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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
FORM 10-K
____
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission File Number 33-85988
C. M. LIFE INSURANCE COMPANY
Incorporated under the laws IRS Employer
of the State of Connecticut Identification No. 06-104383
140 Garden Street, Hartford, Connecticut 06154
Telephone Number: Area Code 860-987-6500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
_____________________
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
(1) Yes X No ___
-----
(2) Yes X No ___
-----
Registrant has 12,500 shares of common stock outstanding on March 27, 1997, all
of which are owned by Massachusetts Mutual Life Insurance Company.
PART I
ITEM 1. BUSINESS
- -----------------
C.M. Life Insurance Company (C.M. Life), 140 Garden Street, Hartford,
Connecticut, 06154, is a stock life insurance company. It was chartered by a
Special Act of the Connecticut General Assembly on April 25, 1980. It is
principally engaged in the sale of life insurance and annuities, primarily
flexible premium universal life insurance and variable annuity products, and is
licensed to sell life insurance and annuities in Puerto Rico, the District of
Columbia and all 50 states except New York. Effective March 1, 1996, C.M. Life
became a wholly owned stock life insurance subsidiary of Massachusetts Mutual
Life Insurance Company (MassMutual) when the operations of C.M. Life's former
parent, Connecticut Mutual Life Insurance Company were merged with and into
MassMutual.
MassMutual is a mutual life insurance company organized as a Massachusetts
corporation which was originally chartered in 1851. As a mutual life insurance
company, MassMutual has no shareholders. MassMutual's primary business is
ordinary life insurance. MassMutual also provides, directly or through its
subsidiaries, a wide range of annuity and disability products, and pension and
pension-related products and services, as well as investment services to
individuals, and corporations and other institutions in all 50 states of the
United States, and the District of Columbia. MassMutual is also licensed to
transact business in Puerto Rico, and six provinces of Canada, but has no export
sales.
MassMutual's principal lines of business are (i) Individual Line of Business,
which provides life insurance including variable and universal life insurance,
annuities and disability insurance to individuals and small businesses; (ii)
Pension Management, which provides group pension investment products and
administrative services, primarily to sponsors of tax qualified retirement
plans; (iii) MassMutual Investment Management Group, which provides advisory
services for MassMutual's general investment account and separate investment
accounts, as well as for various closed-end and open-end investment companies
and external institutional clients.
The direction and operations of MassMutual's three lines of business are guided
by a statement of corporate vision. Under this vision, MassMutual's operations
are managed so as to maintain a financially strong and efficient enterprise for
the benefit of policyholders. MassMutual's long-term objectives are to maintain
corporate financial strength, enhance policyholder value, and generate and
sustain growth.
Products
--------
C.M. Life sells universal life and annuity products. The Regular Series
Universal Life product is an interest-sensitive, flexible-premium universal
life policy. An additional universal life product is an Employee Series
Universal Life product sold as a flexible-premium universal life policy for
use in employer-sponsored sales. These products are sold in all states
except New York. Also available for sale is Universal Life Enterprise Plus
sold as a flexible-premium, non-participating interest-sensitive universal
life policy. In 1996, Enterprise Survivorship Universal Life was
introduced.
The annuity products include CM Windows, Panorama Plus Variable Annuity
(Panorama Plus), Panorama Premier Variable Annuity (Panorama Premier), and
OFFITBANK Variable Annuity (OFFITBANK VA).
CM Windows is a single-premium deferred annuity paying a fixed interest
rate guaranteed for the life of the contract. This product is not
registered with the Securities and Exchange Commission. CM Windows may be
sold by any licensed agent or broker who is contracted with C.M. Life. As
of December 31, 1996, CM Windows was available for sale in 47 states.
Panorama Plus is distributed by MML Distributors, LLC (MML Distributors),
formerly Connecticut Mutual Financial Services, LLC, and beginning March 1,
1996, by MML Investors Services, Inc. (MMLISI) and licensed representatives
of broker/dealers who maintain a certain selling group agreement with MML
Distributors, and allows for investment in Panorama Plus Separate Account
or C.M. Life's General Account. The Separate Account invests in shares of
Panorama Series Fund, Inc. and in shares of Oppenheimer Variable Account
Funds. The General Account
2
provides for a guaranteed interest rate and the protection of principal.
Interest rates are declared quarterly and are guaranteed never to fall
below 3 percent per year. An investment in Panorama Plus may be divided
among the investment portfolios offered by the Separate Account, the
General Account, or any combination thereof. This product is sold by
licensed representatives of broker-dealers who maintain a current selling
group agreement with MML Distributors. As of December 31, 1996, Panorama
Plus was available in 48 states and Puerto Rico.
Panorama Premier is distributed by MML Distributors, and beginning March 1,
1996 by MMLISI, and allows for investment in the Panorama Premier Division
of C.M. Multi-Account A, a separate account of C.M. Life, or C.M. Life's
General Account. The Panorama Premier Division of the Separate Account
invests in shares of Panorama Series Fund, Inc. and shares of Oppenheimer
Variable Account Funds. The General Account provides for a guaranteed
interest rate and the protection of principal. Interest rates are declared
quarterly and are guaranteed never to fall below 3 percent per year. An
investment in Panorama Premier may be divided among the investment
portfolios of the Panorama Premier Division of the Separate Account, the
General Account, or any combination thereof. This product is sold by
licensed representatives of broker-dealers who maintain a current selling
group agreement with MML Distributors. As of December 31, 1996, Panorama
Premier was available for sale in 46 states and Puerto Rico.
OFFITBANK VA is distributed by MML Distributors and allows for investment
in the OFFITBANK Division of C.M. Multi-Account A , a separate account of
C.M. Life. The OFFITBANK Division of the Separate Account invests in shares
of the OFFITBANK Variable Insurance Fund, Inc. and shares of Oppenheimer
Variable Account Funds. An investment in OFFITBANK VA may be divided among
the investment portfolios of the OFFITBANK Division of the Separate
Account. This product is sold by licensed representatives of broker-dealers
who maintain a current selling group agreement with MML Distributors. As of
December 31, 1996, OFFITBANK VA was available for sale in 45 states.
Reinsurance
-----------
C.M. Life cedes a portion of its life insurance business to MassMutual and
other insurers in the normal course of business. C.M. Life's retention
limit per individual insured is $4,000 thousand; the portion of the risk
exceeding the retention limit is reinsured with other insurers. C.M. Life
is contingently liable with respect to ceded reinsurance in the event any
reinsurer is unable to fulfill its contractual obligations.
C.M. Life has a modified coinsurance quota-share reinsurance agreement with
MassMutual whereby C.M. Life cedes 50% of the premiums on certain universal
life policies issued in 1985 and 75% of the premiums on policies with issue
dates on or after January 1, 1986. In return MassMutual pays C.M. Life a
stipulated expense allowance, death and surrender benefits, and a modified
coinsurance adjustment. Reserves for payment of future benefits for the
ceded policies are retained by C.M. Life.
C.M. Life also has a stop-loss agreement with MassMutual, with maximum
coverage at $25,000 thousand, under which C.M. Life cedes claims which, in
aggregate, exceed $28,080 thousand in 1996, $24,245 thousand in 1995, and
$18,348 thousand in 1994. For each of the years, the limit was not
exceeded. C.M. Life paid approximately $400 thousand, $602 thousand, and
$435 thousand in premiums under the agreement in 1996, 1995 and 1994,
respectively.
Reserves
--------
In accordance with the life insurance laws and regulations under which C.M.
Life operates, it is obligated to carry on its books, as liabilities,
actuarially determined reserves to meet its obligations on outstanding
contracts. Reserves are based on mortality tables in general use in the
United States and are computed to equal amounts that, with additions from
premiums to be received, and with interest on such reserves computed
annually at certain assumed rates, will be sufficient to meet C.M. Life's
policy obligations at their maturities or in the event of an insured's
death. In the accompanying financial statements, these reserves are
determined in accordance with statutory regulations.
Competition
-----------
The life insurance industry is highly competitive. There are more than
1,700 life insurance companies in the United States, many of which offer
insurance products similar to those marketed by C.M. Life. In addition to
competition within the industry, insurers are increasingly facing
competition from non-traditional sources in the financial services
3
business, including mutual funds, banks, securities brokerage houses and
other financial services entities, many of which provide alternative
investment and savings vehicles for consumers. Legislative initiatives
proposed at the federal level would, if enacted, reorder the financial
services industry, thereby changing the environment in which C.M. Life
competes.
C.M. Life's management believes its financial strength, agent skill and
historical product performance provide competitive advantages for the
products it offers in these markets. In early 1996, after the merger of
MassMutual and Connecticut Mutual Life Insurance Company, C.M. Life
received the following ratings from the various rating agencies, A.M. Best
Company, Inc. (A++), Standard and Poor's Corporation (AAA) and Duff &
Phelps Credit Rating Company (AAA).
MassMutual, C.M. Life's parent, has received the highest ratings from A.M.
Best Company, Inc. (A++), Standard & Poor's Corporation (AAA), and Duff &
Phelps Credit Rating Company (AAA), as well as a rating of Aa1 by Moody's
Investors Service, Inc. (the highest in its "excellent" category). In late
1995 and early 1996, all four of these agencies conducted thorough reviews
of MassMutual's ratings in light of the Connecticut Mutual Life Insurance
Company merger. In all four cases, the 1995 ratings for MassMutual were
reaffirmed.
Transactions with MassMutual
----------------------------
MassMutual and C.M. Life have an agreement whereby MassMutual for a fee
will furnish C.M. Life, as required, operating facilities, human resources,
computer software development and managerial services. Investment and
administrative services are provided to C.M. Life pursuant to a management
services agreement with MassMutual. Fees incurred under the terms of the
agreement were $45,914 thousand in 1996. Similar arrangements were in place
with Connecticut Mutual Life Insurance Company, C.M. Life's former parent,
prior to its merger with MassMutual. Fees incurred in 1995 and 1994 under
the arrangement with Connecticut Mutual Life Insurance Company were $34,008
thousand and $16,412 thousand, respectively.
In addition, as previously discussed, C.M. Life has a modified coinsurance
quota-share reinsurance agreement on certain universal life policies and a
stop-loss agreement with MassMutual.
Regulation
----------
C.M. Life is organized as a Connecticut stock life insurance company, and
is subject to Connecticut laws governing insurance companies. C.M. Life is
regulated and supervised by the State of Connecticut Insurance
Commissioner. By March 1 of every year, C.M. Life must prepare and file an
annual statement, in a form prescribed by the State of Connecticut
Insurance Department, as of December 31 of the preceding year. The
Commissioner and his or her agents have the right at all times to review or
examine C.M. Life's books and assets. A full examination of C.M. Life's
operations is conducted periodically according to the rules and practices
of the National Association of Insurance Commissioners (NAIC). C.M. Life is
also subject to the insurance laws of the states in which it is authorized
to do business, to various federal and state securities laws and
regulations, and to regulatory agencies which administer those laws and
regulations.
C.M. Life is licensed to transact its insurance business in, and is subject
to regulation and supervision by the Commonwealth of Puerto Rico, the
District of Columbia and all 50 states of the United States, except New
York. The extent of such regulation varies, but most jurisdictions have
laws and regulations requiring the licensing of insurers and their agents
and setting standards of solvency and business conduct to be maintained by
licensed insurance companies, and may regulate withdrawal from certain
markets. In addition, statutes and regulations usually require the approval
of policy forms and, for certain lines of insurance, the approval of rates.
Such statutes and regulations also prescribe the permitted types and
concentration of investments. C.M. Life is also subject to regulation of
its accounting methodologies and is required to file detailed annual
financial statements with supervisory agencies in each of the jurisdictions
in which it does business. Each of its operations and accounts is also
subject to examination by such agencies at regular intervals.
C.M. Life is subject to guaranty fund assessments in all states in which it
does business. The guaranty associations are organized to pay contractual
obligations under insurance policies issued by impaired or insolvent
insurers. C.M. Life believes such assessments in excess of amounts accrued
will not materially affect its financial position, results of
4
operations or liquidity. In 1996, C.M. Life elected not to admit $1,621
thousand of guaranty fund premium tax offset receivable relating to prior
assessments.
