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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2005
Commission file number: 333-65423
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MONY LIFE INSURANCE COMPANY OF AMERICA
(Exact name of Registrant as specified in its charter)
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Arizona 86-0222062
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1290 Avenue of the Americas,
New York, New York 10104
(212) 554-1234
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|
No voting or non-voting common equity of the registrant is held by
non-affiliates of the registrant as of May 16, 2005.
As of May 16, 2005, 2,500,000 shares of the registrant's Common Stock were
outstanding.
REDUCED DISCLOSURE FORMAT:
Registrant meets the conditions set forth in General Instruction H(1)(a)
and (b) of Form 10-Q and is therefore filing this Form with the Reduced
Disclosure Format.
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MONY LIFE INSURANCE COMPANY OF AMERICA
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2005
TABLE OF CONTENTS
Page
PART I FINANCIAL INFORMATION
Item 1: Unaudited GAAP Financial Statements 3
o Balance Sheets, March 31, 2005 and December 31, 2004 3
o Statements of Operations, Three Months Ended March 31, 2005
(Successor) and Three Months Ended March 31, 2004 (Predecessor) 4
o Statement of Shareholder's Equity, Three Months Ended
March 31, 2005 (Successor) 5
o Statements of Cash Flows, Three Months Ended March 31, 2005
(Successor) and Three Months Ended March 31, 2004 (Predecessor) 6
o Notes to Financial Statements 7
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations ("Management Narrative") 14
Item 3: Quantitative and Qualitative Disclosures About Market Risk* 18
Item 4: Controls and Procedures 18
PART II OTHER INFORMATION
Item 1: Legal Proceedings 19
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds 19
Item 3: Defaults Upon Senior Securities 19
Item 4: Submission of Matters to a Vote of Security Holders 19
Item 5: Other Information 19
Item 6: Exhibits 19
SIGNATURES 20
- ----------
* Omitted pursuant to General Instruction H to Form 10-Q.
2
PART I FINANCIAL INFORMATION
ITEM 1: Unaudited GAAP Financial Statements
MONY LIFE INSURANCE COMPANY OF AMERICA
BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
2005 2004
---- ----
(In Millions)
ASSETS
Investments:
Fixed maturities available for sale, at estimated fair value............................. $ 2,040.1 $ 1,927.2
Mortgage loans on real estate............................................................ 372.4 373.2
Policy loans............................................................................. 94.5 93.0
Real estate held for the production of income............................................ 1.5 1.5
Other invested assets.................................................................... 49.4 57.2
-------------- --------------
Total investments................................................................. 2,557.9 2,452.1
-------------- --------------
Cash and cash equivalents................................................................... 55.2 198.8
Amounts due from reinsurers................................................................. 86.4 76.0
Deferred policy acquisition costs........................................................... 81.5 57.3
Value of business acquired.................................................................. 363.7 354.8
Other assets................................................................................ 59.6 23.8
Separate Accounts' assets................................................................... 3,587.7 3,732.2
-------------- --------------
Total Assets ............................................................................. $ 6,792.0 $ 6,895.0
============== ==============
LIABILITIES
Policyholders' account balances............................................................. $ 2,145.4 $ 2,140.6
Future policy benefits and other policyholders liabilities.................................. 360.1 352.4
Other liabilities........................................................................... 105.3 48.1
Note payable to affiliate................................................................... 36.1 36.8
Income taxes payable........................................................................ 35.1 45.2
Separate Accounts' liabilities.............................................................. 3,587.7 3,732.2
-------------- --------------
Total liabilities.................................................................... 6,269.7 6,355.3
-------------- --------------
Commitments and contingencies (Note 7)
SHAREHOLDER'S EQUITY
Common stock, $1.00 par value; 5.0 million shares authorized, 2.5 million issued and
outstanding.............................................................................. 2.5 2.5
Capital in excess of par value.............................................................. 495.8 495.8
Retained earnings........................................................................... 26.4 26.5
Accumulated other comprehensive (loss)/income............................................... (2.4) 14.9
--------------- --------------
Total shareholder's equity........................................................... 522.3 539.7
-------------- --------------
Total Liabilities and Shareholder's Equity.................................................. $ 6,792.0 $ 6,895.0
============== ==============
See Notes to Financial Statements.
3
MONY LIFE INSURANCE COMPANY OF AMERICA
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Three Months
Ended Ended
March 31, March 31,
2005 2004
---- ----
(SUCCESSOR) (PREDECESSOR)
(In Millions)
REVENUES:
Universal life and investment-type product policy fee income........................... $ 48.0 $ 43.8
Premiums............................................................................... 20.9 38.5
Net investment income.................................................................. 35.1 29.5
Investment gains, net.................................................................. 0.8 0.7
Other income........................................................................... 2.6 12.9
----------- -----------
Total revenues................................................................. 107.4 125.4
----------- -----------
BENEFITS AND OTHER DEDUCTIONS:
Policyholders' benefits................................................................ 44.0 42.4
Interest credited to policyholders' account balances................................... 21.3 23.8
Compensation and benefits.............................................................. 14.9 24.4
Commissions............................................................................ 26.3 38.0
Interest expense....................................................................... 0.6 0.7
Amortization of deferred policy acquisition costs and value of business acquired....... 9.2 16.9
Capitalization of deferred policy acquisition costs ................................... (26.1) (43.9)
Rent expense........................................................................... 3.4 5.5
Other operating costs and expenses..................................................... 14.5 15.7
----------- -----------
Total benefits and other deductions.......................................... 108.1 123.5
----------- -----------
(Loss)/earnings before income taxes and cumulative effect of a change in accounting
principle............................................................................ (0.7) 1.9
Income tax benefit/(expense)........................................................... 0.6 (0.1)
----------- -----------
Net (loss)/earnings before cumulative effect of a change in accounting principle....... (0.1) 1.8
Cumulative effect on prior periods of the adoption of SOP 03-1, net of taxes........... - 3.8
----------- -----------
Net (Loss)/Earnings.................................................................... $ (0.1) $ 5.6
=========== ===========
See Notes to Financial Statements.
