<PAGE>
Reg. No. 33-79750
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-2
POST-EFFECTIVE AMENDMENT NO. 4
TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MML BAY STATE LIFE INSURANCE COMPANY
------------------------------------
(Exact name of registrant as specified in its charter)
CONNECTICUT
-----------
(State or other jurisdiction of incorporation or organization)
43-0581430
----------
(I.R.S. Employer Identification No.)
1295 State Street
Springfield, Massachusetts 01111
(413) 744-8441
--------------
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive offices)
Ann F. Lomeli
Secretary
MML Bay State Life Insurance Company
1295 State Street
Springfield, MA 01111
(413) 744-5373
--------------
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Approximate date of commencement of proposed sale to the public: May 1, 1998
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act, check
the following box. [X]
<PAGE>
MML BAY STATE LIFE INSURANCE COMPANY
Cross Reference Sheet Pursuant to
Regulation S-K, Item 501(b)
Form S-2 Item Number and Caption Heading in Prospectus
1. Forepart of the Registration
Statement and Outside
Front Cover Page of Prospectus .................. Outside Front Cover Page
2. Inside Front and Outside
Back Pages of Prospectus ........................ Inside Front Cover
3. Summary Information,
Risk Factors and
Ratio of Earnings to
Fixed Charges ................................... Financial Statements
4. Use of Proceeds ................................. Investments by MML Bay
State
5. Determination of
Offering Price .................................. Not Applicable
6. Dilution ........................................ Not Applicable
7. Selling Security Holders ........................ Not Applicable
8. Plan of Distribution ............................ Distribution of Contracts
9. Description of Securities
to be Registered ................................ Product Description
10. Interests and Named
Experts and Counsel ............................. Not Applicable
11. Information with Respect
to the Registrant ............................... MML Bay State &
MassMutual -Description
of the Business;
Management's Discussion
and Analysis; Financial
Statements
12. Incorporation of Certain Information
by Reference .................................... Not Applicable
13. Position on Indemnification
for Securities Act
Liabilities ..................................... Not Applicable
<PAGE>
PROSPECTUS
May 1, 1998
MML Bay State Life Insurance Company
Fixed Account with Market Value Adjustment
Offered through OppenheimerFunds LifeTrust Variable Annuity
This prospectus (the "Prospectus") describes MML Bay State Life Insurance
Company's ("MML Bay State" or the "Company") Fixed Account (the "Fixed Account")
with Market Value Adjustment. The Fixed Account is available for use with the
OppenheimerFunds LifeTrust Variable Annuity Contract (the "Contract") issued by
MML Bay State. The Fixed Account constitutes an account to which a Contract
Owner may allocate purchase payments or Accumulated Value in accordance with the
Contract's transfer rules. (For a discussion of the transfer restrictions
applicable to the Contract, please consult the Contract prospectus). Since the
Fixed Account is available only through the Contract, an investor should
carefully review the discussion of the Contract contained in that prospectus.
The focus of this Prospectus is limited to the Fixed Account's operations and
features.
MML Bay State guarantees specified rates of interest for amounts allocated to
the Fixed Account for specified periods of time. The interest rate stipulated
for a particular period (the Guaranteed Rate) is an annual effective yield.
Additionally, although Guaranteed Rates will fluctuate, they will never go below
3%. MML Bay State's general account assets, including amounts allocated to the
Fixed Account, are available to meet the guarantees associated with the Fixed
Account. These assets are chargeable with liabilities arising out of other
businesses of the Company. Purchase payments and transfers of Accumulated Value
may be made among the Fixed Account and the Divisions of MML Bay State Variable
Annuity Separate Account 1 (the "Separate Account").
Amounts taken from the Fixed Account by partial or full redemption, received
from payment of a death benefit following the death of the Contract Owner who is
not the annuitant, and transfers made prior to an Expiration Date are subject to
a Market Value Adjustment. Therefore a Contract Owner may experience a negative
investment return.
The annuity benefits available under the Contract may be either fixed or
variable amounts or a combination of both. The Accumulated Value prior to
maturity and the amount of any variable annuity payments thereafter will vary
with the investment performance of the Divisions selected and the amounts
allocated to the Fixed Account.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
THIS PROSPECTUS MUST BE ACCOMPANIED BY THE PROSPECTUSES OF MML BAY STATE's
OPPENHEIMERFUNDS LIFETRUST VARIABLE ANNUITY, MML SERIES INVESTMENT FUND, AND
OPPENHEIMER VARIABLE ACCOUNT FUNDS.
MML Bay State Life Insurance Company
1295 State Street
Springfield, MA 01111
(413) 744-8441
1
<PAGE>
Table of Contents
Section
- -------
<TABLE>
<S> <C>
Glossary .................................................................................... 3
I. Product Description ...................................................................... 4
Product Description ................................................................... 4
The Fixed Account and the Market Value Adjustment Feature ............................. 4
Market Value Adjustment ............................................................... 4
Accumulation Period of a Contract ..................................................... 5
Establishment of the Guaranteed Rate .................................................. 6
The MVA's Applicability on Redemptions ................................................ 6
II. Investments by MML Bay State ............................................................ 6
III. Distribution of Contracts .............................................................. 6
IV. Federal Taxation Discussion ............................................................. 7
V. Accounting Practices ..................................................................... 7
VI. Management's Discussion and Analysis of Financial Condition and Results of Operations.... 7
General ............................................................................... 7
Results of Operations ................................................................. 8
Statement of Financial Position ....................................................... 10
Liquidity and Capital Resources ....................................................... 11
Investments ........................................................................... 11
Year 2000 ............................................................................. 11
VII. MML Bay State and MassMutual -- Description of the Business ............................ 16
VIII. Experts and Additional Available Information .......................................... 18
IX. Selected Historical Financial Data ...................................................... 18
Audited Statutory Financial Statements ................................................ 20
</TABLE>
2
<PAGE>
Glossary
As used in this Prospectus, the following terms mean:
Accumulated Amount: For each amount credited to a Segment of the Fixed Account
the Accumulated Amount on any date is the amount credited to the Segment
accumulated to that date at the Guaranteed Rate for that amount.
Accumulated Value: The value of a Contract on or prior to the Maturity Date
equal to the Variable Value plus the Fixed Value.
Accumulation Period: The period prior to the Maturity Date, during the lifetime
of the Annuitant and Owner.
Accumulation Unit: A unit of measurement used in determining the value of
amounts credited to a Contract in a Division of the Separate Account on or prior
to the Maturity Date.
Annuitant: The person on whose life the Contract is issued.
Beneficiary: The person(s) or entity(ies) designated by the Contract Owner to
receive a death benefit under the Contract, if any, upon the death of the
Contract Owner or the Annuitant.
Cash Redemption Value: The value of a Contract which a Contract Owner will
receive if the Contract is redeemed, equal to Accumulated Value less
Administrative Charges, Sales Charges, premium taxes, and a Market Value
Adjustment, if any such charges are applicable.
Contract: The OppenheimerFunds LifeTrust Variable Annuity Contract issued by MML
Bay State.
Contract Owner(s): The owner (and in some instances the owners) of a Contract.
Contract Owners may include the Annuitant, an employer, a trust, or any entity
specified in an employee benefit plan.
Division(s): A sub-account of the Separate Account, the assets of which consist
of shares of a specified Fund of either MML Series Investment Fund or
Oppenheimer Variable Account Funds.
Expiration Date: The Date on which the Guarantee Period for an Accumulated
Amount ends.
Fixed Account: An account which pays interest at a Guaranteed Rate. If such
amounts are withdrawn prior to the end of the Guarantee Period, a Market Value
Adjustment will be made. Assets attributable to the Fixed Account are not part
of the assets which are allocated to the Divisions of the Separate Account.
Fixed Value: On any date, the Fixed Value of the Contract is the sum of the
Accumulated Amounts credited to all Segments of the Fixed Account.
Funds: The separate series of shares of Oppenheimer Variable Account Funds and
MML Series Investment Fund, in which the Divisions of the Separate Account
invest. MML Series Investment Fund is a no-load, open-end management investment
company and Oppenheimer Variable Account Funds is a diversified open-end
investment company. Both of these investment companies are registered with the
Securities and Exchange Commission.
Guarantee Period: The period for which interest accrues at the Guaranteed Rate
on an amount credited to a Segment. Guarantee Periods range in whole-year
periods from one to ten years.
Guaranteed Rate: The effective annual interest rate MML Bay State uses to accrue
interest on an amount credited to a Segment as of a certain date. Guarantee
Rates are level for the entire Guarantee Period and are fixed at the time an
amount is credited to the Segment.
Market Value Adjustment ("MVA"): An adjustment made to the amount that the
Contract Owner will receive if money is taken from an Accumulated Amount prior
to the Expiration Date of its Guarantee Period.
Maturity Date: The date designated by the Contract Owner as of which Variable
Monthly Income payments (or, if elected, Fixed Income payments or a payment in
one sum) will begin. This date may be no later than the Annuitant's 90th
birthday (unless an earlier date is required by law.)
Purchase Payment: An amount paid to MML Bay State by, or on behalf of, the
Annuitant.
Segment: All Guarantee Periods of a given length constitute a Segment. Segments
for all Guarantee Periods may not be available at one time.
Service Center: The office at which the administration of the Contract occurs.
Prior to July 1, 1998, the Service Center for the Contract will be located at
301 West 11(th) Street, Kansas City, MO 64105, (800) 258-4511 or P.O. Box
419607, Kansas City, MO 64141-1007. Effective July 1, 1998, the Service Center
will be relocated. After July 1, 1998, please direct all requests and/or
inquiries to: Annuity Service Center
H564
P.O. Box 9067
Springfield, MA 01102-9067
(800) 258-4511
Valuation Date: A valuation date is any date on which the net asset value of the
shares of the Funds is determined. Generally, this will be any date on which the
New York Stock Exchange (or its successor) is open for trading.
Valuation Period: The period of time from the end of one Valuation Date to the
end of the next Valuation Date.
Valuation Time: The time of the close of the New York Stock Exchange (or its
successor) (currently 4:00 p.m. New York time) on a Valuation Date. All actions
to be performed on a Valuation Date will be performed as of the Valuation Time.
Variable Monthly Income: A benefit providing for monthly payments that vary
with, and reflect the investment performance of, one or more Divisions of the
Separate Account.
Variable Value: On any date, the Variable Value of a Contract is the sum of the
values of the Accumulation Units credited to each Division of the Separate
Account. The value in each Division is equal to the Accumulation Unit Value
multiplied by the number of units in that Division You own.
You or Your refers to the Contract Owner.
3
<PAGE>
I. Product Description
The investment option described in this Prospectus is a Fixed Account with
Market Value Adjustment ("MVA") available in conjunction with the Contract. As
is also discussed in the Contract prospectus, the Contract provides for the
accumulation of values prior to maturity and for the distribution of annuity
benefits thereafter. Additionally, a death benefit is also available under the
Contract. The earnings on deposits allocated to the Fixed Account will have an
impact on the Contract's Accumulated Value, its Maturity Value, its Cash
Redemption Value and the death benefit. The Company believes that it has
adequate resources to meet its obligations with regard to the Fixed Account and
the Contract. The Contract is described in greater detail in the prospectus for
OppenheimerFunds LifeTrust Variable Annuity. Investors should review that
prospectus in conjunction with this prospectus before deciding whether to invest
in the Contract or allocate sums to the Fixed Account. The Fixed Account is not
available in all states.
A Market Value Adjustment will be made if sums are withdrawn from the Fixed
Account prior to their Expiration Date.
The Fixed Account and the Market Value Adjustment Feature
The Fixed Account is available during the Accumulation Period of the Contract.
(See, Accumulation Pay-in Period of the Contract prospectus.) The Fixed Account
offers different Guarantee Periods, which provide the option of earning interest
at various Guaranteed Rates on all or a portion of Your Accumulated Value.
Please note that amounts credited to a Guarantee Period at different times may
have different Guaranteed Rates, Current Rates, and Expiration Dates since MML
Bay State changes the Current and Guaranteed Rates periodically.
You may allocate purchase payments or transfer all or a portion of Your
Accumulated Value to the Fixed Account. Amounts credited to the Fixed Account
will earn interest at the Guaranteed Rate applicable for the Guarantee Period
selected on the date the amounts are credited. The applicable Guaranteed Rate
does not change during the Guarantee Period. The Guaranteed Rate may never be
less than 3%. Allocations to a Guarantee Period (or Segment) must be for at
least $1,000. The Accumulated Value of the Fixed Account is not guaranteed
against the claims of the Company's creditors.
Guarantee Periods may be available in periods of one to ten years. To the extent
permitted by law, we reserve the right at any time to offer Guarantee Periods
that differ from those available when Your Contract was issued. We also reserve
the right, at any time, to stop accepting purchase payments, transfers, or
renewals for a particular Guarantee Period. Guarantee Periods may be available
in periods of one to ten years. Since the specific Guarantee Periods available
may change periodically, please contact the Service Center to determine the
Guarantee Periods currently being offered.
Market Value Adjustment
Any withdrawal of Your Accumulated Amount will be subject to a Market Value
Adjustment ("MVA") unless the effective date of the withdrawal is within 30 days
prior to the end of a Guarantee Period. If the allocated amount remains in the
Fixed Account until the applicable Expiration Date, its value will be equal to
the amount originally allocated multiplied, on an annually compounded basis, by
its Guaranteed Rate. For this purpose, redemptions, transfers, death benefits
based on a Contract Owner's death (where the Contract Owner and the Annuitant
are different), and maturity amounts are treated as withdrawals.
An MVA will not be applied upon the payment of a Death Benefit following the
death of the Annuitant. The MVA will be applied to the amount being withdrawn,
after the deduction of any applicable Administrative Charge and before the
deduction of any applicable Sales Charge. The MVA can be positive or negative.
The amount being withdrawn after application of the MVA can therefore be greater
than or less than the amount withdrawn before the application of the MVA.
The MVA will reflect the relationship between the Current Rate (as defined
below) for the Accumulated Amount being withdrawn and the Guaranteed Rate. It
also reflects the time remaining in the applicable Guarantee Period. Generally,
if the Guaranteed Rate is lower than the applicable Current Rate, then the
application of the MVA will result in a lower payment upon withdrawal.
Similarly, if the Guaranteed Rate is higher than the applicable Current Rate,
the application of the MVA will result in a higher payment upon withdrawal.
The Market Value Adjustment which is applied to the amount being withdrawn is
determined by using the following formula:
1 + I /n/
MVA = Amount x [ (--------) ----- - 1 ]
1 + j /365/
where,
Amount is the amount being withdrawn from a given accumulated amount less any
applicable administrative charges.
i is the Guaranteed Rate being credited to the Accumulated Amount subject to the
MVA; and
j, the "Current Rate," is the Guaranteed Rate, available as of the effective
date of the application of the MVA, for current allocations to the Segment with
a Guarantee Period equal to the time remaining to the Expiration Date for the
amount being withdrawn rounded to the next higher number of complete years; and
n, is the number of days remaining in the Guarantee Period of the amount subject
to the MVA.
4
<PAGE>
In the determination of "j," if the Company currently does not offer the
applicable Segment, we will determine "j" above by interpolation or
extrapolation of the Guaranteed Rate for the Guarantee Periods then available.
EXAMPLES
The following examples illustrate how the MVA operates on amounts held in a
particular Segment:
Example 1
$1,000 is applied on May 10, 1994, into a Segment with a 5 year Guarantee
period. The Guaranteed Rate for amounts applied to this Segment on May 10, 1994,
is 6%. If the $1,000 is left in that Segment until May 10, 1999, it will
accumulate at a 6% effective annual rate of interest for the full 5 years to
$1,338.23.
If, however, the full amount is taken from the Segment as of May 10, 1998:
(1) The Guaranteed Rate applied on May 10, 1998 to amounts credited to a
1-year Segment is 4%; and
(2) The accumulated amount prior to the application of
the MVA as of May 10, 1998 equals:
$1,000 x 1.06(to the fourth power) = $1,262.48
(3) The number of days remaining = 365 (n = 365);
(4) The MVA equals $24.28, and is calculated according to the following
formula:
1.06 /365/
$24.28 = $1,262.48 x [ (------) ----- - 1 ]
1.04 /365/
The market value for the purposes of surrender on May 10, 1998, of the amount
credited to the 5-year segment on May 10, 1994, is therefore equal to $1,286.76
($1,262.48 + $24.28).
Example 2
$1,000 is applied to a 7-year Segment on May 10, 1992, with a Guaranteed Rate of
5% and will accumulate to $1,407.10 if left in the Segment until May 10, 1999.
If, however, the full amount is taken from the Segment as of May 10, 1995:
(1) The Guaranteed Rate applied on May 10, 1995 to amounts credited to a
4-year Segment is 10%; and
(2) The accumulated amount prior to the application of
MVA as of May 10, 1995 equals:
$1,000 x 1.05(to the third power) = $1,157.63
(3) The period of time from May 10, 1995 to the end of the Guarantee Period
is 4 years or 1460 days
(n = 1460);
(4) The MVA equals $-196.56, and is calculated according to the following
formula:
1.05 /1460/
$-196.56 = $1,157.63 x [ (------) ------ - 1 ]
1.10 /365/
The market value for purposes of surrender on May 10, 1995, of the amount
credited to the 7-year Segment on May 10, 1992, is therefore equal to $961.07
($1,157.63 - $196.56 = $961.07).
THE EXAMPLES SET FORTH ABOVE ARE HYPOTHETICAL AND ARE NOT INDICATIVE OF FUTURE
OR PAST PERFORMANCE.
Accumulation Period of a Contract
Variable annuities are designed to permit a Contract Owner to accumulate values
over a period of time. Generally, a Contract Owner will use such Accumulated
Values for long term needs such as retirement planning. Accordingly, in many
instances, amounts allocated to the Fixed Account will be subject to several
Guarantee Periods over the life of the Contract.
The end of a Guarantee Period for a specific amount credited to a Segment is
called its Expiration Date. At least 45 days, but not more than 75 days, before
the Expiration Date for an Accumulation Amount, we will inform You of the
Guaranteed Rates being offered and the Guarantee Periods available as of the
date of such notice. The Guaranteed Rates on the date of a renewal may be more
or less than the rates quoted in such notice.
The Guarantee Period normally "renews", and in the absence of instructions on
the Expiration Date, we begin crediting interest for a new Guarantee Period
lasting the same amount of time as the one just ended. The Accumulated Amount
then earns interest at the new Guaranteed Rate applicable at the time of
renewal. You may choose different Guarantee Periods from among those we are then
offering, or You may transfer all or a portion of the Accumulated Amount to the
Separate Account.
If Your Accumulated Amount's Segment is no longer available for new amounts
credited, or You choose a different Segment that is no longer available, we will
try to reach You so that You may make another choice.
If a choice is not made at this point, the Segment with the next shorter
Guarantee Period available will be used and if not
5
<PAGE>
available, the Segment with the next longer Period will be used.
Establishment of the Guaranteed Rate
MML Bay State will make the final determination concerning future Guarantee
Rates for future deposits, transfers or renewals. Although we cannot predict
future Guarantee Rates, such Guarantee Rates will never be less than three
percent (3%) per annum.
The MVA's Applicability on Redemptions
An MVA will apply if a partial or full redemption of the Contract is made prior
to an Expiration Date. Where a redemption occurs, the Accumulated Value of the
Contract will be reduced by the amount surrendered from the Fixed Account prior
to any MVA.
The Cash Redemption Value may also be subject to Contingent Deferred Sales
Charges ("Sales Charges") under the Contract pursuant to the schedule set forth
below:
Year Since Payment Sales Charge Assessed
1st 7%
2nd 6%
3rd 5%
4th 4%
5th 3%
6th 2%
7th 1%
We make this adjustment for Sales Charges since we make no deduction for Sales
Charges when a purchase payment is received. The amount of Sales Charges is
computed based on the date the particular payment is received into the Contract.
Purchase Payments redeemed after year 7 are not subject to Sales Charges.
Amounts in the Fixed Account, however, continue to be subject to a Market Value
Adjustment. For more information concerning the application of Sales Charges,
please consult the Contract prospectus.
Please note that other charges are also imposed against the Contract including
mortality and expense risk and administrative charges. For a more detailed
explanation of applicable charges, please see the "Charges and Deductions"
section of the Contract Prospectus.
II. Investments by
MML Bay State
Assets of MML Bay State must be invested in accordance with the requirements
established by applicable state laws regarding the nature and quality of
investments that may be made by life insurance companies and the percentage of
their assets that may be committed to any particular type of investment. In
general, these laws permit investments, within specified limits and subject to
certain qualifications, in federal, state, and municipal obligations, corporate
bonds, preferred and common stocks, real estate mortgages, real estate and
certain other investments.
Proceeds from the Fixed Account will be deposited in a non-unitized segment of
MML Bay State's general account organized as a separate account for accounting
purposes. Proceeds will be used to fund MML Bay State's obligations under the
Contract and amounts not required to fund such obligations may accrue to MML Bay
State as profit. Obligations under the Contract are also met through the
operation of the Divisions to which a Contract Owner has allocated Accumulated
Value. All general account assets of MML Bay State would be available to meet
the guarantees under the Contracts.
In establishing Guaranteed Rates, MML Bay State intends to take into account the
yields available on the instruments in which it intends to invest the proceeds
from the Contracts. MML Bay State's investment strategy with respect to the
proceeds attributable to allocations made to the Fixed Account will generally be
to invest in investment-grade debt instruments having durations tending to match
the applicable Guarantee Periods.
III. Distribution of Contracts
MML Distributors, LLC ("MML Distributors"), 1414 Main Street, Springfield, MA
01144-1013, a wholly-owned subsidiary of Massachusetts Mutual Life Insurance
Company ("MassMutual"), ("the Parent"), is the principal underwriter of the
Contracts. MML Investors Services ("MMLISI") also located at 1414 Main Street,
Springfield, MA 01144-1013, serves as the co-underwriter of the contracts. Both
MML Distributors and MMLISI are registered as broker-dealers under the
Securities Exchange Act of 1934 and are members of the National Association of
Securities Dealers, Inc. (the "NASD"). The maximum commission a broker-dealer
will receive for selling a Contract is 6.25%.
MML Distributors may enter into selling agreements with other broker-dealers
which are registered with the Securities and Exchange Commission and are members
of the NASD ("selling brokers"). The Contracts are sold through agents who are
licensed by state insurance officials to sell the policies. These agents are
also registered representatives of selling brokers or MMLISI. Contracts with the
Fixed Account are offered in states where MML Bay State has received authority
to write modified guarantee annuity business and the Fixed Account and the
Contracts have been approved.
Additionally, Contracts are offered through Oppenheimer's distribution network,
Oppenheimer Funds Distributor, Inc. ("OFDI"). OFDI, MML Bay State Variable
Annuity Separate Account 1, MML Bay State and MML Distributors have entered into
an agreement pursuant to which OFDI has agreed to promote sales of the product
through wholesale distribution arrangements with broker-dealers. Registered
6
<PAGE>
representatives of the particular broker-dealer, who are also properly licensed
to sell MML Bay State products may make such sales.
From time to time, OFDI may enter into special arrangements with broker-dealers
which may provide for the payment of higher compensation to such broker-dealer
in connection with the sale of Contracts. Prospective purchasers of the
Contracts will be informed of such arrangements prior to the completion of the
sale of the Contracts.
IV. Federal Taxation
Discussion
Please see Federal Tax Status section of the Contract prospectus for a
discussion of the tax status of the Contract.