C.M. Life is also subject to risk-based capital (RBC) requirements
promulgated by the NAIC. The RBC Model Act will give state insurance
commissioners explicit regulatory authority to require various actions by,
or take various actions against, insurance companies whose total adjusted
capital does not meet the RBC standards. C.M. Life's total adjusted capital
was well in excess of all RBC standards at December 31, 1996 and 1995.
In addition to regulation of its insurance business, C.M. Life is subject
to various types of federal and state laws and regulations affecting the
conduct, taxation and other aspects of its businesses. Certain policies and
contracts offered by C.M. Life are subject to various levels of regulation
under the federal securities laws administered by the Securities and
Exchange Commission.
C.M. Life's management believes it is in compliance, in all material
respects, with all applicable laws and regulations.
ITEM 2. PROPERTIES
- -------------------
C.M. Life's principal office, which is owned by MassMutual, is located at 140
Garden Street, Hartford, Connecticut.
ITEM 3. LEGAL PROCEEDINGS
- --------------------------
C.M. Life is a defendant in actions arising out of its insurance and investments
operations and is from time to time involved as a party in various governmental
and administrative proceedings. C.M. Life does not believe that any liability
which may result from these actions is likely to have a material adverse effect
on the financial position of C.M. Life.
C.M. Life is not involved in any litigation that is of material importance in
relation to its financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
There were no matters submitted to a vote of security holders during 1996, other
than routine corporate governance matters.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- ------------------------------------------------------------------------------
C.M. Life is a wholly-owned subsidiary of Massachusetts Mutual Life Insurance
Company, and as such, there is no market for its common stock.
ITEM 6. SELECTED FINANCIAL DATA
- -------------------------------
The following summary financial information has been derived from the audited
statutory financial statements. The results for past accounting periods are not
necessarily indicative of the results to be expected for any future period.
The information presented below should be read in conjunction with the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", the audited statutory financial statements and other information
included elsewhere in this filing.
The accompanying statutory financial statements, from which the summary
financial information has been derived, have been prepared in conformity with
the practices of the NAIC and the accounting practices prescribed or permitted
by the Insurance Department of the State of Connecticut. These statutory
financial statements are not in conformity with generally accepted accounting
principles (GAAP). See notes to statutory financial statements.
5
ITEM 6. SELECTED FINANCIAL DATA
C.M. LIFE INSURANCE COMPANY
SELECTED STATUTORY FINANCIAL DATA
FOR THE YEARS ENDED DECEMBER 31,
($ IN THOUSANDS)
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Income:
Premium income $ 314,372 $ 260,847 $ 251,176 $180,372 $ 82,122
Net investment and other income 76,456 84,390 83,354 87,399 92,482
---------- ---------- ---------- -------- --------
390,828 345,237 334,530 267,771 174,604
---------- ---------- ---------- -------- --------
Benefits and expenses:
Policy benefits and payments 98,966 58,913 44,033 31,657 35,059
Additions to policyholder reserves, funds
and separate accounts 210,324 211,403 230,338 175,934 83,269
Operating expenses 45,448 32,146 14,786 17,525 22,831
Commissions 24,987 14,092 7,365 7,776 8,846
State taxes, licenses and fees 3,247 5,017 4,199 3,003 3,633
---------- ---------- ---------- -------- --------
382,972 321,571 300,721 235,895 153,638
---------- ---------- ---------- -------- --------
Net gain from operations before federal
income taxes 7,856 23,666 33,809 31,876 20,966
Federal income taxes 6,286 9,376 14,249 11,016 9,187
---------- ---------- ---------- -------- --------
Net gain from operations 1,570 14,290 19,560 20,860 11,779
Net realized capital gain (loss) 635 (540) (1,772) 234 (248)
---------- ---------- ---------- -------- --------
Net income $ 2,205 $ 13,750 $ 17,788 $ 21,094 $ 11,531
========== ========== ========== ======== ========
Assets:
General account $1,086,829 $1,028,354 $ 912,583 $831,469 $746,888
Separate account 779,742 531,432 309,672 145,661 22,591
---------- ---------- ---------- -------- --------
Total assets $1,866,571 $1,559,786 $1,222,255 $977,130 $769,479
========== ========== ========== ======== ========
Liabilities:
Policyholders' reserves and funds $ 907,492 $ 867,672 $ 783,768 $715,018 $647,831
Investment reserves 21,804 19,879 6,640 8,085 5,221
Separate account reserves and liabilities 779,742 531,432 309,672 145,661 22,591
Other liabilities 47,789 27,604 18,338 20,468 26,414
---------- ---------- ---------- -------- --------
Total liabilities 1,756,827 1,446,587 1,118,418 889,232 702,057
---------- ---------- ---------- -------- --------
Stockholders' equity:
Common stock 2,500 2,500 2,500 2,500 2,500
Paid in capital and contributed surplus 43,759 43,759 43,759 43,759 43,759
Unassigned surplus 63,485 66,940 57,578 41,639 21,163
---------- ---------- ---------- -------- --------
Total stockholders' equity 109,744 113,199 103,837 87,898 67,422
---------- ---------- ---------- -------- --------
Total liabilities and stockholders' equity $1,866,571 $1,559,786 $1,222,255 $977,130 $769,479
========== ========== ========== ======== ========
Total adjusted capital data (1)
Total stockholders' equity $ 109,744 $ 113,199 $ 103,837 $ 87,898 $ 67,422
Asset valuation reserve 18,475 15,869 6,640 6,534 5,221
---------- ---------- ---------- -------- --------
Total adjusted capital $ 128,219 $ 129,068 $ 110,477 $ 94,432 $ 72,643
========== ========== ========== ======== ========
(1) Defined by the NAIC as surplus plus AVR.
Certain prior year amounts have been reclassified to conform with current
year presentation. The preceding selected financial data of C.M. Life
should be read in conjunction with the statutory financial statements and
notes thereto and the related management's discussion and analysis.
6
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS
- -------------
Results of Operations
---------------------
For the Year Ended December 31, 1996
------------------------------------
Compared to the Year Ended December 31, 1995
--------------------------------------------
For the year ended December 31, 1996, C.M. Life had net income of $2,205
thousand, as compared with net income of $13,750 thousand in 1995. The
decrease in net income of $11,545 thousand is primarily attributable to
increased sales of Universal Life Enterprise Plus and variable annuity
products, which in the year of issuance, generate commissions and other
acquisition costs which exceed the revenues received. These products are
priced to be profitable over the life of the contract.
Premium income, net of reinsurance ceded, increased $53,525 thousand to
$314,372 thousand in 1996 from $260,847 thousand in 1995. The 20.5% growth
in premiums is attributable to increased sales of the Universal Life
Enterprise Plus product, which increased by 41.0%, and variable annuity
products which increased by 26.9%. Sales of single premium deferred annuity
products decreased 90.5%, due to less demand in the market place for fixed
rate annuity products.
The following table sets forth premium, sales, and other information for
C.M. Life's products.
Years Ended December 31,
1996 1995
---- ----
(In Thousands)
Premium income
Universal and other life $ 87,658 $ 64,652
Annuities 226,714 196,195
----------- -----------
Total $ 314,372 $ 260,847
=========== ===========
Life insurance sales - face amount
Universal and other life $ 7,113,429 $ 5,024,440
Life insurance in force
Universal and other life $24,357,428 $19,132,954
Number of policies in force
Universal and other life 111,138 98,033
Net investment and other income decreased $7,934 thousand to $76,456
thousand in 1996 from $84,390 thousand in 1995. Other income, which is
primarily comprised of reserve adjustment and commission and expense
allowances on reinsurance ceded, decreased by $14,316 thousand, due to
little growth in the reinsured block of business. Net investment income
increased by $6,357 thousand primarily attributable to the 4.3% growth in
the general investment account assets. The gross yield for the portfolio
was 7.9% for 1996 compared to 7.8% for 1995. The components of net
investment income are set forth below.
Years Ended December 31,
1996 1995
----- ----
(In Thousands)
Gross Investment Income
Bonds $55,439 $54,683
Common and preferred stock 2,803 2,178
Mortgage loans 3,837 2,709
Real estate 0 456
Policy loans 10,035 9,905
Cash and short-term investments 3,969 399
------- -------
Total gross investment income 76,083 70,330
Less: investment expenses 850 1,454
------- -------
Net investment income $75,233 $68,876
======= =======
7
Policy benefits and payments increased $40,053 thousand to $98,966 thousand
in 1996 from $58,913 thousand in 1995. Surrender benefits increased by
$30,054 thousand, essentially due to increased variable and fixed annuity
withdrawals and contract surrenders. The life insurance lapse rate, which
is based upon amount of insurance in force, remained at 7.1% for both 1996
and 1995. Death claims, net of reinsurance, grew to $25,168 thousand in
1996 from $16,268 thousand in 1995, which is due to an increase in the life
insurance in force and worse than expected mortality. Although mortality
experience declined during 1996, C.M. Life does not believe this is an
indication of future trends.
Addition to policyholder reserves, funds and separate accounts decreased
$1,079 thousand to $210,324 thousand in 1996 from $211,403 thousand in
1995. Reserve decreases due to the release of reserves upon death
withdrawal or surrender of contracts was largely offset by increases in
reserves due to strong sales of life and annuity products.
Operating expenses and commissions increased $24,197 thousand to $70,435
thousand in 1996 from $46,238 thousand in 1995. The increase is
attributable to increased expenses associated with the production of new
business and the modification of C.M. Life's variable annuity underwriting
agreements with G.R. Phelps and Co. ,Inc. (G.R. Phelps) and MML
Distributors, both affiliated companies. Effective March 1, 1996, C.M. Life
modified its underwriting agreements such that it would pay all future
commissions relating to variable annuity contracts and would also retain
rights to all future contract fees and charges related to these contracts.
Prior to the contract modification, G.R. Phelps and MML Distributors paid
variable annuity commissions in exchange for the rights to future contract
fees and charges related to these contracts. C.M. Life expects the future
revenue on these contracts to exceed acquisition costs.
Federal income tax expense decreased $3,090 thousand to $6,286 thousand
from $9,376 thousand as a result of decreased taxable income. Taxable
income decreased $9,190 thousand to $18,536 thousand in 1996 from $27,725
thousand in 1995. The change in taxable income is primarily attributable to
the $15,810 thousand decrease in net gain from operations offset by book
tax differences of $6,620 thousand. These book tax differences include the
timing of the deductibility of acquisition costs and other items.
Results of Operations
---------------------
For the Year Ended December 31, 1995
------------------------------------
Compared to the Year Ended December 31, 1994
--------------------------------------------
For the year ended December 31, 1995, C.M. Life had net income of $13,750
thousand, as compared with net income of $17,788 thousand in 1994. The
decrease in net income of $4,038 thousand is attributable to increased
policy benefits and payments and increased acquisition and insurance
expenses which exceeded the increase in net premiums and net investment
income.
Premium income, net of reinsurance ceded, increased $9,671 thousand to
$260,847 thousand in 1995 from $251,176 thousand in 1994. Premiums for CM
Windows, a single premium deferred annuity product, increased $9,412
thousand or 99.3% to $18,894 thousand in 1995 from $9,482 thousand in 1994.
The increase is attributable to higher interest rates and increased
promotional efforts, which increased demand for single premium deferred
annuity products. Premiums for life insurance products increased $16,928
thousand to $64,652 thousand in 1995 from $47,724 thousand in 1994, due to
higher sales of universal life policies, primarily the Enterprise Plus
product. Variable annuity premiums decreased $16,669 thousand or 8.6%, due
to less demand in the market place for variable products in the first half
of 1995.
8
The following table sets forth premium, sales and other information for
C.M. Life's products.