4
MONY LIFE INSURANCE COMPANY OF AMERICA
STATEMENT OF SHAREHOLDER'S EQUITY
THREE MONTHS ENDED MARCH 31, 2005
(UNAUDITED)
Accumulated
Capital Other Total
Common In Excess Retained Comprehensive Shareholder's
Stock of Par Earnings Income/(Loss) Equity
------------- --------- ------------ ---------------- -------------
(In Millions)
Balance, December 31, 2004........................ $ 2.5 $ 495.8 $ 26.5 $ 14.9 $ 539.7
Comprehensive loss:
Net loss.................................. (0.1) (0.1)
Other comprehensive loss.................. (17.3) (17.3)
------------- --------- ------------ ---------------- -------------
Comprehensive loss................ (17.4)
------------- --------- ------------ ---------------- -------------
Balance, March 31, 2005........................... $ 2.5 $ 495.8 $ 26.4 $ (2.4) $ 522.3
============= ========= ============ ================ ============
See Notes to Financial Statements.
5
MONY LIFE INSURANCE COMPANY OF AMERICA
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(UNAUDITED)
Three Months Three Months
Ended Ended
March 31, March 31,
2005 2004
---- ----
(SUCCESSOR) (PREDECESSOR)
(In Millions)
Net (loss)/earnings........................................................ $ (0.1) $ 5.6
Adjustments to reconcile net (loss)/earnings to net cash used in
operating activities:
Interest credited to policyholders' account balances.................. 21.3 23.8
Universal life and investment-type product policy fee income.......... (48.0) (43.8)
Change in accrued investment income................................... (7.8) (3.7)
Investment gains...................................................... (0.8) (0.7)
Change in deferred policy acquisition costs and VOBA.................. (16.9) (27.0)
Change in future policy benefits...................................... 2.8 (2.7)
Change in other policyholders liabilities............................. (1.2) 3.0
Provision for depreciation and amortization........................... 3.7 0.7
Cumulative effect of the adoption of SOP 03-1......................... - (5.9)
Other, net............................................................ 36.4 (28.2)
--------- ---------
Net cash used in operating activities...................................... (10.6) (78.9)
--------- ---------
Cash flows from investing activities:
Sales, maturities or repayments of:
Fixed maturities..................................................... 35.8 68.2
Mortgage loans on real estate........................................ 3.3 3.7
Acquisitions of investments:
Fixed maturities..................................................... (194.3) (150.0)
Mortgage loans on real estate........................................ (2.5) (33.1)
Other invested assets................................................ - (0.1)
Policy loans, net.................................................... (1.5) (0.7)
--------- ---------
Net cash used in investing activities...................................... (159.2) (112.0)
--------- ---------
Cash flows from financing activities:
Policyholders' account balances:
Deposits............................................................. 40.1 246.1
Withdrawals and transfers to Separate Accounts....................... (12.1) (179.0)
Repayment of note to affiliate.......................................... (0.7) (0.7)
Other, net.............................................................. (1.1) -
--------- ---------
Net cash provided by financing activities.................................. 26.2 66.4
--------- ---------
Net decrease in cash and cash equivalents.................................. (143.6) (124.5)
Cash and cash equivalents, beginning of period............................. 198.8 180.9
--------- ---------
Cash and Cash Equivalents, End of Period................................... $ 55.2 $ 56.4
========= =========
Supplemental cash flow information:
Interest Paid............................................................ $ 0.6 $ 0.7
========= =========
Income Taxes............................................................. $ - $ -
========= =========
See Notes to Financial Statements.
6
MONY LIFE INSURANCE COMPANY OF AMERICA
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The preparation of the accompanying financial statements in conformity with
U.S. generally accepted accounting principles ("GAAP") requires management to
make estimates and assumptions (including normal, recurring accruals) that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities, at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates. The accompanying
unaudited financial statements reflect all adjustments necessary in the
opinion of management for fair statement of the financial position of MLOA
and its results of operations and cash flows for the periods presented.
The terms "first quarter 2005" and "first quarter 2004" refer to the three
months ended March 31, 2005 and 2004, respectively. References in these
financial statements to "Predecessor" refer to MLOA prior to July 1, 2004.
References to "Successor" refer to MLOA on or after July 1, 2004, after
giving effect to the implementation of the Purchase Adjustments recorded in
connection with the acquisition of MONY by the Holding Company.
Certain reclassifications have been made in the prior period amounts to
conform to the current presentation.
2. ACCOUNTING CHANGES AND NEW ACCOUNTING PRONOUNCEMENTS
Accounting Changes
------------------
Effective January 1, 2004, MLOA adopted SOP 03-1, "Accounting and Reporting
by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts
and for Separate Accounts". SOP 03-1 required a change in MLOA's accounting
policies relating to (a) assets and liabilities associated with market value
adjusted fixed rate investment options available in certain variable annuity
contracts issued by MLOA, and (b) liabilities related to certain mortality
and annuitization benefits, such as the no lapse guarantee feature contained
in variable and interest-sensitive life policies.
The adoption of SOP 03-1 resulted in a change in the method of determining
liabilities associated with the no lapse guarantee feature contained in
variable and interest-sensitive life contracts. While both MLOA's previous
method of establishing the no lapse guarantee reserve and the SOP 03-1 method
are based on accumulation of a portion of the charges for the no lapse
guarantee feature, SOP 03-1 specifies a different approach for identifying
the portion of the fee to be accrued and for establishing the related
reserve.
The adoption of SOP 03-1 as of January 1, 2004 resulted in an increase in the
three months ended March 31, 2004 (Predecessor) net earnings of $3.8 million
related to the cumulative effect of the required changes in accounting. The
determination of liabilities associated with mortality and annuitization
benefits, as well as related impacts on deferred acquisition costs, is based
on models that involve numerous estimates and subjective judgments. There can
be no assurance that the ultimate actual experience will not differ from
management's estimates.
New Accounting Pronouncements
-----------------------------
On December 16, 2004, the FASB issued SFAS Statement No. 123(R), "Share-Based
Payment". SFAS Statement No. 123(R) eliminates the alternative to apply the
intrinsic value method of accounting for employee stock-based compensation
awards that was provided in FASB Statement No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123") as originally issued. SFAS No.
123(R) requires the cost of all share-based payments to employees, including
stock options, stock appreciation rights, and most tax-qualified employee
stock purchase plans, to be recognized in the financial statements based on
the fair value of those awards. Under SFAS No. 123(R) the cost of
equity-settled awards generally is based on fair value at date of grant,
adjusted for subsequent modifications of terms or conditions, while
cash-settled awards require remeasurement of fair value at the end of each
reporting period. SFAS No. 123(R) does not prescribe or specify a preference
for a particular valuation technique or model for estimating the fair value
of employee stock options and similar awards but instead requires
consideration of certain factors in selecting one that is appropriate for the
unique substantive characteristics of the instruments awarded. SFAS No.
