<PAGE>
 
                                   FORM 10-Q



                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549


            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934



For Quarter Ended  September 30, 1996         Commission File Number  33-85988
                  ----------------------                            -----------
                    
                      
 

                          C.M. LIFE INSURANCE COMPANY
           --------------------------------------------------------
            (Exact name of registrant as specified in its charter)


           Connecticut                               06-1041383
           -----------                               ----------
     (State or other jurisdiction of                 (I.R.S. Employer
      incorporation or organization)                 Identification No.)


                140 Garden Street, Hartford, Connecticut 06154
                ----------------------------------------------
                   (Address of principal executive offices)
                                  (Zip Code)


                                (860) 987-6500
                                --------------
             (Registrant's telephone number, including area code)


                                     None
                                    ------
                    (Former name, former address and former
                  fiscal year, if changed since last report)



Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                             (1) Yes   X     No  __
                                     -----         
                             (2) Yes   X     No  __
                                     -----              

Registrant has 12,500 shares of common stock outstanding on September 30, 1996,
all of which are owned by Massachusetts Mutual Life Insurance Company.

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION (1) (A) AND
(B) OF FORM 10Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE
FORMAT.
<PAGE>
 
                          C.M. LIFE INSURANCE COMPANY


                                     INDEX

 
<TABLE> 
PART I:  Financial Information
         ---------------------
<S>      <C>                                                                 <C> 
         Item 1:  Financial Statements:

                   Statement of Financial Position -
                    September 30, 1996 and December 31, 1995  .............. 3

                   Statement of Operations -
                    Three Months Ended
                    September 30, 1996 and 1995   .......................... 4

                   Statement of Operations -
                    Nine Months Ended
                    September 30, 1996 and 1995   .......................... 5

                   Statement of Stockholder's Equity -
                    Nine Months Ended
                    September 30, 1996 and 1995   .......................... 6

                   Statement of Cash Flows -
                    Nine Months Ended
                    September 30, 1996 and 1995   .......................... 7

                   Notes to Financial Statements  .......................... 8

         Item 2:  Management's Discussion and Analysis of
                  Financial Condition and Results of
                  Operations   ............................................. 10


PART II:  Other Information
          -----------------

          Item 1:  Not applicable.

          Item 2:  Not applicable.

          Item 3:  Not applicable.

          Item 4:  Not applicable.

          Item 5:  Not applicable.
 
          Item 6:  Exhibits and Reports on Form 8-K  ....................... 13
</TABLE> 

2
<PAGE>
 
                          C.M. LIFE INSURANCE COMPANY
                        STATEMENT OF FINANCIAL POSITION
                   ($ IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                               September 30,         December 31, 
                                                        1996                 1995
                                              ---------------      ---------------

ASSETS:
<S>                                           <C>                  <C> 
Investments:
Fixed maturities at cost                          $  742,924          $  736,099
Equity securities at cost                             54,727              72,572
Mortgage loans on real estate at net                  32,068              26,705
 realizable value
Policy loans at outstanding balance                  129,529             126,014
Cash and cash equivalents                            100,078              15,069
                                              ---------------      ---------------
Total Investments                                  1,059,326             976,459
                                              ---------------      ---------------
 
Investment and insurance amounts                      25,043              22,515
 receivable
Other assets                                             995               3,069
Assets of Separate Account                           692,900             531,432
                                              ---------------      --------------- 
TOTAL ASSETS                                      $1,778,264          $1,533,475
                                              ===============      ===============
 
LIABILITIES AND STOCKHOLDER'S EQUITY:
Liabilities:
Policyholders' reserves and funds                 $  892,336          $  867,672
Policy claims and benefits currently                   2,316               2,086
 payable
Federal income tax payable                            (1,793)              2,821
Asset valuation reserve                               19,849              15,869
Remittances and items not allocated                   35,207               3,861
Transfers due from Separate Account                  (23,832)            (22,301)
Liabilities of Separate Account                      692,900             531,432
Other liabilities                                     43,905              18,836
                                              ---------------      ---------------
Total Liabilities                                  1,660,888           1,420,276
                                              ---------------      --------------- 
 
STOCKHOLDER'S EQUITY:
Common stock, $200 par value -
     50,000 shares authorized,
     12,500 shares issued and                          2,500               2,500
      outstanding
Additional paid-in capital                            43,759              43,759
Retained earnings                                     71,117              66,940
                                              ---------------      ---------------
Total Stockholder's Equity                           117,376             113,199
                                              ---------------      ---------------
TOTAL LIABILITIES AND
 STOCKHOLDER'S EQUITY                             $1,778,264          $1,533,475
                                              ===============      ===============
</TABLE>

The accompanying notes are an integral part of these unaudited financial
statements.