Years Ended December 31,
1995 1994
---- ----
(In Thousands)
Premium income
Universal and other life $ 64,652 $ 47,724
Annuities 196,195 203,452
----------- -----------
Total $ 260,847 $ 251,176
=========== ===========
Life insurance sales - face amount
Universal and other life $ 5,024,440 $ 2,694,531
Life insurance in force
Universal and other life $19,132,954 $15,800,300
Number of policies in force
Universal and other life 98,033 89,043
Net investment and other income increased by $1,036 thousand. Net
investment income increased by $9,298 thousand to $68,876 thousand in 1995
from $59,887 thousand in 1994. This increase is attributable to an 11.5%
increase in general investment account assets and policy loans and an
increase in the portfolio yield from 7.5% in 1994 to 7.8% in 1995. Other
income, which is primarily comprised of reserve adjustments and commission
and expense allowances on reinsurance ceded , decreased by $7,894 thousand,
due to less growth in the reinsured block of business in 1995 versus 1994.
The components of net investment income are set forth below.
Years Ended December 31,
1995 1994
---- ----
(In Thousands)
Gross Investment Income
Bonds $54,683 $47,704
Common and preferred stock 2,178 161
Mortgage loans 2,709 4,383
Real estate 456 733
Policy loans 9,905 7,925
Cash and short-term investments 399 509
------- -------
Total gross investment income 70,330 61,415
Less: investment expenses 1,454 1,837
------- -------
Net investment income $68,876 $59,578
======= =======
Policy benefits and payments, net of reinsurance ceded, increased by
$14,880 thousand from $44,033 thousand in 1994 to $58,913 thousand in 1995.
Surrender benefits increased by $11,969 thousand, to $40,028 thousand in
1995 from $28,059 thousand in 1994. The increase in surrender benefits is
primarily attributable to variable annuity products. Death claims, net of
reinsurance, increased $5,183 thousand over 1994 due to growth in the in-
force life insurance block of business.
Operating expenses and commissions increased $24,086 thousand or 108.7%
over 1994. This increase is primarily attributable to increased costs
related to the production of new business.
Income tax expense decreased by $4,873 thousand over 1994. This decrease is
attributable to lower taxable income in 1995 versus 1994. Taxable income
was $27,726 thousand and $38,660 thousand in 1995 and 1994 respectively.
C.M. Life's federal income tax expense is based on income which is
currently taxable. The differences between pre-tax book income and taxable
income are primarily due to lower tax basis reserves for future policy
benefits and other book tax differences associated with the timing of the
deductibility of acquisition costs.
9
Net realized capital losses were $540 thousand in 1995 as compared to net
realized capital losses of $1,772 thousand in 1994. This loss is due to net
realized losses of $1,407 thousand, with $867 thousand being transferred to
the Interest Maintenance Reserve (IMR) in 1995 as compared to net realized
losses of $5,163 thousand in 1994, with $3,391 thousand being transferred
to the IMR.
Statement of Financial Position
-------------------------------
Total assets increased by $306,785 thousand or 19.7% to $1,866,571 thousand
at December 31, 1996 from $1,559,786 thousand at year end 1995. Much of
this growth was due to continued growth in C.M. Life's separate investment
accounts, which assets increased by $248,310 thousand.
Total liabilities increased in 1996 by $310,240 thousand or 21.5% to
$1,756,827 thousand from $1,446,587 thousand in 1995. As with assets, most
of this growth occurred in the separate investment accounts. Growth in the
separate investment account's assets and liabilities is attributable to
increased variable annuity sales and deposits and appreciation in the
separate account's underlying investments.
Liquidity and Capital Resources
-------------------------------
Net cash provided by operating activities was $42,388 thousand, $97,916
thousand, and $81,148 thousand for the years ended 1996, 1995 and 1994,
respectively. In 1996, net cash provided by operating activities declined
by $55,528 thousand as compared to 1995, primarily due to increased
surrender benefits and strong sales growth which generates commissions and
acquisition costs in excess of revenues in the first contract year. The
Board of Directors of MassMutual has authorized the contribution of funds
to C.M. Life sufficient to meet the capital requirements of all states in
which C.M. Life is licensed to do business.
C.M. Life has structured its investment portfolio to ensure a strong
liquidity position in order to permit timely payment of policy and contract
benefits without requiring an untimely sale of assets. C.M. Life manages
its liquidity position by matching its exposure to cash demands with
adequate sources of cash and other liquid assets.
C.M. Life's principal sources of liquidity are cash flow and holdings of
cash, near cash and other readily marketable assets. The primary cash flow
sources are investment income and principal repayments on invested assets,
life insurance premiums, annuity considerations and deposits.
C.M. Life's liquid assets include substantial Treasury holdings, short-term
money market investments, stocks and marketable long-term fixed income
securities. Cash and short-term investments totaled $63,688 thousand at
December 31, 1996.
The liquidity position of C.M. Life is proactively managed on an ongoing
basis to meet cash needs while minimizing adverse impacts on investments
returns. A variety of scenarios are analyzed by modeling potential demands
on liquidity, taking into account the provisions of C.M. Life's policies
and contracts in force, C.M. Life's cash flow position and the volume of
cash and readily marketable securities in C.M. Life's portfolio.
C.M. Life also employs sophisticated quantitative asset/liability cash flow
management techniques to optimize and control the investment return and
liquidity for each portfolio, taking into account the distinguishing
liability characteristics of each portfolio.
A primary liquidity concern for C.M. Life is the risk of early
contractholder and policyholder withdrawal. The most affected products are
individual life insurance and individual deferred annuities. Personal life
insurance policies are less susceptible to withdrawal than annuity
contracts because annuities are primarily used as investment vehicles,
while personal life policies are used to fulfill longer term financial
planning needs. C.M. Life closely evaluates and manages its liquidity risk.
10
C.M. Life's exposure to early withdrawal for annuity products as of the
dates indicated can be described as follows:
Withdrawal Characteristics of Annuity Actuarial Reserves and
Deposit Fund Liabilities
December 31,
------------
1996 1995
---- ----
% of % of
Amount Total Amount Total
------ ----- ------ -----
($ In Thousands)
Subject to discretionary withdrawal
with adjustment:
At market value $755,387 87.1% $507,674 83.0%
At book value less
surrender charge 88,398 10.2 92,606 15.1
-------- ----- -------- -----
Subtotal 843,785 97.3 600,280 98.1
Subject to discretionary
withdrawal without
adjustment:
At book value
(minimal or no charge or
adjustment) 22,346 2.5 11,032 1.8
Not subject to discretionary
withdrawal 1,446 0.2 215 .1
-------- ----- -------- -----
Total annuity actuarial
reserves and deposit
fund liabilities (gross) 867,577 100.0% 611,527 100.0%
Less reinsurance 0 0
-------- --------
Total annuity actuarial
reserves and deposit
fund liabilities $867,577 $611,527
======= ========
Based on its ongoing monitoring and analysis of its liquidity sources and
demands, C.M. Life believes that it is in a strong liquidity position.
Capital Resources
-----------------
As of December 31, 1996, C.M. Life's total adjusted capital as defined by
the NAIC was $128,219 thousand. The NAIC has developed the "Risk Based
Capital" (RBC) model to compare the total adjusted capital with a standard
design in order to reflect C.M. Life's risk profile. Although C.M. Life
believes that there is no single appropriate means of measuring risk-based
capital needs, it feels that the NAIC approach to RBC measurement is
reasonable, and will manage its capital position with significant attention
to maintaining adequate total adjusted capital relative to RBC. C.M. Life's
total adjusted capital was well in excess of all RBC standards at December
31, 1996 and 1995. Management believes that C.M. Life enjoys a strong
capital position in light of the risks to which it is subject and that it
is well-positioned to meet policyholder and other obligations.
Segment Information
-------------------
During 1996, 1995 and 1994, C.M. Life's operations consisted of one
business segment which was principally the sale of universal life insurance
and annuity products. C.M. Life is not dependent upon any single customer
and no single customer accounted for more than 10% of revenues in 1996,
1995 and 1994.
Reserves
--------
In accordance with the life insurance laws and regulations under which C.M.
Life operates, it is obligated to carry on its books, as liabilities,
actuarially determined reserves to meet its obligations on outstanding
contracts. Reserves are based on mortality tables in general use in the
United States and are computed to equal amounts that, with additions
11
from premiums to be received, and with interest on such reserves computed
annually at certain assumed rates, will be sufficient to meet C.M. Life's
policy obligations at their maturities or in the event of an insured's
death. In the accompanying financial statements, these reserves are
determined in accordance with statutory regulations.
Inflation
---------
The C.M. Life's operating expenses are affected by inflation. A large
portion of C.M. Life's operating expenses consists of salaries which are
subject to wage increases, at least partially affected by the rate of
inflation. C.M. Life's continuing efforts to control expenses may reduce
the impact of inflation on operating expenses.
Inflation also has an indirect effect on C.M. Life. To the extent that the
government's economic policy to control the level of inflation results in
changes in interest rates, C.M. Life's new sales of insurance products and
investment income are affected. Changes in the level of interest rates also
have an effect on interest spreads, as investment earnings are reinvested.
Investments
-----------
At December 31, 1996, C.M. Life had $1,022,587 thousand of invested assets
in its general investment account. The portfolio of invested assets is
managed to support the liabilities of the lines of business in light of
yield, liquidity and diversification considerations. The general investment
account portfolio does not include C.M. Life's separate account investment
assets.
The following table sets forth C.M. Life's invested assets in the general
investment account and gross investment yield thereon (after deducting real
estate operating expenses and taxes) as of the dates indicated:
December 31,
------------
1996 1995 1994
---- ---- ----
Carrying % of Carrying % of Carrying % of
Value Total Yield Value Total Yield Value Total Yield
----- ----- ----- ----- ----- ----- ----- ----- -----
($ In Thousands)
Bonds $ 736,524 72.0% 7.8% $736,099 75.1% 7.8% $717,291 81.9% 7.4%
Preferred stocks - - - 211 0.0 5.8 1,815 0.2 9.3
Common stocks 55,642 5.4 4.5 72,361 7.4 6.0 - - -
Mortgage loans 33,791 3.3 12.6 30,716 3.1 7.7 42,038 4.8 8.5
Real estate 0.0 0.0 0.0 0.0 0.0 23.7 1,897 0.2 6.1
Policy loans 132,942 13.0 8.1 126,014 12.9 8.8 109,720 12.5 7.9
Cash and short-term
investments 63,688 6.3 10.6 15,069 1.5 4.5 3,025 0.4 12.6
---------- ----- ---- -------- ----- ---- -------- ----- ----
Total investments $1,022,587 100.0 7.9% $980,470 100.0 7.8% $875,786 100.0% 7.5%
========== ===== ==== ======== ===== ==== ======== ===== ====
12
The yield on total investments before indirect expenses was 7.9%, 7.8% and
7.5% for the years ended December 31, 1996, 1995 and 1994, respectively.
The yield on each investment category before federal income taxes is
calculated as: (a) gross investment income (which for real estate deducts
operating expenses and real estate taxes) divided by (b) the average
carrying value, which does not include investment reserves.
C.M. Life carries its investments in accordance with methods and values
prescribed by the NAIC and adopted by state insurance authorities.
Generally, bonds are valued at amortized cost, preferred stocks in good
standing at cost, and common stocks at fair value. Mortgage loans are
valued at principal less impairments and unamortized discount. Real estate
is valued at cost less accumulated depreciation, impairments, and mortgage
encumbrances. Depreciation on investment real estate is calculated using
the straight-line method. Policy loans are carried at the outstanding loan
balance less amounts unsecured by the cash surrender value of the policy.
Short-term investments are stated at amortized cost which approximates fair
value.
Bonds
-----
The following table provides certain information regarding the maturity
distribution of bonds (excluding short-term securities):
Bond Maturities
December 31,
------------
1996 1995
---- ----
Carrying % of Carrying % of
Value Total Value Total
----- ----- ----- -----
($ In Thousands)
Due in one year or less $ 76,698 10.9% $ 17,729 2.4%
Due after one year
through five years 284,200 15.3 306,539 41.6
Due after five years
through ten years 202,722 22.7 225,283 30.6
Due after ten years 84,515 16.3 35,854 4.9
Mortgage-backed
securities(1) 88,389 34.8 150,694 20.5
-------- ---- -------- -----
$736,524 100.0% $736,099 100.0%
======== ===== ======== =====
(1) Including securities guaranteed by the U.S. Government.