V. Accounting Practices
The accompanying financial information included in this filing, have been
prepared in conformity with the practices of the National Association of
Insurance Commissioners ("NAIC") and the accounting practices prescribed or
permitted by the Department of Insurance of the State of Connecticut, and prior
to June 30, 1997, the Department of Insurance of the State of Missouri
("statutory accounting practices").
The accompanying statutory financial statements are different in some respects
from GAAP financial statements. The more significant differences are as follows:
(a) acquisition costs, such as commissions and other costs directly related to
acquiring new business, are charged to current operations as incurred, whereas
under GAAP these expenses would be capitalized and recognized over the life of
the policies; (b) policy reserves are based upon statutory mortality and
interest requirements without consideration of withdrawals, whereas GAAP
reserves would be based upon reasonably conservative estimates of mortality,
morbidity, interest and withdrawals; (c) bonds are generally carried at
amortized cost whereas GAAP generally requires they be valued at fair value (d)
deferred income taxes are not provided for book-tax timing differences as would
be for GAAP (e) payments received for universal life products and variable
annuities are reported as premium revenue, whereas under GAAP, these payments
would be recorded as deposits to policy-holders' account balances.
VI. Management's Discussion
and Analysis of Financial
Condition and Results of
Operations
GENERAL
The Company's and its Parent's direction and operations are guided by a
statement of corporate vision. The Company's operations are managed so as to
maintain a financially strong and efficient enterprise for the benefit of
policyholders. The Company's long-term objectives are to maintain corporate
financial strength, enhance policyholder value, and generate and sustain growth.
The Company has pursued this objective by emphasizing profitability through
refined product pricing, sophisticated asset/liability management, rigorous
expense control, prudent underwriting standards, the adoption of efforts to
improve persistency and retention levels and continued commitment to the high
credit quality of its general account investment portfolio.
Management believes, with regard to profitability, that net gain from
operations, rather than net income, is the most relevant statutory measure of
operating results for the Company. Net gain from operations represents the
excess of income derived from the Company's business over the costs of business
operations (after deducting taxes). Net income is net gain from operations
adjusted by any realized capital gains or losses (net of taxes). Management's
investment philosophy and practice do not emphasize capital gains as a recurring
source of income or capital and the Company does not manage its investment
portfolio to realize gains for non-economic purposes.
On June 30, 1997 the Company redomesticated from the state of Missouri to the
state of Connecticut which had no effect on the accounting practices of the
Company.
7
<PAGE>
RESULTS OF OPERATIONS
Year Ended December 31, 1997
Compared to Year Ended December 31, 1996
The following table sets forth the components of the Company's results of
operations:
Years Ended December 31,
------------------------
1997 1996
---- ----
(In Millions)
Revenue:
Premium income $ 606.6 $ 441.2
Net investment and other income 10.7 8.4
-------- --------
Total revenue 617.3 449.6
-------- --------
Benefits and expenses:
Policy benefits and payments 34.3 11.0
Addition to policyholders'
reserves and funds 489.0 363.5
Expenses, commissions and
state taxes 84.9 61.2
-------- --------
Total benefits and expenses 608.2 435.7
-------- --------
Net gain from operations
before federal income taxes 9.1 13.9
Federal income taxes 15.9 11.8
-------- --------
Net gain (loss) from operations (6.8) 2.1
Net realized capital loss (0.1) (0.1)
-------- --------
Net income (loss) $ (6.9) $ 2.0
======== ========
The net loss from operations of $6.8 million in 1997 compares to a $2.1 million
gain for 1996. This loss was primarily due to increased expenses and
commissions, due to increased sales of variable life, annuity and corporate
owned life products and increased federal income taxes, partially offset by
increases in separate investment account fees earned by the Company for asset
management.
Premium income increased $165.4 million or 37.5% to $606.6 million in 1997 from
$441.2 million in 1996. The growth in premiums is attributed to increased
premiums from Variable Life products of 37.6%, increased premium from Variable
Annuity products of 77.8%, and increased premium from Corporate Owned Life
products of 23.3%. The result is a change in the Company's business mix in which
Variable Annuity products increased to 25.2% of total premium income in 1997
compared to 19.5% in 1996, Variable Life products remained constant at 24.8% of
total premium income, and Corporate Owned Life products decreased to 50.0% of
total premium income in 1997 compared to 55.8% in 1996. This increase in
Variable Annuity products in the Company's business mix is primarily a result of
increased sales through the Company's distribution channels which experienced a
shift toward annuity products issued by the Company from annuity products issued
by the Company's affiliates. Corporate owned life policy sales represent a small
number of very large cases sold to corporate clients.
The following table sets forth premium, sales, and other information for the
Company's products:
Years Ended December 31,
------------------------
1997 1996
---- ----
(In Millions)
Premium Income:
Variable Life $ 150.3 $ 109.2
Variable Annuities 152.9 86.0
Corporate Owned Life 303.4 246.0
------------ -----------
Total $ 606.6 $ 441.2
============ ===========
Life Insurance Sales - Face Amount:
Variable Life $ 3,871.8 $ 3,408.9
Corporate Owned Life 1,301.8 4,584.6
------------ -----------
Total $ 5,173.6 $ 7,993.5
============ ===========
Life Insurance In Force Face Amount:
Variable Life $ 13,261.5 $ 9,686.1
Corporate Owned Life 6,375.6 4,979.2
------------ -----------
Total 19,637.1 14,665.3
Less reinsurance ceded 1,889.7 1,604.9
------------ -----------
$ 17,747.4 $ 13,060.4
============ ===========
Number of Policies/Certificates In Force:
(In Whole Units)
Variable Life 65,905 50,703
Variable Annuities 5,531 2,373
Corporate Owned Life 7,433 6,395
---------- ---------
Total 78,869 59,471
========== =========
Average Face Value of a New
Policy Sold: (In Whole Dollars)
Variable Life $ 219,016 $ 207,768
Corporate Owned Life $1,231,600 $ 809,144
Net investment and other income increased 27.4%, or $2.3 million in 1997
compared to 1996. Net investment income remained level at $3.4 million in 1997
compared to $3.5 million in 1996. Other income increased $2.4 million to $7.3
million in 1997 from $4.9 million in 1996 primarily due to the income generated
in the Company's separate account, which was $3.4 million in 1997 and $0.6
million in 1996.
The components of net investment income are set forth below.
Years Ended December 31,
------------------------
1997 1996
---- ----
(In Millions)
Gross investment income:
Bonds $ 3.1 $ 3.1
Policy loans 0.8 0.5
Cash and short-term investments 0.5 0.5
------ ------
Total gross investment income 4.4 4.1
Less investment expenses 1.0 0.6
------ ------
Net investment income $ 3.4 $ 3.5
====== ======
Bond income remained constant at $3.1 million for both 1997 and 1996,
respectively. The Company's investment in bonds decreased $6.4 million to $38.5
million in 1997 from $44.9
8
<PAGE>
million in 1996, while the average yield on the bond portfolio increased to 7.7%
in 1997 from 7.5% in 1996. Policy loan income increased $0.3 million to $0.8
million in 1997 from $0.5 million in 1996 due to increased policy loan balances
resulting from increased loans on variable life products.
Policy benefits and payments for 1997 increased $23.3 million, or 211.8% from
1996. This increase was due to a $11.9 million increase in death benefits and a
$9.6 million increase in surrenders. The lapse rate on variable life policies
was 3.6% in 1997 compared to 3.8% in 1996. The significant increase in death
benefits and surrenders is consistent with the dramatic increase in the inforce
business occurring in 1997 and 1996.
Addition to policyholders' reserves and funds increased by $125.5 million or
34.5% to $489.0 million in 1997 from $363.5 million in 1996. The increase is due
to significant growth in premiums, low level of withdrawals and significant
investment returns in the Company's separate accounts.
Operating expenses, which includes charges for administrative services provided
by the Parent, increased by $14.3 million, or 59.6%, compared to 1996. The
increase is primarily due to salaries and agency costs associated with the
acquisition of new business.
Commissions increased by $7.3 million, or 26.0%, in 1997 compared to 1996,
resulting from higher sales of individual life insurance and renewal commissions
paid on life and annuity business in force. The percentage increase in
commissions was lower than the percentage increase in premiums due to a reduced
commission structure for annuity and corporate owned life policies.
Federal income taxes increased to $15.9 million in 1997 compared to $11.8
million in 1996, primarily due to timing of the tax deductibility of acquisition
expenses.
There were no significant net realized capital gains or losses, by asset
category, for 1997 and 1996, before or after the transfer to Interest
Maintenance Reserve ("IMR"). The IMR captures after-tax realized capital gains
and losses due to changes in interest rates for all types of fixed income
investments.
As a result of the foregoing factors, net loss was $6.9 million in 1997,
compared to a net income of $2.0 million in 1996.
RESULTS OF OPERATIONS
Year Ended December 31, 1996
Compared to Year Ended December 31, 1995
The following table sets forth the components of the Company's results of
operations:
Years Ended December 31,
------------------------
1996 1995
---- ----
(In Millions)
Revenue:
Premium income $441.2 $ 92.7
Net investment and other income 8.4 4.8
------ ------
Total revenue 449.6 97.5
------ ------
Benefits and expenses:
Policy benefits and payments 11.0 5.7
Addition to policyholders'
reserves and funds 363.5 67.0
Expenses, commissions and
state taxes 61.2 28.8
------ ------
Total benefits and expenses 435.7 101.5
------ ------
Net gain (loss) from operations
before federal income taxes 13.9 (4.0)
Federal income taxes 11.8 0.6
------ ------
Net gain (loss) from operations 2.1 (4.6)
Net realized capital gain (loss) (0.1) -
------ ------
Net income (loss) $ 2.0 $ (4.6)
====== ======
The net gain from operations of $2.1 million in 1996 compares favorably to the
$4.6 million net loss from operations for 1995. This gain was primarily due to
an increase in premium income of 375.9% while benefits, commissions and
operating expenses increased only 97.2%. Also, 1995 includes a one time fee of
$6.2 million paid to MassMutual for the termination of a reinsurance agreement.
Premium income increased to $441.2 million in 1996 from $92.7 million in 1995.
The growth was primarily the result of Corporate owned life policy premiums
which increased $234.1 million. Corporate owned life policy premiums represent a
small number of very large cases sold to corporate clients. Additionally, sales
of individual variable life and annuities increased by 141.3%. The total number
of individual life policies issued in 1996 was 16,407 up from 10,324 in 1995.
The following table sets forth premium, sales, and other information for the
Company's products:
Years Ended December 31,
------------------------
1996 1995
---- ----
(In Millions)
Premium Income:
Variable Life $ 109.2 $ 57.9
Annuities 86.0 23.0
Corporate Owned Life 246.0 11.8
---------- ----------
Total $ 441.2 $ 92.7
========== ==========
Life Insurance Sales -- Face Amount:
Variable Life $ 3,408.9 $ 1,989.3
Corporate Owned Life 4,584.6 6.6
---------- ----------
Total $ 7,993.5 $ 1,995.9
========== ==========
<PAGE>
Life Insurance In force Face Amount:
Variable Life $ 9,686.1 $ 6,553.1
Corporate Owned Life 4,979.2 383.7
---------- ----------
Total 14,665.3 6,936.8
Less reinsurance ceded 1,604.9 1,088.6
---------- ----------
Net amount $ 13,060.4 $ 5,848.2
========== ==========
Number of Policies In Force:(in Whole Units)
Variable Life 50,703 36,227
Annuities 2,373 610
Corporate Owned Life 6,395 733
-------- --------
Total 59,471 37,570
======== ========
Average Size of a New Policy Sold:(In Whole Dollars)
Variable Life $207,768 $192,685
Corporate Owned Life $809,144 $947,241
Net investment and other income increased 75.0%, or $3.6 million in 1996
compared to 1995 primarily due to $4.1 million of fees paid by MassMutual for
the conversion of non-variable life contracts to variable life contracts. Net
investment income decreased slightly, primarily due to higher investment
expenses. The components of net investment income are set forth below.
Years Ended December 31,
------------------------
1996 1995
---- ----
(In Millions)
Gross investment income:
Bonds $3.1 $3.2
Policy loans 0.5 0.4
Cash and short-term investments 0.5 0.1
---- ----
Total gross investment income 4.1 3.7
Less investment expenses 0.6 (0.1)
---- ----
Net investment income $3.5 $3.6
==== ====
Policy benefits and payments for 1996 increased $5.3 million, or 93.0% from
1995. This increase was due principally to a $5.0 million increase in surrenders
of variable life policies.
Addition to policyholders' reserves and funds increased by $296.5 million or
442.5% to $363.5 million in 1996 from $67.0 million in 1995. The increase is
primarily due to strong growth in premiums which results in offsetting increases
in policyholders' reserves and transfers to separate accounts.
Operating expenses, which includes administrative services provided by the
Parent, increased by $12.8 million, or 114.3%, compared to 1995. The increase is
primarily due to salaries and agency costs associated with the acquisition of
new business.
Commissions increased by $13.0 million, or 86.1%, in 1996 compared to 1995,
resulting from higher sales of individual life insurance and renewal commissions
paid on life and annuity business in force. The percentage increase in
commissions was lower than the percent increase in premiums due to a reduced
commission structure for the annuity and corporate owned life policies.
Federal income taxes increased to $11.8 million in 1996 compared to $0.6 million
in 1995, primarily due to higher book gains and the tax on policy acquisition
costs inherent in a period of substantial sales growth.
There were no significant net realized capital gains or losses, by asset
category, for 1996 and 1995, before or after the transfer to IMR. The IMR
captures after-tax realized capital gains and losses due to changes in interest
rates for all types of fixed income investments.
As a result of the foregoing factors, net income was $2.0 million in 1996,
compared to a net loss of $4.6 million in 1995.
STATEMENT OF FINANCIAL POSITION
Assets
Total assets rose from $823.3 million at December 31, 1996 to $1,536.0 million
at December 31, 1997, an increase of $712.7 million or 86.6%. Asset growth was
concentrated in the Company's separate investment accounts.
General account assets increased from $116.6 million at December 31, 1996 to
$135.9 million at December 31, 1997 due primarily to increased recoveries from
separate accounts which represent separate account assets in excess of statutory
benefit reserves.
Policy loans increased by 61.0% to $16.1 million in 1997 primarily due to loans
on individual variable life products, which is consistent with the increase in
life insurance inforce.
Separate account assets increased by 98.1% to $1,400.1 million at December 31,
1997 due to increased sales of individual variable life, corporate owned life
and annuity policies, where the policyholders primarily invest in the Company's
separate investment accounts, and to increases in market values in the equity
and fixed income markets.
Liabilities
Total liabilities increased by $722.8 million, or 96.9%, to $1,468.5 million at
December 31, 1997 due to increased individual variable life, annuity and
corporate owned life sales. Of the $722.8 million increase, $693.0 million was
in the Company's separate account reserves and liabilities. Policyholders'
reserves and funds in the general account increased $9.7 million, primarily due
to increases in general account reserves for variable life products. Amounts
payable to Parent increased $21.7 million due to increased administration
charges in 1997.
Shareholder's Equity
Shareholder's equity was $67.5 million at December 31, 1997, a decrease of $10.1
million, or 13.0%, from December 31, 1996. This decrease was composed of 1997
net loss of
<PAGE>
$6.9 million and a decrease of $3.2 million due to changes in non-admitted
assets and other changes.
LIQUIDITY AND CAPITAL RESOURCES
In years of increasing sales, the Company's operating activities result in a net
use of cash. In 1997, $3.8 million of net cash was used in operations, primarily
due to acquisition costs and related federal income taxes in excess of first
year revenues.
The Company has structured its investment portfolio to ensure a strong liquidity
position in order to permit timely payment of policy and contract benefits and
future acquisition costs without requiring an untimely sale of assets. The
Company manages its liquidity position by matching its exposure to cash demands
with adequate sources of cash and other liquid assets.
The Company's liquid assets include substantial Treasury holdings and short-term
money market investments. Cash and short-term investments totaled $3.5 million
at December 31, 1997. The market value of other highly liquid securities,
including NAIC Category 1 and 2 publicly traded bonds, was $39.1 million at
December 31, 1997.
The liquidity position of the Company is proactively managed on an ongoing basis
to meet cash needs while minimizing adverse impacts on investment returns. The
Company also employs quantitative asset/liability cash flow management
techniques to optimize and control the investment return and liquidity for the
portfolio.
YEAR 2000 ISSUE
Like other businesses and governments around the world, MML Bay State could be
adversely affected if the computer systems used by the company and those with
which it does business do not properly recognize the year 2000. This is commonly
known as the "Year 2000 issue." In 1996, MML Bay State's parent company,
MassMutual, began an enterprise-wide process of identifying, evaluating and
implementing changes to computer systems and applications software, to address
the Year 2000 issue on its own behalf and on behalf of its insurance
subsidiaries, including MML Bay State.
MassMutual is addressing the Year 2000 issue internally with modifications to
existing programs and conversions to new programs. MML Bay State's costs related
to the Year 2000 issue are being currently expensed by MML Bay State and when
measured against MML Bay State's net gain from operations, are not material to
MML Bay State. MassMutual is also seeking assurances from vendors, customers,
service providers and others with which MassMutual and its subsidiaries conduct
business, in order to identify and resolve the Year 2000 issue.
INVESTMENTS
As directed by the policyholders, the majority of the Company's assets are
policyholders' investments in the Company's separate investment accounts
("SIA"). The assets in the SIA are recorded at market value, and all investment
risks are passed on to the policyholders. The following discussion focuses on
the general investment account portfolio, which does not include the Company's
SIA assets.
At December 31, 1997, the Company had $58.1 million of invested assets in its
general investment account. The portfolio of invested assets is managed to
support the liabilities of the business in light of yield, liquidity, and
diversification considerations.
The following table sets forth the Company's invested assets in the general
investment account and gross investment yield:
<TABLE>
<CAPTION>
December 31,
1997 1996 1995
---- ---- ----
Carrying % of Carrying % of Carrying % of
Value Total Yield Value Total Yield Value Total Yield
----- ----- ----- ----- ----- ----- ----- ----- -----
(In Millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bonds $38.5 66.3% 7.7% $44.9 72.5% 7.5% $41.3 85.7% 7.1%
Policy loans 16.1 27.7 6.3 10.0 16.2 6.4 6.4 13.3 6.1
Cash and short-
term investments 3.5 6.0 10.5 7.0 11.3 13.1 0.5 1.0 15.6
----- ----- ---- ----- ----- ---- ----- ----- -----
Total investments $58.1 100.0% 7.6% $61.9 100.0% 7.7% $48.2 100.0% 7.1%
===== ===== ==== ===== ===== ==== ===== ===== =====
</TABLE>
The yield on total investments before investment expenses was 7.6%, 7.7% and
7.2% for the years ended December 31, 1997, 1996 and 1995, respectively. If
investment expenses were deducted, net yields were 5.8%, 6.6% and 6.9%,
respectively. The yield on each investment category before federal income taxes
is calculated as: (a) two times gross investment income (which for real estate
deducts operating expenses and real estate taxes) divided by (b) the sum of
assets at the beginning of the year and assets at the end of the year, less
gross investment income. This is the formula, which was specified by the NAIC
for calculating investment yield when this information was last required to be
included in the annual statement.
The Company carries its investments in accordance with methods and values
prescribed by the NAIC and adopted by state insurance authorities. Generally,
bonds are valued at amortized cost. Policy loans are carried at the outstanding
11
<PAGE>
loan balance less amounts unsecured by the cash surrender value of the policy.
Short-term investments are stated at amortized cost which approximates fair
value.
<PAGE>
Bonds
The following table provides certain information regarding the maturity
distribution of bonds (excluding short-term securities):
Bond Maturities
December 31,
1997 1996
---- ----
Carrying % of Carrying % of
Value Total Value Total
----- ----- ----- -----
(In Millions)
Due in one year or less $0.1 0.3% $6.4 14.3%
Due after one year
through five years 18.9 49.1 13.0 29.0
Due after five years
through ten years 7.5 19.4 12.9 28.7
Due after ten years 2.0 5.2 1.5 3.3
Mortgage-backed
securities (1) 10.0 26.0 11.1 24.7
----- ----- ----- -----
$38.5 100.0% $44.9 100.0%
===== ===== ===== =====
(1) Including securities guaranteed by the U.S. Government.
The maturities of portfolio bonds are considered by the Company to be
sufficiently diversified and are carefully monitored and managed in light of the
Company's liquidity needs.
Bonds and short-term investments consist of $37.2 million of publicly traded and
$2.2 million of privately placed debt securities. Substantially all of the
publicly traded and privately placed bonds held by the Company are evaluated by
the NAIC's Securities Valuation Office ("SVO"), which assigns securities to one
of six NAIC investment credit categories, with Category 1 securities being the
highest quality and Category 6 securities being the lowest quality. Categories 1
and 2 are investment grade, Category 3 is medium quality, and Categories 4, 5,
and 6 are non-investment grade. The remainder of the securities which have not
as yet received NAIC ratings are rated under an internal system which the
Company believes to be equivalent to that used by the SVO. At December 31, 1997
and 1996, the portfolio was 100% invested in NAIC Categories 1 and 2.
The Company invests a significant portion of its investment funds in high
quality publicly traded bonds in order to maintain and manage liquidity and
reduce the risk of default in the portfolio. At December 31, 1997 and 1996, the
portfolio was 100% invested in NAIC categories 1 and 2.
The Company utilizes its investments in the privately placed bond portfolio to
enhance the value of the overall portfolio, increase diversification and obtain
higher yields than are possible with comparable quality public market
securities. To control risk, the Company relies upon broader access to
management information, strengthened negotiated protective covenants, call
protection features, and a higher level of collateralization than can
customarily be achieved in the public market. The strength of the privately
placed bond portfolio is demonstrated by the 100% investment in NAIC categories
1 and 2 at December 31, 1997 and 1996.
<PAGE>
The following table sets forth by industry category the carrying value and the
percentage breakdown of the bond portfolio, including short-term securities, as
of December 31, 1997:
Bond Portfolio By Industry
December 31, 1997
-----------------
(In Millions)
Carrying % of
Industry Category Value (1) Total
- ----------------- --------- -----
Collateralized (2) $17.5 44.4%
Finance 4.1 10.4
U.S. Government 4.1 10.4
Insurance and other financial 3.4 8.6
Producer goods 2.9 7.4
Natural resources 2.1 5.3
Consumer goods 1.4 3.6
Media 1.0 2.5
Transportation 1.0 2.5
Utilities 0.9 2.3
Merchandise Retailers 0.5 1.3
Other Services 0.5 1.3
----- -----
Total $39.4 100.0%
===== =====
(1) Includes short-term securities.
(2) These bonds are collateralized by mortgages backed by FNMA or FHLMC and
include collateralized mortgage obligations and $1.2 million in privately
placed bonds.
The estimated fair value of bonds is based upon quoted market prices for
actively traded securities.
The tables below set forth the carrying value, gross unrealized gains and
losses, net unrealized gain (loss) and estimated fair value of the bond
portfolio (excluding short-term securities) at December 31, 1997 and 1996.
<PAGE>
<TABLE>
<CAPTION>
December 31, 1997
-----------------
Gross Gross Net Estimated
Carrying Unrealized Unrealized Unrealized Fair
Value Gains Losses Gain (Loss) Value
----- ----- ------ ----------- -----
(In Millions)
<S> <C> <C> <C> <C> <C>
U. S. Treasury Securities
and Obligations of U. S.