3
          
<PAGE>
 
                          C.M. LIFE INSURANCE COMPANY
                            STATEMENT OF OPERATIONS
            FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
                               ($ IN THOUSANDS)


<TABLE>
<CAPTION>
                                            1996       1995
                                        --------------------
 
REVENUES:
<S>                                       <C>        <C>
   Premiums and annuity considerations    $ 76,622    66,294
   Net investment income and other          17,498    17,075
    income                                            
                                          --------  --------
                                                     
        Total revenues                      94,120    83,369
                                                     
BENEFITS AND EXPENSES:                               
   Policy payments and benefits             27,131    13,614
   Additions to policyholders' reserves     53,802    52,820
    and funds                                        
   Operating expenses                       12,608    10,099
      Commissions                            8,014     3,129
      State taxes, licenses and fees           399     1,333
                                                     
        Total benefits and expenses        101,954    80,995
                                          --------  --------
                                                      
        Net gain (loss) before federal      (7,834)    2,374
         income taxes                                 
                                                      
FEDERAL INCOME TAX EXPENSE (BENEFIT)        (1,984)      451
                                                      
                                                      
        Net gain from operations            (5,850)    1,923
                                                      
NET REALIZED CAPITAL LOSS                   (1,424)     (506)
                                          --------- ---------
 
     NET INCOME (LOSS)                    $ (7,274)  $ 1,417
                                          ========= =========
</TABLE>



The accompanying notes are an integral part of these unaudited financial
statements.
Prior year amounts have been reclassed to conform with 1996 presentation.

4
<PAGE>
 
                          C.M. LIFE INSURANCE COMPANY
                            STATEMENT OF OPERATIONS
             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
                               ($ IN THOUSANDS)

<TABLE>
<CAPTION>
                                            1996      1995
                                         --------- ---------
<S>                                      <C>       <C>
REVENUES:                                          
   Premiums and annuity considerations    $238,305  $196,452
   Net investment income and other          54,686    51,293
    income                                         
                                         --------- ---------
                                                   
        Total revenues                     292,991   247,745
                                                   
BENEFITS AND EXPENSES:                             
   Policy payments and benefits             72,720    42,271
   Additions to policyholders' reserves    166,891   155,527
   and funds                                      
   Operating expenses                       24,898    23,603
   Commissions                              16,617     8,979
   State taxes, licenses and fees            2,496     3,848
                                                   
        Total benefits and expenses        283,622   234,228
                                         --------- ---------
                                                   
        Net gain before federal income       9,369    13,517
         taxes                                     
                                                   
FEDERAL INCOME TAX EXPENSE                   5,561     4,274
                                                   
                                                   
        Net gain from operations             3,808     9,243
                                                   
NET REALIZED CAPITAL GAIN (LOSS)               846      (708)
                                         --------- ---------
                                                   
     NET INCOME                           $  4,654  $  8,535
                                         ========= =========
</TABLE>

The accompanying notes are an integral part of these unaudited financial
statements.
Prior year amounts have been reclassed to conform with 1996 presentation.

5
<PAGE>
 
                          C.M. LIFE INSURANCE COMPANY
                       STATEMENT OF STOCKHOLDER'S EQUITY
             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
                               ($ IN THOUSANDS)


<TABLE>
<CAPTION>
                                                 1996          1995
                                              ----------    ----------
                                                            
<S>                                           <C>           <C>
STOCKHOLDER'S EQUITY, beginning of year         $113,199      $103,837
                                                            
Increases (decreases) due to:                               
  Net gain from operations                         4,654         8,535
  Net unrealized capital gain                      1,038         6,124
  Change in asset valuation reserve               (3,981)       (9,371)
  Change in nonadmitted assets                      (533)         (981)
  Change in general investment reserve             2,999             -
                                              ----------    ----------
Net increase                                       4,177         4,307
                                              ----------    ----------
                                                            
STOCKHOLDER'S EQUITY, end of period             $117,376      $108,144
                                              ==========    ==========
</TABLE>

The accompanying notes are an integral part of these unaudited financial
statements.
Prior year amounts have been reclassed to conform with 1996 presentation.