The maturities of portfolio bonds are considered to be sufficiently
diversified and are carefully monitored and managed in light of C.M. Life's
liquidity needs. See "Liquidity and Capital Resources".
Bonds consist primarily of government securities and high-quality
marketable corporate securities. At December 31, 1996 and 1995, publicly
traded bonds comprised 66.0% and 57.2% of the bond portfolio, respectively,
and privately placed bonds comprised the remainder. Substantially all of
the publicly traded and privately placed bonds held by C.M. Life are
evaluated by the NAIC's Securities Valuation Office ("SVO") which assigns
securities to one of six NAIC investment categories with Category 1
securities being the highest quality and Category 6 securities being the
lowest quality. Categories 1 and 2 are investment grade, Category 3 is
medium quality and Categories 4, 5 and 6 are non-investment grade.
13
The table below sets forth, as of the dates indicated, the NAIC Securities
Valuation Office (SVO) ratings for C.M. Life's bond portfolio (including
short-term securities) and the equivalent public rating agency
designations. The bond portfolio consists primarily of high grade
securities. At December 31, 1996 and 1995, 93.7% and 91.9%, respectively,
of the portfolio was invested in NAIC Categories 1 and 2 securities
Bond Credit Quality
(includes short-term securities)
December 31,
------------
1996 1995
---- ----
($ In Thousands)
NAIC
Bond Rating Agency Carrying % of Carrying % of
Rating Equivalent Designation Value Total Value Total
- ------ ---------------------- ------- ----- ------- -----
1 Aaa/Aa/A $452,615 56.7% $425,073 56.6%
2 Baa 295,314 37.0 265,117 35.3
3 Ba 36,082 4.5 50,302 6.7
4 B 11,802 1.5 9,929 1.3
5 Caa and lower 0 0.0 0 0.0
6 In or near default 2,017 0.3 18 0.1
-------- ----- -------- -----
Total $797,830 100.0% $750,439 100.0%
======== ===== ======== ======
14
C.M. Life invests a significant portion of its investment funds in high
quality publicly traded bonds in order to maintain and manage liquidity and
reduce the risk of default in the portfolio. As of December 31, 1996, 96.8%
of the publicly traded bonds were rated as NAIC Categories 1 and 2, as
illustrated by the following chart:
Publicly Traded Bond Credit Quality
(includes short-term securities)
December 31,
------------
1996 1995
---- ----
($ In Thousands)
NAIC
Bond Rating Agency Carrying % of Carrying % of
Rating Equivalent Designation Value Total Value Total
- ------ ---------------------- ----- ----- ----- -----
1 Aaa/Aa/A $364,432 69.2% $310,593 72.4%
2 Baa 145,368 27.6 92,078 21.5
3 Ba 11,515 2.2 17,818 4.2
4 B 5,520 1.0 8,436 1.9
5 Caa and lower 0 0.0 0 0.0
6 In or near default 0 0.0 0 0.0
-------- ----- -------- -----
Total $526,835 100.0% $428,925 100.0%
======== ===== ======== =====
15
C.M. Life utilizes its investments in the privately placed bond portfolio to
enhance the value of the overall portfolio, increase diversification and
obtain higher yields than are possible with comparable quality public market
securities. To control risk, C.M. Life relies upon broader access to
management information, strengthened negotiated protective convenants, call
protection features, and a higher level of collateralization. The strength of
the privately placed bond portfolio is demonstrated by the predominance of
NAIC Categories 1 and 2 securities.
Privately Placed Bond Credit Quality
December 31,
------------
1996 1995
---- ----
($ In Thousands)
NAIC
Bond Rating Agency Carrying % of Carrying % of
Rating Equivalent Designation Value Total Value Total
- ------ ---------------------- ----- ----- ----- -----
1 Aaa/Aa/A $ 88,183 32.6% $114,480 35.6%
2 Baa 149,946 55.3 173,039 53.8
3 Ba 24,567 9.1 32,485 10.1
4 B 6,281 2.3 1,493 0.5
5 Caa and lower 0 0 0 0
6 In or near default 2,018 0.7 17 0
-------- ------ -------- -----
Total $270,995 100.0% $321,514 100.0%
======== ======= ======== ======
16
The following table sets forth by industry category the carrying value and
percent of total of the bond portfolio, including short-term securities, as of
December 31, 1996.
Bond Portfolio By Industry
December 31, 1996
-----------------
Private Public (1) Total
------- ---------- -----
Carrying % of Carrying % of Carrying % of
Industry Category Value Total Value Total Value Total
-------- ----- ----- ----- ----- -----
($ in Thousands)
Aerospace $ 517 0.2% $ 8,217 1.6% $ 8,734 1.1%
Banking 6,497 2.4 38,863 7.4 45,360 5.7
Consumer Goods 28,375 10.5 23,628 4.5 52,003 6.5
Finance & Leasing Co. 14,740 5.4 20,258 3.8 34,998 4.4
Governments 3,052 1.1 103,463 19.6 106,515 13.4
Health Care 1,500 0.6 1,001 0.2 2,501 0.3
Insurance & other financial
services 11,500 4.2 44,268 8.4 55,768 7.0
Media 17,216 6.4 5,447 1.0 22,663 2.8
Merchandise retailers 4,500 1.7 0 0.0 4,500 0.6
Natural resources 18,000 6.6 31,041 5.9 49,041 6.1
Other Services 7,250 2.7 983 0.2 8,233 1.0
Others 65,297 24.1 52,326 9.9 117,623 14.7
Producer goods 35,963 13.3 22,259 4.2 58,222 7.3
Securitized 40,422 14.9 99,693 18.9 140,115 17.6
Transportation 1,000 0.3 15,034 2.9 16,034 2.0
Utilities 15,166 5.6 60,354 11.5 75,520 9.5
-------- ----- -------- ----- -------- -----
Total $270,995 100.0% $526,835 100.0% $797,830 100.0%
======== ====== ======== ====== ======== ======
(1) Includes short-term securities.
17
The estimated fair value of bonds is based upon quoted market prices for
actively traded securities. C.M. Life subscribes to commercial pricing
services providing estimated fair values of fixed income securities that are
not actively traded. Estimated fair values for privately placed bonds are
generally determined by applying interest rate spreads based on quality and
asset type to the appropriate duration on the Treasury yield curve. The tables
below set forth the carrying value, gross unrealized gains and losses, net
unrealized gains and loses and estimated fair value of the bond portfolio
(excluding short-term securities) at December 31, 1996 and 1995.
December 31, 1996
-----------------
Gross Gross Net Estimated
Carrying Unrealized Unrealized Unrealized Fair
Value Gains Losses Gain (Loss) Value
----- ----- ------ ---------- -----
($ In Thousands)
U.S. Treasury Securities
and Obligations of U.S.
Government Corporations
and Agencies $138,751 $ 2,175 $ 964 $ 1,211 $139,962
Debt Securities issued by
Foreign Governments 3,953 53 22 31 3,984
Mortgage-backed securities 37,395 745 725 20 37,415
State and local governments 10,263 244 101 143 10,406
Industrial securities 509,227 11,643 3,700 7,943 517,170
Utilities 36,935 1,168 159 1,009 37,944
-------- ------- ------ ------- --------
$736,524 $16,028 $5,671 $10,357 $746,881
======== ======= ====== ======= ========
18
December 31, 1995
-----------------
Gross Gross Net Estimate
Carrying Unrealized Unrealized Unrealized Fair
Value Gains Losses Gain (Loss) Value
----- ----- ------ ---------- -----
($ In Thousands)
U.S. Treasury Securities
and Obligations of U.S.
Government Corporations
and Agencies $ 27,817 $ 1,764 $ 8 $ 1,756 $ 29,573
Debt Securities issued by
Foreign Governments 11,186 483 295 188 11,374
Mortgage-backed securities 150,694 7,144 347 6,797 157,491
Industrial securities 501,252 21,472 711 20,761 522,013
Utilities 45,150 2,303 16 2,287 47,437
-------- ------- ------ ------- --------
$736,099 $33,166 $1,377 $31,789 $767,888
======== ======= ====== ======= ========
Common Stocks
-------------
The common stock portfolio comprised 5.4% and 7.4% of C.M. Life's investments
at December 31, 1996 and 1995, respectively. Common stock had a cost of
$47,195 thousand in 1996 and $64,255 thousand in 1995; the fair value was
$55,642 thousand and $73,361 thousand at December 31, 1996 and 1995,
respectively.
Mortgage Loans
--------------
All mortgage loans are fixed rate commercial mortgages on completed, income
producing properties.
The following table provides certain information regarding the maturity
distribution of commercial mortgage loans:
Mortgage Loan Maturities
December 31, 1996
-----------------
Carrying % of
Value Total
----- -----
($ In Thousands)
Due in one year or less $ 4,387 13.0%
Due after one year
through five years 23,915 70.8
Due after five years
through ten years 5,489 16.2
------- -----
Total $33,791 100.0%
======= ======
19
At December 31, 1996, 99.6% of the mortgage loan portfolio consisted of bullet
loans (loans that do not fully amortize over their term). Scheduled bullet
maturities at December 31, 1996 of $4,387 thousand, $6,003 thousand, $1,886
thousand in 1997, 1998 and 1999 and represent 13.0%, 17.8% and 5.6%,
respectively, of the mortgage loan portfolio. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without prepayment penalties.
During 1996 and 1995, all renewed bullet loans were performing assets prior to
renewal and all loan renewals reflected market conditions. Past experience
with regard to bullet maturities, however, is not necessarily indicative of
future results.
The maturities of commercial mortgage loans are considered by C.M. Life to be
sufficiently diversified and are carefully monitored and managed in light of
C.M. Life's liquidity needs. See "Liquidity and Capital Resources."
The mortgage loan portfolio comprised 3.3% and 3.1% of C.M. Life's investments
at December 31, 1996 and 1995, respectively. The mortgage loan average
investment yield was 12.6% and 7.7% for the years ending December 31, 1996 and
1995, respectively.
The following tables set forth by property type and geographic distribution
the carrying value of mortgage loan balances as a percentage of the portfolio
as of the dates indicated:
Mortgage Loans by
Property Type
December 31,
------------
1996 1995
---- ----
Carrying % of Carrying % of
Value Total Value Total
----- ----- ----- -----
(In Thousands)
Office $16,321 48.3% $11,796 38.4%
Retail 5,332 15.8 4,507 14.7
Industrial & Other 8,030 23.7 7,479 24.4
Apartments 4,108 12.2 6,934 22.5
------- ----- ------- ------
$33,791 100.0% $30,716 $100.0%
======= ====== ======= =======
20
Mortgage Loans by
Geographic Distribution
December 31,
------------
1996 1995
---- ----
Carrying % of Carrying % of
Value Total Value Total
----- ----- ----- -----
(In Thousands)
West $ 3,643 10.8% $ 3,770 12.3%
Northeast 12,833 38.0 17,530 57.1
Mid-Atlantic 3,446 10.2 0 0
Southeast 8,633 25.6 9,416 30.6
Midwest 1,990 6.0 0 0
Southwest 3,246 9.4 0 0
------- ----- ------- -----
$33,791 100.0% $30,716 100.0%
======= ====== ======= ======
C.M. Life actively monitors and manages its mortgage loan portfolio and also
directly services the portfolio. Company personnel perform or review all
aspects of loan origination and portfolio management, including lease
analysis, property transfer analysis, economic and financial reviews, tenant
analysis and oversight of default and bankruptcy proceedings. All properties
are revalued each year and reinspected either each year or every other year
based on internal quality ratings. C.M. Life uses the following criteria to
determine whether a current or potential problem exists: ( i) borrower
bankruptcies, (ii) major tenant bankruptcies, (iii) requests for
restructuring, (iv) delinquent tax payments, (v) late payments, (vi) loan-to-
value or debt service coverage deficiencies and (vii) overall vacancy levels.