Government Corporations
and Agencies $ 7.6 $ 0.1 $ - $ 0.1 $ 7.7
Mortgage-backed securities 6.5 0.1 - 0.1 6.6
Corporate debt securities 23.9 0.4 - 0.4 24.3
Utilities 0.5 - - - 0.5
----- ----- ---- ----- -----
$38.5 $ 0.6 $ - $ 0.6 $39.1
===== ===== ==== ===== =====
<CAPTION>
December 31, 1996
-----------------
Gross Gross Net Estimated
Carrying Unrealized Unrealized Unrealized Fair
Value Gains Losses Gain (Loss) Value
----- ----- ------ ----------- -----
(In Millions)
<S> <C> <C> <C> <C> <C>
U. S. Treasury Securities
and Obligations of U. S.
Government Corporations
and Agencies $ 7.8 $0.1 $0.1 $ - $ 7.8
Mortgage-backed securities 8.3 - 0.1 (0.1) 8.2
Corporate debt securities 28.8 0.3 0.1 0.2 29.0
----- ---- ---- ---- -----
$44.9 $0.4 $0.3 $0.1 $45.0
===== ==== ==== ==== =====
</TABLE>
15
<PAGE>
Portfolio Surveillance and Under-performing Investments
Bonds
The Company reviews all bonds on a regular basis utilizing the following
criteria: (i) material declines in revenues or margins, (ii) significant
uncertainty regarding the issuer's industry, (iii) debt service coverage or cash
flow ratios that fall below industry-specific thresholds, (iv) violation of
financial covenants, (v) trading of public securities at a substantial discount
due to specific credit concerns and (vi) other subjective factors that relate to
the issuer. The bond portfolio is actively reviewed to estimate the likelihood
and amount of financial defaults or write-downs in the portfolio and to make
timely decisions as to the potential sale or renegotiation of terms of specific
investments.
As defined by the NAIC, under-performing bonds are those whose deferral of
interest and/or principal payments are deemed to be caused by the inability of
the obligor to make such payments as called for in the bond contract. At
December 31, 1997 and 1996 there were no under-performing bonds.
Write-downs and Allowances
In the case of bonds, the net realizable value is determined in accordance with
principles established by the SVO using criteria such as the net worth and
capital structure of the borrower, the value of the collateral, the presence of
additional credit support and the Company's evaluation of the borrower's ability
to compete in a relevant market.
Investment Reserves
In compliance with regulatory requirements, the Company maintains an asset
valuation reserve ("AVR"). The AVR stabilizes shareholder's equity (surplus)
against non-interest rate related fluctuations in the value of stocks, bonds,
mortgage loans and real estate investments.
The following table presents the change in AVR for the years 1997 and 1996:
ASSET VALUATION RESERVES
Years Ended
December 31,
------------
1997 1996
---- ----
(In Millions)
Balance at Beginning of the Year $0.2 $0.1
Reserve contributions (1) (0.1) 0.1
---- ----
Balance at End of the Year $0.1 $0.2
---- ----
(1) The negative contribution represents an adjustment to reduce the reserve to
the statutory maximum. The amount is calculated on a statutory formula and
represents the net impact on share-holder's equity for investment gains and
losses not related to changes in interest rates. The net change in reserves
is recorded as a charge/(credit) to shareholder's equity.
VII. MML Bay State and MassMutual - Description of the Business
MML Bay State is a life insurance company and a wholly-owned subsidiary of
MassMutual. Organized in 1894 under the laws of the state of Missouri, the
Company (formerly known as Western Life Insurance Company of America) was
purchased in 1981 by MassMutual. Its name was changed to MML Bay State in 1982.
On June 30, 1997, MML Bay State redomesticated from the State of Missouri to the
State of Connecticut.
The Company is an issuer of variable life and variable annuity contracts. The
Company currently is licensed to sell variable life insurance in the District of
Columbia and in all states except New York. The Company, as of March 1, 1998,
obtained authority to sell variable annuity contracts in 45 states and the
District of Columbia and plans to obtain authority to sell variable annuity
contracts in all states except New York.
Currently, aside from the Contract, the Company offers certain variable
universal life insurance policies. These products provide a policyholder, within
guidelines established by the terms of the policy, the ability to select and
change premium levels, amounts of death benefits, and account value investment
options. Premiums in excess of specified sales charges are credited to the
account value of the policies allocated either to a fixed account backed by the
general investment account of the Company, or to one or more of the available
divisions of the policies' separate accounts.
The Company's Home Office is located in Hartford, Connecticut. The Company's
principal administrative office is located at 1295 State Street, Springfield,
Massachusetts. The Company believes that it has adequate space, equipment and
resources to meet its obligations with regard to the Fixed Account and the
Contract. The Company currently has an agreement with Alliance One Services,
Inc., to provide most of the administrative services for the Contract through
the operation of the Service Center. However as of July 1, 1998, the Company
will relocate the Service Center to its Home Office in Hartford, CT.
Functionally, the Company is part of MassMutual's operations, and as a result, a
discussion of MassMutual's business and the Company's position within
MassMutual's operations is useful for an understanding of the Company's
business.
MassMutual is a mutual life insurance company organized as
16
<PAGE>
a Massachusetts corporation which was originally chartered in 1851. As a mutual
life insurance company, MassMutual has no shareholders. MassMutual's primary
business is ordinary life insurance. MassMutual also provides, directly or
through its subsidiaries, a wide range of annuity and disability products, and
pension and pension-related products and services, as well as investment
services to individuals, and corporations and other institutions in all 50
states of the United States, and the District of Columbia. MassMutual is also
licensed to transact business in Puerto Rico, and six provinces of Canada.
MassMutual's principal lines of business are (i) Individual Line of Business,
which includes individual protection products, including life and disability,
and individual accumulation products, which provide annuities, large corporate
market and investment products and services; (ii) Retirement Services, which
provides group pension investment products and administrative services,
primarily to sponsors of tax qualified retirement plans; (iii) MassMutual
Investment Group, which provides investment advisory services to MassMutual, its
affiliates and various outside individual and institutional investors through
MassMutual's investment management staff and its principal subsidiaries:
OppenheimerFunds, Inc., David L. Babson and Company, Inc., Antares Leveraged
Capital Corporation, Charter Oak Capital Management and Cornerstone Real Estate
Advisors, Inc.
The direction and operations of MassMutual's three lines of business are guided
by a statement of corporate vision. Under this vision, MassMutual's operations
are managed so as to maintain a financially strong and efficient enterprise for
the benefit of policyholders. MassMutual's long-term objectives are to maintain
corporate financial strength, enhance policyholder value, and generate and
sustain growth.
COMPETITION
The life insurance industry is highly competitive. There are more than 1,700
life insurance companies in the United States, many of which offer insurance
products similar to those marketed by MML Bay State. In addition to competition
within the industry, insurers are increasingly facing competition from
non-traditional sources in the financial services business, including mutual
funds, banks, securities brokerage houses and other financial services entities,
many of which provide alternative investment and savings vehicles for consumers.
Legislative initiatives proposed at the federal level would, if enacted, reorder
the financial services industry, thereby changing the environment in which MML
Bay State competes.
MML Bay State's management believes its financial strength, agent skill and
historical product performance provide competitive advantages for the products
it offers in these markets. MML Bay State has received the following ratings
from the various rating agencies, A.M. Best Company, Inc. (A++), and Standard
and Poor's Corporation (AAA).
MassMutual's, MML Bay State's parent, financial strength continued to be
recognized favorably by the rating agencies. MassMutual has received the highest
ratings from A.M. Best Company, Inc. (A++), Standard & Poor's Corporation (AAA),
and Duff & Phelps Credit Rating Company (AAA), as well as a rating of Aa1 by
Moody's Investors Service, Inc. (the highest in its "excellent" category).
REGULATION
MML Bay State is organized as a Connecticut stock life insurance company, and is
subject to Connecticut laws governing insurance companies. MML Bay State is
regulated and supervised by the State of Connecticut Insurance Commissioner. The
Commissioner and his or her agents have the right at all times to review or
examine MML Bay State's books and assets. A full examination of MML Bay State's
operations is conducted periodically according to the rules and practices of the
NAIC. MML Bay State is also subject to the insurance laws of the states in which
it is authorized to do business, to various federal and state securities laws
and regulations, and to regulatory agencies which administer those laws and
regulations.
MML Bay State is licensed, regulated and supervised in all jurisdictions where
it conducts an insurance business. The extent of such regulation varies, but
most jurisdictions have laws and regulations requiring the licensing of insurers
and their agents and setting standards of solvency and business conduct to be
maintained by licensed insurance companies, and may regulate withdrawal from
certain markets. In addition, statutes and regulations usually require the
approval of policy forms and, for certain lines of insurance, the approval of
rates. Such statutes and regulations also prescribe the permitted types and
concentration of investments. MML Bay State is also subject to regulation of its
accounting methodologies and is required to file detailed annual financial
statements with supervisory agencies in each of the jurisdictions in which it
does business. Each of its operations and accounts is also subject to
examination by such agencies at regular intervals.
All 50 states of the United States, the District of Columbia and Puerto Rico
have insurance guaranty fund laws requiring insurance companies doing business
within those jurisdictions to participate in guaranty associations which are
organized to pay contractual obligations under insurance policies (and
certificates issued under group insurance policies) issued by impaired or
insolvent life insurance companies. These association levy assessments (up to
prescribed limits) on all member insurers in a particular state on the basis of
the proportionate shares of the premiums written by member insurers in the lines
of business in which the impaired or insolvent insurer is engaged. Some states
permit member insurers to recover assessments paid through full or partial
premium tax offsets, usually over a period of years. The Company believes such
assessments in excess of amounts, accrued will not materially affect its
financial position, results of operations
17
<PAGE>
or liquidity. The Company elected not to admit $0.1 million of guaranty fund
premium tax offset receivables relating to prior assessments in both 1997 and
1996.
MML Bay State is also subject to risk-based capital ("RBC") requirements
promulgated by the NAIC. The RBC Model Act will give state insurance
commissioners explicit regulatory authority to require various actions by, or
take various actions against, insurance companies whose total adjusted capital
does not meet the RBC standards.
In addition to regulation of its insurance business, MML Bay State is subject to
various types of federal and state laws and regulations affecting the conduct,
taxation and other aspects of its businesses. Certain policies and contracts
offered by MML Bay State are subject to various levels of regulation under the
federal securities laws administered by the Securities and Exchange Commission.
MML Bay State's management believes it is in compliance in all material respects
with all applicable regulations.
VIII. Experts and Additional Available Information
Experts
The audited statutory statement of financial position of MML Bay State as of
December 31, 1997 and 1996 and the related statutory statements of operations,
changes in shareholder's equity and cash flows for each of the years in the
three year period ended December 31, 1997 included in this prospectus have been
so included in reliance on the reports of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
Additional Available Information
The Company files registration statements, reports and informational statements
with the SEC under the Securities Act of 1933. These filings contain information
not contained in this Prospectus. Such registration statements, reports,
information statements and other information can be reviewed and copied at the
public reference facilities maintained by the Securities and Exchange
Commission, at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 or at
the Commission's New York and Chicago regional offices located at the following
addresses: Northeast Regional Office, 7 World Trade Center, Suite 1300, New
York, New York, 10046; and Midwest Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. The SEC also maintains a Web site that
contains these filings. The SEC's Inter-net address is http://www.sec.gov.
IX. Selected Historical Financial Data
The following summary financial information has been derived from the statutory
financial statements of the Company, which have been audited by Coopers &
Lybrand L.L.P., independent accountants. The results for past accounting periods
are not necessarily indicative of the results to be expected for any future
accounting period.
The information presented below should be read in conjunction with the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", the audited statutory financial statements and other information
included elsewhere in this prospectus.
18
<PAGE>
MML Bay State Life Insurance Company
Selected Statutory Financial Data
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Statement of Operations Data: (In Millions)
Revenue:
Premium income $ 606.6 $441.2 $ 92.7 $ 54.5 $ 43.4
Net investment and other income 10.7 8.4 4.8 3.6 6.7
-------- ------ ------ ------ ------
Total revenue 617.3 449.6 97.5 58.1 50.1
-------- ------ ------ ------ ------
Benefits and expenses:
Policy benefits and payments 34.3 11.0 5.7 2.9 2.2
Addition to policyholders' reserves and funds 489.0 363.5 67.0 30.4 27.2
Expenses, commissions and state taxes 84.9 61.2 28.8 24.1 18.8
-------- ------ ------ ------ ------
Total benefits and expenses 608.2 435.7 101.5 57.4 48.2
-------- ------ ------ ------ ------
Net gain (loss) from operations before federal
income taxes 9.1 13.9 (4.0) 0.7 2.0
Federal income taxes (benefit) 15.9 11.8 0.6 (0.9) 1.3
-------- ------ ------ ------ ------
Net gain (loss) from operations (6.8) 2.1 (4.6) 1.6 0.7
Net realized capital gain (loss) (0.1) (0.1) - - -
-------- ------ ------ ------ ------
Net income (loss) $ (6.9) $ 2.0 $ (4.6) $ 1.6 $ 0.7
======== ====== ====== ====== ======
Balance Sheet Data (at period end):
Assets:
General account $ 135.9 $116.6 $ 78.8 $ 79.6 $ 47.4
Separate account 1,400.1 706.7 265.2 151.1 112.7
-------- ------ ------ ------ ------
Total Assets $1,536.0 $823.3 $344.0 $230.7 $160.1
======== ====== ====== ====== ======
Liabilities:
Policyholders' reserves and funds $ 36.2 $ 26.5 $ 19.1 $ 11.8 $ 9.5
Payable to parent 21.7 - 3.2 4.4 -
Asset valuation reserve 0.1 0.2 0.2 0.1 -
Separate account reserves and liabilities 1,396.7 703.7 262.8 149.1 111.0
Other liabilities 13.8 15.3 8.4 9.3 6.2
-------- ------ ------ ------ ------
Total liabilities 1,468.5 745.7 293.7 174.7 126.7
Total shareholder's equity (1) (2) 67.5 77.6 50.3 56.0 33.4
-------- ------ ------ ------ ------
Total liabilities and shareholder's equity $1,536.0 $823.3 $344.0 $230.7 $160.1
======== ====== ====== ====== ======
Total Adjusted Capital Data (at period end) (3):
Total surplus (shareholder's equity) $ 67.5 $ 77.6 $ 50.3 $ 56.0 $ 33.4
Asset Valuation reserve 0.1 0.2 0.2 0.1 -
-------- ------ ------ ------ ------
Total adjusted capital $ 67.6 $ 77.8 $ 50.5 $ 56.1 $ 33.4
======== ====== ====== ====== ======
</TABLE>
(1) In 1994, the Company received a surplus contribution of $25 million and
recorded a prior year adjustment of $4 million through the Statement of
Changes in Shareholder's Equity
(2) In 1996, the Company received a surplus contribution of $25.5 million.
(3) As defined by the NAIC.
19
<PAGE>
Report Of Independent Accountants
To the Board of Directors and Policyholders of
MML Bay State Life Insurance Company
We have audited the accompanying statutory statements of financial position of
MML Bay State Life Insurance Company as of December 31, 1997 and 1996, and the
related statutory statements of income, changes in capital stock and surplus,
and cash flows for each of the three years in the period ended December 31,
1997. 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.
As described more fully in Note 1, these financial statements were prepared in
conformity with statutory accounting practices of the National Association of
Insurance Commissioners and the accounting practices prescribed or permitted by
the Department of Insurance of the State of Connecticut, and prior to June 30,
1997, the Department of Insurance of the State of Missouri (collectively
"statutory accounting principles"), which practices differ from generally
accepted accounting principles. The effects on the financial statements of the
variances between the statutory basis of accounting and generally accepted
accounting principles, although not reasonably determinable at this time, are
presumed to be material.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of MML Bay State Life Insurance Company at December 31, 1997 and 1996, or the
results of its operations or its cash flows for each of the three years in the
period ended December 31, 1997.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of MML Bay State Life Insurance
Company at December 31, 1997 and 1996, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1997, on
the statutory basis of accounting described in Note 1.
COOPERS & LYBRAND L.L.P.
Springfield, Massachusetts
February 6, 1998
20
<PAGE>
MML Bay State Life Insurance Company
STATUTORY STATEMENTS OF FINANCIAL POSITION
December 31,
1997 1996
---- ----
(In Millions)
Assets:
Bonds ........................................... $ 38.5 $ 44.9
Policy loans .................................... 16.1 10.0
Cash and short-term investments ................. 3.5 7.0
-------- -------
58.1 61.9
Investment and insurance amounts
receivable ..................................... 2.0 2.3
Transfer due from separate account .............. 75.8 50.2
Receivable from parent .......................... -- 1.1
Federal income tax receivable ................... -- 1.1
-------- -------
135.9 116.6
Separate account assets ......................... 1,400.1 706.7
-------- -------
$1,536.0 $ 823.3
======== =======
See notes to statutory financial statements.
21
<PAGE>
MML Bay State Life Insurance Company
STATUTORY STATEMENTS OF FINANCIAL POSITION, Continued
<TABLE>
<CAPTION>
December 31,
1997 1996
---- ----
($ In Millions Except for Par Value
and Share Amounts)
<S> <C> <C>
Liabilities:
Policyholders' reserves and funds............................... $ 36.2 $ 26.5
Policyholders' claims and other benefits........................ 1.9 1.1
Payable to parent............................................... 21.7 --
Federal income tax payable...................................... 3.9 --
Accrued expenses and taxes...................................... 3.0 6.9
Asset valuation reserve......................................... 0.1 0.2
Other liabilities............................................... 5.0 7.3
-------- ------
71.8 42.0
Separate account reserves and liabilities....................... 1,396.7 703.7
-------- ------
1,468.5 745.7
-------- ------
Capital stock and surplus:
Common stock, $200 par value
25,000 shares authorized
12,501 shares issued and outstanding............................ 2.5 2.5
Paid-in capital and contributed surplus......................... 71.7 71.7
Surplus......................................................... (6.7) 3.4
-------- ------
67.5 77.6
-------- ------
$1,536.0 $823.3
======== ======
</TABLE>
See notes to statutory financial statements.
22
<PAGE>
MML Bay State Life Insurance Company
STATUTORY STATEMENTS OF INCOME
Years Ended December 31,
1997 1996 1995
---- ---- ----
(In Millions)
Revenue:
Premium income ................................ $606.6 $441.2 $ 92.7
Net investment and other income ............... 10.7 8.4 4.3
Expense allowance on reinsurance ceded ........ -- -- 0.5
------ ------ ------
617.3 449.6 97.5
------ ------ ------
Benefits and expenses:
Policy benefits and payments .................. 34.3 11.0 5.7
Addition to policyholders' reserves, funds
and separate accounts ........................ 489.0 363.5 67.0
Operating expenses ............................ 38.3 24.0 11.2
Commissions ................................... 35.4 28.1 15.1
State taxes, licenses and fees ................ 11.2 9.1 2.5
------ ------ ------
608.2 435.7 101.5
Net gain (loss) from operations
before federal income taxes .................. 9.1 13.9 (4.0)
Federal income taxes .......................... 15.9 11.8 0.6
------ ------ ------
Net gain (loss) from operations ............... (6.8) 2.1 (4.6)
Net realized capital loss ..................... (0.1) (0.1) --
------ ------ ------
Net income (loss) ............................. $ (6.9) $ 2.0 $ (4.6)
====== ====== ======
See notes to statutory financial statements.
23
<PAGE>
MML Bay State Life Insurance Company
STATUTORY STATEMENTS OF CHANGES IN CAPITAL STOCK AND SURPLUS
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
---- ---- ----
(In Millions)
<S> <C> <C> <C>
Capital stock and surplus, beginning of year............... $ 77.6 $ 50.3 $ 55.9
------ ------ ------
Increases (decrease) due to:
Net income (loss)......................................... (6.9) 2.0 (4.6)
Change in asset valuation reserve......................... 0.1 (0.1) --
Change in separate account surplus........................ -- -- 0.3
Capital contribution...................................... -- 25.5 --
Change in reserving methodology........................... -- -- (1.3)
Change in non-admitted assets and other................... (3.3) (0.1) --
------ ------ ------
(10.1) 27.3 (5.6)
------ ------ ------
Capital stock and surplus, end of year..................... $ 67.5 $ 77.6 $ 50.3
====== ====== ======
</TABLE>
See notes to statutory financial statements.
24
<PAGE>
MML Bay State Life Insurance Company
STATUTORY STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
---- ---- ----
(In Millions)
<S> <C> <C> <C>
Operating activities:
Net income (loss) .................................... $(6.9) $ 2.0 $(4.6)
Additions to policyholders' reserves and funds,
net of transfers to separate accounts .............. 10.5 7.0 8.6
Net realized capital loss ............................ 0.1 0.1 -
Change in receivable from
separate accounts .................................... (25.6) (21.2) (7.9)
Change in receivable (payable) to parent ............. 22.8 (0.2) (1.2)
Change in federal taxes receivable (payable) ......... 5.0 (1.0) (1.0)
Other changes ........................................ (9.7) 1.5 (2.6)
----- ----- -----
Net cash used in operating activities ................ (3.8) (11.8) (8.7)
----- ----- -----
Investing activities:
Purchases of investments and loans ................... (20.1) (35.9) (28.4)
Sales and maturities of investments and receipts
from repayments of loans ........................... 20.4 28.7 36.6
----- ----- -----
Net cash provided by (used in) investing activities .. 0.3 (7.2) 8.2
----- ----- -----
Financing activities:
Capital and Surplus contribution ..................... - 25.5 -
----- ----- -----
Net cash provided by financing activities ............ - 25.5 -
----- ----- -----
Increase (decrease) in cash and short-term investments (3.5) 6.5 (0.5)
Cash and short-term investments, beginning of year ... 7.0 0.5 1.0
----- ----- -----
Cash and short-term investments, end of year ......... $ 3.5 $ 7.0 $ 0.5
===== ===== =====
</TABLE>
25
<PAGE>
Notes To Statutory Financial Statements
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
MML Bay State Life Insurance Company ("the Company") is a wholly-owned
subsidiary of Massachusetts Mutual Life Insurance Company ("MassMutual"). The
Company is primarily engaged in the sale of flexible and limited premium
variable whole life insurance and variable annuities distributed through career
agents. On March 1, 1996, the operations of Connecticut Mutual Life Insurance
Company were merged into MassMutual.
The accompanying statutory financial statements, except as to form, have been
prepared in conformity with the statutory accounting practices of the National
Association of Insurance Commissioners ("NAIC") and the accounting practices
prescribed or permitted by the Department of Insurance of the State of
Connecticut, and prior to June 30, 1997, the Department of Insurance of the
State of Missouri. On June 30, 1997, the Company redomesticated from the state
of Missouri to the state of Connecticut which did not have any effect on the
accounting practices being followed.
The accompanying statutory financial statements are different in some respects
from GAAP financial statements. The more significant differences are as follows:
(a) acquisition costs, such as commissions and other costs directly related to
acquiring new business, are charged to current operations as incurred, whereas
under GAAP these expenses would be capitalized and recognized over the life of
the policies; (b) policy reserves are based upon statutory mortality and
interest requirements without consideration of withdrawals, whereas GAAP
reserves would be based upon reasonably conservative estimates of mortality,
morbidity, interest and withdrawals; (c) bonds are generally carried at
amortized cost whereas GAAP generally requires they be valued at fair value; (d)
deferred income taxes are not provided for book-tax timing differences as would
be required by GAAP; and (e) payments received for universal life products and
variable annuities are reported as premium revenue, whereas under GAAP, these
payments would be recorded as deposits to policyholders' account balances.