123(R) generally requires adoption using a modified version of prospective
application. Under "modified prospective" application, SFAS No. 123(R)
applies to new awards granted and to awards modified, repurchased, or
cancelled after the required effective date. Additionally, compensation cost
for unvested awards outstanding as of the required effective date must be
recognized prospectively over the remaining requisite service/vesting period
based on the fair values of those awards as already calculated under SFAS No.
123. Entities may further elect to apply SFAS No. 123(R) on a "modified
retrospective" basis to give effect to the fair value based method of
accounting for awards granted, modified, or settled in cash in earlier
periods. The cumulative effect of initial application, if any, is recognized
as of the required effective date. On April 14, 2005,
7
the SEC adopted a new rule allowing companies to implement SFAS 123(R) at the
beginning of their next fiscal year, instead of the next reporting period,
that begins after June 15, 2005.
As more fully described in Note 8, MLOA is charged for services including
personnel services and employee benefits provided by MONY Life employees,
and, effective with the acquisition of MONY, AXA Equitable employees, on
MLOA's behalf. MONY Life and AXA Financial elected under SFAS No. 123 to
continue to account for stock-based compensation using the intrinsic value
method and instead to provide only pro-forma disclosure of the effect on net
earnings from applying the fair value based method. Consequently, adoption of
SFAS No. 123(R) would be expected to result in recognition of compensation
expense for certain types of AXA Financial's equity-settled awards, such as
options to purchase AXA ADRs and AXA ordinary share options, for which no
cost previously would have been charged to net earnings under the intrinsic
value method. Similarly, certain types of AXA Financial's cash-settled
awards, such as stock appreciation rights, may be expected to result either
in different amounts of compensation expense or different patterns of expense
recognition under SFAS No. 123(R) as compared to the intrinsic value method.
Management of AXA Financial currently is assessing the impact of adoption of
SFAS No. 123(R), including measurement and reporting of related income tax
effects, selection of an appropriate valuation model and determination of
assumptions, as well as consideration of plan design issues.
3. INVESTMENTS
Investment valuation allowances for mortgage loans and equity real estate and
changes thereto follow:
Three Months Ended
March 31,
------------------------------------
2005 2004
(SUCCESSOR) (PREDECESSOR)
--------------- ----------------
(In Millions)
Balances, beginning of year............................................... $ - $ 4.4
Additions charged to income............................................... - 0.2
Deductions for writedowns and asset dispositions.......................... - -
--------------- ----------------
Balances, end of period................................................... $ - $ 4.6
=============== ================
Balances, end of period comprise:
Mortgage loans on real estate........................................... $ - $ 4.6
--------------- ----------------
Total..................................................................... $ - $ 4.6
=============== ================
For the first quarter of 2005 and of 2004, net investment income is shown net
of investment expenses of $1.9 million and $4.5 million, respectively.
As of March 31, 2005 and December 31, 2004, fixed maturities classified as
available for sale had amortized costs of $2,047.1 million and $1,891.1
million, respectively.
For the first quarter of 2005 and of 2004, proceeds received on sales of
fixed maturities classified as available for sale amounted to $17.3 million
and $43.0 million, respectively. Gross gains of $0.9 million and $1.3 million
and gross losses of $0.4 million and $0.0 million were realized on these
sales for the first quarter of 2005 and of 2004, respectively. Unrealized net
investment gains related to fixed maturities classified as available for sale
decreased by $43.0 million during the first quarter of 2005, resulting in a
net unrealized loss balance of $6.9 million at March 31, 2005.
Impaired mortgage loans along with the related investment valuation
allowances for losses follow:
March 31, December 31,
2005 2004
----------------- -----------------
(In Millions)
Impaired mortgage loans with investment valuation allowances............ $ - $ -
Impaired mortgage loans without investment valuation allowances......... 5.0 3.4
----------------- -----------------
Recorded investment in impaired mortgage loans.......................... 5.0 3.4
Investment valuation allowances......................................... - -
----------------- -----------------
Net Impaired Mortgage Loans............................................. $ 5.0 $ 3.4
================= =================
8
There was no income recognized on impaired mortgage loans for the first
quarter of 2005 and 2004, respectively.
Mortgage loans on real estate are placed on nonaccrual status once management
believes the collection of accrued interest is doubtful. Once mortgage loans
on real estate are classified as nonaccrual loans, interest income is
recognized under the cash basis of accounting and the resumption of the
interest accrual would commence only after all past due interest has been
collected or the mortgage loan on real estate has been restructured to where
the collection of interest is considered likely. At March 31, 2005 and
December 31, 2004, respectively, there are no mortgage loans on real estate
that had been classified as nonaccrual loans.
The following presents MLOA's investment in 1.2 million units in Alliance, an
affiliate, which is included in other invested assets:
March 31,
2005
---------------
(In Millions)
Balance, beginning of year ............................................. $ 49.1
Equity in net earnings.................................................. 0.8
Dividends received...................................................... (1.1)
---------------
Balance, end of period.................................................. $ 48.8
===============
4. GMDB, GMIB AND NO LAPSE GUARANTEE FEATURES
A) Variable Annuity Contracts - GMDB and GMIB
------------------------------------------
MLOA issues certain variable annuity contracts with GMDB and GMIB features
that guarantee either:
o Return of Premium: the benefit is the greater of current account value
or premiums paid (adjusted for withdrawals);
o Ratchet: the benefit is the greatest of current account value, premiums
paid (adjusted for withdrawals), or the highest account value on any
anniversary up to contractually specified ages (adjusted for
withdrawals);
o Roll-Up: the benefit is the greater of current account value or
premiums paid (adjusted for withdrawals) accumulated at contractually
specified interest rates up to specified ages; or
o Combo: the benefit is the greater of the ratchet benefit or the roll-up
benefit.