6
<PAGE>
 
                          C.M. LIFE INSURANCE COMPANY
                            STATEMENTS OF CASH FLOWS
             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
                                ($ IN THOUSANDS)

<TABLE>
<CAPTION>
                                             1996           1995
                                        ------------  ------------
<S>                                     <C>           <C>  
Cash Provided:                                        

Premiums and annuity considerations,                  
     net of reinsurance                   $ 231,703      $ 182,039
Net investment and other income              47,971         59,929
                                          ----------     ----------            
                                            279,674        241,968
                                                      
Benefits and interest to policyholders                
 and beneficiaries, net of reinsurance     (184,946)      (126,481)
Operating expenses, commissions,                      
  other expenses and taxes paid             (14,126)       (44,711)
Other payments, net                          (3,515)       (10,836)
                                          ----------     ----------             
Net cash provided by operations              77,087         59,940
                                          ----------     ----------
                                                      
Proceeds from the disposition of fixed                
     maturities, equity securities and                
      mortgage                                        
     loans on real estate                   114,315        358,417
Other cash provided                             860   
                                        ------------  ------------
      Total cash provided                   192,262        418,357
                                        ------------  ------------
                                                      
CASH APPLIED:                                         
                                                      
Purchases of fixed maturities, equity                 
 securities                                           
     and mortgage loans on real estate      111,007        419,074
Other applications                           (3,754)           843
     Total cash applied                     107,253        419,917
                                        ------------  ------------
                                                      
Net increase in cash and cash                
 equivalents                                 85,009         (1,560)         
                                                      
CASH AND CASH EQUIVALENTS:                            
                                                      
     Beginning of year                       15,069          3,026
                                        ------------  ------------
                                                      
     End of period                        $ 100,078      $   1,466
                                        ============  ============
</TABLE>


The accompanying notes are an integral part of these unaudited financial
statements.
Prior year amounts have been reclassed to conform with 1996 presentation.

7
<PAGE>
 
                          C.M. LIFE INSURANCE COMPANY
                         NOTES TO FINANCIAL STATEMENTS
                          SEPTEMBER 30, 1996 AND 1995
                            (AMOUNTS IN THOUSANDS)
                                  (UNAUDITED)

1.  General:
    ------- 


     C.M. Life Insurance Company (C.M. Life) is a wholly owned stock life
     insurance subsidiary of Massachusetts Mutual Life Insurance Company
     (MassMutual).

     Effective February 29, 1996 Connecticut Mutual Life Insurance Company
     (Connecticut Mutual) merged with MassMutual.  Connecticut Mutual was the
     former parent of C.M. Life.
     
     The enclosed financial statements have been prepared in accordance with
     Statutory Accounting Principles. In the opinion of C.M. Life these
     financial statements contain all adjustments, consisting of only normal
     recurring adjustments, necessary to present fairly the financial position
     as of September 30, 1996 and December 31, 1995, the results of its
     operations for the three month and nine month periods ended September 30,
     1996 and 1995, stockholder's equity and its cash flows for the nine months
     ended September 30, 1996 and 1995.

     C.M. Life's financial statements have been prepared in conformity with
     accounting practices and procedures of the National Association of
     Insurance Commissioners (NAIC) as prescribed or permitted by the Insurance
     Department of the State of Connecticut.

     The Financial Accounting Standards Board (FASB), which has no role in
     establishing regulatory practices, issued Interpretation 40, Applicability
     of Generally Accepted Accounting Principles to Mutual Life Insurance and
     Other Enterprises, and Statement of Financial Accounting Standards No. 120,
     Accounting and Reporting by Mutual Life Insurance Enterprises for Certain
     Long-Duration Participating Contracts. The American Institute of Certified
     Public Accountants, which also has no role in establishing regulatory
     accounting practices, issued Statement of Position 95-1, Accounting for
     Certain Insurance Activities of Mutual Life Insurance Enterprises. These
     pronouncements will require mutual life insurance companies and their
     wholly owned stock life insurance subsidiaries to modify their financial
     statements in order to continue to be in accordance with generally accepted
     accounting principles, effective for financial statements issued for 1996
     and prior periods presented. The manner in which policy reserves, new
     business acquisition costs, asset valuations and related tax effects are
     recorded will change. Management has not determined the impact of such
     changes on C.M. Life's Statement of Operations, but believes implementation
     of these pronouncements will cause Stockholders' Equity to increase. C.M.
     Life is in the process of reviewing if it will adopt the above
     pronouncements.