The NAIC is currently engaged in an extensive project to codify statutory
accounting principles ("Codification") with a goal of providing a comprehensive
guide of statutory accounting principles for use by insurers in all states. This
comprehensive guide, which has not been approved by the NAIC or any state
insurance department, includes seventy-two Statements of Statutory Accounting
Principles ("SSAPs") and is expected to be effective no earlier than January 1,
1999. The effect of adopting these SSAPs shall be reported as an adjustment to
surplus on the effective date. Management is currently reviewing the impact of
Codification. However, since the SSAPs have not been finalized, the ultimate
impact cannot be determined at this time.
The preparation of statutory financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, as well as disclosures of contingent assets and liabilities, at the
date of the statutory financial statements. Management must also make estimates
and assumptions that affect the amounts of revenues and expenses during the
reporting period. Future events, including changes in the levels of mortality,
morbidity, interest rates and asset valuations, could cause actual results to
differ from the estimates used in the statutory financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a description of the Company's principal accounting policies
and practices.
A. Investments
Bonds are valued in accordance with rules established by the National
Association of Insurance Commissioners. Generally, bonds are valued at amortized
cost.
Policy loans are carried at the outstanding loan balance less amounts unsecured
by the cash surrender value of the policy.
Short-term investments are stated at amortized cost, which approximates fair
value.
In compliance with regulatory requirements, the Company maintains an Asset
Valuation Reserve and an Interest Maintenance Reserve. The Asset Valuation
Reserve and other investment reserves stabilize surplus against declines in the
value of bonds.
26
<PAGE>
Notes To Statutory Financial Statements (Continued)
The Interest Maintenance Reserve captures after-tax realized capital gains and
losses which result from changes in the overall level of interest rates for all
types of fixed income investments and amortizes these capital gains and losses
into income using the grouped method over the remaining life of the investment
sold or over the life of the underlying asset. Net realized after tax capital
losses of $0.1 million in 1997 and 1996 and net realized after tax capital gains
of $0.3 million in 1995 were charged to the Interest Maintenance Reserve.
Amortization of the Interest Maintenance Reserve into net investment income
amounted to $0.1 million in 1997, 1996 and 1995. The Interest Maintenance
Reserve is included in other liabilities on the statutory Statement of Financial
Position.
Realized capital gains and losses, less taxes, not includable in the Interest
Maintenance Reserve, are recognized in net income. Realized capital gains and
losses are determined using the specific identification method. Unrealized
capital gains and losses are included in surplus.
B. Separate Accounts
Separate account assets and liabilities represent segregated funds administered
and invested by the Company for the benefit of variable annuity and variable
life insurance policyholders. Assets, consisting of holdings in an open-end
series investment fund affiliated with MassMutual, bonds, common stocks, and
short-term investments, are reported at fair value. The transfer due from
separate account represents the policyholders' account values in excess of
statutory benefit reserves. Premiums, benefits and expenses of the separate
accounts are reported in the Statutory Statement of Income. The Company receives
compensation for providing administrative services to the separate account and
for assuming mortality and expense risks in connection with the policies. The
Company had $3.4 million and $3.0 million of its assets invested in the separate
account as of December 31, 1997 and 1996, respectively.
Net transfers to separate accounts of $479.4 million, $356.1 million, and $59.8
million in 1997, 1996 and 1995, respectively, are included in the addition to
policyholders' reserves, funds and separate accounts.
C. Policyholders' Reserves
Policyholders' reserves for life contracts were developed using accepted
actuarial methods computed principally on the net level premium method and the
Commissioners' Reserve Valuation Method using the 1958 and 1980 Commissioners'
Standard Ordinary mortality tables with assumed interest rates ranging from 3.5
to 5.5 percent. Reserves for individual annuities are based on accepted
actuarial methods, principally at interest rates ranging from 5.5 to 6.0
percent.
During 1994, actuarial guidelines requiring additional reserves for immediate
payment of claims became effective. While the Company's aggregate reserves were
sufficient, the reserves for certain products were not recorded. The effect of
correctly recording these reserves was $1.3 million at December 31, 1994 and was
recorded as an adjustment to surplus during 1995.
D. Premium and Related Expense Recognition
Premium revenue is recognized annually on the anniversary date of the policy.
Annuity premium is recognized when received. Commissions and other costs related
to issuance of new policies, maintenance and settlement costs, are charged to
current operations when incurred.
E. Cash and Short-Term Investments
For purposes of the Statutory Statement of Cash Flows, the Company considers all
highly liquid short-term investments purchased with a maturity of twelve months
or less to be cash and short-term investments.
27
<PAGE>
Notes To Statutory Financial Statements (Continued)
3. CAPITAL STOCK AND SURPLUS
The Board of Directors of MassMutual has authorized the contribution of funds to
the Company sufficient to meet the capital requirements of all states in which
the Company is licensed to do business. Substantially all of the statutory
capital stock and surplus is subject to dividend restrictions relating to
various state regulations which limit the payment of dividends without prior
approval. Under these regulations, $7.5 million of capital stock and surplus is
available for distribution to the shareholder in 1998 without prior regulatory
approval.
4. RELATED PARTY TRANSACTIONS
MassMutual and the Company have an agreement whereby MassMutual, for a fee, will
furnish the Company, as required, operating facilities, human resources,
computer software development and managerial services. Fees incurred under the
terms of the agreement were $26.8 million, $16.4 million and $6.6 million in
1997, 1996 and 1995, respectively.
The Company had reinsurance agreements with MassMutual in which MassMutual
assumed specific plans of insurance on a coinsurance basis and on a yearly
renewal term basis. The coinsurance agreement was terminated in 1995. A
termination fee of $6.2 million was recorded as an expense and paid to
MassMutual for the right to retain future fees and charges on the reinsurance
business. Premium income and policy benefits and payments are stated net of
reinsurance. Premium income of $5.1 million, $3.8 million and $29.6 million was
ceded to MassMutual in 1997, 1996 and 1995, respectively. Death benefits of $5.5
million, $3.1 million and $1.8 million were ceded to MassMutual in 1997, 1996
and 1995, respectively.
The Company entered into a stop-loss agreement with MassMutual on January 1,
1997, with maximum coverage at $25.0 million, under which the Company cedes
claims which, in aggregate exceed 18% of the covered volume for any year. For
1997, this limit was $15.4 million and it was not exceeded. The Company paid
approximately $1.0 million in premiums under the agreement in 1997.
During 1996, MassMutual contributed additional paid in capital of $25.0 million
cash to the Company and purchased an additional 2,500 shares of common stock for
$0.5 million.
5. FEDERAL INCOME TAXES
The provision for federal income taxes is based upon the Company's best estimate
of its tax liability. No deferred tax effect is recognized for temporary
differences that may exist between financial reporting and taxable income.
Accordingly, the reporting of miscellaneous temporary differences, such as
reserves and acquisition costs, resulted in effective tax rates which differ
from the statutory tax rate.
The Company plans to file its 1997 federal income tax return on a consolidated
basis with its parent, MassMutual and MassMutual's other eligible life and
non-life affiliates. The Company and its eligible life and non-life affiliates
are subject to a written tax allocation agreement which allocates the group's
tax liability for payment purposes. Generally, the agreement provides that loss
members shall be compensated for the use of their losses and credits by other
members.
The Internal Revenue Service has completed examining MassMutual's income tax
returns through the year 1992 and is currently examining the Company for the
years 1993 and 1994. The Company believes any adjustments resulting from such
examinations will not materially affect its statutory financial statements.
The Company made federal tax payments of $10.9 million in 1997, $12.8 million in
1996 and $1.9 million in 1995.
28
<PAGE>
Notes To Statutory Financial Statements (Continued)
6. INVESTMENTS
The Company maintains a diversified investment portfolio. Investment policies
limit concentration in any asset class, geographic region, industry group,
economic characteristic, investment quality or individual investment.
A. Bonds
The carrying value and estimated fair value of bonds are as follows:
<TABLE>
<CAPTION>
December 31, 1997
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
----- ----- ------ -----
(In Millions)
<S> <C> <C> <C> <C>
U. S. Treasury securities
and obligations of U. S.
government corporations
and agencies $7.6 $0.1 $ -- $7.7
Mortgage-backed securities 6.5 0.1 -- 6.6
Corporate debt securities 23.9 0.4 -- 24.3
Utilities 0.5 -- -- 0.5
----- ----- ----- -----
TOTAL $38.5 $ 0.6 $ -- $39.1
===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
----- ----- ------ -----
(In Millions)
<S> <C> <C> <C> <C>
U. S. Treasury securities
and obligations of U. S.
government corporations
and agencies $ 7.8 $0.1 $0.1 $ 7.8
Mortgage-backed securities 8.3 -- 0.1 8.2
Corporate debt securities 28.8 0.3 0.1 29.0
----- ---- ----- -----
TOTAL $44.9 $0.4 $ 0.3 $45.0
===== ==== ===== =====
</TABLE>
The carrying value and estimated fair value of bonds at December 31, 1997 by
contractual maturity are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Carrying Fair
Value Value
----- -----
<S> <C> <C>
(In Millions)
Due in one year or less $ 0.1 $ 0.1
Due after one year through five years 18.9 19.2
Due after five years through ten years 7.5 7.7
Due after ten years 2.0 2.0
----- -----
28.5 29.0
Mortgage-backed securities, including
securities guaranteed by the
U.S. government 10.0 10.1
----- -----
TOTAL $38.5 $39.1
===== =====
</TABLE>
29
<PAGE>
Notes To Statutory Financial Statements (Continued)
Proceeds from sales and maturities of investments in bonds were $20.4 million
during 1997, $28.7 million during 1996 and $36.6 million during 1995. Gross
capital gains of $0.1 million in 1997, $0.1 million in 1996 and $0.5 million in
1995 and gross capital losses of $0.1 million in 1997, $0.1 million in 1996, and
$0.1 million in 1995 were realized on those sales, portions of which were
included in the Interest Maintenance Reserve. The estimated fair value of
non-publicly traded bonds is determined by the Company using a pricing matrix.
B. Other
It is not practicable to determine the fair value of policy loans which do not
have a stated maturity.
7. LIQUIDITY
The withdrawal characteristics of the policyholders' reserves and funds,
including separate accounts, and the invested assets which support them at
December 31, 1997 are illustrated below:
<TABLE>
<CAPTION>
(In Millions)
<S> <C> <C>
Total policyholders' reserves and funds and
separate account liabilities $1,432.9
Not subject to discretionary withdrawal (0.4)
Policy loans (16.1)
--------
Subject to discretionary withdrawal $1,416.4
========
Total invested assets, including separate
investment accounts $1,458.2
Policy loans and other invested assets (16.1)
--------
Marketable investments $1,442.1
========
</TABLE>
8. BUSINESS RISKS AND CONTINGENCIES
Approximately 49% of the Company's premium revenue in 1997 was derived from
three customers and approximately 52% of the Company's premium revenue in 1996,
was derived from two customers.
The Company is subject to insurance guaranty fund laws in the states in which it
does business. These laws assess insurance companies amounts to be used to pay
benefits to policyholders and claimants of insolvent insurance companies. Many
states allow these assessments to be credited against future premiums. The
Company believes such assessments in excess of amounts accrued will not
materially affect its financial position, results of operations or liquidity. In
1997, the Company elected not to admit $0.1 million of guaranty fund premium tax
offset receivables relating to prior assessments.
The Company is involved in litigation arising in and out of the normal course of
its business. Management intends to defend these actions vigorously. While the
outcome of litigation cannot be foreseen with certainty, it is the opinion of
management, after consultation with legal counsel, that the ultimate resolution
of these matters will not materially affect its financial position, results of
operations or liquidity.
9. RECLASSIFICATIONS
Certain 1996 and 1995 amounts have been reclassified to conform with the current
year presentation.
30
<PAGE>
Notes To Statutory Financial Statements (Continued)
AFFILIATED COMPANIES
The relationship of the Company, its parent and affiliated companies as of
December 31, 1997 is illustrated below. Subsidiaries are wholly-owned by the
parent, except as noted.
Parent
------
Massachusetts Mutual Life Insurance Company
Subsidiaries of Massachusetts Mutual Life Insurance Company
-----------------------------------------------------------
C.M. Assurance Company
C.M. Benefit Insurance Company
C.M. Life Insurance Company
MassMutual Holding Company
MassMutual Holding Company Two, Inc. (Sold in March 1996)
MassMutual of Ireland, Limited
MML Bay State Life Insurance Company
MML Distributors, LLC
Subsidiaries of MassMutual Holding Company
------------------------------------------
GR Phelps, Inc.
MassMutual Holding Trust I
MassMutual Holding Trust II
MassMutual Holding MSC, Inc.
MassMutual International, Inc.
MassMutual Reinsurance Bermuda (Sold in December 1996)
MML Investors Services, Inc.
State House One (Liquidated in December 1996)
Subsidiaries of MassMutual Holding Trust I
- ------------------------------------------
Antares Leveraged Capital Corporation 98.5%
Charter Oak Capital Management, Inc. 80.0%
Cornerstone Real Estate Advisors, Inc.
DLB Acquisition Corporation 84.8%
Oppenheimer Acquisition Corporation - 88.55%
Subsidiaries of MassMutual Holding Trust II
- -------------------------------------------
CM Advantage, Inc. -- (Liquidated in December 1997)
CM International, Inc.
CM Property Management, Inc. -- (Liquidated in December 1997)
High Yield Management, Inc.
MMHC Investments, Inc.
MML Realty Management
Urban Properties, Inc.
Westheimer 335 Suites, Inc.
Subsidiaries of MassMutual International
- ----------------------------------------
MassLife Seguros de Vida (Argentina) S. A.
MassMutual International (Bermuda) Ltd.
Mass Seguros de Vida (Chile) S. A.
MassMutual International (Luxemburg) S. A.
MassMutual Holding MSC, Incorporated
- ------------------------------------
MassMutual/Carlson CBO N. V. - 100%
MassMutual Corporate Value Limited - 46%
9048 -- 5434 Quebec, Inc.
Affiliates of Massachusetts Mutual Life Insurance Company
- ---------------------------------------------------------
MML Series Investment Fund
MassMutual Institutional Funds
Oppenheimer Value Stock Fund
31
<PAGE>
PART II. INFORMATION NOT REQUIRED IN A PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
-------------------------------------------
Not applicable.
Item 15. Indemnification of Directors and Officers
-----------------------------------------
MML Bay State directors and officers are indemnified under its by-laws. MML Bay
State indemnifies each person who was or is a party to any threatened, pending
or completed action, suit or to any liability to any entity which is registered
as an investment company under the Investment Company Act of 1940 or to the
security holders thereof provided that:
(a) Such person acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation;
(b) With respect to any criminal action or proceeding, such person had no
reasonable cause to believe their conduct was unlawful;
(c) Unless ordered by a court, indemnification shall be made only as
authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances set
forth in subparagraphs (a) and (b) above, such determination to be made (i)
by the Board of Directors of the MML Bay State by a majority vote of a
quorum consisting of Directors who were not parties to such action, suit or
proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable
a quorum of disinterested Directors so directs, by independent legal counsel
in a written opinion, or (iii) by the stockholders of the corporation.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
MML Bay State pursuant to the foregoing provisions, or otherwise, MML Bay
State has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933, and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than the payment
by MML Bay State of expenses incurred or paid by a director, officer or
controlling person of MML Bay State 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, MML Bay State
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issues.
Item 16. Exhibits and Financial Statement Schedules
------------------------------------------
Exhibit Number Description Method of Filing
- -------------- ----------- ----------------
(1)(a) Form of Underwriting Agreement with
MML Investors Services, Inc. *
(1)(b) Form of Underwriting Agreement with
MML Distributors, LLC **
4 Form of Individual Annuity Contract Filed herewith
5 Opinion re legality Filed herewith
23(i) Consent of
1
<PAGE>
Coopers & Lybrand L.L.P,
Independent Accountants Filed herewith
23(ii) Financial Statement
Schedules Filed herewith
24 Powers of Attorney Filed Herewith
27 Financial Data Schedule Filed Herewith
*Incorporated by reference to Post-Effective Amendment No. 2 to Registration
Statement File No. 33-79750.
**Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement File No. 33-79750.
Item 17. Undertakings
------------
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i.) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(ii.) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement;
(iii.) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement, including (but not
limited to) any addition or deletion of a managing
underwriter;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(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.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has caused this Post-Effective Amendment
No. 4 to Registration Statement No. 33-79750 to be signed on its behalf by the
undersigned thereunto duly authorized, all in the city of Springfield and the
Commonwealth of Massachusetts, on the 20(th) day of March, 1998.
MML BAY STATE LIFE INSURANCE COMPANY
By: /s/ Lawrence V. Burkett, Jr.*
-----------------------------
Lawrence V. Burkett, Jr., Director, President and
Chief Executive Officer
MML Bay State Life Insurance Company
/s/ Richard M. Howe On March 20, 1998, as Attorney-in-Fact pursuant to
- -------------------- powers of attorney filed herewith.
*Richard M. Howe
As required by the Securities Act of 1933, this Post-Effective Amendment
No. 4 to Registration Statement No. 33-79750 has been signed by the following
persons in the capacities and on the duties indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Lawrence V. Burkett, Jr* Director, President and Chief March 20, 1998
- ---------------------------- Executive Officer
Lawrence V. Burkett, Jr
/s/ Edward M. Kline* Treasurer (Principal Financial March 20, 1998
- -------------------- Officer)
Edward M. Kline
/s/ John Miller, Jr* Second Vice President and March 20, 1998
- -------------------- Comptroller (Principal Accounting Officer)
John Miller, Jr
/s/ Paul D. Adornato* Director March 20, 1998
- ---------------------
Paul D. Adornato
/s/ John B. Davies* Director March 20, 1998
- -------------------
John B. Davies
/s/ Anne Melissa Dowling* Director March 20, 1998
- -------------------------
Anne Melissa Dowling
/s/ Maureen R. Ford* Director March 20, 1998
- --------------------
Maureen R. Ford
/s/ Isadore Jermyn* Director March 20, 1998
- -------------------
Isadore Jermyn
/s/ Stuart H. Reese* Director March 20, 1998
- --------------------
Stuart H. Reese
/s/ Richard M. Howe On March 20, 1998, as Attorney-in-Fact
- ------------------- pursuant to powers of attorney filed herewith
*Richard M. Howe
</TABLE>
3
<PAGE>
LIST OF EXHIBITS
Exhibit 4 Form of Individual Annuity Contract
Exhibit 5 Opinion re legality
Exhibit 23(i) Consent of Independent Accountants
Exhibit 23(ii) Financial Statement Schedules
Exhibit 24 Powers of Attorney
Exhibit 27 Financial Data Schedule
<PAGE>
Exhibit 4
Form of Individual Annuity Contract
<PAGE>
Exhibit 4
[LETTERHEAD OF MML BAY STATE LIFE INSURANCE COMPANY APPEARS HERE]
Deferred Variable Annuity Contract
With Oppenheimer Variable Account Funds and MML Series Investment Funds
Includes Fixed Interest Account with Market-Value Adjustment
- --------------------------------------------------------------------------------
Contract Number
Annuitant
Amount
- --------------------------------------------------------------------------------
Dear Contract Owner:
READ YOUR CONTRACT CAREFULLY. We have used examples to explain some of the
provisions. These examples do not reflect the actual amounts or status of this
contract. As you read through the contract, remember the words "we," "us," and
"our" refer to MML Bay State Life Insurance Company.
We will pay the maturity benefit to the Payee when this contract matures if the
Annuitant and Owner are living at that time. If the Annuitant or Owner dies
before this contract matures, we will pay the death benefit to the Beneficiary
when due proof of the death is received at our Service Center. Either payment is
subject to the terms of this contract, which are contained on this and the
following pages.
For service or information on this contract, contact our Service Center.
YOU HAVE A RIGHT TO RETURN THIS CONTRACT. If you decide not to keep this
contract, return it within ten days after you receive it. It may be returned by
delivering or mailing it to our Service Center. Then, the contract will be as
though it had never been issued. We will promptly refund the accumulated value
of this contract on the date we receive it, plus any deductions made from the
purchase payments.
Signed for MML Bay State Life Insurance Company at Springfield, Massachusetts.
Sincerely yours,
/s/ Thomas J. Finnegan, Jr.
President Secretary
This Contract provides that: Flexible purchase payments may be made, while the
Annuitant and Owner are living, to the date
this contract matures.
A death benefit is payable if the Annuitant or
Owner dies before this contract matures.
A monthly life income is payable beginning on
the date this contract matures if the Annuitant
and Owner are living at that time.
This Contract is not participating. It does not provide for the payment of
dividends.
All values and payments based on the investment performance of the Separate
Account shown on the Schedule Page are variable and not guaranteed as to dollar
amount. All amounts accumulated in MVA segments of the Fixed Account shown on
the Schedule Page may be subject to market-value adjustment on withdrawal, which
may result in upward or downward adjustments; however, no adjustment is made on
withdrawal during the last 30 days of the guarantee period.
<PAGE>
Contract Summary
This Summary briefly describes some of the major contract provisions. Since it
does not go into detail, the actual provisions will control. See those
provisions for full information and any limits that may apply. The "Where To
Find It" on the inside of the back cover shows where these provisions may be
found.
We will pay a maturity benefit if the Annuitant and Owner are living on the
maturity date and the contract is in force at that time. We will pay a death
benefit if the Annuitant or Owner dies before this contract matures and while it
is in force. "In force" means that the contract has not terminated. Since this
is a variable annuity contract, neither of these benefits is guaranteed as to
dollar amount. Instead, all values and benefits that depend on the investment
performance of the Separate Account shown on the Schedule Page are variable and
not guaranteed as to dollar amount.
Purchase payments for this contract are flexible. Therefore, after the first
purchase payment has been paid, there is no requirement that any specific amount
of purchase payment be made on any date. Instead, within the limits stated in
the contract, any amount may be paid on any date before the maturity date while
the Annuitant and Owner are living.
Rights available under this contract include the rights to:
. Assign this contract;
. Change the Owner, the Payee, or any Beneficiary;
. Redeem this contract;
. Make partial redemptions;
. Change the date this contract matures;
. Allocate purchase payments among the divisions of the Separate Account;
and
. Transfer values among the divisions of the Separate Account.
This contract also includes a number of Payment Options. These provide
alternative ways to pay the maturity value, the death benefit, or the amount
payable upon redemption of this contract.
<PAGE>
THE SCHEDULE PAGE
This page shows specific information about this contract and is referred to
throughout the contract.
CONTRACT NUMBER 0 000 000
ANNUITANT John A Doe
AMOUNT Monthly Income Provided By Maturity Value
Issue Date MAY 01 1995
Contract Date MAY 01 1995
Maturity Date MAY 01 2025
Annuitant's age on Contract Date 35 MALE
- --------------------------------------------------------------------------------
BASIC CONTRACT INFORMATION
- --------------------------
Plan
- ----
Deferred Variable Annuity
- --------------------------------------------------------------------------------
SERVICE CENTER INFORMATION
- --------------------------
Mailing Address: __________________________ Telephone Number: 1-800-NNN-NNNN
__________________________
NNNNN-NNNN
________________
We will send written notice of any change in the mailing address or telephone
number of the Service Center.
- --------------------------------------------------------------------------------
PURCHASE PAYMENT INFORMATION
- ----------------------------
First Purchase Payment See confirmation notice
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT INFORMATION (See The Separate Account provision in Part 3.)
- ----------------------------
The Separate Account referred to in this contract is MML Bay State Variable
Annuity Separate Account ???.