The following table summarizes the GMDB and GMIB liabilities, before
reinsurance ceded, reflected in the General Account in future policy benefits
and other policyholders' liabilities:
GMDB GMIB Total
---------------- ----------------- -----------------
(In Millions)
Balance at December 31, 2004....................... $ 1.0 $ 0.1 $ 1.1
Paid guarantee benefits.......................... (0.8) - (0.8)
Other changes in reserve......................... 0.8 - 0.8
---------------- ----------------- -----------------
Balance at March 31, 2005.......................... $ 1.0 $ 0.1 $ 1.1
================ ================= =================
Balance at December 31, 2003....................... $ 0.9 $ 0.1 $ 1.0
Paid guarantee benefits.......................... (1.1) - (1.1)
Other changes in reserve......................... 1.4 - 1.4
---------------- ----------------- -----------------
Balance at March 31, 2004.......................... $ 1.2 $ 0.1 $ 1.3
================ ================= =================
9
Related GMDB reinsurance ceded amounts were:
Three Months Ended
March 31,
---------------------------------
2005 2004
(SUCCESSOR) (PREDECESSOR)
--------------- ---------------
(In Millions)
Balances, beginning of year............................................... $ 0.9 $ 0.2
Paid guarantee benefits ceded.......................................... 0.8 -
Other changes in reserve............................................... (0.5) -
--------------- ---------------
Balances, End of Period................................................... $ 1.2 $ 0.2
=============== ===============
The March 31, 2005 values for those variable annuity contracts with GMDB
and GMIB features are presented in the following table. For contracts with
the GMDB feature, the net amount at risk in the event of death is the
amount by which the GMDB benefits exceed related account values. For
contracts with the GMIB feature, the net amount at risk in the event of
annuitization is the amount by which the present value of the GMIB
benefits exceeds related account values, taking into account the
relationship between current annuity purchase rates and the GMIB
guaranteed annuity purchase rates. Since variable annuity contracts with
GMDB guarantees may also offer GMIB guarantees in each contract, the GMDB
and GMIB amounts listed are not mutually exclusive:
Return
of
Premium Ratchet Roll-Up Combo Total
------------ --------------- ------------- ------------- ------------
(Dollars In Millions)
GMDB:
Account value (1).............. $ 1,103 $ 1,962 N.A. $ 201 $ 3,266
Net amount at risk, gross...... $ 17 $ 260 N.A. $ 12 $ 289
Net amount at risk, net of
amounts reinsured............ $ 17 $ 245 N.A. $ 0 $ 262
Average attained age of
contractholders.............. 60.9 60.6 N.A. 59.7 61.1
Percentage of contractholders
over age 70.................. 17.5% 14.7% N.A. 11.3% 17.9%
Guaranteed minimum return
rates........................ N.A. N.A. N.A. 5.0% 5.0%
GMIB:
Account value (2).............. N.A. N.A. $ 201 N.A. $ 201
Net amount at risk, gross...... N.A. N.A. $ 0 N.A. $ 0
Net amount at risk, net of
amounts reinsured............ N.A. N.A. $ 0 N.A. $ 0
Weighted average years
remaining until earliest
annuitization............... N.A. N.A. 7.3 N.A. 7.3
Guaranteed minimum return
rates....................... N.A. N.A. 5.0% N.A. 5.0%
- ----------------------
(1) Includes General Account balances of $210 million, $323 million and $33
million, respectively, for a total of $566 million.
(2) Includes General Account balances of $33 million.
10
B) Separate Account Investment by Investment Category Underlying GMDB and
----------------------------------------------------------------------
GMIB Features
-------------
The total account values of variable annuity contracts with GMDB and GMIB
features include amounts allocated to the guaranteed interest option which is
part of the General Account and variable investment options which invest
through Separate Accounts in variable insurance trusts. The following table
presents the aggregate fair value of assets, by major investment category,
held by Separate Accounts that support variable annuity contracts with GMDB
and GMIB benefits and guarantees. The investment performance of the assets
impacts the related account values and, consequently, the net amount of risk
associated with the GMDB and GMIB benefits and guarantees. Since variable
annuity contracts with GMDB benefits and guarantees may also offer GMIB
benefits and guarantees in each contract, the GMDB and GMIB amounts listed
are not mutually exclusive.
Investment in Variable Insurance Trust Mutual Funds
March 31, December 31,
2005 2004
---------------- ------------------
(In Millions)
GMDB:
Equity............................................................... $ 2,092 $ 2,209
Fixed income......................................................... 438 452
Balanced............................................................. 64 67
Other................................................................ 106 108
---------------- ------------------
Total................................................................ $ 2,700 $ 2,836
================ ==================
GMIB:
Equity............................................................... $ 123 $ 126
Fixed income......................................................... 37 37
Balanced............................................................. 3 3
Other................................................................ 5 4
---------------- ------------------
Total................................................................ $ 168 $ 170
================ ==================
C) Variable and Interest-Sensitive Life Insurance Policies - No Lapse
------------------------------------------------------------------
Guarantee
---------
The no lapse guarantee feature contained in variable and interest-sensitive
life insurance policies keeps them in force in situations where the policy
value is not sufficient to cover monthly charges then due. The no lapse
guarantee remains in effect so long as the policy meets a contractually
specified premium funding test and certain other requirements. At March 31,
2005 and December 31, 2004 MLOA had liabilities of $0.5 million for no lapse
guarantees reflected in the General Account in future policy benefits and
other policyholders liabilities.
5. VALUE OF BUSINESS ACQUIRED
The following presents MLOA's VOBA asset as of March 31, 2005, related to the
Holding Company's acquisition of MONY:
Less: Less:
Gross Carrying Accumulated Impact of
Amount Amortization (1) Recapture (2) Net
-------------- ---------------- ------------- ---
(In Millions)
VOBA........................................... $ 416.5 $ (20.7) $ (32.1) $ 363.7
=========== ============ ============ ===========
For the three months ended March 31, 2005, total amortization expense related
to VOBA was $7.1 million. VOBA amortization is estimated to range between
$36.0 million and $46.0 million annually over the next five years.
-------------
(1) Includes reactivity to unrealized investment gains and losses.
(2) The impact of recapture shown above relates to the December 31, 2004
recapture by USFL of level premium term insurance contracts previously
ceded to MLOA under the modified coinsurance agreement between MLOA and
USFL.
11
6. INCOME TAXES
Income taxes for interim periods have been computed using an estimated annual
effective tax rate. This rate is revised, if necessary, at the end of each
successive interim period to reflect the current estimate of the annual
effective tax rate.
7. LITIGATION
There have been no new material legal proceedings and no material
developments in specific litigations previously reported in MLOA's Notes to
Financial Statements for the year ended December 31, 2004, except as
described below:
In Goshen, in April 2005, plaintiffs filed a motion for leave to appeal with
the Court of Appeals.