2.   Related Party Transactions:
     -------------------------- 

     The parent, MassMutual, allocates certain expenses to C.M. Life for
     providing operating facilities, human resources, computer software
     development and managerial services. Total expenses allocated to C.M. Life
     were approximately $12,615 and $25,187 for the three and nine month periods
     ended September 30, 1996 and $10,301 and $24,827 for the same periods in
     1995.

     Effective March 1, 1996, C.M. Life modified its variable annuity selling
     agreement with G.R. Phelps (an affiliated broker-dealer) such that variable
     annuity commissions will be paid by C.M. Life and all related expense and
     surrender fees received from variable annuity contract holders will be
     retained by C.M. Life.

8
<PAGE>
 
3.  Net Investment and Other Income:
    ------------------------------- 

    Net investment and other income is comprised of the following:

<TABLE>
<CAPTION>
                                         Three Months     Nine Months Ended
                                             Ended
                                         September 30,      September 30,
                                     --------------------------------------
                                         1996     1995      1996      1995
                                     --------- --------- --------- --------
<S>                                    <C>       <C>      <C>       <C>
Fixed Maturities                       $13,420   $13,319  $41,783   $40,368
Mortgage loans on real estate              334       646    3,204     2,158
Policy loans                             2,523     2,548    7,513     7,304
Amortization of IMR                        (45)       37      (83)      (48)
Other                                    1,176       489    2,514     1,394
                                     --------- --------- --------- -------- 
    Total Investment Income             17,408    17,039   54,931    51,176
Less: Applicable investment expense        224       384      461     1,049
                                     --------- --------- --------- -------- 
 
    Net Investment Income               17,184    16,655   54,470    50,127
Other Income                               314       420      216     1,166
    Net Investment and Other Income    $17,498   $17,075  $54,686   $51,293
                                     ========= ========= ========= ========
</TABLE>

9
<PAGE>
 
                                    ITEM 2.
               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS


     Results of Operations (dollar amounts in thousands)
     ---------------------------------------------------

     Three Months Ended September 30, 1996 Compared with 1995
     --------------------------------------------------------

     For the three months ended September 30, 1996, C.M. Life had a net loss of
     ($7,274) as compared to net income of $1,417 for the same period in 1995.
     The decrease in net income of $8,691 was attributable to increased premium
     and annuity considerations of $10,328, an increase in net investment and
     other income of $423 and a decrease in federal income taxes of $2,435;
     offset by an increase in policy benefits of $14,499, increased operating
     expenses and taxes, licenses and fees of $1,575, increased commission
     expenses of $4,885, and an increase in net realized capital losses of $918.

     Premiums and annuity considerations for the three months ended September
     30, 1996 increased $10,328 to $76,622 in 1996 from $66,294 in 1995;
     primarily due to increased sales of the Universal Life Enterprise Plus and
     variable annuity products partially offset by lower sales of single premium
     deferred annuity products.

     Premiums ceded decreased $410 to $11,695 from $12,105 in 1995, the decrease
     is primarily due to lower direct premiums for the reinsured block of
     business.

     Net investment and other income increased $423 from 1995; this increase was
     primarily attributable to increased invested assets, primarily fixed
     maturities and other invested assets, in addition to lower investment
     expenses.

     Expenses related to policy benefits and payments, insurance operations,
     acquisition and state taxes and fees increased $20,959 to $101,954 in 1996
     from $80,995 in 1995. This increase is partially attributed to increases in
     acquisition costs. Surrender benefits increased $5,141 from $10,298 in 1995
     to $15,439 in 1996 while death claims, annuity and disability benefits
     increased $7,107 from $4,147 in 1995 to $11,254 in 1996. Reserves ceded
     increased $1,204 to $3,115 in 1996 from $1,911 in 1995. Commissions
     increased $4,885 primarily as a result of the revised variable annuity
     selling agreement with G.R. Phelps, discussed above.

     Reinsurance benefits and expenses ceded decreased $1,169 to $9,655 in
     1996 from $10,824 in 1995.