<TABLE>
<CAPTION>
The divisions of the Separate Account are:
<S> <C> <C>
MML Money Market Division Oppenheimer Money Division Oppenheimer Multiple Strategies Division
MML Managed Bond Division Oppenheimer Bond Division Oppenheimer Growth Division
MML Blend Division Oppenheimer Strategic Bond Division Oppenheimer Capital Appreciation Division
MML Equity Division Oppenheimer High Income Division Oppenheimer Global Securities Division
</TABLE>
Each division invests in a corresponding Fund. The investment strategy and
objectives for each Fund are given in the Prospectus.
- --------------------------------------------------------------------------------
FIXED ACCOUNT INFORMATION (See The Fixed Account provision in Part 3.)
- -------------------------
For each segment of the Fixed Account, the guaranteed rate of interest will be
at least 3%.
- --------------------------------------------------------------------------------
OTHER INFORMATION
- -----------------
Owner and Beneficiary - see application attached to this contract.
<PAGE>
Part 1. The Basics Of This Contract
In this Part, we discuss some basic concepts that
are necessary to understand this contract.
The Parties Involved- The Owner is the person who owns this contract, as
Owner, Joint shown on our records.
Owner, Annuitant,
Beneficiary, A Joint Owner may be named on this contract. In
Irrevocable this case, the Owner and the Joint Owner will have
Beneficiary, Payee equal and undivided interest in this contract.
While a Joint Owner is named under this contract:
. All rights and benefits conditioned on
the Owner living are conditioned on both
the Owner and the Joint Owner living;
. Either the Owner or the Joint Owner may
exercise an Owner right with the consent,
satisfactory to us, of the other;
. All notices, any tax forms, and any other
mailings about this contract will be sent
to the Owner's mailing address; and
. Any benefit payable upon the death of the
Owner will be payable upon the death of
the Owner or the Joint Owner, whomever
dies first.
The Annuitant is the person on whose life this
contract is issued. Payment of the maturity
benefit will be made if that person is living when
this contract matures. The Annuitant may be the
Owner of this contract, or someone else may be the
Owner; in the latter case, payment of the maturity
benefit will be made if both the Annuitant and
Owner are living when this contract matures.
Example: You buy a contract on your own life
and name yourself as Owner. In this case,
you are both the Annuitant and Owner. If
you buy a contract on your spouse's life
and name yourself as Owner, then the
Annuitant and Owner are different people.
A Beneficiary is any person named on our records
to receive death proceeds after the Annuitant or
Owner dies. There may be different classes of
Beneficiaries, such as primary and secondary.
These classes set the order of payment. There may
be more than one Beneficiary in a class.
Example: Debbie is named as primary (first)
Beneficiary. Anne and Scott are named as
Beneficiaries in the secondary class. If
Debbie is alive when the Annuitant dies,
she receives any death benefit. But if
Debbie is dead and Anne and Scott are
alive when the Annuitant dies, Anne and
Scott receive any death benefit.
Any Beneficiary may be named an Irrevocable
Beneficiary. An Irrevocable Beneficiary is one
whose consent is needed to change the named
Beneficiary. Also, this Beneficiary must consent
to the exercise of other contract rights.
The Payee is the person named on our records to
receive the maturity benefit when this contract
matures. The Annuitant is the Payee unless the
Owner names another Payee.
Dates - Contract Two important dates shown on the Schedule Page are
Date, Contract the Contract Date and the Issue Date.
Anniversary Date,
Contract Year, Issue The Contract Date is the starting point for
Date, Maturity Date determining Contract Anniversary Dates and
Contract Years. The first Contract Anniversary
Date is one year after the Contract Date. The
period from the Contract Date to the first
Contract Anniversary Date, or from one Contract
Anniversary Date to the next, is called a Contract
Year.
Example: The Contract Date is June 10, 19X1. The
first Contract Anniversary Date is June
10, 19X2. The period from June 10, 19X1,
through June 9, 19X2, is a Contract Year.
The Issue Date is used to determine the start of
the contestability period. We discuss
contestability below.
-2-
<PAGE>
-3-
Another important date shown on the Schedule Page
is the maturity date. This is the date the
maturity benefit is payable unless an earlier or
later maturity date is elected (see Part 4). The
maturity benefit will be payable only if this
contract is in force and the Annuitant and Owner
are living on the maturity date.
This Is A Legal Contract This annuity is a legal contract between the Owner
and us. The entire contract consists of the
application and the annuity, which includes any
riders. We have issued this contract in return for
the application and the payment of the first
purchase payment. Any change or waiver of its
terms must be in writing and signed by our
Secretary or an Assistant Secretary to be
effective.
Trusts And Other Agreements We are not responsible for carrying out the terms
of any trust or other agreement that is not a part
of this contract. Our only responsibility is to
perform according to the terms of this contract.
Representations And We rely on all statements made by or for the
Contestability Annuitant in the application. Legally, these
statements are considered to be representations
and not warranties. We can bring legal action to
contest the validity of this contract for any
material misrepresentation of a fact. To do so,
however, the misrepresentation must have been in
the application for this contract and a copy of
the application must have been attached to this
contract when issued.
In the absence of fraud, we cannot contest the
validity of this contract after it has been in
force during the lifetime of the Annuitant for two
years from its Issue Date.
Misstatement Of Age Or Sex One of the questions in the application concerns
the Annuitant's date of birth; another concerns
the Annuitant's sex. If the sex or date of birth
given is not correct, all benefits and amounts
payable under this contract will be what would
have been provided if the correct sex and date of
birth had been given.
No life income payments will be made until we have
received satisfactory proof of the Annuitant's sex
and date of birth at our Service Center.
Meaning Of In Force "In force" means that this contract has not
terminated. This contract is in force from its
Issue Date or, if later, the date the first
purchase payment is paid. Subject to the Right To
Terminate Contract provision in Part 2, payment of
future purchase payments is not required to
continue this contract in force.
Service Center All service for this contract is provided through
our Service Center. The mailing address and
telephone number of our Service Center are shown
on the Schedule Page. We will send written notice
of any change in this information.
Contract State This contract shall be construed according to the
laws of the state in which it was delivered.
Currency All payments made to us and by us will be in the
lawful currency of the United States of America.
All monetary amounts shown in this contract are in
U.S. dollars.
Contract Is Not This contract is "not participating," which means
Participating that no dividends are payable on this contract.
Part 2. Purchase Payments
Purchase payments are the amounts that may be paid
to us under this contract. Purchase payments for
this contract are discussed in this Part.
The First Purchase Payment The first purchase payment for this contract is
due on the Contract Date. This contract will not
be in force until the first purchase payment has
been paid to us.
<PAGE>
Purchase Payment Flexibility After the first purchase payment has been paid and
subject to the Right To Terminate Contract
provision, payment of additional purchase payments
is not required to continue the contract in force.
Instead, any amount may be paid at any time before
the maturity date while the Annuitant and Owner
are living. However, no purchase payment can be
less than $100 without our consent.
We have the right to set a maximum limit on the
total amount of purchase payments that may be made
under this contract. Any such limit will not be
less than $500,000.
Right To Terminate Contract We have the right to terminate this contract if:
. No purchase payment has been made for at
least two consecutive years measured from
the date we received the last purchase
payment; and
. Each of the following amounts is less
than $2,000 on the date we send notice of
our election to terminate this contract:
(1) The accumulated value of this
contract (see Part 3) less any
premium tax we would deduct on
redemptions;
(2) The cash redemption value (see Part
4); and
(3) The sum of all purchase payments made
into this contract less any partial
redemption amounts.
If we exercise this right, we will mail a written
notice of termination to the Owner at the last
known address shown on our records. This notice
will state that the contract will terminate 30
days after we have mailed the notice unless we
receive a purchase payment that brings the
accumulated value (less any premium tax) to at
least $2,000 before that time.
If we terminate this contract, we will pay to the
Owner the greater of the amounts in items (1) and
(2) above.
Where To Pay All purchase payments are payable to us at our
Service Center. Upon request, a receipt signed by
our Secretary or an Assistant Secretary will be
given for any purchase payment made.
Net Purchase Payments A net purchase payment is a purchase payment we
receive less any premium tax we deduct at that
time.
Allocation Of Net Each net purchase payment we receive will be
Purchase Payments allocated among the segments of the Fixed Account
and the divisions of the Separate Account, as
directed in the application. This allocation will
remain in effect until changed by any later
election satisfactory to us and received at our
Service Center.
If the allocation of any net purchase payment
would not meet the requirements stated in the MVA
Segments provision (see Part 3), we will promptly
refund the purchase payment made.
Part 3. Accounts, Values, And Charges
This contract provides that certain values
(referred to as variable values) are based on the
investment performance of the Separate Account and
are not guaranteed as to dollar amount. This
contract also provides that other values (referred
to as fixed values and market values) are based on
the value of amounts credited to the Fixed
Account. This Part gives information about these
Accounts and the values and charges connected with
them.
The Separate Account And The Fixed Account
The Separate Account The Separate Account shown on the Schedule Page is
a separate investment account we have established
under Missouri law. It is subject to the laws of
the state in which this contract was delivered.
-4-
<PAGE>
-5-
The Separate Account has several divisions. Each
division invests in shares of an investment Fund.
The divisions are shown on the Schedule Page.
The values of the assets in the divisions are
variable and are not guaranteed. They depend on
the investment results of the Separate Account
shown on the Schedule Page.
We own the assets of the Separate Account. Those
assets will only be used to support variable
annuities. A portion of the assets equal to the
reserves and other liabilities of the Separate
Account will not be charged with liabilities that
arise from any other business we may conduct.
However, we may transfer assets exceeding the
reserves and other liabilities of the Separate
Account to our general account. The income and
capital gains and losses, whether or not realized,
from each division of the Separate Account are
credited to or charged against that division
without regard to any of our other income and
capital gains or losses. The assets of the
Separate Account are protected from the claims of
our creditors.
Changes In The Separate We have the right to establish both additional
Account divisions of the Separate Account and additional
Separate Accounts from time to time. Amounts
credited to any additional divisions established
would be invested in shares of other Funds. For
any division, we have the right to substitute new
Funds.
Subject to applicable provisions of federal
securities laws, we have the right to change the
investment policy of any division of the Separate
Account with the approval of the Missouri
Insurance Commissioner. If required, evidence of
the approval of a material change by the Missouri
Insurance Commissioner will be filed with the
insurance supervisory official of the state where
this contract is delivered. We will notify the
Owner if the Missouri Insurance Commissioner
approves any material change.
We have the right to withdraw availability of any
division of the Separate Account for future
amounts being credited. We will notify the Owner
before we withdraw any division of the Separate
Account.
We have the right to operate the Separate Account
as a unit investment trust under the Investment
Company Act of 1940 or in any other form permitted
by law.
Accumulation Units And Accumulation units are used to measure the
Annuity Units variable values on or before the maturity date of
this contract. Annuity units are used to determine
the amount of each payment of Variable Monthly
Income after those payments have begun. The value
of a unit is determined as of the valuation time
on each valuation date for valuation of the
Separate Account. The value of any unit can vary
from valuation date to valuation date. That value
reflects the investment performance of the
division of the Separate Account applicable to
that unit. The value of accumulation units and
annuity units is discussed further in Part 7.
Valuation Date, A valuation date is any date the New York Stock
Valuation Time, Exchange (or its successor) is open for trading. A
Valuation Period valuation period is the period of time from the
end of one valuation date to the end of the next
valuation date. The valuation time is the time of
day the New York Stock Exchange (or its successor)
closes on a valuation date. All actions to be
performed on a valuation date will be performed as
of the valuation time.
Purchase And Sale Of Amounts may be credited to a division of the
Accumulation Units Separate Account through:
. Allocation of net purchase payments to
the division (see Part 2); and
. Transfers of values to the division from
other divisions or from the Fixed Account
(see Transfers Of Values provision in
Part 4).
Amounts may be taken from a division through:
. Maturity of the contract (see Part 5);
. Death of the Annuitant or Owner (see Part
5);
. Full or partial redemption (see Part 4);
<PAGE>
. Transfers of values from the division to
any other divisions or to the Fixed
Account (see Part 4);
. Assessment of an administrative charge
from the division (see Administrative
Charge provision below in this Part); and
. Assessment of a transfer fee from the
division (see Transfer Fee provision
below in this Part).
Amounts are credited to and taken from divisions
of the Separate Account by purchasing and selling
accumulation units. Accumulation units will be
purchased and sold at the unit value as of the
valuation time on the valuation date of purchase
or sale. The number of units purchased or sold
will be the amount of money for purchase or sale
divided by that unit value.
Example: The amount applied is $550. The
date of purchase is June 10, 19X4. The
accumulation unit value on that date is
$10. The number of units purchased would
be 55 ($550 divided by $10 = 55). If,
instead, the unit value was $11, then the
amount applied would purchase 50 units
($550 divided by $11 = 50).
If a purchase payment, or a request that causes us
to purchase or sell accumulation units, is
received by us before the valuation time on a
valuation date, accumulation units will be
purchased or sold as of that valuation date.
Otherwise, accumulation units will be purchased or
sold as of the next following valuation date.
In no case will accumulation units be purchased or
sold before the Contract Date.
The Fixed Account The Fixed Account is part of our general
investment account. It has no connection with,
and does not depend on, the investment performance
of the Separate Account. Unlike the Separate
Account, amounts held in the Fixed Account are
not protected from the claims of our creditors.
The Fixed Account has distinct segments in which
amounts credited earn interest at different rates
and for different periods of time. We have the
right to establish additional segments of the
Fixed Account from time to time. Also, we have the
right to withdraw availability of any segment of
the Fixed Account for future amounts being
credited. The effect of this withdrawal is
discussed in the next provision.
MVA Segments The segments of the Fixed Account are MVA
segments. The "MVA" indicates that amounts taken
from these segments may be subject to a
market-value adjustment (see the Market Value In
The MVA Segments provision below in this Part).
Amounts may be credited to an MVA segment through:
. Allocation of net purchase payments to
the MVA segment (see Part 2);
. The crediting of accumulated amounts that
were left in the MVA segment to the end
of the guarantee period (see below in
this provision); and
. Transfers of values to the segment from
other MVA segments or from divisions of
the Separate Account (see Transfers Of
Values provision in Part 4).
Any amount credited to an MVA segment at any one
time must be at least $1,000.
Amounts credited to an MVA segment will accumulate
at a guaranteed rate of interest if left in the
segment for a stated period of time. We refer to
this period as the "guarantee period" for the MVA
segment. The guaranteed rate of interest is set
when an amount is credited and is the same for all
contracts in this class. Guaranteed rates for
amounts currently being credited to MVA segments
are available by calling the Service Center. The
lowest guaranteed rate we can use is shown on the
Schedule Page.
Guaranteed rates of interest for amounts credited
at various times to the same MVA segment are
subject to change. However, once an amount is
credited to an MVA segment, the guaranteed rate
used to accumulate that amount will be fixed for
the entire guarantee period.
-6-
<PAGE>
-7-
Example: An amount of $1,000 is applied on
May 10, 19X1, to an MVA segment with a
5-year guarantee period. The guaranteed
rate for amounts applied to this segment
on May 10, 19X1, is 6%. If the $1,000 is
left in that segment until May 10, 19X6,
it will accumulate at a 6% effective
annual rate of interest for the full 5
years to $1,338.23.
An amount of $1,000 applied to the same
segment on June 2, 19X1, has a guaranteed
rate of 6.5%. If that amount is left in
the segment until June 2, 19X6, it will
accumulate at a 6.5% effective annual
rate of interest for the full 5 years to
$1,370.09.
Once an amount credited to an MVA segment has
remained in that segment to the end of the
guarantee period, the resulting accumulated amount
is credited as of that date to the same MVA
segment at the guaranteed rate for that segment as
of that date. However, if that MVA segment is no
longer available as of that date, the accumulated
amount will instead be credited to the available
MVA segment with the next shorter guarantee period
or, if none is available, the available MVA
segment with the next longer guarantee period.
Example: Using the example above, if the
$1,000 amount applied on May 10, 19X1, is
left at 6% until May 10, 19X6, its
accumulated value of $1,338.23 is applied
as of that date for another 5-year
period. If the guaranteed rate for
amounts applied to this segment on May
10, 19X6, is 7%, the $1,338.23 will then
accumulate at 7%.
We will send to the Owner written notice that the
guarantee period for an amount credited to an MVA
segment is about to end. The notice will give:
. The date the amount was credited;
. The amount for that date still left in
the segment;
. The date the guarantee period will end;
and
. The accumulated amount as of that date.
The notice will also specify which MVA segment the
accumulated amount will be credited to, and how to
determine the guaranteed rate that will be applied
to it. This notice will be sent 45 to 75 days
before the end of the guarantee period.
Amounts may be taken from an MVA segment through:
. Maturity of the contract (see Part 5);
. Death of the Annuitant or Owner (see Part
5);
. Full or partial redemption (see Part 4);
. Transfers of values from the segment to
other MVA segments or to divisions of the
Separate Account (see Transfers Of Values
provision in Part 4);
. Assessment of an administrative charge
(see Administrative Charge provision
below in this Part); and
. Assessment of a transfer fee (see
Transfer Fee provision below in this
Part).
If an amount is taken from an MVA segment before
the end of its guarantee period, its market value
may be higher or lower than its accumulated value.
See the Market Value In The MVA Segments provision
in the next section.
Values Of This Contract
Accumulated Value Of The accumulated value of this contract on any date
Contract is the variable value of this contract plus the
fixed value of this contract, both determined as
of that date.
Variable Value Of Contract The value of the accumulation units credited to
this contract in a division of the Separate
Account is equal to the accumulation unit value in
that division on the date the value is determined,
multiplied by the number of those units in that
division.
<PAGE>
The variable value of this contract on any date is
the total of the values of the accumulation units
credited to this contract in each division of the
Separate Account.
Fixed Value Of Contract The fixed value of this contract on any date is
the sum, over all of the MVA segments of the Fixed
Account, of the amounts credited to this contract
still left in those segments accumulated at
interest to that date. In accumulating each
amount, we use an effective annual rate of
interest equal to the guaranteed rate for that
amount.
Example: An amount of $1,000 is applied on
May 10, 19X1, to an MVA segment with a
5-year guarantee period. The guaranteed
rate for amounts applied to this segment
on May 10, 19X1, is 6%. If the $1,000 is
left in that segment until May 10, 19X6,
it will accumulate at a 6% effective
annual rate of interest for the full 5
years to $1,338.23. The value of that
$1,000 amount on May 10, 19X5, at the 6%
guaranteed rate, is $1,262.48 ($1,000
accumulated for 4 years at 6% interest).
An amount of $1,000 applied to the same
5-year MVA segment on May 10, 19X2, has a
guaranteed rate of 6.5%. If left in the
segment until May 10, 19X7, it will
accumulate to $1,370.09. The value of
that $1,000 amount on May 10, 19X5, at
the 6.5% guaranteed rate, is $1,207.95
($1,000 accumulated for 3 years at 6.5%
interest).
If these are the only amounts credited to
your contract in MVA segments that are
still left in those segments, then the
fixed value of the contract on May 10,
19X5, is $2,470.43 ($1,262.48 plus
$1,207.95).
Market Value Of Contract The market value of this contract on any date is
the variable value of this contract plus the
market value in the MVA segments.
Market Value In The MVA The market value in the MVA segments on any date
Segments is the sum, over all of the MVA segments in the
Fixed Account, of the market values of the amounts
credited to this contract still left in those
segments.
The market value of an amount credited to an MVA
segment is based on:
(1) Its accumulated value if left in the MVA
segment to the end of the guarantee
period;
(2) The period of time from the current date
to the end of the guarantee period for
the amount; and
(3) The guaranteed rate currently applied to
amounts credited to an MVA segment with a
guarantee period equal in whole years to
the period of time determined in (2)
above. However, if the period of time
determined in (2) above is not a whole
number of years, we will use the
guaranteed rate for the MVA segment for
the next higher whole number of years.
(The guaranteed rate currently applied to
amounts credited to MVA segments is
available by calling the Service Center.)
The market value on any date of an amount credited
to an MVA segment is equal to:
. The amount determined in (1) above;
discounted at
. The effective annual rate of interest
equal to the guaranteed rate determined
in (3) above; for
. The period of time determined in (2)
above.
However, if the period of time determined in item
(2) above for an amount in an MVA segment is 30
days or less, that amount will not be subject to
market-value adjustment. Also, any amount taken
from an MVA segment through assessment of an
administrative charge or a transfer fee will not
be subject to a market-value adjustment. In each
of these cases, the market value of that amount
will be the amount accumulated to the current date
at an effective annual rate of interest equal to
its respective guaranteed rate.
-8-
<PAGE>
-9-
Example 1: An amount of $1,000 is applied on
May 10, 19X1, to an MVA segment with a
5-year guarantee period. The guaranteed
rate for amounts applied to this segment
on May 10, 19X1, is 6%. If the $1,000 is
left in that segment until May 10, 19X6,
it will accumulate at a 6% effective
annual rate of interest for the full 5
years to $1,338.23.
The full amount is taken from the MVA
segment on May 10, 19X5:
(1) Its accumulated value at the end of
the guarantee period (5 years)
would be $1,338.23;
(2) The period of time from May 10,
19X5, to May 10, 19X6, is one year;
and
(3) The guaranteed rate applied on May
10, 19X5, to amounts credited to a
1-year MVA segment is 4%.
The market value on May 10, 19X5, of the
amount credited to the 5-year MVA segment
on May 10, 19X1, is $1,338.23 discounted
at 4% for one year, or $1,286.76
($1,338.23 divided by 1.04 = $1,286.76).
The accumulated value on May 10, 19X5,
of that amount is $1,262.48 ($1,000
accumulated for 4 years at 6%).
Example 2: An amount of $1,000 applied to a 7-year
MVA segment on May 10, 19X2, with a
guaranteed rate of 5% will accumulate
to $1,407.10 if left in that segment
until May 10, 19X9.
The full amount is taken from the MVA
segment on May 10, 19X5:
(1) Its accumulated value at the end of
the 7-year guarantee period (May
10, 19X9) would be $1,407.10;
(2) The period of time from May 10,
19X5, to May 10, 19X9, is four
years; and
(3) The guaranteed rate applied on May
10, 19X5, to amounts credited to a
4-year MVA segment is 10%.
The market value on May 10, 19X5, of the
amount credited to the 7-year MVA segment
on May 10, 19X2, is $1,407.10 discounted
at 10% for four years, or $961.07. The
accumulated value on May 10, 19X5, of
that amount is $1,157.63 ($1,000
accumulated for 3 years at 5%).
For each MVA segment, amounts credited to the
contract that are still in the segment are taken
in a certain order until the total market value
needed from the segment is taken. We first take
the amount with the shortest time left in the
guarantee period, then the amount with the next
shortest time left, and so on. However, for
transfers and partial redemptions taken from an
MVA segment, the Owner may choose a different
order.
Contract Charges
Administrative Charge An administrative charge will be assessed each
year on the Contract Anniversary Date. An
administrative charge will also be assessed upon
full redemption, death, or maturity. In either
case, however, we will not assess the charge if
the accumulated value of the contract at that time
is $50,000 or more.
<PAGE>
The amount of the administrative charge will be
determined each year by us. However, it will not
exceed $50, or any lower limit required by law.
Any administrative charge assessed will be taken:
. First, from all divisions in the Separate
Account on a pro rata basis, based on the
variable value of this contract in each
division; and
. Second, any remainder will be taken from
all MVA segments of the Fixed Account on
a pro rata basis, based on the fixed
value of this contract in each segment.
The administrative charge discussed in this
provision is in addition to any charge for
administrative expenses contained in the asset
charge discussed in the Net Investment Factor
provision in Part 7.