In McLean, in April 2005, claims of the individual Illinois plaintiffs were
settled and the case has been dismissed.
Although the outcome of litigation generally cannot be predicted with
certainty, management believes that, except as otherwise noted above or in
MLOA's Notes to Financial Statements for the year ended December 31, 2004,
the ultimate resolution of the litigations described above or previously
reported in MLOA's Notes to Financial Statements for the year ended December
31, 2004 should not have a material adverse effect on the financial position
of MLOA. Except as previously noted, management cannot make an estimate of
loss, if any, or predict whether or not any of such other litigations
described above or previously reported in MLOA's Notes to Financial
Statements for the year ended December 31, 2004 will have a material adverse
effect on MLOA's results of operations in any particular period.
In addition to the matters previously reported and those described above,
MLOA is involved in various legal actions and proceedings in connection with
its business. Some of the actions and proceedings have been brought on behalf
of various alleged classes of claimants and certain of these claimants seek
damages of unspecified amounts. While the ultimate outcome of such matters
cannot be predicted with certainty, in the opinion of management no such
matter is likely to have a material adverse effect on MLOA's financial
position or results of operations. However, it should be noted that the
frequency of large damage awards, including large punitive damage awards that
bear little or no relation to actual economic damages incurred by plaintiffs
in some jurisdictions, continues to create the potential for an unpredictable
judgment in any given matter.
8. RELATED PARTY TRANSACTIONS
Under its respective service agreements with affiliates AXA Equitable
(Successor Period) and MONY Life (Predecessor Period), personnel services,
employee benefits, facilities, supplies and equipment are provided to MLOA to
conduct its business. The associated costs related to the service agreements
are allocated to MLOA based on methods that management believes are
reasonable, including a review of the nature of such costs and time studies
analyzing the amount of employee compensation costs incurred by MLOA. As a
result of such allocations, MLOA incurred expenses of $30.7 million and $42.5
million for first quarter 2005 and 2004, respectively. At March 31, 2005 MLOA
had a payable to AXA Equitable in connection with its current service
agreement of $30.7 million. At December 31, 2004 MLOA had a receivable from
MONY Life in connection with its predecessor service agreement of $2.3
million.
In addition to the service agreements discussed above, MLOA has various other
service and investment advisory agreements with affiliates. The amount of
expenses incurred by MLOA related to these agreements was $0.9 million and
$1.8 million for first quarter 2005 and 2004, respectively. In addition, MLOA
had an intercompany payable of $0.4 million and $0.2 million at March 31,
2005 and December 31, 2004, respectively, related to these agreements.
As of December 31, 2004, USFL recaptured all of the term life policies that
had previously been assumed by MLOA under its MODCO agreement with USFL. The
MODCO agreement remains in effect with USFL for the universal life insurance
policies previously assumed and for new level term and universal life
business issued on or subsequent to January 1, 2005. MLOA's statements of
operations include certain revenues and expenses assumed from USFL under the
MODCO agreement as follows:
12
Three Months Three Months
Ended Ended
March 31, March 31,
2005 2004
------------ -------------
(SUCCESSOR) (PREDECESSOR)
(In Millions)
REVENUES:
Universal life and investment-type product policy
fees............................................ $ 4.3 $ 3.6
Premiums .......................................... 3.2 25.4
Investment gains, net ............................. (1.3) 5.1
------------ ----------
6.2 34.1
------------ ----------
BENEFITS AND EXPENSES:
Benefits to policyholders.......................... 2.8 21.7
Interest credited to policyholders' account
balances........................................ 1.3 1.1
Amortization of deferred policy acquisition costs
and value of business acquired.................. 0.8 4.2
Capitalization of deferred policy acquisition
costs .......................................... (8.4) (16.1)
Commissions........................................ 12.0 21.3
------------ ----------
8.5 32.2
------------ ----------
(Loss)/earnings before income taxes and
cumulative effect of a change in accounting
principle....................................... $ (2.3) $ 1.9
============ ==========
At March 31, 2005 and December 31, 2004, MLOA recorded a payable of $38.3
million and $27.8 million, respectively, to USFL in connection with this
agreement.
MLOA recognized (losses) income of $(1.4) million and $5.2 million for first
quarter 2005 and 2004, respectively, on the embedded derivative within the
MODCO agreement with USFL. In addition, MLOA had a swap asset of $1.9 million
and $3.3 million at March 31, 2005 and December 31, 2004, respectively,
related to this embedded derivative.
On March 5, 1999, MLOA borrowed $50.5 million from MONY Benefit Management
Corp. ("MBMC"), an affiliate, in exchange for a note payable in the same
amount. The note bears interest at 6.8% per annum and matures on March 5,
2014. Principal and interest are payable quarterly to MBMC. The carrying
value of the note as of March 31, 2005 is $36.1 million.
9. STOCK OPTIONS
Although MLOA has no employees, under its respective service agreements with
AXA Equitable (Successor Period) and MONY Life (Predecessor Period), MLOA is
charged for services, including personnel services and employee benefits,
provided on its behalf. MLOA's affiliates account for stock-based
compensation using the intrinsic value method prescribed in APB No. 25. The
following table reflects the effect on net income if compensation expense as
related to options awarded under those plans had been determined based on
SFAS No. 123's fair value based method:
Three Months Three Months
Ended Ended
March 31, March 31,
2005 2004
----------- -------------
(SUCCESSOR) (PREDECESSOR)
(In Millions)
Net (Loss)/Earnings as reported.................... $ (0.1) $ 5.6
Less: total stock-based employee compensation
expense determined under fair value method for
all awards, net of income tax.................... 0.6 0.8
----------- -----------
Pro Forma Net (Loss) Earnings...................... $ (0.7) $ 4.8
=========== ===========
13
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis is omitted pursuant to General Instruction
H of Form 10-Q. The management narrative for MLOA that follows should be read in
conjunction with the Financial Statements, the related Notes to Financial
Statements and the information discussed under Forward-Looking Statements
included in this Form 10-Q, and with the management narrative found in the
Management's Discussion and Analysis ("MD&A") section included in MLOA's Annual
Report on Form 10-K for the year ended December 31, 2004 ("2004 Form 10-K").
