
/s/ Tracy A. Kane
Tracy A. Kane
Secretary and Counsel
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Independent
Auditors" and to the use of our report dated February 22, 1999, in Post
Effective Amendment No. 1 to the Registration Statement (Form S-1 File No.
333-31491) of The Manufacturers Life Insurance Company of New York (formerly
First North American Life Assurance Company and hereinafter referred to as the
Company).
Our audit also included the financial statement schedules of the Company listed
in Item 16(b). These schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. 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 set forth therein.
ERNST & YOUNG LLP
Boston, Massachusetts
March 31, 1999
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<DEBT-HELD-FOR-SALE> 125,088
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 135,847
<CASH> 5,946
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 36,831
<TOTAL-ASSETS> 1,017,224
<POLICY-LOSSES> 94,492
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 833,693
<NOTES-PAYABLE> 0
<COMMON> 2,000
0
0
<OTHER-SE> 77,367
<TOTAL-LIABILITY-AND-EQUITY> 1,017,224
0
<INVESTMENT-INCOME> 9,786
<INVESTMENT-GAINS> 713
<OTHER-INCOME> 10,961
<BENEFITS> 4,603
<UNDERWRITING-AMORTIZATION> 4,849
<UNDERWRITING-OTHER> 10,359
<INCOME-PRETAX> 1,649
<INCOME-TAX> 576
<INCOME-CONTINUING> 1,073
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,073
<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>