Deductions For Sales Charges Sales charges are not deducted from purchase
payments when received by us. Instead, we may make
deductions for sales charges from amounts payable
upon full or partial redemption of this contract.
We may also make deductions for sales charges from
the death benefit in certain cases. Finally, we
may make deductions for sales charges from the
maturity value on the maturity date of this
contract.
In certain situations, however, sales charges will
not apply. Sales charges will not be assessed on
the following amounts of purchase payments:
1. All amounts paid as death benefits due to
the Annuitant's death if the Annuitant's
age on the Contract Date (shown on the
Schedule Page) is 75 or less;
2. The full amount if the Annuitant has not
reached age 59 1/2 and all proceeds from
maturity or full redemption of this
contract are applied under any one, or
more than one, of the following payment
options:
a. Variable Monthly Income Option B
with payments for 10 years or more;
and
b. Variable Monthly Income Options C,
E, and F;
3. The full amount if the Annuitant has
attained age 59 1/2 and all proceeds from
maturity or full redemption of this
contract are applied under any one, or
more than one, of the following payment
options:
a. Fixed Income or Variable Monthly
Income Option B with payments for
10 years or more; and
b. Fixed Income or Variable Monthly
Income Options C, E, and F;
4. During any Contract Year:
a. Any amounts not yet redeemed for
which the sales charge percentage
(see Amount Of Sales Charge
provision below) is 0%; and
b. 10% of the amounts not yet
redeemed for which the sales charge
percentage is 1% or greater.
Amount Of Sales Charge Sales charges are based on the purchase payments
made and the time that has passed since we
received them.
The part of the sales charge related to a purchase
payment is a level percentage of that payment
during each year since it was paid. For each
successive year, the percentage decreases until it
becomes zero. Sales charge percentages for each
purchase payment are shown in the table below.
-10-
<PAGE>
- 11 -
Year Since Year Since
Payment Percentage Payment Percentage
---------- ---------- ---------- ----------
1st 7% 5th 3%
2nd 6 6th 2
3rd 5 7th 1
4th 4 8th and later 0
Example: You make a $1,000 purchase payment
on May 10, 19X1. The part of the sales
charge related to this purchase payment
is:
$70 from May 10, 19X1 through May 9,
19X2;
$60 from May 10, 19X2 through May 9,
19X3;
:
$10 from May 10, 19X7 through May
9, 19X8; and $0 thereafter.
Subject to the limits stated above in the
Deductions For Sales Charges provision, the sales
charge at any time is based solely on the purchase
payments assumed to be redeemed at that time. In
determining the sales charge, we assume that
purchase payments are redeemed in the order in
which they are paid. Any amounts in excess of
purchase payments are assumed to be redeemed last.
Example: You've made two purchase payments of
$1,000 each, one on May 10, 19X1, and
the other on July 21, 19X4.
You make your first request for a partial
redemption on August 7, 19X5; it is for
$800. The sales charge is based solely on
the first $1,000 purchase payment, made
in 19X1, since it exceeds the $800
requested. Since August 7, 19X5, is
during the 5th year since the purchase
payment was made, the sales charge
percentage is 3%. But a sales charge is
assessed only on $600 (all but 10% of
the $2,000 not yet redeemed). The sales
charge is therefore $18 (3% of $600),
and you receive $782.
You request a second partial redemption
of $800 on September 21, 19X8. The sales
charge is based on the remaining $200
from the first purchase payment and on
$600 from the second. The percentage for
the first purchase payment is 0% (8th
year since payment) and for the second is
3% (5th year since payment). But a sales
charge is assessed only on $500 (none of
the $200 not yet redeemed having a
percentage of 0% and, on the $600, all
but 10% of the $1,000 not yet redeemed
having a percentage of 1% or greater).
The sales charge is then $15 (3% of
$500), and you receive $785.
Transfer Fee We reserve the right to assess a transfer fee of
$20 for each transfer of value in a Contract Year
in excess of four transfers.
If we assess a transfer fee, it will be assessed
as of the date of the transfer. Any transfer fee
assessed will be taken from the divisions of the
Separate Account, and the MVA segments of the
Fixed Account, from which the amounts are
transferred.
Part 4. Life Benefits
This variable annuity contract provides a maturity
benefit if the Annuitant and Owner are living on
the maturity date and the contract is in force at
that time. It provides a death benefit if the
Annuitant or Owner dies before the maturity date
while the contract is in force. There are other
rights and benefits available under this contract.
These "Life Benefits" are discussed in this Part.
<PAGE>
Contract Ownership
Rights Of Owner While the Annuitant is living, the Owner may exercise
all rights given by this contract or allowed by us.
These rights include assigning this contract, changing
Beneficiaries, changing ownership, enjoying all
contract benefits, and exercising all contract
options. The consent of any Irrevocable Beneficiary is
needed to exercise any contract right.
Assigning This Contract This contract may be assigned. But for any assignment
to be binding on us, we must receive a signed copy of
it at our Service Center. We will not be responsible
for the validity of any assignment.
Once we receive a signed copy, the rights of the Owner
and the interest of any Beneficiary or any other
person will be subject to the assignment.
Changing The Owner, The Owner, the Payee, or the Beneficiary may be
Payee, Or Beneficiary changed while the Annuitant is living. We do not limit
the number of changes that may be made. To make a
change, the Owner's written request, satisfactory to
us, must be received at our Service Center. The change
will take effect as of the date the request is signed,
even if the Annuitant or Owner dies before we receive
it. Each change will be subject to any payment we made
or other action we took before receiving the request.
Transfers Of Values Transfers of values are subject to the limitations
stated in the Limitations On Transfers provision
below. Subject to those limitations, transfers of
values may be made upon direction, satisfactory to us,
received at our Service Center. These transfers are:
. Transfers of values between divisions of the
Separate Account. Before any proceeds from this
contract are applied to a payment option, these
transfers will be made by selling all or part
of the accumulation units in a division and
applying the value of the sold units to
purchase units in any other division. While
payments are being made under a Variable
Monthly Income payment option, these transfers
will be made by exchanging all or part of the
annuity units in a division for a number of
annuity units in any other division that give
the same amount of monthly income as of the
date of transfer.
. Transfers of values from one or more divisions
of the Separate Account to one or more MVA
segments of the Fixed Account. These transfers
will be made by selling all or part of the
accumulation units in a division and applying
the value of the sold units to one or more MVA
segments of the Fixed Account.
. Transfers of values from one or more MVA
segments of the Fixed Account to one or more
divisions of the Separate Account. These
transfers will be made by applying all or part
of the market value in an MVA segment to
purchase accumulation units in one or more
divisions of the Separate Account.
. Transfers of values between MVA segments of the
Fixed Account. These transfers will be made by
applying all or part of the market value in an
MVA segment to any other MVA segment.
An amount transferred from a division of the Separate
Account or from a segment of the Fixed Account may be
expressed in terms of either a dollar amount or a
whole-number percentage.
Transfers involving the Separate Account will be as of
the valuation date specified in the Purchase And Sale
Of Accumulation Units provision in Part 3. All
transfers made on one date will be considered one
transfer.
- 12 -
<PAGE>
- 13 -
Limitations On The smallest amount that can be transferred from a
Transfers division of the Separate Account is $500 or, if less,
the value of the accumulation units or annuity units
credited to this contract in that division. The
smallest accumulated amount that can be transferred
from a segment of the Fixed Account with respect to
any amount credited is $500 or, if less, all of that
amount still left in the segment as of the date of
transfer. Transfers of values are also subject to any
limits stated in the MVA Segments provision in Part 3.
We reserve the right to limit the number and frequency
of transfers allowed during any Contract Year.
Transfers cannot be made during the 30-day period
ending on the maturity date.
While any amounts are applied under a Variable Monthly
Income payment option, transfers of values are allowed
only between divisions of the Separate Account.
Redeeming This Contract
Right To Redeem This contract may be redeemed for its cash redemption
value, while the Annuitant and Owner are living, at
any time before it matures. Redemption will be
effective on the date we receive this contract and a
written redemption request, satisfactory to us, at our
Service Center. A later effective date may be elected
in the redemption request.
Cash Redemption Value The cash redemption value on any date is the market
value of this contract less any deductions for sales
and administrative charges and less any premium tax we
deduct at that time. The market value of this contract
is described in Part 3.
Partial Redemptions Partial redemptions may be made, while the Annuitant
and Owner are living, at any time before this contract
matures. For amounts redeemed from the Separate
Account, the request must state the division (or
divisions) from which redemption will be made. For
amounts redeemed from the Fixed Account, the request
must also state the segment (or segments) from which
the redemption will be made.
Partial redemptions from a division (or divisions) of
the Separate Account will be made by selling a
sufficient number of accumulation units to provide the
partial redemption including any sales charge
deduction that applies to that redemption. Partial
redemptions from an MVA segment of the Fixed Account
will be made by reducing the amounts credited to that
segment, in the order in which they were credited
(unless another order is specified by the Owner), to
provide a market value equal to the partial redemption
including any sales charge deduction that applies to
that redemption.
Any partial redemption will be subject to the limits
set forth below.
. Any partial redemption must be for at least
$100.
. The accumulated value of the contract
remaining after a partial redemption must be
at least $1,000 plus any premium tax we would
deduct at that time on a full redemption.
When And How We Pay Any partial redemption made will be paid in one sum.
However, if the entire contract is redeemed, the cash
redemption value may be paid in one sum or applied
under any payment option. See Part 6.
We will pay all redemptions within seven days after
the written request for the redemption is received by
us at our Service Center. However:
<PAGE>
. For redemptions from the Separate Account, this
time period is subject to any extension
permitted under federal laws, rules, and
regulations applying to redemption of variable
annuity contracts; and
. For redemptions from the Fixed Account, we may
delay payment for up to six months from the
date the request is received by us at our
Service Center. If payment is delayed 30 days
or more, we will add interest at the rate
payable under our Option D payment option.
Right To Change The Maturity Date
Electing An Early Before this contract matures and while it is in force,
Maturity Date the maturity date may be changed to any date that is
earlier than the maturity date then in effect. To
elect an earlier maturity date, we require that the
Owner's written election for the change be received at
our Service Center at least 30 days before the early
maturity date wanted.
Electing A Later Before this contract matures and while it is in force,
Maturity Date the maturity date may be changed to any date that is
later than the maturity date then in effect. However,
that later maturity date must be on or before the
Contract Anniversary Date nearest the Annuitant's 90th
birthday. To elect a later maturity date, the Owner
must send us written election to be received at our
Service Center within 90 days before the maturity date
then in effect. Any rider this contract has will be
cancelled when the change is made.
Other Provisions Regarding Life Benefits
Periodic Statements While this contract is in force before the maturity
date, or the Annuitant's or Owner's death if earlier,
we will send a Status Report to the Owner at least
semiannually. This Report will show:
. The number of accumulation units in each division
of the Separate Account;
. The accumulation unit value in each division of
the Separate Account;
. The accumulated amounts in the MVA segments of
the Fixed Account;
. The market value in the MVA segments;
. The accumulated value of this contract;
. The cash redemption value of this contract; and
. Any other information required by applicable law.
All this information will be as of a date not more
than 45 days before the date the Status Report is
mailed.
We will also give the Owner any other periodic
reports, containing information about this contract,
that may be required by federal or state law.
Receipt Of Information Any directions, requests, or other information
received other than by mail at our Service Center
after the time set for valuation of the Separate
Account will be deemed to have been received the next
day.
Part 5. Maturity Benefit And Death Benefit
The maturity benefit is the payment we will make when
this contract matures if the Annuitant and Owner are
living at that time. The death benefit is the amount
of money we will pay when we receive due proof at our
Service Center that the Annuitant, or Owner if the
Annuitant is still living, has died before the
contract matures. These benefits are discussed in this
Part.
-14-
<PAGE>
-15-
Maturity Benefit
Maturity Value The maturity value is the cash redemption value of
this contract on the maturity date.
Monthly Life Income When this contract matures, the maturity value will be
applied to provide a monthly life income under
Variable Monthly Income Payment Option C, as described
in Part 6. This income will be based on the life of
the Annuitant and will be paid for the lifetime of the
Annuitant. The first payment is due on the maturity
date. Future payments will be due on the same day of
the month as the maturity date. The final payment will
be the last one due before the Annuitant's death.
There is a guarantee as to the first 120 income
payments. If the Annuitant dies before all these
payments are made, we will continue to make payments
until 120 income payments have been made.
The Owner may change the payment option at any time,
while the Annuitant is living, up to 30 days before
the maturity date.
Alternate Settlements At There are other settlements available when this
Maturity contract matures. That is, the Owner may elect to have
the maturity value either applied under any other
payment option discussed in Part 6 or paid in one sum.
In any case, if an assignment of this contract is in
effect on the maturity date, we have the right to pay
the maturity value in one sum. Any amount due the
assignee will be paid to the assignee. The balance, if
any, will be paid to the Owner.
Restriction On Rights The Annuitant cannot assign, transfer, or place any
restriction on this contract without the Owner's
written consent. No income payment under this contract
can be assigned, transferred, or taken in advance of
its due date, and the right to receive any income
payments cannot be restricted, without the Owner's
written consent. In any case, the Owner's written
consent must be given before the Annuitant dies and
must be received at our Service Center.
Death Benefit
Amount Of Death The amount of the death benefit is determined as of
Benefit the date we receive due proof of death at our Service
Center.
If the death benefit is payable due to the death of
the Annuitant, the amount of the death benefit is the
greater of:
. The accumulated value of this contract less any
deduction for administrative charge (and any
sales charge if the Annuitant's age on the
Contract Date exceeds 75); and
. The accumulation at interest of all purchase
payments made less any partial redemption
amounts, but not more than twice the sum of
purchase payments less partial redemption
amounts. The effective annual rate of interest
used in this accumulation will be 5% for any
period before the Annuitant's 75th birthday and
0% thereafter.
In all cases, the amount of death benefit due to the
Annuitant's death is reduced by any premium tax we
deduct at that time.
If the Owner is not the Annuitant and the death
benefit is payable due to the death of the Owner, the
amount of the death benefit will be the cash
redemption value of this contract.
<PAGE>
Interest On Maturity Or Death Benefit
Interest Payable If the maturity value is paid in one sum after this
contract matures, we will add interest from the
maturity date to the date of payment. If the death
benefit is paid in one sum, we will add interest from
the date proof of death is received to the date of
payment.
If the death benefit is applied under a payment
option, interest will be paid from the valuation date
that is on or next follows the date written notice of
death is received to the effective date of that
option. It will be paid in one sum to the Beneficiary
living on the effective date.
In all cases, the amount of interest payable on the
maturity value or death benefit will be the same as
would be paid under Option D of the payment options
for the applicable period of time. See Part 6 for a
description of Option D.
Part 6. Payment Options
These are Optional Methods of Settlement. They provide
alternate ways in which payment can be made. This
contract provides Fixed Income payment options. It
also provides Variable Monthly Income payment options.
These two types of options are discussed below. Any
other payment option agreed to by us may be elected.
Fixed Income Payment A Fixed Income payment option provides payments that
Options are guaranteed by us under our general account. The
amounts of these payments do not depend on the
investment performance of the Separate Account.
All the payment options described in this Part are
available on a Fixed Income basis. They are described
in terms of monthly payments. However, annual,
semiannual, or quarterly payments may be requested
instead. The amount of these payments will be
determined in a way that is consistent with monthly
payments and will be quoted on request.
Variable Monthly A Variable Monthly Income payment option provides
Income Payment payments that are not guaranteed as to dollar amount.
Options Instead, they are based on the investment performance
of the Separate Account. Payment options B, C, E, and
F are available on a Variable Monthly Income basis.
Payment can only be made monthly. The manner in which
the dollar amounts of Variable Monthly Income payments
are computed is set forth in Part 7.
Availability Of Payment All or part of the death benefit, the maturity value,
Options or the cash redemption value may be applied under any
payment option. If the contract is assigned, any
amount due to the assignee will be paid in one sum.
The balance, if any, may be applied under any payment
option.
If the Schedule Page shows that this contract was
issued on a unisex rate basis, the female rates shown
in the Option C, E, and F Tables apply in all cases.
The male rates in those Tables do not apply to unisex-
rate contracts.
Minimum Amounts If the amount to be applied under any option is less
than $2,000, we may pay that amount in one sum
instead. If payments under a Fixed Income option
amount to less than $20 each, we have the right to
make payments at less frequent intervals. If the first
payment under a Variable Monthly Income option amounts
to less than $20, we have the right to make a one-sum
payment.
-16-
<PAGE>
-17-
Option A Level Income Payment Option (not available as a
Variable Monthly Income option). Monthly payments
are level. The amount of each payment may not be
less than $10 for each $1,000 applied. Interest
will be credited each month on the unpaid balance
and added to it. This interest will be at a rate
determined by us, but not less than the equivalent
of 2 1/2% per year. Payments continue until the
amount we hold runs out. The last payment will be
for the balance only.
Option B Fixed Time Payment Option (available as a Fixed
Income option and as a Variable Monthly Income
option). For either option, monthly payments will
be made for any period selected, up to 30 years.
For Fixed Income Option B, the monthly payments
are level. They depend on the total amount
applied, the period selected, and the monthly
payment rates we are using when the first payment
is due. The rate for any payment will not be less
than shown in the Fixed Income Option B Table.
For Variable Monthly Income Option B, the payments
are not guaranteed as to amount and may vary
during the period selected. The Variable Income
Option B Table shows the first monthly payment for
each $1,000 applied.
Fixed Income Option B Table
Minimum Monthly Payment Rates For Each $1,000 Applied
Monthly Monthly Monthly
Years Payment Years Payment Years Payment
1 $84.28 11 $8.64 21 $5.08
2 42.66 12 8.02 22 4.90
3 28.79 13 7.49 23 4.74
4 21.86 14 7.03 24 4.60
5 17.70 15 6.64 25 4.46
6 14.93 16 6.30 26 4.34
7 12.95 17 6.00 27 4.22
8 11.47 18 5.73 28 4.12
9 10.32 19 5.49 29 4.02
10 9.39 20 5.27 30 3.93
For quarterly payment, multiply by 2.994. For
semiannual payment, multiply by 5.969. For annual
payment, multiply by 11.865.
<PAGE>
Variable Monthly Income Option B Table
Monthly Payment Rates For First Payment For Each
$1,000 Applied, Based On 4% Assumed Investment Rate
Monthly Monthly Monthly
Years Payment Years Payment Years Payment
1 $84.84 11 $9.31 21 $5.81
2 43.25 12 8.69 22 5.64
3 29.40 13 8.17 23 5.49
4 22.47 14 7.72 24 5.35
5 18.32 15 7.34 25 5.22
6 15.56 16 7.00 26 5.10
7 13.59 17 6.71 27 5.00
8 12.12 18 6.44 28 4.90
9 10.97 19 6.21 29 4.80
10 10.06 20 6.00 30 4.72
Option C Lifetime Payment Option. For Fixed Income Option
C, the monthly payments are level. For Variable
Income Option C, the payments are not guaranteed
as to amount and may vary. For either option, the
payments are based on the life of a named person.
Payments will continue for the life of that
person. The three variations are:
(1) Payments for life only (available as a Fixed
Income option and as a Variable Monthly Income
option). No specific number of payments is
guaranteed. Payments stop when the named person
dies.
(2) Payments guaranteed for amount applied (not
available as a Variable Monthly Income option).
Payments stop when they equal the amount applied
or when the named person dies, whichever is later.
"Amount applied" means the dollar amount used to
provide the income.
(3) Payments guaranteed for 5, 10, or 20 years
(available as a Fixed Income option and as a
Variable Monthly Income option). Payments stop at
the end of the selected guaranteed period or when
the named person dies, whichever is later.
The Fixed Income Option C Table shows the minimum
monthly payment for each $1,000 applied. The
Variable Monthly Income Option C Table shows the
minimum amount of the first monthly payment for
each $1,000 applied. The actual payments will be
based on the monthly payment rates we are using
when the first payment is due. They will not be
less than shown in the Table.
-18-
<PAGE>
-19-
Fixed Income Option C Table
Minimum Monthly Payment Rates For Each $1,000 Applied
Payments Payments Guaranteed For
Age* For Life Amount 5 10 20
Male Female Only Applied Years Years Years
35 40 $ 3.01 $ 2.95 $ 3.00 $ 2.99 $ 2.97
40 45 3.18 3.11 3.17 3.16 3.14
45 50 3.40 3.30 3.39 3.38 3.34
50 55 3.67 3.53 3.66 3.65 3.58
55 60 4.03 3.82 4.02 3.99 3.86
60 65 4.49 4.18 4.47 4.42 4.18
65 70 5.13 4.63 5.10 4.99 4.51
70 75 6.01 5.21 5.93 5.69 4.82
75 80 7.21 5.94 7.03 6.51 5.06
80 85 8.87 6.89 8.44 7.39 5.20
85 11.18 8.09 10.19 8.21 5.26
* Age on birthday nearest due date of the first payment. Monthly payment
rates for ages not shown will be furnished on request. Monthly payment
rates for ages over 85 are the same as those for 85.
Variable Monthly Income Option C Table
Minimum Monthly Payment Rates For First Payment For Each
$1,000 Applied, Based on 4%% Interest Rate
Payments Payments Guaranteed For
Adjusted For Life 5 10
Age* Only Years Years
M F M F M F
40 $ 4.11 $ 3.90 $ 4.10 $ 3.89 $ 4.09 $ 3.88
45 4.31 4.05 4.30 4.04 4.28 4.03
50 4.56 4.24 4.55 4.23 4.52 4.21
55 4.87 4.48 4.85 4.47 4.81 4.45
60 5.28 4.80 5.26 4.79 5.19 4.75
65 5.85 5.22 5.81 5.20 5.67 5.15
70 6.61 5.81 6.52 5.77 6.27 5.66
75 7.62 6.61 7.44 6.54 6.96 6.31
80 8.96 7.75 8.60 7.58 7.72 7.10
85 10.77 9.36 10.02 8.96 8.48 7.94
* Age on birthday nearest the due date of the first payment, adjusted
according to the table in the Basis Of Computation provision in Part 7.
Monthly payment rates for adjusted ages not shown will be furnished on
request.
<PAGE>
Option D Interest Payment Option (not available as a Variable
Monthly Income option). We will hold any amount
applied under this option. Interest on the unpaid
balance will be paid each month at a rate determined
by us. This rate will not be less than the equivalent
of 2 1/2% per year.
Option E Joint Lifetime Payment Option (available as a Fixed
Income option and as a Variable Monthly Income
option). For Fixed Income Option E, the monthly
payments are level. For Variable Income Option E, the
payments are not guaranteed as to amount and may vary.
For either option, the payments are based on the lives
of two named persons. While both are living, one
payment will be made each month. When one dies,
payments continue for the lifetime of the other. The
two variations are:
(1) Payments for two lives only. No specific number of
payments is guaranteed. Payments stop when both named
persons have died.
(2) Payments guaranteed for 10 years. Payments stop at
the end of 10 years or when both named persons have
died, whichever is later.
The Fixed Income Option E Table shows the minimum
monthly payment for each $1,000 applied. The Variable
Monthly Income Option E Table shows the minimum amount
of the first monthly payment for each $1,000 applied.
The actual payments will be based on the monthly rates
we are using when the first payment is due. They will
not be less than shown in the Table.