RESULTS OF OPERATIONS
The acquisition of MONY by the Holding Company on July 8, 2004 resulted in a new
basis of accounting for the successor period beginning July 1, 2004. Information
relating to the predecessor period prior to the completion of the acquisition is
presented using MLOA's historical basis of accounting.
THREE MONTHS ENDED MARCH 31, 2005 COMPARED TO THREE MONTHS ENDED MARCH 31, 2004
The loss before income taxes and cumulative effect of a change in accounting
principle was $0.7 million for the first three months of 2005, a decrease of
$2.6 million from earnings before income taxes and cumulative effect of a change
in accounting principle of $1.9 million for the first three months of 2004. The
net loss for MLOA was $(0.1) million for the first three months of 2005, down
from earnings of $5.6 million for the first three months of 2004. In first
quarter 2004, MLOA recorded earnings of $3.8 million (net of related income
taxes of $2.1 million) for the cumulative effect of the January 1, 2004 adoption
of SOP 03-1.
Revenues. Total revenues for the first three months of 2005 decreased $18.0
million as compared to the first three months of 2004.
Universal life and investment type policy fee income was $48.0 million, $4.2
million higher than the first three months of 2004, principally due to increased
account balances primarily as a result of predecessor period growth in the
Universal Life and FPVA product lines. Premiums totaled $20.9 million for the
first three months of 2005, a $17.6 million decrease from the prior year,
principally due to a decrease in premiums assumed under the MODCO agreement with
USFL attributable to the December 31, 2004 recapture by USFL of all of the term
life policies in force that had previously been assumed by MLOA under the MODCO
agreement partially offset by an increase in renewal premiums on level term
business attributable to growth of the in-force block of business.
Net investment income was $35.1 million, $5.6 million higher than the first
three months of 2004. The increase was principally due to increased income on
fixed maturities as a result of a higher average asset base and a decrease in
investment related expenses attributable to cost reductions associated with AXA
Financial's integration of the MONY Companies.
Investment gains, net were $0.8 million for the first three months of 2005
compared to $0.7 million for the first three months of 2004.
There was a $10.3 million decrease in other income to $2.6 million in the first
three months of 2005 from $12.9 million for the first three months of 2004. The
decrease was principally attributable to a $6.6 million decrease in the value of
the embedded derivative related to the reinsurance agreement with USFL and a
$2.7 million insurance recovery recorded in first quarter 2004.
Benefits and Other Deductions. Total benefits and other deductions for the first
three months of 2005 decreased $15.4 million to $108.1 million from $123.5
million for the first three months of 2004.
Policyholders' benefits increased $1.6 million to $44.0 million in the first
three months of 2005, resulting principally from an increase in CSVUL and SVUL
death claims offset by a decrease in assumed benefits under the MODCO treaty
with USFL and a decrease in the change in reserves due to reduced sales of
certain annuity products.
The $2.5 million decrease in interest credited to policyholders' account
balances to $21.3 million for the first three months of 2005 was principally due
to a decrease in fund balances attributable to an increase in FPVA surrenders.
Compensation and benefits decreased $9.5 million to $14.9 million for the first
three months of 2005 from $24.4 million for the first three months of 2004
principally due to cost reductions associated with AXA Financial's integration
of the MONY Companies.
Commissions decreased $11.7 million during the first three months of 2005 to
$26.3 million principally due to a decrease in the reinsurance expense allowance
paid to USFL as a result of the recapture by USFL on December 31, 2004 of all of
the term life policies in force that had previously been assumed by MLOA under
the MODCO agreement.
14
Amortization of DAC and VOBA decreased $7.7 million to $9.2 million for the
first three months of 2005 due principally to the impact of new basis accounting
in the successor period. Amortization of VOBA resulting from the new purchase
accounting basis in the successor period was $7.1 million.
DAC capitalization of $26.1 million for the first three months of 2005 decreased
$17.8 million from $43.9 million in the first three months of 2004 due to a
decrease in commissions and deferrable operating expenses in the successor
period.
Rent expense decreased $2.1 million, reflecting the cost reductions associated
with AXA Financial's integration of the MONY Companies.
Other operating costs and expenses totaling $14.5 million for the first three
months of 2005 decreased by $1.2 million from $15.7 million for the comparative
2004 period, primarily due to cost reductions associated with AXA Financial's
integration of the MONY Companies.
Premiums and Deposits. Total premiums and deposits for insurance and annuity
products, excluding reinsurance assumed under the MODCO treaty with USFL, for
the first three months of 2005 decreased from comparative prior year levels by
$241.7 million to $132.7 million. The decrease was principally attributable to a
reduction in new sales of certain life insurance and annuity products following
the acquisition of MONY by the Holding Company as certain products previously
offered by MLOA have been replaced by AXA Financial's products and a decrease in
COLI and BOLI sales. Sales of annuities in the first three months of 2005
totaled $43.5 million, a 60.0% decrease from the first three months of 2004, as
a result of the decrease in MLOA's product sales.
Surrenders and Withdrawals. When totals for the first three months of 2005 are
compared to the first three months of 2004, surrenders and withdrawals increased
from $138.7 million to $144.2 million with an increase of $14.6 million reported
for individual annuities offset by respective decreases of $8.9 million and $0.2
million reported for variable and interest-sensitive life products and
traditional life insurance products. The annualized annuities surrender rate
increased to 12.8% in the 2005 period from 12.2% in the 2004 period, while the
individual life surrender rates showed a decrease from 6.2% in the 2004 period
to 4.0% in the 2005 period. The decrease in surrenders on life insurance
products is primarily attributable to large COLI surrenders in first quarter
2004. The trends in surrender and withdrawal rates described above continue to
fall within the range of expected experience.
FORWARD-LOOKING STATEMENTS AND RISK CONSIDERATIONS
MLOA's management has made in this report, and from time to time may make in its
public filings and press releases as well as in oral presentations and
discussions, forward-looking statements concerning operations, economic
performance and financial position. Forward-looking statements include, among
other things, discussions concerning MLOA's potential exposure to market risks,
as well as statements expressing management's expectations, beliefs, estimates,
forecasts, projections and assumptions, as indicated by words such as
"believes," "estimates," "intends," "anticipates," "expects," "projects,"
"should," "probably," "risk," "target," "goals," "objectives," or similar
expressions. MLOA claims the protection afforded by the safe harbor for
forward-looking statements contained in Section 21E of the Exchange Act, and
assumes no duty to update any forward-looking statement. Forward-looking
statements are based on management's expectations and beliefs concerning future
developments and their potential effects, and are subject to risks and
uncertainties. Actual results could differ materially from those anticipated by
forward-looking statements due to a number of important factors including those
discussed elsewhere in this report and in MLOA's other public filings, press
releases, oral presentations and discussions. The following discussion
highlights some of the more important risk and other factors that could cause
such differences and/or, if realized, could have a material adverse effect on
MLOA's financial position and/or results of operations.