Policy Loans
------------
As of December 31, 1996 and 1995, C.M. Life's policy loans were $132,942
thousand and $126,014 thousand, respectively. Policy loans, as a percentage
of invested assets, were 13.0% and 12.9% at December 31, 1996 and 1995,
respectively. Variable interest rate policy loans were 98.6% of total policy
loans at December 31, 1996 and 1995. For loans with variable interest rates,
the rates are adjusted annually based upon changes in a corporate bond index.
Competition
-----------
The life insurance industry is highly competitive. There are more than 1,700
life insurance companies in the United States, many of which offer insurance
products similar to those marketed by C.M. Life. In addition to competition
within the industry, insurers are increasingly facing competition from non-
traditional sources in the financial services business, including mutual
funds, banks, securities brokerage houses and other financial services
entities, many of which provide alternative investment and savings vehicles
for consumers. Legislative initiatives proposed at the federal level would,
if enacted, reorder the financial services industry, thereby changing the
environment in which C.M. Life competes.
C.M. Life's management believes its financial strength, agent skill and
historical product performance provide competitive advantages for the products
it offers in these markets. In early 1996, after the merger of MassMutual and
Connecticut Mutual Life Insurance Company, C.M. Life received the following
ratings from the various rating agencies, A.M. Best Company, Inc. (A++),
Standard and Poor's Corporation (AAA) and Duff & Phelps Credit Rating Company
(AAA).
21
MassMutual, C.M. Life's parent, has received the highest ratings from A.M.
Best Company, Inc. (A++), Standard & Poor's Corporation (AAA), and Duff &
Phelps Credit Rating Company (AAA), as well as a rating of Aa1 by Moody's
Investors Service, Inc. (the highest in its "excellent" category). In late
1995 and early 1996, all four of these agencies conducted thorough reviews of
MassMutual's ratings in light of the Connecticut Mutual Life Insurance Company
merger. In all four cases, the 1995 ratings for MassMutual were reaffirmed.
Transactions with MassMutual
----------------------------
MassMutual and C.M. Life have an agreement whereby MassMutual for a fee will
furnish C.M. Life, as required, operating facilities, human resources,
computer software development and managerial services. Investment and
administrative services are provided to C.M. Life pursuant to a management
services agreement with MassMutual. Fees incurred under the terms of the
agreement were $45,914 thousand in 1996. Similar arrangements were in place
with Connecticut Mutual Life Insurance Company, C.M. Life's former parent;
prior to its merger with MassMutual. Fees incurred in 1995 and 1994 under the
arrangement with Connecticut Mutual Life Insurance Company were $34,008
thousand and $16,412 thousand, respectively.
In addition, as previously discussed, C.M. Life has a modified coinsurance
quota-share reinsurance agreement on certain universal life policies and a
stop-loss agreement with MassMutual.
Regulation
----------
C.M. Life is organized as a Connecticut stock life insurance company, and is
subject to Connecticut laws governing insurance companies. C.M. Life is
regulated and supervised by the State of Connecticut Insurance Commissioner.
By March 1 of every year, C.M. Life must prepare and file an annual statement,
in a form prescribed by the State of Connecticut Insurance Department, as of
December 31 of the preceding year. The Commissioner and his or her agents
have the right at all times to review or examine C.M. Life's books and assets.
A full examination of C.M. Life's operations is conducted periodically
according to the rules and practices of the NAIC. C.M. Life is also subject
to the insurance laws of the states in which it is authorized to do business,
to various federal and state securities laws and regulations, and to
regulatory agencies which administer those laws and regulations.
C.M. Life is licensed to transact its insurance business in, and is subject to
regulation and supervision by the Commonwealth of Puerto Rico, the District of
Columbia and all 50 states of the United States, except New York. The extent
of such regulation varies, but most jurisdictions have laws and regulations
requiring the licensing of insurers and their agents and setting standards of
solvency and business conduct to be maintained by licensed insurance
companies, and may regulate withdrawal from certain markets. In addition,
statutes and regulations usually require the approval of policy forms and, for
certain lines of insurance, the approval of rates. Such statutes and
regulations also prescribe the permitted types and concentration of
investments. C.M. Life is also subject to regulation of its accounting
methodologies and is required to file detailed annual financial statements
with supervisory agencies in each of the jurisdictions in which it does
business. Each of its operations and accounts is also subject to examination
by such agencies at regular intervals.
C.M. Life is subject to guaranty fund assessments in all states in which it
does business. The guaranty associations are organized to pay contractual
obligations under insurance policies issued by impaired or insolvent insurers.
C.M. Life believes such assessments in excess of amounts accrued will not
materially affect its financial position, results of operations or liquidity.
In 1996, C.M. Life elected not to admit $1,621 thousand of guaranty fund
premium tax offset receivable relating to prior assessments.
C.M. Life is also subject to risk-based capital (RBC) requirements promulgated
by the NAIC. The RBC Model Act will give state insurance commissioners
explicit regulatory authority to require various actions by, or take various
actions against, insurance companies whose total adjusted capital does not
meet the RBC standards. C.M. Life's total adjusted capital was well in excess
of all RBC standards at December 31, 1996 and 1995.
In addition to regulation of its insurance business, C.M. Life is subject to
various types of federal and state laws and regulations affecting the conduct,
taxation and other aspects of their businesses. Certain policies and
contracts offered by C.M. Life are subject to various levels of regulation
under the federal securities laws administered by the Securities and Exchange
Commission.
C.M. Life's management believes it is in compliance in all material respects
with all applicable laws and regulations.
22
New Accounting Pronouncements
-----------------------------
The accompanying statutory financial statements, except as to form, have been
prepared in conformity with the practices of the NAIC and the accounting
practices prescribed or permitted by the Insurance Department of the State of
Connecticut ("statutory accounting practices"). Prior to 1996 financial
statements prepared using statutory accounting practices were considered to
be in conformity with GAAP for wholly-owned stock life insurance subsidiaries
of mutual life insurance companies. In 1993, the Financial Accounting
Standards Board ("FASB") issued interpretation No. 40 ("Fin. 40"),
"Applicability of Generally Accepted Accounting Principles to Mutual Life
Insurance and Other Enterprises", which clarified that wholly owned stock
life insurance subsidiaries of mutual life insurance companies issuing
financial statements described as prepared in conformity with GAAP after 1995
are required to apply all applicable GAAP pronouncements in preparing those
financial statements. In January 1995, the FASB issued Statement No. 120
("SFAS 120"), "Accounting and Reporting by Mutual Life Insurance Enterprises
and by Insurance Enterprises for Certain Long-Duration Participating
Contracts," which among other things, extended the applicability of certain
FASB statements to mutual life insurance companies and deferred the effective
date of Fin. 40 to financial statements issued or reissued after 1996.
Accordingly, the financial statements presented herein are no longer
considered to be in conformity with GAAP.
The NAIC is currently drafting proposed codification changes to existing
statutory accounting practices. At this time, C.M. Life can not determine the
impact of these changes, as additional proposals are expected to be made in
the near future.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------
Financial statements, in the form required by Regulation S-X, are set forth
below. The Registrant is not required to file supplementary financial data
specified by Item 302 of Regulation S-K.
23
C.M. LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF FINANCIAL POSITION
December 31,
1996 1995
---------- ----------
(In Thousands Except for
Share Information)
Assets:
Bonds $ 736,524 $ 736,099
Preferred stocks - 211
Common stocks 55,642 72,361
Mortgage loans 33,791 30,716
Policy loans 132,942 126,014
Cash and short-term instruments 63,688 15,069
---------- ----------
Total invested assets 1,022,587 980,470
Investment and insurance amounts receivable 32,783 23,765
Transfer due from separate account 24,278 22,300
Federal income tax receivable 7,094 -
Other assets 87 1,819
Separate account assets 779,742 531,432
---------- ----------
$1,866,571 $1,559,786
========== ==========
Liabilities:
Policyholders' reserves and funds $ 907,492 $ 867,672
Policy claims and other benefits 3,843 2,086
Payable to parent and affiliates 9,654 10,823
Federal income taxes - 2,820
Asset valuation reserve 18,475 15,868
Investment reserves 3,329 4,011
Other liabilities 34,292 11,875
Separate account reserves and liabilities 779,742 531,432
---------- ----------
1,756,827 1,446,587
---------- ----------
Shareholder's equity:
Common stock, $200 par value
50,000 shares authorized
12,500 shares issued and outstanding 2,500 2,500
Paid-in capital and contributed surplus 43,759 43,759
Shareholder's equity 63,485 66,940
---------- ----------
109,744 113,199
---------- ----------
$1,866,571 $1,559,786
========== ==========
See notes to Statutory Financial Statements.
24
C.M. LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF INCOME
Years Ended December 31,
1996 1995 1994
-------- -------- --------
(In Thousands)
Income:
Premium income $314,372 $260,847 $251,176
Net investment and other income 76,456 84,390 83,354
-------- -------- --------
390,828 345,237 334,530
-------- -------- --------
Benefits and expenses:
Policy benefits and payments 98,966 58,913 44,033
Addition to policyholder's reserves, funds
and separate accounts 210,324 211,403 230,338
Operating expenses 45,448 32,146 14,786
Commissions 24,987 14,092 7,365
State taxes, licenses and fees 3,247 5,017 4,199
-------- -------- --------
382,972 321,571 300,721
Net gain from operations before federal
income taxes 7,856 23,666 33,809
Federal income taxes 6,286 9,376 14,249
-------- -------- --------
Net gain from operations 1,570 14,290 19,560
Net realized capital gain (loss) 635 (540) (1,772)
-------- -------- --------
Net income $ 2,205 $ 13,750 $ 17,788
======== ======== ========
See notes to Statutory Financial Statements.
25
C.M. LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
Years Ended December 31,
1996 1995 1994
-------- -------- --------
(In Thousands)
Shareholder's equity, beginning of year $113,199 $103,837 $ 87,898
Increases (decreases) due to:
Net income 2,205 13,750 17,788
Change in asset valuation and investment
reserves (1,923) (9,228) (106)
Change in non-admitted assets (2,765) (1,157) (1,761)
Net unrealized capital gain (loss) (972) 5,997 18
-------- -------- --------
(3,455) 9,362 15,939
-------- -------- --------
Shareholder's equity, end of year $109,744 $113,199 $103,837
======== ======== ========
See notes to Statutory Financial Statements.
26
C.M. LIFE INSURANCE COMPANY
STATUTORY STATEMENT OF CASH FLOWS
Years Ended December 31,
1996 1995 1994
-------- -------- --------
(In Thousands)
Operating activities:
Net income (loss) $ 2,205 $ 13,750 $ 17,788
Additions to policyholder's reserves, funds,
and net of transfers to separate accounts 41,578 84,218 68,764
Net realized capital gain (loss) (635) 540 1,772
Change in receivable (payable) from parent (1,169) 5,711 (3,870)
Other changes 409 (6,303) (3,306)
--------- --------- ---------
Net cash provided by operating activities 42,388 97,916 81,148
Investing activities:
Loans and purchases of investments (184,900) (491,893) (332,750)
Sales or maturities of investments and
receipts from repayment of loans 191,131 406,021 249,038
--------- --------- ---------
Net cash provided by (used in) investing
activities 6,231 (85,872) (83,712)
Financing activities:
Net cash provided by financing activities - - -
Increase (decrease) in short-term investments 48,619 12,044 (2,564)
Cash and short-term investments, beginning of
year 15,069 3,025 5,589
--------- --------- ---------
Cash and short-term investments, end of year $ 63,688 $ 15,069 $ 3,025
========= ========= =========
See notes to Statutory Financial Statements.
27
C.M. Life Insurance Company
Notes to Financial Statements
December 31, 1996, 1995 and 1994
1. Summary of Significant Accounting Policies
C.M. Life Insurance Company (the Company) is a wholly owned stock life
insurance subsidiary of Massachusetts Mutual Life Insurance Company
("MassMutual"). On March 1, 1996, the operations of the Company's former
parent, Connecticut Mutual Life Insurance Company, were merged into
MassMutual. The Company is primarily engaged in the sale of flexible
premium universal life insurance and variable annuity products. The Company
is licensed to transact business in all states except New York.