-20-
<PAGE>
- 21 -
- --------------------------------------------------------------------------------
Fixed Income Option E Table
Minimum Monthly Payment Rates For Each $1,000 Applied
Payments For Two Lives Only
M50 M55 M60 M65 M70 M75
Age* F55 F60 F65 F70 F75 F80
M F
50 55 $ 3.25 $ 3.35 $ 3.45 $ 3.52 $ 3.57 $ 3.61
55 60 3.35 3.50 3.64 3.75 3.84 3.91
60 65 3.45 3.64 3.83 4.00 4.15 4.27
65 70 3.52 3.75 4.00 4.26 4.50 4.70
70 75 3.57 3.84 4.15 4.50 4.85 5.17
75 80 3.61 3.91 4.27 4.70 5.17 5.65
80 85 3.63 3.95 4.36 4.86 5.45 6.10
Payments Guaranteed For 10 Years
M50 M55 M60 M65 M70 M75
Age* F55 F60 F65 F70 F75 F80
M F
50 55 $ 3.24 $ 3.34 $ 3.44 $ 3.51 $ 3.56 $ 3.60
55 60 3.34 3.49 3.63 3.74 3.83 3.90
60 65 3.44 3.63 3.82 3.99 4.14 4.26
65 70 3.51 3.74 3.99 4.25 4.48 4.67
70 75 3.56 3.83 4.14 4.48 4.82 5.12
75 80 3.60 3.90 4.26 4.67 5.12 5.56
80 85 3.62 3.94 4.33 4.82 5.36 5.94
* Age on the birthday nearest the due date of the first payment. Monthly
payment rates for ages not shown will be furnished on request.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Variable Monthly Income Option E Table
Minimum Monthly Payment Rates For First Payment For Each
$1,000 Applied, Based On 4% Assumed Investment Rate
Payments For Two Lives Only - One Male, One Female
Adjusted
Age* F 50 F 55 F 60 F 65 F 70 F 75 F 80 F 85
M 50 $3.98 $4.08 $4.17 $4.26 $4.34 $4.40 $4.45 $4.48
M 55 4.04 4.16 4.29 4.41 4.53 4.62 4.70 4.76
M 60 4.09 4.24 4.40 4.57 4.73 4.88 5.00 5.10
M 65 4.13 4.30 4.50 4.72 4.94 5.16 5.36 5.52
M 70 4.16 4.36 4.59 4.85 5.15 5.46 5.75 6.01
M 75 4.19 4.40 4.65 4.96 5.33 5.74 6.16 6.55
M 80 4.20 4.42 4.70 5.05 5.48 5.98 6.55 7.12
M 85 4.21 4.44 4.73 5.11 5.59 6.19 6.89 7.66
Payments For Two Lives Only - Both Females
Adjusted
Age* F 50 F 55 F 60 F 65 F 70 F 75 F 80 F 85
F 50 $3.91 $3.98 $4.04 $4.09 $4.14 $4.17 $4.19 $4.21
F 55 3.98 4.07 4.16 4.24 4.31 4.36 4.40 4.43
F 60 4.04 4.16 4.29 4.41 4.51 4.60 4.66 4.71
F 65 4.09 4.24 4.41 4.57 4.73 4.87 4.98 5.07
F 70 4.14 4.31 4.51 4.73 4.96 5.17 5.36 5.51
F 75 4.17 4.36 4.60 4.87 5.17 5.49 5.79 6.05
F 80 4.19 4.40 4.66 4.98 5.36 5.79 6.23 6.65
F 85 4.21 4.43 4.71 5.07 5.51 6.05 6.65 7.27
Payments Guaranteed For 10 Years - One Male, One Female
Adjusted
Age* F 50 F 55 F 60 F 65 F 70 F 75 F 80 F 85
M 50 $3.97 $4.07 $4.16 $4.25 $4.33 $4.39 $4.44 $4.47
M 55 4.03 4.15 4.28 4.40 4.52 4.61 4.69 4.74
M 60 4.08 4.23 4.39 4.56 4.72 4.87 4.99 5.07
M 65 4.12 4.29 4.49 4.71 4.93 5.15 5.33 5.47
M 70 4.15 4.35 4.58 4.84 5.13 5.43 5.70 5.93
M 75 4.18 4.39 4.64 4.95 5.31 5.69 6.08 6.41
M 80 4.19 4.41 4.69 5.03 5.44 5.92 6.42 6.87
M 85 4.20 4.43 4.72 5.08 5.54 6.09 6.69 7.28
Payments Guaranteed For 10 Years - Two Females
Adjusted
Age* F 50 F 55 F 60 F 65 F 70 F 75 F 80 F 85
F 50 $3.90 $3.97 $4.03 $4.08 $4.13 $4.16 $4.18 $4.20
F 55 3.97 4.06 4.15 4.23 4.30 4.35 4.39 4.42
F 60 4.03 4.15 4.28 4.40 4.50 4.59 4.65 4.70
F 65 4.08 4.23 4.40 4.56 4.72 4.86 4.97 5.05
F 70 4.13 4.30 4.50 4.72 4.95 5.16 5.34 5.48
F 75 4.16 4.35 4.59 4.86 5.16 5.46 5.75 5.97
F 80 4.18 4.39 4.65 4.97 5.34 5.75 6.15 6.50
F 85 4.20 4.42 4.70 5.05 5.48 5.97 6.50 7.00
(Continued)
- 22 -
<PAGE>
- 23 -
*Age on birthday nearest the due date of
the first payment, adjusted according to
the table in the Basis Of Computation
provision in Part 7. Monthly payment
rates for adjusted ages not shown and for
two males will be furnished on request.
- --------------------------------------------------------------------------------
Option F Joint Lifetime Payment Option With Reduced
Payments (available as a Fixed Income option and
as a Variable Monthly Income option). Monthly
payments are based on the lives of two named
persons. Payments will continue while both are
living. When one dies, reduced payments will
continue for the lifetime of the other. These
reduced payments will be two-thirds of what they
would have been if both persons had continued to
live. Payments stop when both named persons have
died.
The Fixed Income Option F Table shows the minimum
monthly payment for each $1,000 applied. The
Variable Monthly Income Option F Table shows the
minimum amount of the first monthly payment for
each $1,000 applied. The actual payments will be
based on the rates we are using when the first
payment is due. They will not be less than shown
in the Table.
- --------------------------------------------------------------------------------
Fixed Income Option F Table
Minimum Monthly Payment Rates For Each $1,000 Applied
Payments For Two Lives Only
M50 M55 M60 M65 M70 M75
Age* F55 F60 F65 F70 F75 F80
M F
50 55 $3.51 $3.66 $3.82 $3.99 $4.17 $4.35
55 60 3.66 3.83 4.02 4.22 4.44 4.66
60 65 3.82 4.02 4.24 4.49 4.76 5.04
65 70 3.99 4.22 4.49 4.80 5.14 5.49
70 75 4.17 4.44 4.76 5.14 5.57 6.02
75 80 4.35 4.66 5.04 5.49 6.02 6.60
80 85 4.54 4.88 5.31 5.84 6.48 7.22
*Age on the birthday nearest the due date of the
first payment. Monthly payment rates for ages not
shown will be furnished on request. Monthly
payment rates for ages over 85 are the same as
those for 85.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Variable Monthly Income Option F Table
Minimum Monthly Payment Rates For First Payment For Each
$1,000 Applied, Based On 4% Assumed Investment Rate
Payments For Two Lives Only - One Male, One Female
Adjusted
Age* F 50 F 55 F 60 F 65 F 70 F 75 F 80 F 85
M 50 $4.24 $4.36 $4.49 $4.64 $4.82 $5.01 $5.23 $5.46
M 55 4.35 4.48 4.63 4.81 5.01 5.23 5.48 5.74
M 60 4.47 4.62 4.80 5.00 5.23 5.50 5.79 6.09
M 65 4.62 4.78 4.98 5.22 5.50 5.81 6.16 6.54
M 70 4.78 4.96 5.19 5.47 5.79 6.18 6.61 7.07
M 75 4.94 5.15 5.41 5.72 6.11 6.57 7.10 7.68
M 80 5.12 5.34 5.63 5.99 6.43 6.98 7.63 8.36
M 85 5.29 5.54 5.85 6.25 6.76 7.39 8.17 9.09
Payments For Two Lives Only - Both Females
Adjusted
Age* F 50 F 55 F 60 F 65 F 70 F 75 F 80 F 85
F 50 $4.11 $4.21 $4.33 $4.46 $4.61 $4.78 $4.96 $5.16
F 55 4.21 4.33 4.46 4.61 4.78 4.96 5.17 5.39
F 60 4.33 4.46 4.61 4.78 4.98 5.19 5.43 5.69
F 65 4.46 4.61 4.78 4.98 5.21 5.47 5.76 6.05
F 70 4.61 4.78 4.98 5.21 5.49 5.81 6.15 6.52
F 75 4.78 4.96 5.19 5.47 5.81 6.19 6.62 7.09
F 80 4.96 5.17 5.43 5.76 6.15 6.62 7.17 7.77
F 85 5.16 5.39 5.69 6.05 6.52 7.09 7.77 8.54
* Age on birthday nearest the due date of the first payment, adjusted
according to the table in the Basis Of Computation provision in Part 7.
Monthly payment rates for adjusted ages not shown and for two males will be
furnished on request.
- --------------------------------------------------------------------------------
Electing A Payment To elect any option, we require that a written
Option request, satisfactory to us, be received at our
Service Center. The Owner may elect an option
during the Annuitant's lifetime. If the death
benefit is payable in one sum when the Annuitant
dies, the Beneficiary may elect an option with our
consent.
Options for any amount payable to an association,
corporation, partnership, or fiduciary are
available with our consent. However, a corporation
or partnership may apply any amount payable to it
under Option C, E, or F if the option payments are
based on the life or lives of the Annuitant, the
Annuitant's spouse, any child of the Annuitant, or
any other person agreed to by us.
- 24 -
<PAGE>
- 25 -
Effective Date And The effective date of an option is the date the amount
Payment Date is applied under that option. For a death benefit, this
is the date that due proof of the Annuitant's or Owner's
death is received at our Service Center. For a maturity
value, it is the date the contract matures. For the cash
redemption value, it is the effective date of
redemption.
The first payment is due on the effective date, except
that the first payment under Option D is due one month
later. A later date for the first payment may be
requested in the payment option election. All payment
dates will fall on the same day of the month as the
first one. No payment will become due until a payment
date. No part payment will be made for any period
shorter than the time between payment dates.
Example: Monthly payments are being made to your son on
the 1st of each month. He dies on the 10th. No
part payment is due your son or his estate for
the period between the 1st and the 10th.
Withdrawals And If provided in the payment option election, all or part
Changes of the unpaid balance under Options A and D may be
withdrawn or applied under any other option.
If provided in the payment option election, the commuted
value of the future payments under Variable Monthly
Income Option B may be withdrawn. In this case, the
number of annuity units that Variable Monthly Income
Option B has in each division of the Separate Account
will be commuted at the Assumed Investment Rate. The
commuted units in each division will be multiplied by
the annuity unit value for that division on the date the
commuted value is determined. The commuted value will be
the sum of the values determined for each division less
any deduction for sales charges that applies.
A deduction for sales charges will apply only if:
. No sales charges were deducted when the redemption
or maturity value was applied under Variable
Monthly Income Option B; and
. A deduction for sales charges would be made if this
contract was redeemed or matured in one sum on the
date commutation is made; and
. Commutation is made during the lifetime of the
person receiving the Option B payments.
The amount of the sales charge deduction will be the
same as if this contract was redeemed for an amount
equal to the commuted value (before deduction of the
sales charge) on the date commutation is made.
Income Protection To the extent permitted by law, each option payment and
any withdrawal shall be free from legal process and the
claim of any creditor of the person entitled to them. No
option payment and no amount held under an option can be
taken or assigned in advance of its payment date, unless
the Owner's written consent is given before the
Annuitant dies. This consent must be received at our
Service Center.
Part 7. Notes On Our Computations
This Part covers some technical points about this
contract.
Net Investment Factor For each division of the Separate Account, the Net
Investment Factor for any valuation period is the gross
investment rate for that period plus 1.000000 and minus
an asset charge. This asset charge will be not more than
.0000411 for each day of a valuation period. The Net
Investment Factor may be greater or less than 1.000000.
For each division of the Separate Account, the gross
investment rate for any valuation period is equal to:
<PAGE>
. The net earnings of that division during the
valuation period, divided by
. The value of the total assets of that division at
the beginning of the valuation period.
The net earnings of each division are equal to the
accrued investment income and capital gains and losses
(realized and unrealized) of that division reduced by
any amount charged against that division for taxes paid
or reserved for by us. The gross investment rate will be
determined by us in accordance with generally accepted
accounting principals and applicable laws, rules, and
regulations. This determination shall be conclusive upon
the Owner, the Annuitant, any Beneficiary, and any
assignee and any other person under this contract.
Accumulation Unit The value of an accumulation unit in each division was
Value set at $1.000000 on the first valuation date selected by
us. The value on any date thereafter is equal to the
product of the Net Investment Factor for that division
for the valuation period that includes that date and the
value of the corresponding accumulation unit value on
the preceding valuation date.
Annuity Unit Value All annuity unit values in each division were set at
$1.000000 on the first valuation date selected by us.
The value on any date thereafter is equal to (a) the Net
Investment Factor for that division for the valuation
period that includes that date divided by (b) the sum of
1.000000 and the rate of interest for the number of days
in the valuation period, computed at an effective annual
rate equal to the Assumed Investment Rate, and
multiplied by (c) the corresponding annuity unit value
on the preceding valuation date.
Assumed Investment The Assumed Investment Rate is the annual interest rate
Rate assumed in determining the first payment under each of
the Variable Monthly Income payment options. The amount
of each subsequent payment from each division of the
Separate Account will depend on the relationship between
the Assumed Investment Rate and the actual investment
performance of that division. The Assumed Investment
Rate will be 4% per annum. If a 4% rate would result
in a first Variable Monthly Income payment larger than
that permitted under applicable state law, we will
select a lower rate to comply with that law.
Adjustment Of Units We have the right to split or consolidate the number of
And Values accumulation units or annuity units credited to the
contract, with a corresponding increase or decrease in
the unit values. We may exercise this right whenever we
consider an adjustment of units to be desirable.
However, strict equity will be preserved in making any
adjustment. No adjustment will have any material effect
on the benefits, provisions, or investment return of
this contract, or on the Owner, Annuitant, any
Beneficiary, any assignee or other person, or on us.
Payment Calculation Payments under a Variable Monthly Income payment option
Date are calculated on a payment calculation date. That date
is the earliest valuation date that is not more than 10
days before the due date of the payment.
Computing Variable The first payment under a Variable Monthly Income
Monthly Income payment option is computed in the following steps:
Payments
(1) As of the due date of the first payment, the
proceeds of this contract in any MVA segments of
the Fixed Account will be automatically
transferred to the MML Money Market Division of
the Separate Account. (If the MML Money Market
Division is not available under contracts in this
class as of that date, we will transfer such
proceeds to another division of the Separate
Account that we choose.)
(2) For each division, we multiply the proceeds from
the division by the rate we are using for the
payment option as of the date of the first
payment.
(3) For each division, we multiply the result of step
(2) above by the ratio of the accumulation unit
value for the division on the first payment
calculation date (see Payment Calculation Date
provision above) to the accumulation unit value
of the division on the due date the first payment
is due.
(4) We sum the results of step (3) for all divisions
of the Separate Account; this is the first
payment.
- 26 -
<PAGE>
- 27 -
Future payments under a Variable Monthly Income payment
option are measured by annuity units. The number of
annuity units in each division is the portion of the
first payment provided by that division divided by the
annuity unit value for that division on the first
payment calculation date.
For payments after the first one, the annuity units in
each division are multiplied by the annuity unit value
on the payment calculation date that applies. The
payment to be made on the payment due date is the sum of
the amounts provided by each division.
Basis Of Computation In computing the minimum payments under Fixed Income
payment options C, E, and F, we use mortality rates from
the 1983 Table a with Projection Scale G for 30 years
and with female rates set back five years.
The Variable Monthly Income Option C, E, and F Tables
are based on mortality rates from the 1983 Table a, with
Projection Scale G, for annuitants born in 1942. For all
other years of birth, the mortality improvement is
determined by adjusting the annuitant's age according to
the following table:
Adjustment to Adjustment to
Year of Birth Actual Age Year of Birth Actual Age
1905-1909 +7 Years 1955-1959 -3 Years
1910-1914 +6 Years 1960-1964 -4 Years
1915-1919 +5 Years 1965-1969 -5 Years
1920-1924 +4 Years 1970-1974 -6 Years
1925-1929 +3 Years 1975-1979 -7 Years
1930-1934 +2 Years 1980-1984 -8 Years
1935-1939 +1 Year 1985-1989 -9 Years
1940-1944 +0 Years 1990-1994 -10 Years
1945-1949 -1 Year 1995-1999 -11 Years
1950-1954 -2 Years 2000-2004 -12 Years
The annual interest rate used is the Assumed Investment
Rate discussed in this Part.
Guarantees All benefits, payments, and values under this contract
that depend on the investment performance of the
Separate Account may increase or decrease, as discussed
in this Part. However, we guarantee that the dollar
amounts of variable benefits will not be adversely
affected by variations of actual expenses from expense
charges stated in this contract. Also, those benefits
will not be adversely affected by variations in actual
mortality from the mortality assumptions stated in this
contract.
A part of the assets of the Separate Account is the
reserve for variable benefits and liabilities that
depend on the investment performance of that Account.
That part of the assets shall not be charged with any
liabilities we have that arise from any business we
conduct that does not depend on the performance of that
Account.
The values and benefits of the Fixed Account under this
contract are not less than those required by the laws of
the state in which this contract is delivered.
<PAGE>
WHERE TO FIND IT
Page No.
The Schedule Page ....................................................... 1
Part 1. - The Basics Of This Contract ..................................... 2
The Parties Involved - Owner, Joint Owner, Annuitant,
Beneficiary, Irrevocable Beneficiary, Payee ........................... 2
Dates - Contract Date, Contract Anniversary Date,
Contract Year, Issue Date, Maturity Date .............................. 2
This Is A Legal Contract ................................................ 3
Trusts And Other Agreements ............................................. 3
Representations And Contestability ...................................... 3
Misstatement Of Age Or Sex .............................................. 3
Meaning Of In Force ..................................................... 3
Service Center .......................................................... 3
Contract State .......................................................... 3
Currency ................................................................ 3
Contract Is Not Participating ........................................... 3
Part 2. - Purchase Payments .............................................. 3
The First Purchase Payment .............................................. 3
Purchase Payment Flexibility ............................................ 4
Right To Terminate Contract ............................................. 4
Where To Pay ............................................................ 4
Net Purchase Payments ................................................... 4
Allocation Of Net Purchase Payments ..................................... 4
Part 3. - Accounts, Values, And Charges .................................. 4
The Separate Account And The Fixed Account .............................. 4
The Separate Account .................................................... 4
Changes In The Separate Account ........................................ 5
Accumulation Units And Annuity Units ................................... 5
Valuation Date, Valuation Time, Valuation Period ....................... 5
Purchase And Sale Of Accumulation Units ................................ 5
The Fixed Account ...................................................... 6
MVA Segments ........................................................... 6
Values Of This Contract ................................................. 7
Accumulated Value Of Contract .......................................... 7
Variable Value Of Contract ............................................. 8
Fixed Value Of Contract ................................................ 8
Market Value Of Contract ............................................... 8
Market Value In The MVA Segments ....................................... 8
Contract Charges ....................................................... 9
Administrative Charge ................................................. 9
Deductions For Sales Charges .......................................... 10
Amount Of Sales Charge ................................................ 10
Transfer Fee .......................................................... 11
Part 4. - Life Benefits .................................................. 11
Contract Ownership ...................................................... 12
Rights Of Owner ........................................................ 12
Assigning This Contract ................................................ 12
Changing The Owner, Payee, Or Beneficiary .............................. 12
Transfers Of Values .................................................... 12
Limitations On Transfers ............................................... 13
Redeeming This Contract ................................................ 13
Right To Redeem ........................................................ 13
Cash Redemption Value .................................................. 13
Partial Redemptions .................................................... 13
When And How We Pay .................................................... 13
Right To Change The Maturity Date ....................................... 14
Electing An Early Maturity Date ........................................ 14
Electing A Later Maturity Date ......................................... 14
Other Provisions Regarding Life Benefits ................................ 14
Periodic Statements .................................................... 14
Receipt Of Information ................................................. 14
Part 5. - Maturity Benefit And Death Benefit .............................. 14
Maturity Benefit ........................................................ 15
Maturity Value ......................................................... 15
Monthly Life Income .................................................... 15
Alternate Settlements At Maturity ...................................... 15
Restriction On Rights .................................................. 15
Death Benefit ........................................................... 15
Amount Of Death Benefit ................................................ 15
Interest On Maturity Or Death Benefit ................................... 16
Interest Payable ....................................................... 16
Part 6. - Payment Options ................................................. 16
Fixed Income Payment Options ........................................... 16
Variable Monthly Income Payment Options ................................ 16
Availability Of Payment Options ........................................ 16
Minimum Amounts ........................................................ 16
Electing A Payment Option .............................................. 23
Effective Date And Payment Date ........................................ 24
Withdrawals And Changes ................................................ 24
Income Protection ...................................................... 24
Part 7. - Notes On Our Computations ....................................... 24
Net Investment Factor .................................................. 24
Accumulation Unit Value ................................................ 25
Annuity Unit Value ..................................................... 25
Assumed Investment Rate ................................................ 25
Adjustment Of Units And Values ......................................... 25
Payment Calculation Date ............................................... 25
Computing Variable Monthly Income Payments ............................. 25
Basis Of Computation ................................................... 26
Guarantees ............................................................. 26
Any riders and endorsements, and a copy of the application for the contract,
follow Page 27.
<PAGE>
[LETTERHEAD OF MML APPEARS HERE]
Deferred Variable Annuity Contract
With Oppenheimer Variable Account Funds and MML Series Investment Funds
Includes Fixed Interest Account with Market-Value Adjustment
This Contract provides that:
Flexible purchase payments may be made, while the Annuitant and Owner are
living, to the date this contract matures.
A death benefit is payable if the Annuitant or Owner dies before this
contract matures.
A monthly life income is payable beginning on the date this contract matures
if the Annuitant and Owner are living at that time.
This Contract is not participating. It does not provide for the payment of
dividends.
<PAGE>
EXHIBIT 5
OPINION RE LEGALITY
March, 1998
MML Bay State Life Insurance Company
1295 State Street
Springfield, MA 01111
RE: MML Bay State Fixed Account with Market Value
Adjustment; Commission File No. 33-79750
Ladies and Gentlemen:
This opinion is furnished in connection with the filing of Post-Effective
Amendment No. 4 to the Registration Statement on Form S-2 (the "Registration
Statement") under the Securities Act of 1933 for MML Bay State Fixed Account
with Market Value Adjustment (the "Fixed Account") offered in connection with
OppenheimerFunds LifeTrust Variable Annuity contract, issued by MML Bay State.
The Fixed Account offers investors the choice among various guarantee periods to
which account value may be allocated. If such amounts remain in the Fixed
Account for the chosen guarantee period, then a guaranteed rate of interest will
be paid. If, however, amounts are withdrawn prior to the expiration of the
selected guarantee period, such withdrawal will be subject to a market value
adjustment.
As Chief Legal Officer for MML Bay State Life Insurance Company, ("MML Bay
State"), I provide legal advice to MML Bay State in connection with the
operation of its variable products. In such role I have participated in the
preparation of Post-Effective Amendment No. 4 to the Registration Statement for
the Fixed Account. In so acting, I have made such examination of the law and
examined such records and documents as in my judgment are necessary or
appropriate to enable me to render the opinion expressed below. I am of the
following opinion:
1. MML Bay State is a valid and subsisting corporation, operated under
Connecticut law, and subject to regulation by the Connecticut Commissioner of
Insurance.