Market Risk. MLOA's businesses are subject to market risks arising from its
insurance asset/liability management activities. The primary market risk
exposures result from interest rate fluctuations, equity price movements and
changes in credit quality. The nature of each of these risks is discussed under
the caption "Quantitative and Qualitative Disclosures About Market Risk" and in
Note 13 of Notes to Financial Statements, both contained in the 2004 Form 10-K.
Increased volatility of equity markets can impact MLOA's profitability. In
addition to impacts on equity securities held in MLOA's General Account,
significant changes in equity markets impact asset-based policy fees charged on
variable life and annuity products. Moreover, for variable life and annuity
products with GMDB/GMIB and other guaranteed features, sustained periods with
declines in the value of underlying Separate Account investments would increase
MLOA's net exposure to guaranteed benefits under those contracts (increasing
claims and reserves, net of any reinsurance) at a time when fee income for these
benefits is also reduced from prior period levels.
Equity market volatility also may impact DAC and VOBA amortization on variable
and universal life insurance contracts and variable annuities. To the extent
that actual market trends, and reasonable expectations as to future performance
drawn from those trends, lead to reductions in the investment return and/or
other related estimates underlying the DAC and VOBA amortization rates, DAC and
VOBA amortization could be accelerated. Volatile equity markets can also impact
the level of contractholder surrender activity, which, in turn, can impact
future profitability.
15
Interest rate fluctuations, equity price movements and changes in credit quality
may also affect invested assets held in the qualified pension plan which could
impact future pension plan costs charged to MLOA under its service agreement
with AXA Equitable pursuant to which personnel services, employee benefits,
facilities, supplies and equipment are provided to MLOA to conduct its business.
The effects of significant equity market fluctuations on MLOA's operating
results can be complex and subject to a variety of estimates and assumptions,
such as assumed rates of long-term equity market performance, making it
difficult to reliably predict effects on operating earnings over a broad range
of equity market performance alternatives. Further, these effects may not always
be proportional for market increases and market decreases.
Margins on interest-sensitive annuities and universal life insurance can be
affected by interest rate fluctuations. In a declining interest rate
environment, credited rates can generally be adjusted more quickly than the
related invested asset portfolio is affected by declining reinvestment rates,
tending to result in higher net interest margins on interest-sensitive products
in the short term. However, under scenarios in which interest rates fall and
remain at significantly lower levels, minimum guarantees on interest-sensitive
annuities and universal life insurance (generally 3.0% to 6.0%) could cause the
spread between the yield on the portfolio and the interest rate credited to
policyholders to deteriorate and in some cases, potentially, to become negative.
For both interest-sensitive annuities and universal life insurance, a rapid and
sustained rise in interest rates poses risks of deteriorating spreads and high
surrenders. In such an environment, there is pressure to increase credited rates
on interest-sensitive products to match competitors' new money rates. However,
such changes in credited rates generally occur more quickly than the earned
rates on the related invested asset portfolios reflect changes in market yields.
The greater and faster the rise in interest rates, the more the earned rates
will tend to lag behind market rates.
Other Risks. MLOA's future sales of life insurance and annuity products are
dependent on numerous factors including: implementation of AXA Financial's
integration strategy for MLOA, including the contemplated discontinuation of new
sales of certain life insurance and annuity products offered by MLOA; the
intensity of competition from other insurance companies, banks and other
financial institutions; conditions in the securities markets; the strength and
professionalism of distribution channels; the continued development of existing
and additional channels; the financial and claims-paying ratings of MLOA; its
reputation and visibility in the market place; its ability to develop,
distribute and administer competitive products and services in a timely,
cost-effective manner; its ability to obtain reinsurance for certain products,
the offering of which products depends upon the ability to reinsure all or a
substantial portion of the risks; its investment management performance; and
unanticipated changes in industry trends.
In addition, the nature and extent of competition and the markets for products
sold by MLOA may be materially affected by changes in laws and regulations,
including changes relating to savings, retirement funding and taxation.
Management cannot predict what proposals may be made, what legislation, if any,
may be introduced or enacted or what the effect of any such legislation might
be. See "Business - Regulation" contained in the 2004 Form 10-K.
The profitability of MLOA depends on a number of factors including: levels of
gross operating expenses and the amount which can be deferred as DAC and
software capitalization; successful implementation of expense-reduction
initiatives, including those anticipated from the integration of the businesses
of AXA Financial and MLOA; secular trends; increased costs and impact of
compliance, regulatory examinations and oversight; the ability to reach sales
targets for key products including the continuing market receptivity of its
variable annuity products; MLOA's mortality, morbidity, persistency and claims
experience; margins between investment results from MLOA's General Account
Investment Assets and interest credited on individual insurance and annuity
products, which are subject to contractual minimum guarantees; the level of
claims and reserves on contracts with GMDB/GMIB and other guaranteed features,
the impact of related reinsurance and the effectiveness of any program
management implements to hedge certain risks associated with such features; the
account balances against which policy fees are assessed on universal and
variable life insurance and variable annuity products; the pattern of DAC and
VOBA amortization which is based on models involving numerous estimates and
subjective judgments including those regarding investment, mortality and expense
margins, expected market rates of return, lapse rates and anticipated surrender
charges; the adequacy of reserves and the extent to which subsequent experience
differs from management's estimates and assumptions, including future
reinvestment rates, used in determining those reserves; and the effects of any
future terrorist attacks or the war on terrorism. With regard to terrorism
generally, in August 2004, the Federal government announced a heightened threat
level for financial institutions.
Recoverability of DAC and VOBA is dependent on future contract cash flows
(including premiums and deposits, contract charges, benefits, surrenders,
withdrawals, and expenses), which can be affected by equity market and interest
rate trends as well as changes in contract persistency levels. The performance
of MLOA's General Account Investment Assets depends, among other things, on
levels of interest rates and the markets for equity securities and real estate,
the need for asset valuation allowances and writedowns, and the performance of
equity investments that have created, and in the future may create, significant
volatility in investment income.