The accompanying statutory financial statements, except as to form, have
been prepared in conformity with the practices of the National Association
of Insurance Commissioners and the accounting practices prescribed or
permitted by the Insurance Department of the State of Connecticut
("statutory accounting practices") which prior to 1996 were considered to
be in conformity with generally accepted accounting principles ("GAAP"). In
1993, the Financial Accounting Standards Board ("FASB") issued
interpretation No. 40 ("Fin. 40"), "Applicability of Generally Accepted
Accounting Principles to Mutual Life Insurance and Other Enterprises",
which clarified that wholly owned stock life insurance subsidiaries of
mutual life insurance companies issuing financial statements described as
prepared in conformity with GAAP after 1995 are required to apply all
applicable GAAP pronouncements in preparing those financial statements. In
January 1995, the FASB issued Statement No. 120 ("SFAS 120"), "Accounting
and Reporting by Mutual Life Insurance Enterprises and by Insurance
Enterprises for Certain Long-Duration Participating Contracts," which among
other things, extended the applicability of certain FASB statements to
mutual life insurance companies and deferred the effective date of Fin. 40
to financial statements issued or reissued after 1996. As required by
generally accepted auditing standards, the opinion expressed by our former
independent accountants on the 1995 and 1994 financial statements is
different from that expressed in their previous report.
The accompanying statutory financial statements are different in some
respects from GAAP financial statements. The more significant differences
are as follows: (a) acquisition costs, such as commissions and other costs
in connection with acquiring new business, are charged to current
operations as incurred, whereas GAAP would require these expenses to be
capitalized and recognized over the life of the policies; (b) policy
reserves are based upon statutory mortality and interest requirements
without consideration of withdrawals, whereas GAAP reserves would be based
upon reasonably conservative estimates of mortality, morbidity, interest
and withdrawals; (c) bonds are generally carried at amortized cost whereas
GAAP would value bonds at fair value and (d) deferred income taxes are not
provided for book-tax timing differences whereas GAAP would record deferred
income taxes. Management has not yet completed GAAP financial statements,
but believes that shareholder's equity based upon GAAP will be higher than
shareholder's equity based upon statutory accounting practices.
The preparation of financial statements requires management to make
estimates and assumptions that affect the report amounts of assets and
liabilities, as well as disclosures of contingent assets and liabilities,
at the date of the financial statements. Management must also make
estimates and assumptions that affect the amounts of revenues and expenses
during the reporting period. Future events, including changes in the levels
of mortality, morbidity, interest rates and asset valuations, could cause
actual results to differ from the estimates used in the financial
statements.
The following is a description of C.M. Life's current principal accounting
policies and practices.
a. Investments
Bonds and stocks are valued in accordance with rules established by
the National Association of Insurance Commissioners. Generally, bonds
are valued at amortized cost, preferred stocks in good standing at
cost, and common stocks at fair value.
28
NOTES TO STATUTORY FINANCIAL STATEMENTS, Continued
Mortgage loans are valued at principal less unamortized discount.
Policy loans are carried at the outstanding loan balance less amounts
unsecured by the cash surrender value of the policy.
Short-term investments are stated at amortized cost, which
approximates fair value.
In compliance with regulatory requirements, C.M. Life maintains an
Asset Valuation Reserve and an Interest Maintenance Reserve. The Asset
Valuation Reserve and other investment reserves, as prescribed and
permitted by the Connecticut Insurance Department, stabilize the
policyholders' contingency reserves against fluctuations in the value
of stocks, as well as declines in the value of bonds and mortgage
loans.
The Interest Maintenance Reserve captures after-tax realized capital
gains and losses which result from changes in the overall level of
interest rates for all types of fixed income investments. This reserve
is amortized into income using the grouped method over the remaining
life of the investment sold or over the remaining life of the
underlying asset. Net realized after tax capital gains of $425
thousand in 1996 and net realized after tax capital losses of $867
thousand in 1995 and $3,391 thousand in 1994 were transferred to the
Interest Maintenance Reserve. Amortization of the Interest Maintenance
Reserve into net investment income amounted to $37 thousand in 1996,
$61 thousand in 1995, and $309 thousand in 1994. In 1996, 1995 and
1994, the Interest Maintenance Reserve resulted in net loss deferral.
In accordance with the practices of the National Association of
Insurance Commissioners, the balance was recorded as a reduction of
shareholder's equity.
Realized capital gains and losses, less taxes, not includable in the
Interest Maintenance Reserve, are recognized in net income. Realized
capital gains and losses are determined using the specific
identification method. Unrealized capital gains and losses are
included in shareholder's equity.
b. Separate Accounts
Separate account assets and liabilities represent segregated funds
administered and invested by C.M. Life for the benefit of variable
annuity and variable life insurance contract holders. The assets
consist principally of marketable securities reported at fair value.
Transfers due from separate account represents the separate account
assets in excess of statutory benefit reserves. Premiums, benefits and
expenses of the separate accounts are reported in the statutory
statement of operations. Reserves for these life and annuity contracts
have been established using assumed interest rates and valuation
methods that will provide reserves at least as great as those required
by law and contract provisions. C.M. Life receives administrative and
investment advisory fees from these accounts.
29
NOTES TO STATUTORY FINANCIAL STATEMENTS, Continued
c. Non-admitted Assets
Assets designated as "non-admitted" (principally prepaid agent
commissions, other prepaid expenses and Interest Maintenance Reserve,
when in a net loss deferral position) are excluded from the statutory
statement of financial position. These amounted to $6,604 thousand and
$3,839 thousand as of December 31, 1996 and 1995, respectively and
changes therein are charged directly to shareholder's equity.
d. Policyholders' Reserves and Funds
Policyholders' reserves for life contracts are developed using
accepted actuarial methods computed principally on the net level
premium and the Commissioners' Reserve Valuation Method bases using
the American Experience and 1980 Commissioners' Standard Ordinary
mortality tables with assumed interest rates ranging from 4.0 to 4.5
percent.
Reserves for single premium deferred annuities are calculated based on
the Commissioners' Annuity Reserve Valuation Method utilizing the
change in fund method and assuming interest on changes in funds of
7.0%, 8.0% and 7.0% in 1996, 1995 and 1994, respectively. Additional
reserves are maintained for contracts where the cash surrender value
exceeds the actuarially determined reserve.
Reserves for policies and contracts considered investment contracts
have a carrying value and fair value of $113,670 thousand (fair value
is determined by discounted cash flow projections).
e. Premium and Related Expense Recognition
Life insurance premium income is recognized annually on the
anniversary date of the policy. Annuity premium is recognized when
received. Commissions and other costs related to the issuance of new
policies, maintenance and settlement costs are charged to current
operations.
f. Cash and Short-term Investments
For purposes of the statutory Statement of Cash Flows, the Company
considers all highly liquid short-term investments with a maturity of
twelve months or less from the date of purchase to be cash and short-
term investments.
2. Federal Income Taxes
Provision for federal income taxes is based upon C.M. Life's best estimate
of its tax liability. No deferred tax effect is recognized for temporary
differences that may exist between financial reporting and taxable income.
Accordingly, the reporting of miscellaneous temporary differences, such as
reserves and acquisition costs, resulted in an effective tax rate which is
other than the statutory tax rate.
3. Stockholder's Equity
The Board of Directors of MassMutual has authorized the contribution of
funds to C.M. Life sufficient to meet the capital requirements of all
states in which C.M. Life is licensed to do business. Substantially all of
the statutory stockholder's equity is subject to dividend restrictions
relating to various state regulations which limit the payment of dividends
without prior approval. Under these regulations, $11,320 thousand of
stockholder's equity is available for distribution to shareholders in 1997
without prior regulatory approval.
4. Related Party Transactions
Investment and administrative services are provided to C.M. Life pursuant
to a management services agreement with MassMutual. Fees incurred under the
terms of the agreement were $45,914 thousand, $34,008 thousand and $16,412
thousand in 1996, 1995 and 1994, respectively.
30
NOTES TO STATUTORY FINANCIAL STATEMENTS, Continued
Effective March 1, 1996, C.M. Life modified its underwriting agreement with
its affiliates, GR Phelps and MML Distributors, whereby C.M. Life will pay
all future commissions relating to variable annuity business in exchange
for the rights to retain all future policy administration fees and charges.
C.M. Life cedes a portion of its life insurance business to MassMutual and
other insurers in the normal course of business. C.M. Life's retention
limit per individual insured is $4,000 thousand; the portion of the risk
exceeding the retention limit is reinsured with other insurers. C.M. Life
is contingently liable with respect to ceded reinsurance in the event any
reinsurer is unable to fulfill its contractual obligations.
C.M. Life has a modified coinsurance quota-share reinsurance agreement with
MassMutual whereby C.M. Life cedes 50% of the premiums on certain
universal life policies issued in 1985 and 75% of the premiums with issue
dates on or after January 1, 1986. In return MassMutual pays C.M. Life a
stipulated expense allowance, death and surrender benefits, and a modified
coinsurance adjustment. Reserves for payment of future benefits for the
ceded policies are retained by C.M. Life.
C.M. Life also has a stop-loss agreement with MassMutual, with maximum
coverage at $25,000 thousand, under which C.M. Life cedes claims which, in
aggregate, exceed $28,080 thousand in 1996, $24,245 thousand in 1995, and
$18,348 thousand in 1994. For each of the years, the limit was not
exceeded. C.M. Life paid approximately $400 thousand, $602 thousand, and
$435 thousand in premiums under the agreement in 1996, 1995 and 1994,
respectively.
5. Investments
C.M. Life maintains a diversified investment portfolio. Investment policies
limit concentration in any asset class, geographic region, industry group,
economic characteristic, investment quality or individual investment.
a. Bonds
The carrying value and estimated fair value of investments in bonds as
of December 31, 1996 and 1995 are as follows:
December 31, 1996
-----------------
Gross Gross Gross
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
--------- ----------- ----------- --------------
(In Thousands)
U. S. Treasury Securities $138,751 $ 2,175 $ 964 $139,962
and Obligations of U.S.
Government Corporations
and Agencies
Debt Securities issued by 3,953 53 22 3,984
Foreign Governments
Mortgage-backed securities 37,395 745 725 37,415
State and local governments 10,263 244 101 10,406
Industrial securities 509,227 11,643 3,700 517,170
Utilities 36,935 1,168 159 37,944
-------- ------- ------ --------
Total $736,524 $16,028 $5,671 $746,881
======== ======= ====== ========
31
NOTES TO STATUTORY FINANCIAL STATEMENTS, Continued
December 31, 1995
-----------------
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
--------- ----------- ----------- -------------
(In Thousands)
U. S. Treasury Securities $ 27,817 $ 1,764 $ 8 $ 29,573
and Obligations of U.S.
Government Corporations
and Agencies
Debt Securities issued by 11,186 483 295 11,374
Foreign Governments
Mortgage-backed securities 150,694 7,144 347 157,491
Industrial securities 501,252 21,472 711 522,013
Utilities 45,150 2,303 16 47,437
-------- ------- ------ --------
Total $736,099 $33,166 $1,377 $767,888
======== ======= ====== ========
The carrying value and estimated fair value of bonds at December 31, 1996,
by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without prepayment penalties.
Estimated
Carrying Fair
Value Value
--------- ---------
(In Thousands)
Due in one year or less $ 76,698 $ 77,009
Due after one year through five years 284,200 287,363
Due after five years through ten years 202,722 206,317
Due after ten years 84,515 86,874
-------- --------
subtotal 648,135 657,563
-------- --------
Mortgage-backed securities, including
securities guaranteed by the U.S. Government 88,389 89,318
-------- --------
Total $736,524 $746,881
======== ========
Proceeds from sales of investments in bonds were $162,934 thousand during 1996,
$380,567 thousand during 1995 and $224,884 thousand during 1994. Gross capital
gains of $1,608 thousand in 1996, $3,598 thousand in 1995 and $1,358 thousand in
1994 and gross capital losses of $876 thousand in 1996, $4,658 thousand, in 1995
and $4,439 thousand in 1994 were realized on those sales, a portion of which
were included in the Interest Maintenance Reserve. Estimated fair value of non-
publicly traded bonds is determined by C.M. Life using a pricing matrix .
b. Stocks
Common stocks had a cost of $47,195 thousand in 1996 and $64,225
thousand in 1995.