2. The securities being registered, when sold will be legally issued, fully paid
and non-assessable.
I hereby consent to the use of this opinion as an exhibit to the Post-Effective
Amendment.
Very truly yours,
/s/ Thomas F. English
-----------------
Thomas F. English
Chief Legal Officer
<PAGE>
EXHIBIT 23(i)
CONSENT OF INDEPENDENT ACCOUNTANTS
<PAGE>
Exhibit 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
MML Bay State Life Insurance Company
We consent to the inclusion in this Post-Effective Amendment No. 4 to the
registration statement on Form S-2 File (No. 33-79750) of our report, which
includes explanatory paragraphs relating to the use of statutory accounting
practices, which practices differ from generally accepted accounting principles,
dated February 6, 1998 on our audit of the statutory financial statements and
the statutory financial statement schedules of MML Bay State Life Insurance
Company. We also consent to the reference to our Firm under the caption
"Experts" and "Selected Historical Financial Data".
COOPERS & LYBRAND, L.L.P
Springfield, Massachusetts
March 17, 1998
<PAGE>
Exhibit 23(b)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Policyholders of
MML Bay State Life Insurance Company
In connection with our audits of the statutory financial statements of MML Bay
State Life Insurance Company as of December 31, 1997 and 1996, and for each of
the three years in the period ended December 31, 1997, which financial
statements are included in the Post Effective Amendment No. 4 to the
registration statement of Form S-2 (File No. 33-79750), we have also audited the
financial statement schedules listed in Exhibit 23(ii) herein.
In our opinion, these financial statement schedules, when considered in relation
to the basic statutory financial statements taken as a whole, present fairly, in
all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Springfield, Massachusetts
February 6, 1998
<PAGE>
EXHIBIT 23 (ii)
STATUTORY FINANCIAL STATEMENT SCHEDULES
<PAGE>
MML BAY STATE LIFE INSURANCE COMPANY
SCHEDULE I: SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES
December 31, 1997
(In Millions)
<TABLE>
<CAPTION>
Amount
at which
Cost or shown on
Other Fair Balance
Basis Value Sheet
----- ----- -----
<S> <C> <C> <C>
Bonds:
U.S. Treasury Securities and Obligations of U.S.
Government Corporations and Agencies $ 7.6 $ 7.7 $ 7.6
Mortgage-backed securities 6.5 6.6 6.5
Corporate debt Securities 23.9 24.3 23.9
Utilities 0.5 0.5 0.5
----- ----- -----
Total Bonds 38.5 $39.1 38.5
=====
Policy Loans 16.1 16.1
Cash and Short-term investments 3.5 3.5
----- -----
Total Investments $58.1 $58.1
===== =====
</TABLE>
<PAGE>
MML BAY STATE LIFE INSURANCE COMPANY
SCHEDULE III: SUPPLEMENTARY INSURANCE INFORMATION (1) (2)
December 31, 1997
(In Millions)
<TABLE>
<CAPTION>
Policyholders' Net Policy Benefits
Policyholders' Dividends Investment and Payments Other
Reserves and Claims and Premium and Other and Increase Insurance
Segment Funds Other Benefits Income Income (2) in Reserves Commissions Expenses
- ------- ----- -------------- ------ ---------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1997
$ 36.2 $ 1.9 $606.6 $ 10.7 $523.3 $ 35.4 $49.5
====== ====== ====== ====== ====== ====== =====
Year ended December 31, 1996
$ 26.5 $ 1.1 $441.2 $ 8.4 $374.5 $ 28.1 $33.1
====== ====== ====== ====== ====== ====== =====
Year ended December 31, 1995
$ 19.1 $ 1.5 $ 92.7 $ 4.3 $ 72.7 $ 15.1 $13.7
====== ====== ====== ====== ====== ====== =====
</TABLE>
(1) Deferred policy acquisition cost column has been omitted from this schedule
because it does not apply to mutual life insurance companies.
(2) Includes other income of $0.8 million, $4.9 million and $7.3 million for
1997, 1996 and 1995, respectively.
<PAGE>
MML BAY STATE LIFE INSURANCE COMPANY
SCHEDULE IV: REINSURANCE
(In Millions)
Ceded
Gross to Other Net
Year ended December 31, 1997 Amount Companies Amount
- ---------------------------------------------------------------------------
Life Insurance in Force $19,637.2 $1,889.7 $17,747.5
========= ======== =========
Premiums and other considerations
Individual life & annuities $ 308.0 $ 4.8 $ 303.2
Group life & annuities 303.7 0.3 303.4
--------- -------- ---------
Total Premium and other considerations $ 611.7 $ 5.1 $ 606.6
========= ======== =========
Year ended December 31, 1996
Life Insurance in Force $14,665.3 $1,604.9 $13,060.4
========= ======== =========
Premiums and other considerations
Individual life & annuities $ 198.8 $ 3.6 $ 195.2
Group life & annuities 246.2 0.2 246.0
--------- -------- ---------
Total Premium and other considerations $ 445.0 $ 3.8 $ 441.2
--------- -------- ---------
Year ended December 31, 1995
Life Insurance in Force $ 6,936.8 $1,088.6 $ 5,848.2
========= ======== =========
Premiums and other considerations
Individual life & annuities $ 109.8 $ 19.1 $ 90.7
Group life & annuities 12.5 10.5 2.0
--------- -------- ---------
Total Premium and other considerations $ 122.3 $ 29.6 $ 92.7
========= ======== =========
<PAGE>
MML BAY STATE LIFE INSURANCE COMPANY (1)
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS
(In Millions)
Additions Balance
Balance at Reserve at end
beginning of Contributions of
Description period (1) period
- --------------------------------------------------------------------------------
As of and for the year ended
December 31, 1997
-----------------
Bonds, Preferred Stocks and Short-
term Investments $ 0.2 $ (0.1) $ 0.1
Total Asset Valuation Reserve $ 0.2 $ (0.1) $ 0.1
====== ====== ======
As of and for the year ended
December 31, 1996
-----------------
Bonds, Preferred Stocks and Short-
term Investments $ 0.1 $ 0.1 $ 0.2
Total Asset Valuation reserve $ 0.1 $ 0.1 $ 0.2
====== ====== ======
As of and for the year ended
December 31, 1995
-----------------
Bonds, Preferred Stocks and Short-
term Investments $ 0.1 $ - $ 0.1
Total Asset Valuation Reserve $ 0.1 $ - $ 0.1
====== ====== ======
(1) The negative contribution represents an adjustment to reduce the reserve to
the statutory maximum. Amounts are calculated using a statutory formula plus
amounts deemed necessary by the Company. Represents the net impact on
Shareholder's Equity for investment gains and losses not related to changes
in interest rates.
<PAGE>
EXHIBIT 24
POWERS OF ATTORNEY
<PAGE>
POWER OF ATTORNEY: FEDERAL SECURITIES LAWS
------------------------------------------
The Undersigned, Lawrence V. Burkett, Jr., Director, President and Chief
Executive Officer of MML Bay State Life Insurance Company ("MML Bay State"),
does hereby constitute and appoint Thomas F. English, Richard M. Howe, Stephen
R. Bosworth, and Michael Berenson, and each of them individually, as his true
and lawful attorneys and agents.
Such attorneys and agents shall have full power of substitution and to take any
and all action and execute any and all instruments on the Undersigned's behalf
as Director, President and Chief Executive Officer of MML Bay State that said
attorneys and agents may deem necessary or advisable to enable MML Bay State to
comply with the Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, the Investment Company Act of 1940, as amended,
(collectively, the "Acts") and any rules, regulations, orders or other
requirements of the Securities and Exchange Commission (the "Commission")
thereunder. This Power of Attorney authorizes such attorneys and agents to sign
the Undersigned's name on his behalf as Director, President and Chief Executive
Officer of MML Bay State to any and all registration statements and/or
amendments thereto, reports, instruments or documents filed or to be to be filed
with the Commission under the Acts. Without limiting the scope of this Power of
Attorney, it shall apply to filings by or on behalf of MML Bay State separate
investment accounts currently in existence or established in the future,
including but not limited to those listed below.
MML Bay State Variable Annuity Separate Account 1
MML Bay State Variable Life Separate Account I
MML Bay State Variable Life Separate Account II
MML Bay State Variable Life Separate Account III
MML Bay State Variable Life Separate Account IV
MML Bay State Variable Life Separate Account V
The Undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 27th day of
February, 1998
/s/ Lawrence V. Burkett, Jr. /s/ Leslie C. Langford
- ---------------------------------- ----------------------------
Lawrence V. Burkett, Jr. Witness
Director, President
and Chief Executive Officer
<PAGE>
POWER OF ATTORNEY: FEDERAL SECURITIES LAWS
------------------------------------------
The Undersigned, John B. Davies, Member of the Board of Directors of MML Bay
State Life Insurance Company ("MML Bay State"), does hereby constitute and
appoint Lawrence V. Burkett, Jr., Thomas F. English, Richard M. Howe, Stephen R.
Bosworth, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
Such attorneys and agents shall have full power of substitution and to take any
and all action and execute any and all instruments on the Undersigned's behalf
as Member of the Board of Directors of MML Bay State that said attorneys and
agents may deem necessary or advisable to enable MML Bay State to comply with
the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the Investment Company Act of 1940, as amended, (collectively, the
"Acts") and any rules, regulations, orders or other requirements of the
Securities and Exchange Commission (the "Commission") thereunder. This Power of
Attorney authorizes such attorneys and agents to sign the Undersigned's name on
his behalf as Member of the Board of Directors of MML Bay State to any and all
registration statements and/or amendments thereto, reports, instruments or
documents filed or to be to be filed with the Commission under the Acts. Without
limiting the scope of this Power of Attorney, it shall apply to filings by or on
behalf of MML Bay State separate investment accounts currently in existence or
established in the future, including but not limited to those listed below.
MML Bay State Variable Annuity Separate Account 1
MML Bay State Variable Life Separate Account I
MML Bay State Variable Life Separate Account II
MML Bay State Variable Life Separate Account III
MML Bay State Variable Life Separate Account IV
MML Bay State Variable Life Separate Account V
The Undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 26th day of
February, 1998
/s/ John B. Davies /s/ Cynthia A. Van Wart
- ----------------------------- -----------------------------
John B. Davies Witness
Member, Board of Directors
<PAGE>
POWER OF ATTORNEY: FEDERAL SECURITIES LAWS
------------------------------------------
The Undersigned, Stuart H. Reese, Member of the Board of Directors of MML Bay
State Life Insurance Company ("MML Bay State"), does hereby constitute and
appoint Lawrence V. Burkett, Jr., Thomas F. English, Richard M. Howe, Stephen R.
Bosworth, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
Such attorneys and agents shall have full power of substitution and to take any
and all action and execute any and all instruments on the Undersigned's behalf
as Member of the Board of Directors of MML Bay State that said attorneys and
agents may deem necessary or advisable to enable MML Bay State to comply with
the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the Investment Company Act of 1940, as amended, (collectively, the
"Acts") and any rules, regulations, orders or other requirements of the
Securities and Exchange Commission (the "Commission") thereunder. This Power of
Attorney authorizes such attorneys and agents to sign the Undersigned's name on
his behalf as Member of the Board of Directors of MML Bay State to any and all
registration statements and/or amendments thereto, reports, instruments or
documents filed or to be to be filed with the Commission under the Acts. Without
limiting the scope of this Power of Attorney, it shall apply to filings by or on
behalf of MML Bay State separate investment accounts currently in existence or
established in the future, including but not limited to those listed below.
MML Bay State Variable Annuity Separate Account 1
MML Bay State Variable Life Separate Account I
MML Bay State Variable Life Separate Account II
MML Bay State Variable Life Separate Account III
MML Bay State Variable Life Separate Account IV
MML Bay State Variable Life Separate Account V
The Undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 3rd day of March, 1998
/s/ Stuart H. Reese /s/ Elizabeth Gagne
- ----------------------------- -----------------------------
Stuart H. Reese Witness
Member, Board of Directors
<PAGE>
POWER OF ATTORNEY: FEDERAL SECURITIES LAWS
------------------------------------------
The Undersigned, John Miller, Jr., Second Vice President and Comptroller of MML
Bay State Life Insurance Company ("MML Bay State"), does hereby constitute and
appoint Lawrence V. Burkett, Jr., Thomas F. English, Richard M. Howe, Stephen R.
Bosworth, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
Such attorneys and agents shall have full power of substitution and to take any
and all action and execute any and all instruments on the Undersigned's behalf
as Second Vice President and Comptroller of MML Bay State that said attorneys
and agents may deem necessary or advisable to enable MML Bay State to comply
with the Securities Act of 1933, as amended, the Securities Exchange Act of
1934, as amended, the Investment Company Act of 1940, as amended, (collectively,
the "Acts") and any rules, regulations, orders or other requirements of the
Securities and Exchange Commission (the "Commission") thereunder. This Power of
Attorney authorizes such attorneys and agents to sign the Undersigned's name on
his behalf as Second Vice President and Comptroller of MML Bay State to any and
all registration statements and/or amendments thereto, reports, instruments or
documents filed or to be to be filed with the Commission under the Acts. Without
limiting the scope of this Power of Attorney, it shall apply to filings by or on
behalf of MML Bay State separate investment accounts currently in existence or
established in the future, including but not limited to those listed below.
MML Bay State Variable Annuity Separate Account 1
MML Bay State Variable Life Separate Account I
MML Bay State Variable Life Separate Account II
MML Bay State Variable Life Separate Account III
MML Bay State Variable Life Separate Account IV
MML Bay State Variable Life Separate Account V
The Undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 6th day of March, 1998
/s/ John Miller, Jr. /s/ Bianca A. Marrero
- ----------------------------- -----------------------------
John Miller, Jr. Witness
Second Vice President
and Comptroller
<PAGE>
POWER OF ATTORNEY: FEDERAL SECURITIES LAWS
------------------------------------------
The Undersigned, Edward M. Kline, Treasurer of MML Bay State Life Insurance
Company ("MML Bay State"), does hereby constitute and appoint Lawrence V.
Burkett, Jr., Thomas F. English, Richard M. Howe, Stephen R. Bosworth, and
Michael Berenson, and each of them individually, as his true and lawful
attorneys and agents.
Such attorneys and agents shall have full power of substitution and to take any
and all action and execute any and all instruments on the Undersigned's behalf
as Treasurer of MML Bay State that said attorneys and agents may deem necessary
or advisable to enable MML Bay State to comply with the Securities Act of 1933,
as amended, the Securities Exchange Act of 1934, as amended, the Investment
Company Act of 1940, as amended, (collectively, the "Acts") and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission (the "Commission") thereunder. This Power of Attorney authorizes such
attorneys and agents to sign the Undersigned's name on his behalf as Treasurer
of MML Bay State to any and all registration statements and/or amendments
thereto, reports, instruments or documents filed or to be to be filed with the
Commission under the Acts. Without limiting the scope of this Power of Attorney,
it shall apply to filings by or on behalf of MML Bay State separate investment
accounts currently in existence or established in the future, including but not
limited to those listed below.
MML Bay State Variable Annuity Separate Account 1
MML Bay State Variable Life Separate Account I
MML Bay State Variable Life Separate Account II
MML Bay State Variable Life Separate Account III
MML Bay State Variable Life Separate Account IV
MML Bay State Variable Life Separate Account V
The Undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 26th day of
February, 1998
/s/ Edward M. Kline /s/ Elizabeth A. Martins
- ----------------------------- -----------------------------
Edward M. Kline Witness
Treasurer
<PAGE>
POWER OF ATTORNEY: FEDERAL SECURITIES LAWS
------------------------------------------
The Undersigned, Paul D. Adornato, Member of the Board of Directors of MML Bay
State Life Insurance Company ("MML Bay State"), does hereby constitute and
appoint Lawrence V. Burkett, Jr., Thomas F. English, Richard M. Howe, Stephen R.
Bosworth, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
Such attorneys and agents shall have full power of substitution and to take any
and all action and execute any and all instruments on the Undersigned's behalf
as Member of the Board of Directors of MML Bay State that said attorneys and
agents may deem necessary or advisable to enable MML Bay State to comply with
the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the Investment Company Act of 1940, as amended, (collectively, the
"Acts") and any rules, regulations, orders or other requirements of the
Securities and Exchange Commission (the "Commission") thereunder. This Power of
Attorney authorizes such attorneys and agents to sign the Undersigned's name on
his behalf as Member of the Board of Directors of MML Bay State to any and all
registration statements and/or amendments thereto, reports, instruments or
documents filed or to be to be filed with the Commission under the Acts. Without
limiting the scope of this Power of Attorney, it shall apply to filings by or on
behalf of MML Bay State separate investment accounts currently in existence or
established in the future, including but not limited to those listed below.
MML Bay State Variable Annuity Separate Account 1
MML Bay State Variable Life Separate Account I
MML Bay State Variable Life Separate Account II
MML Bay State Variable Life Separate Account III
MML Bay State Variable Life Separate Account IV
MML Bay State Variable Life Separate Account V
The Undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 10th day of
March, 1998
/s/ Paul D. Adornato /s/ Mary Lou Best
- ---------------------------- ----------------------------
Paul D. Adornato Witness
Member, Board of Directors
<PAGE>
POWER OF ATTORNEY: FEDERAL SECURITIES LAWS
------------------------------------------
The Undersigned, Anne Melissa Dowling, Member of the Board of Directors of MML
Bay State Life Insurance Company ("MML Bay State"), does hereby constitute and
appoint Lawrence V. Burkett, Jr., Thomas F. English, Richard M. Howe, Stephen R.
Bosworth, and Michael Berenson, and each of them individually, as her true and
lawful attorneys and agents.
Such attorneys and agents shall have full power of substitution and to take any
and all action and execute any and all instruments on the Undersigned's behalf
as Member of the Board of Directors of MML Bay State that said attorneys and
agents may deem necessary or advisable to enable MML Bay State to comply with
the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the Investment Company Act of 1940, as amended, (collectively, the
"Acts") and any rules, regulations, orders or other requirements of the
Securities and Exchange Commission (the "Commission") thereunder. This Power of
Attorney authorizes such attorneys and agents to sign the Undersigned's name on
her behalf as Member of the Board of Directors of MML Bay State to any and all
registration statements and/or amendments thereto, reports, instruments or
documents filed or to be to be filed with the Commission under the Acts. Without
limiting the scope of this Power of Attorney, it shall apply to filings by or on
behalf of MML Bay State separate investment accounts currently in existence or
established in the future, including but not limited to those listed below.
MML Bay State Variable Annuity Separate Account 1
MML Bay State Variable Life Separate Account I
MML Bay State Variable Life Separate Account II
MML Bay State Variable Life Separate Account III
MML Bay State Variable Life Separate Account IV
MML Bay State Variable Life Separate Account V
The Undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set her hand this 2nd day of March, 1998
/s/ Anne Melissa Dowling /s/ Jane Desilets
- ---------------------------- ----------------------------
Anne Melissa Dowling Witness
Member, Board of Directors
<PAGE>
POWER OF ATTORNEY: FEDERAL SECURITIES LAWS
------------------------------------------
The Undersigned, Maureen R. Ford, Member of the Board of Directors of MML Bay
State Life Insurance Company ("MML Bay State"), does hereby constitute and
appoint Lawrence V. Burkett, Jr., Thomas F. English, Richard M. Howe, Stephen R.
Bosworth, and Michael Berenson, and each of them individually, as her true and
lawful attorneys and agents.
Such attorneys and agents shall have full power of substitution and to take any
and all action and execute any and all instruments on the Undersigned's behalf
as Member of the Board of Directors of MML Bay State that said attorneys and
agents may deem necessary or advisable to enable MML Bay State to comply with
the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the Investment Company Act of 1940, as amended, (collectively, the
"Acts") and any rules, regulations, orders or other requirements of the
Securities and Exchange Commission (the "Commission") thereunder. This Power of
Attorney authorizes such attorneys and agents to sign the Undersigned's name on
her behalf as Member of the Board of Directors of MML Bay State to any and all
registration statements and/or amendments thereto, reports, instruments or
documents filed or to be to be filed with the Commission under the Acts. Without
limiting the scope of this Power of Attorney, it shall apply to filings by or on
behalf of MML Bay State separate investment accounts currently in existence or
established in the future, including but not limited to those listed below.
MML Bay State Variable Annuity Separate Account 1
MML Bay State Variable Life Separate Account I
MML Bay State Variable Life Separate Account II
MML Bay State Variable Life Separate Account III
MML Bay State Variable Life Separate Account IV
MML Bay State Variable Life Separate Account V
The Undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set her hand this 2nd day of March, 1998
/s/ Maureen R. Ford /s/ K.B. Peak
- ---------------------------- ----------------------------
Maureen R. Ford Witness
Member, Board of Directors
<PAGE>
POWER OF ATTORNEY: FEDERAL SECURITIES LAWS
------------------------------------------
The Undersigned, Isadore Jermyn, Member of the Board of Directors of MML Bay
State Life Insurance Company ("MML Bay State"), does hereby constitute and
appoint Lawrence V. Burkett, Jr., Thomas F. English, Richard M. Howe, Stephen R.
Bosworth, and Michael Berenson, and each of them individually, as his true and
lawful attorneys and agents.
Such attorneys and agents shall have full power of substitution and to take any
and all action and execute any and all instruments on the Undersigned's behalf
as Member of the Board of Directors of MML Bay State that said attorneys and
agents may deem necessary or advisable to enable MML Bay State to comply with
the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the Investment Company Act of 1940, as amended, (collectively, the
"Acts") and any rules, regulations, orders or other requirements of the
Securities and Exchange Commission (the "Commission") thereunder. This Power of
Attorney authorizes such attorneys and agents to sign the Undersigned's name on
his behalf as Member of the Board of Directors of MML Bay State to any and all
registration statements and/or amendments thereto, reports, instruments or
documents filed or to be to be filed with the Commission under the Acts. Without
limiting the scope of this Power of Attorney, it shall apply to filings by or on
behalf of MML Bay State separate investment accounts currently in existence or
established in the future, including but not limited to those listed below.
MML Bay State Variable Annuity Separate Account 1
MML Bay State Variable Life Separate Account I
MML Bay State Variable Life Separate Account II
MML Bay State Variable Life Separate Account III
MML Bay State Variable Life Separate Account IV
MML Bay State Variable Life Separate Account V
The Undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF the Undersigned has set his hand this 27th day of
February, 1998
/s/ Isadore Jermyn /s/ Jean M. Bourgeois
- ---------------------------- ----------------------------
Isadore Jermyn Witness
Member, Board of Directors
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MML BAY STATE LIFE INSURANCE COMPANY AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<DEBT-HELD-FOR-SALE> 39
<DEBT-CARRYING-VALUE> 39
<DEBT-MARKET-VALUE> 39
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 58
<CASH> 0
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 1,536
<POLICY-LOSSES> 36
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 2
<POLICY-HOLDER-FUNDS> 1,397
<NOTES-PAYABLE> 0
0
0
<COMMON> 3
<OTHER-SE> 65
<TOTAL-LIABILITY-AND-EQUITY> 1,536
607
<INVESTMENT-INCOME> 11
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 0
<BENEFITS> 523
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 85
<INCOME-PRETAX> 9
<INCOME-TAX> 16
<INCOME-CONTINUING> (7)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7)
<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>