16
Disclosure and Internal Control System. There are inherent limitations in the
effectiveness of any system of disclosure and internal controls, including the
possibilities of faulty judgments in decision-making, simple error or mistake,
fraud, the circumvention of controls by individual acts or the collusion of two
or more people, or management override of controls. Accordingly, even an
effective disclosure and internal control system can provide only reasonable
assurance with respect to disclosures and financial statement preparation.
Furthermore, because of changes in conditions, the effectiveness of a disclosure
and internal control system may vary over time.
Technology and Information Systems. Information systems are central to, among
other things, designing and pricing products, marketing and selling products and
services, processing policyholder and investor transactions, client
recordkeeping, communicating with retail sales associates, employees and
clients, and recording information for accounting and management purposes in a
secure and timely manner. These systems are maintained to provide customer
privacy and are tested to ensure the viability of business resumption plans. Any
significant difficulty associated with the operation of such systems, or any
material delay or inability to develop needed system capabilities, could have a
material adverse effect on MLOA's results of operations and, ultimately, its
ability to achieve its strategic goals.
Legal Environment. A number of lawsuits have been filed against life and health
insurers and affiliated distribution companies involving insurers' sales
practices, alleged agent misconduct, failure to properly supervise agents and
other matters. Some of the lawsuits have resulted in the award of substantial
judgments against other insurers, including material amounts of punitive
damages, or in substantial settlements. In some states, juries have substantial
discretion in awarding punitive damages. MLOA, like other life insurers, is
involved in such litigation and MLOA's results of operations and financial
position could be affected by defense and settlement costs and any unexpected
material adverse outcome in such litigations as well as in other material
litigations pending against MLOA. The frequency of large damage awards,
including large punitive damage awards that bear little or no relation to actual
economic damages incurred by plaintiffs in some jurisdictions, continues to
create the potential for an unpredictable judgment in any given matter. In
addition, examinations by Federal and state regulators and other regulatory and
related agencies, including, among others, state insurance departments and state
securities agencies, could result in adverse publicity, sanctions and fines. In
the last year, MLOA provided or is in the process of providing, information and
documents to the SEC, the NASD and state attorneys general and insurance and
securities regulators on a wide range of issues, including supervisory issues,
valuation, suitability, replacements and exchanges of variable life insurance
and annuities, finite risk reinsurance and related matters. At this time,
management cannot predict what other actions the SEC, NASD and/or other
regulators may take or what the impact of such actions might be. Fines and other
sanction could result from pending regulatory matters. For further information,
see "Business - Regulation" and "Legal Proceedings" contained in the 2004 Form
10-K.
Future Accounting Pronouncements. In the future, new accounting pronouncements,
as well as new interpretations of accounting pronouncements, may have material
effects on MLOA's statements of operations and shareholder's equity. See Note 3
of Notes to Financial Statements contained in the 2004 Form 10-K for
pronouncements issued but not effective at December 31, 2004.
Regulation. The businesses conducted by MLOA are subject to extensive regulation
and supervision by state insurance departments and Federal and state agencies
regulating, among other things, insurance and annuities, securities
transactions, investment companies, investment advisors and anti-money
laundering compliance programs. Changes in the regulatory environment could have
a material impact on operations and results. The activities of MLOA are subject
to the supervision of the insurance regulators of each of the 49 states (not
including New York), the District of Columbia and Puerto Rico. See "Business -
Regulation" contained in the 2004 Form 10-K.
In addition to the foregoing, federal and state authorities are continuing to
investigate various practices of insurers, principally in the property and
casualty and related businesses (including general insurance lines), as well as
the purchase or sale of nontraditional insurance products including finite risk
reinsurance. While AXA Financial's insurance company subsidiaries do not have
any material non-life insurance operations, other subsidiaries and affiliates of
AXA Financial's parent, AXA, are involved in these areas and have received
various inquiries and requests for information from federal and state
authorities, to which they are in the process of responding. The concerned
subsidiaries and affiliates of AXA intend to fully cooperate with these federal
and state authorities. While, at this time, AXA Financial is unable to predict
what actions, if any, regulators may take against any of these affiliated
entities, any negative publicity associated with the AXA brand name generated by
these inquiries (or by any actions or sanctions that may arise in connection
with them) may result in general reputational damage to MLOA, which could
adversely affect MLOA's results of operations.
17
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Omitted pursuant to General Instruction H of Form 10-Q.
ITEM 4: CONTROLS AND PROCEDURES
An evaluation was performed under the supervision and with the
participation of management, including the Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation
of MLOA's disclosure controls and procedures as of March 31, 2005. Based
on that evaluation, management, including the Chief Executive Officer and
Chief Financial Officer, concluded that MLOA's disclosure controls and
procedures are effective. Except for the enhancements to internal controls
described below, there has been no change in MLOA's internal control over
financial reporting that occurred during the period covered by this report
that has materially affected, or is reasonably likely to materially
affect, MLOA's internal control over financial reporting.
In connection with the continuing integration process associated with the
Holding Company's recent acquisition of MONY, management has enhanced, and
continues to enhance, the overall internal control environment of MLOA by
implementing new procedures and controls, including increasing and
re-allocating staffing in the accounting department, instituting
additional account reconciliations and upgrading the investment accounting
computer systems.
18
PART II OTHER INFORMATION
Item 1. Legal Proceedings
See Note 7 of Notes to Financial Statements contained herein. Except as
disclosed in Note 7 of Notes to Financial Statements contained herein,
there have been no new material legal proceedings and no new material
developments in legal proceedings previously reported in the 2004 Form
10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits
Number Description
------ -------------------------------------------------------
31.1 Section 302 Certification made by the Registrant's
Chief Executive Officer
31.2 Section 302 Certification made by the Registrant's
Chief Financial Officer
32.1 Section 906 Certification made by the Registrant's
Chief Executive Officer
32.2 Section 906 Certification made by the Registrant's
Chief Financial Officer
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, MONY
Life Insurance Company of America has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Date: May 16, 2005 MONY LIFE INSURANCE COMPANY OF AMERICA
By: /s/ STANLEY B. TULIN
---------------------------------------------
Name: Stanley B. Tulin
Title: Vice Chairman of the Board and
Chief Financial Officer
Date: May 16, 2005 By: /s/ ALVIN H. FENICHEL
---------------------------------------------
Name: Alvin H. Fenichel
Title: Senior Vice President and Controller
20