32
NOTES TO STATUTORY FINANCIAL STATEMENTS, Continued
c. Mortgages
The fair value of mortgage loans, as determined from a pricing matrix for
performing loans and the estimated underlying real estate value for non-
performing loans, approximated carrying value less valuation reserves held.
d. Other
The carrying value of investments which were non-income producing for the
preceding twelve months was $2,774 thousand at December 31, 1996. C.M. Life
had restructured loans with book values of $21,867 thousand and $17,128
thousand at December 31, 1996 and 1995, respectively. The loans typically
have been modified to defer a portion of the contracted interest payments
to future periods. Interest deferred to future periods totaled $178
thousand in 1996, $171 thousand in 1995 and $183 thousand in 1994.
It is not practicable to determine the fair value of policy loans as they
do not have a stated maturity.
6. Portfolio Risk Management
C.M. Life manages its investment risks to reduce interest rate and duration
imbalances determined in asset/liability analyses. The fair values of these
instruments, which are not recorded in the financial statements, are based
upon market prices or prices obtained from brokers. C.M. Life does not hold
or issue financial instruments for trading purposes.
C.M. Life utilizes interest rate swap agreements and options to reduce
interest rate exposures arising from mismatches between assets and
liabilities and to modify portfolio profiles to manage other risks
identified. Under interest rate swaps, C.M. Life agrees to exchange, at
specified intervals, the difference between fixed and floating interest
rates calculated by reference to an agreed-upon notional principal amount.
Net amounts receivable and payable are accrued as adjustments to interest
income and included in investment and insurance amounts receivable on the
Statutory Statement of Financial Position. Gains and losses realized on the
termination of contracts are amortized through the Interest Maintenance
Reserve over the remaining life of the associated contract. At December 31,
1996 and 1995, C.M. Life had swaps with notional amounts of $13,000
thousand. The fair value of these instruments was $103 thousand at December
31, 1996 and $491 thousand at December 31, 1995. During 1996 options
(protective puts) were utilized to hedge equity exposures. The net 1996
realized losses from this activity were $837 thousand. The notional amount
options totaled $34,700 thousand as of December 31, 1996.
During 1994 interest rate futures were acquired to hedge the reinvestment
of anticipated proceeds from a bulk mortgage sale. The actual gain of $95
thousand was amortized over the expected term of the assets acquired with
the mortgage sale proceeds. No interest rate futures were held as of
December 31, 1996 and 1995.
7. Liquidity
The withdrawal characteristics of the policyholder's reserves and funds,
including separate accounts, and the invested assets which support them at
December 31, 1996 are illustrated below:
(In thousands)
Total policyholders' reserves and funds and
separate account liabilities $1,687,234
Not subject to discretionary withdrawal (1,446)
Policy loans (132,941)
----------
Subject to discretionary withdrawal $1,552,847
==========
Total invested assets, including separate
investment accounts $1,802,416
Policy loans and other invested assets (216,721)
----------
Readily available marketable instruments $1,585,695
==========
33
NOTES TO STATUTORY FINANCIAL STATEMENTS, Continued
8. Business Risks and Contingencies
C.M. Life is subject to insurance guaranty fund laws in the states in which
it does business. These laws assess insurance companies amounts to be used
to pay benefits to policyholders and claimants of insolvent insurance
companies. Many states allow these assessments to be credited against
future premium taxes. C.M. Life believes such assessments in excess of
amounts accrued will not materially affect its financial position, results
of operations or liquidity. In 1996, C.M. Life elected not to admit $1,621
thousand of guaranty fund premium tax offset receivable relating to prior
assessments.
C.M. Life is involved in regulatory proceedings and various litigation in
the ordinary course of business. In the opinion of management, the ultimate
resolution of such proceedings and litigation will not result in fines or
judgments which, in the aggregate, would materially affect C.M. Life's
financial position or results of operations.
9. Reclassifications
Certain 1995 and 1994 amounts have been reclassified to conform with the
current year presentation.
10. Affiliated Companies
The relationship of the Company, its parent and affiliated companies as of
December 31, 1996 is illustrated below. Subsidiaries are wholly-owned by
the parent, except as noted.
Parent
------
Massachusetts Mutual Life Insurance Company
Subsidiaries of Massachusetts Mutual Life Insurance Company
-----------------------------------------------------------
C.M. Assurance Company
C.M. Benefit Insurance Company
C.M. Life Insurance Company
MassMutual Holding Company
MassMutual Holding Company Two, Inc. (Sold in March 1996)
MassMutual of Ireland, Limited
MML Bay State Life Insurance Company
MML Distributors, LLC
Subsidiaries of MassMutual Holding Company
------------------------------------------
G.R. Phelps, Inc.
MassMutual Holding Trust I
MassMutual Holding Trust II
MassMutual Holding MSC, Inc.
MassMutual International, Inc.
MassMutual Reinsurance Bermuda (Sold in December 1996)
MML Investor Services, Inc.
State House One (Liquidated in December 1996)
Subsidiaries of MassMutual Holding Trust I
------------------------------------------
Antares Leveraged Capital Corporation
Charter Oak Capital Management, Inc.
Cornerstone Real Estate Advisors, Inc.
DLB Acquisition Corporation
Oppenheimer Acquisition Corporation - 86.15%
34
NOTES TO STATUTORY FINANCIAL STATEMENTS, Continued
Subsidiaries of MassMutual Holding Trust II
-------------------------------------------
CM Advantage, Inc.
CM International, Inc.
CM Property Management, Inc.
High Yield Management, Inc.
MMHC Investments, Inc.
MML Realty Management
Urban Properties, Inc.
Westheimer 335 Suites, Inc.
Subsidiaries of MassMutual International
----------------------------------------
MassLife Seguros de Vida (Argentina) S.A.
MassMutual International (Bermuda) Ltd.
Mass Seguros de Vida (Chile) S.A.
MassMutual International (Luxemburg) S.A.
MassMutual Holding MSC, Incorporated
------------------------------------
MassMutual/Carlson CBO N.V. - 50%
MassMutual Corporate Value Limited - 46%
Affiliates of Massachusetts Mutual Life Insurance Company
---------------------------------------------------------
MML Series Investment Fund
MassMutual Institutional Funds
Oppenheimer Value Stock Fund
35
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Policyholders of
C.M. Life Insurance Company
We have audited the statutory financial statements and the financial statement
schedules of C.M. Life Insurance Company as of December 31, 1996 listed in Item
14(a) 1 and 2 of this Form 10-K. The 1996 financial statements and the financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and the
financial statement schedules based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
As described in Note 1 to the financial statements, the Company prepared these
financial statements using statutory accounting practices of the National
Association of Insurance Commissioners and the accounting practices prescribed
or permitted by the Department of Insurance of the State of Connecticut, which
practices differ from generally accepted accounting principles. The effects on
the financial statements of the variances between the statutory basis of
accounting and generally accepted accounting principles, although not
determinable at this time, are presumed to be material.
In our opinion, because of the effects of the matter discussed in the third
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of C.M. Life Insurance Company at December 31, 1996 and the results of its
operations and its cash flows for the year then ended.
In our opinion, the 1996 financial statements referred to above present fairly,
in all material respects, the financial position of C.M. Life Insurance Company
at December 31, 1996, and the results of its operations and its cash flows for
the year then ended, on the statutory basis of accounting described in Note 1.
In addition, in our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial statements taken as a
whole, present fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND, LLP
Springfield, Massachusetts
February 7, 1997
36
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To C.M. Life Insurance Company:
We have audited the accompanying statutory statement of financial position of
C.M. Life Insurance Company (a Connecticut corporation and a wholly-owned
subsidiary of Connecticut Mutual Life Insurance Company) as of December 31,
1995, and the related statutory statements of income, changes in shareholder's
equity and cash flows for each of the two years in the period ended December 31,
1995. These financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our originally issued report dated February 15, 1996, we expressed an opinion
that the 1995 financial statements, prepared using accounting practices
prescribed or permitted by the Insurance Department of the State of Connecticut,
present fairly, in all material respects, the financial position of C.M. Life
Insurance Company as of December 31, 1995, and the results of its operations,
and its cash flows for each of the two years in the period ended December 31,
1995 in conformity with generally accepted accounting principles. As described
in Note 1 to the financial statements, pursuant to the provisions of Statement
of Financial Accounting Standards No. 120 (SFAS No. 120), Accounting and
Reporting by Mutual Life Insurance Enterprises and by Insurance Enterprises for
Certain Long-Duration Participating Contracts, financial statements of mutual
life insurance enterprises for periods ending on or before December 31, 1996,
prepared using accounting practices prescribed or permitted by insurance
regulators (statutory financial statements) are no longer considered
presentations in conformity with generally accepted accounting principles when
presented for comparative purposes with the enterprise's financial statements
for periods subsequent to the effective date of SFAS No. 120. Accordingly, our
present opinion on the presentation of the 1995 financial statements in
accordance with generally accepted accounting principles, as presented herein,
is different from that expressed in our previous report.
In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of C.M. Life Insurance Company as of December 31, 1995, or the results of its
operations and it cash flows for each of the two years in the period ended
December 31, 1995.
In our opinion, the financial statements referred to above do present fairly, in
all material respects, the financial position of C.M. Life Insurance Company as
of December 31, 1995 and the results of its operations and its cash flows for
each of the two years in the period ended December 31, 1995 in conformity with
accounting practices prescribed or permitted by the Insurance Department of the
State of Connecticut.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as whole. Schedule VI is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the financial statements and, in
our opinion, fairly states in all material respects the financial data required
to be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN, LLP
Hartford, Connecticut
February 15, 1996
(Except with respect to the matter discussed in Note 1,
as to which the date is March 4, 1996)
37
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------------------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
Form 8-K as required by Item 304 of Regulation S-K was filed on October 4, 1996
regarding a change in accountants.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
Position with
C.M. Life; Year Other Positions During
Name (Age at 12/31/96) Commenced the Past Five Years
- ---------------------- --------------- -------------------
Lawrence V. Burkett, Jr. (51) Director, Executive Vice
President and President and
Chief Executive Officer, General Counsel, MassMutual
since 1996 since 1993; Senior Vice President
and Deputy General Counsel; 1992-1993.
Ann Iseley (40) Treasurer, since 1996 Vice President and Treasurer
(Principal Financial Officer) MassMutual since 1996; Chief
Financial and Operations Officer,
Connecticut Mutual Financial
Services, 1994 - 1996;
Controller, The Mack Company,
1993-1994; Vice President - Finance,
Mutual of New York, 1988 - 1993.
Stuart H. Reese (41) Director and Senior Vice Senior Vice President, MassMutual
President - Investments, since since 1993; Investment Manager,
1996 Aetna Life and Casualty and
Affiliates, 1979-1993.
John B. Davies (47) Director, since 1996 Executive Vice President, Mass
Mutual since 1994; Associate
Executive Vice President, Mass
Mutual, 1994-1994; General Agent,
Mass Mutual, 1982-1993
Daniel J. Fitzgerald (48) Director, since 1996 Executive Vice President Corporate
Financial Operations, MassMutual
since 1994; Senior Vice President,
MassMutual, 1991-1994
38
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. (CONT'D )
- ------------------------------------------------------------
Position with
C.M. Life; Year Other Positions During
Name (Age at 12/31/96) Commenced the Past Five Years
- ---------------------- --------------- -------------------
Paul D. Adornato (58) Senior Vice President - Senior Vice President, MassMutual
Operations, since 1996 since 1986
Anne Melissa Dowling (38) Senior Vice President - Senior Vice President, MassMutual
Large Corporate Marketing, since 1996; Chief Investment Officer,
since 1996 Connecticut Mutual Life Insurance
Company, 1994-1996; Senior Vice
President - International, Travelers
Insurance Co., 1987-1993
Maureen R. Ford (41) Senior Vice President - Senior Vice President, MassMutual
Annuity Marketing, since 1996 since 1996, Marketing Officer,
Connecticut Mutual Life Insurance
Company, 1989-1996
Isadore Jermyn (46) Senior Vice President Senior Vice President and Actuary,
and Actuary, since 1996 MassMutual since 1995; Vice
President and Actuary, 1980-1995
Ann F. Lomeli (40) Secretary, since 1988 Vice President, Associate Secretary
and Associate General Counsel,
MassMutual since 1996; Corporate
Secretary and Counsel, Connecticut
Mutual Life Insurance Company,
1988-1996
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
The officers and directors of C.M. Life are employees of MassMutual and perform
their duties for C.M. Life as part of their employment with MassMutual. Many of
them serve as directors and officers of other companies that are also wholly
owned by MassMutual. Although applicable expense allocation agreements between
and among MassMutual and its subsidiaries (such as C.M. Life) do not
specifically allocate to the subsidiaries, portions of the salaries paid by
MassMutual, the amount of compensation received by any one director or officer
of C.M. Life from MassMutual for services performed for C.M. Life would not
exceed $100,000 annually. The directors of C.M. Life do not receive fees (or
expenses) for serving as directors of C.M. Life or for attending directors'
meetings. None of the officers or directors of C.M. Life owns shares of capital
stock of C.M. Life, which is wholly owned by MassMutual. The officers and
directors of C.M. Life, individually and as a group, hold (by virtue of their
ownership of insurance policies issued by MassMutual) interests in MassMutual of
less than one percent.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
This item is not applicable since the Registrant is wholly owned by MassMutual.
39
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
Reinsurance
- -----------
C.M. Life cedes a portion of its life insurance business to MassMutual and other
insurers in the normal course of business. C.M. Life's retention limit per
individual insured is $4,000 thousand; the portion of the risk exceeding the
retention limit is reinsured with other insurers. C.M. Life is contingently
liable with respect to ceded reinsurance in the event any reinsurer is unable to
fulfill its contractual obligations.
C.M. Life has a modified coinsurance quota-share reinsurance agreement with
MassMutual whereby C.M. Life cedes 50% of the premiums on certain universal life
policies issues in 1985 and 75% of the premiums on policies with issue dates on
or after January 1, 1986. In return MassMutual pays C.M. Life a stipulated
expense allowance, death and surrender benefits, and a modified coinsurance
adjustment. Reserves for payment of future benefits for the ceded policies are
retained by C.M. Life.
C.M. Life also has a stop-loss agreement with MassMutual, with maximum coverage
at $25,000 thousand, under which C.M. Life cedes claims which, in aggregate,
exceed $28,080 thousand in 1996, $24,245 thousand in 1995, and $18,348 thousand
in 1994. For each of the years, the limit was not exceeded. C.M. Life paid
approximately $400 thousand, $602 thousand, and $435 thousand in premiums under
the agreement in 1996, 1995 and 1994 respectively.
Related Party Transactions
- --------------------------
MassMutual and C.M. Life have an agreement whereby MassMutual for a fee will
furnish C.M. Life, as required, operating facilities, human resources, computer
software development and managerial services. Investment and administrative
services are provided to the Company pursuant to a management services agreement
with MassMutual. Fees incurred under the terms of the agreement were $45,914
thousand in 1996. Similar arrangements were in place with Connecticut Mutual
Life Insurance Company, C.M. Life's former parent, prior to its merger with
MassMutual. Fees incurred under the arrangement with Connecticut Mutual Life
Insurance Company were $34,008 thousand and $16,412 thousand, respectively.
Effective March 1, 1996, C.M. Life modified its underwriting agreements with
its affiliates, G.R. Phelps and MML Distributors, whereby C.M. Life will pay all
future commissions relating to variable annuity business in exchange for the
rights to retain all future policy administration fees and charges.
40
SCHEDULE I
C.M. LIFE INSURANCE COMPANY
SUMMARY OF INVESTMENTS OTHER THAN INVESTMENTS IN RELATED PARTIES
AS OF DECEMBER 31, 1996
($ IN THOUSANDS)
Fair Balance
Cost or Value Sheet
Type of Investment Other Basis (see note) Amount
----------- ---------- ----------
Bonds
U.S. Treasury Securities
and obligations of
U.S. Government Corporations
and Agencies $138,751 $139,962 $ 138,751
Debt Securities issued by Foreign
Governments 3,953 3,984 3,953
Mortgage-backed securities 37,395 37,415 37,395
State and local governments 10,263 10,406 10,263
Industrial securities 509,227 517,170 509,227
Utilities 36,935 37,944 36,935
-------- -------- ----------
Total Bonds 736,524 746,881 736,524
-------- -------- ----------
Common Stocks 47,195 55,642 55,642
Total Bonds and
Common Stock 783,719 $802,523 792,166
-------- ======== ----------
Other Investments:
Mortgage Loans N/A 33,791
Policy Loans 132,942 (see note) 132,942
Cash and Cash Equivalents 63,688 63,688 63,688
-------- -------- ----------
Total Other Investments 196,630 230,421
-------- ----------
Total Investments $980,349 $1,022,587
======== ==========
Note: Fair values for equity securities and fixed maturities approximate those
quotations published by applicable stock exchanges or are received from other
reliable sources. Approximately 98% of policy loans are comprised of variable
interest rate loans whose carrying value approximates fair value.
41
Schedule VI
C.M. Life Insurance Company
Reinsurance
For the Years Ended December 31, 1996, 1995 and 1994
($ In Thousands)
Ceded
Gross To Other Net
Amount Companies Amount
----------- ---------- -----------
December 31, 1996
Life insurance in force $24,357,428 $7,812,837 $16,544,591
=========== ========== ===========
Premium and other considerations:
Individual life and annuities $125,996 $46,512 $79,484
Group life 8,606 0 8,606
-------- ------- -------
Total Premium and other considerations: $134,602 $46,512 $88,090
======== ======= =======
December 31, 1995
Life insurance in force $19,132,954 $7,323,441 $11,809,513
=========== ========== ===========
Premium and other considerations:
Individual life and annuities $134,278 $50,732 $83,546
======== ======= =======
December 31, 1994
Life insurance in force $15,800,300 $7,310,290 $ 8,490,010
=========== ========== ===========
Premium and other considerations:
Individual life and annuities $111,238 $54,032 $57,206
======== ======= =======
42
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------
(a) 1. Financial Statements (set forth in Item 8.):
- Balance sheets as of December 31, 1996 and 1995.
- Statements of Operations for each of the three years ended
December 31, 1996, 1995 and 1994.
- Statements of Stockholder's Equity for each of the three years
ended December 31, 1996, 1995 and 1994.
- Statements of Cash Flows for each of the three years ended
December 31, 1996, 1995 and 1994.
- Notes to Financial Statements.
- Report of Independent Public Accountants.
2. Financial Statement Schedules (set forth below):
- Schedule I - Summary of Investments - Other than Investments in
Related Parties as of December 31, 1996.
- Schedule VI - Reinsurance for the years ended December 31, 1996,
1995 and 1994.
All other schedules are omitted because of the absence of conditions
under which they are required or because the information is shown in
the financial statements or notes thereto.
3. Exhibit Number
Per Item 601 of Description
Regulation S-K of Exhibits
--------------- -----------
3(a) Charter of C.M. Life Insurance Company.*
3(b) By Laws of C.M. Life Insurance Company.*
4(a) Form of Individual Contract for the Panorama Plus
Annuity.**
(i) Form of IRA Endorsement for the
Panorama Plus Annuity Individual Contract.**
(ii) Form of Terminal Illness Endorsement
for the Panorama Plus Annuity Individual
Contract.**
(iii) Form of Tax-Sheltered Annuity
Endorsement for the Panorama Plus Annuity
Individual Contract.**
(iv) Form of Qualified Plan Endorsement for
the Panorama Plus Annuity Individual
Contract.**
(v) Form of Unisex Endorsement for the
Panorama Plus Annuity Individual Contract.**
4(b) Form of Group Contract for the Panorama Plus
Annuity.**
(i) Form of IRA Endorsement for the
Panorama Plus Annuity Group Contract.**
(ii) Form of Terminal Illness Endorsement
for the Panorama Plus Annuity Group
Contract.**
(iii) Form of Tax-Sheltered Annuity
Endorsement for the Panorama Plus Annuity
Group Contract.**
43
(iv) Form of Qualified Plan Endorsement for
the Panorama Plus Annuity Group Contract.**
(v) Form of Unisex Endorsement for the
Panorama Plus Annuity Group Contract.**
4(c) Form of Individual Certificate for the Panorama
Plus Annuity.**
(i) Form of IRA Endorsement for the
Panorama Plus Annuity Individual
Certificate.**
(ii) Form of Terminal Illness Endorsement
for the Panorama Plus Annuity Individual
Certificate.**
(iii) Form of Tax-Sheltered Annuity
Endorsement for the Panorama Plus Annuity
Individual Certificate.**
(iv) Form of Qualified Plan Endorsement for
the Panorama Plus Annuity Individual
Certificate.**
(v) Form of Unisex Endorsement for the
Panorama Plus Annuity Individual
Certificate.**
4(d) Form of Application for the Individual Panorama
Plus Annuity.**
4(e) Form of Application for the Group Panorama Plus
Annuity.**
4(f) Form of Application Supplement for Panorama Plus
Tax Sheltered Annuity.**
4(g) Form of Certificate Application Supplement for
Panorama Plus Tax Sheltered Annuity.**
5 Opinion Regarding Legality (filed as Exhibit 5 to
Pre-Effective Amendment No. 1 to Registration
Statement filed April 13, 1992 on Form S-1 (Reg.
No. 33-45123))
10 Agreement to Purchase Shares by and between C.M.
Life Insurance Company and Connecticut Mutual
Financial Services Series Fund I, Inc.**
16 Change of independent accountant - Incorporate by
reference Form 8-K filed October 4, 1996.
24(b) Consent of Counsel (filed as Exhibit 24(b) to Pre-
Effective Amendment No. 1 to Registration Statement
filed April 13, 1992 on Form S-1 (Reg. No. 33-
45123)).
27 Financial Data Schedule
* Incorporated by reference to the initial registration statement on
Form N-4 for the Contracts and Panorama Plus Separate Account (File
No. 33-45122) as filed with the Securities and Exchange Commission on
January 16, 1992.
** Incorporated by reference to Pre-Effective Amendment No. 1 to the
registration statement on Form N-4 for the Contracts and Panorama Plus
Separate Account (File No. 33-45122) as filed with the Securities and
Exchange Commission on April 13, 1992.
(b) Reports on Form 8-K.
Form 8-K as required by Item 304 of Regulation S-K was filed on October
4, 1996 regarding a change in accountants.
(d) No additional financial statements are required to be filed.
44
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
C.M. LIFE INSURANCE COMPANY
(Registrant)
By: s/ Lawrence V. Burkett, Jr
--------------------------
Lawrence V. Burkett, Jr
President and Chief Executive Officer
(Principal Executive Officer)
Date: March 27, 1997
--------------
Pursuant to the requirements of the Securities Act of 1934, this report has been
signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
s/ Lawrence V. Burkett, Jr. Director and President March 27, 1997
- ----------------------------- --------------
Lawrence V. Burkett, Jr. (Principal Executive Officer)
s/ Ann Iseley Treasurer March 27, 1997
- ----------------------------- --------------
Ann Iseley (Principal Financial Officer)
s/ John Miller, Jr Comptroller March 27, 1997
- ----------------------------- --------------
John Miller, Jr. (Chief Accounting Officer)
s/ John B. Davies Director March 27, 1997
- ----------------------------- --------------
John B. Davies
45
s/ Daniel J. Fitzgerald Director March 27, 1997
- ----------------------------- --------------
Daniel J. Fitzgerald
s/ Stuart H. Reese Director March 27, 1997
- ----------------------------- --------------
Stuart H. Reese
46