     Federal income tax expense decreased by $2,435 from 1995. Taxable income
     decreased $7,876 from taxable income of $2,206 in 1995 to a loss of
     ($5,670) in 1996. The change in taxable income is primarily attributable to
     the $10,209 decrease in net gain from operations offset by book tax
     differences of $2,333.

     Nine Months Ended September 30, 1996 Compared with 1995
     -------------------------------------------------------

     For the nine months ended September 30, 1996, C.M. Life had net income of
     $4,654 as compared with net income of $8,535 for the same period in 1995.
     The decrease in net income of $3,881 was attributable to increased premium
     and annuity considerations of $41,853, an increase in net investment and
     other income of $3,393, and an increase in net realized capital gains of
     $1,554 to a gain of $846 in 1996 from a loss of $708 in 1995; partially
     offset by increased policy benefits and commission expenses of $49,451 and
     increased federal income taxes of $1,287.

10
<PAGE>
 
     Premiums and annuity considerations increased $41,853 to $238,305 in 1996
     from $196,452 in 1995; primarily due to increased sales of the Universal
     Life Enterprise Plus and variable annuity products offset by lower sales on
     single premium deferred annuity products.

     Premiums ceded decreased $1,375 from $38,603 in 1995 to $37,288 in 1996,
     due to lower direct premiums for the reinsured block of business.

     Net investment and other income increased by $3,393 from 1995; this
     increase was primarily attributable to increased invested assets, primarily
     fixed maturities, mortgage loans on real estate and short-term investments,
     in addition to lower investment expenses.

     Expenses related to policy benefits, claims payments, insurance operations,
     acquisition and state taxes and fees increased $49,394 to $283,622 in 1996
     from $234,228 in 1995. This increase is partially attributed to increased
     acquisition costs. Surrender benefits increased $20,022 from $28,621 in
     1995 to $48,643 in 1996 while death claims, annuity and disability benefits
     increased $9,784 from $13,878 in 1995 to $23,662 in 1996. Reserves ceded
     increased $5,830 to $8,831 in 1996 from $3,001 in 1995. Commissions
     increased $7,638 primarily as a result of the revised variable annuity
     selling agreement with G.R. Phelps, previously discussed and increased
     Universal Life Sales.

     Reinsurance benefits and expenses ceded decreased $1,748 to $39,023 in 1996
     from $40,771 in 1995.

     Federal income tax expense increased by $1,287 from 1995. Taxable income
     increased $2,644 from $13,131 in 1995 to $15,775. The change in taxable
     income is primarily attributable to book to tax adjustments of $6,793,
     offset by the decrease in taxable income of $4,149.

     Net realized capital gains increased $1,554 from 1995 primarily due to
     sales of unaffiliated common stocks.


     Liquidity and Capital Resources
     -------------------------------

     C.M. Life's operations have historically provided substantial cash flow.
     The majority of the Company's cash is invested in investment-grade
     securities to provide ample protection for policyholders. The liabilities
     of the Company are predominantly long-term in nature and, therefore, the
     Company invests in long-term fixed maturity investments such as bonds.

     C.M. Life's liquidity requirements were met by funds provided from
     operations and investment activity. The primary uses of funds were to
     purchase investments and to pay commissions, insurance operating expenses
     and policy benefits.


     Segment Information
     -------------------

     During 1996 and 1995, 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 was not dependent upon any single customer and
     no single customer accounted for more than 10% of revenues in 1996 and
     1995.

11
<PAGE>
 
     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
     -----------

     C.M. Life is engaged in a business that is highly competitive because of
     the large number of stock and mutual life insurance companies and other
     entities marketing insurance products comparable to those of C.M. Life.
     
     At December 31, 1995, MassMutual had over $52 billion in life insurance
     assets and $103 billion in total assets under management. Best's Insurance
     Reports, Life-Health Edition, upgraded C.M. Life's rating on March 4, 1996
     to the highest possible rating of A++. MassMutual's ratings were the
     highest possible from A.M. Best (A++), Duff & Phelps (AAA), and the second-
     highest rating from Moody's Investors Service (Aa1).
     
     Regulation
     ----------
     
     Currently, the Federal government does not directly regulate the business
     of insurance. However, Federal legislative, regulatory and judicial
     decisions and initiatives often have significant effects on C.M. Life's
     business. Types of changes that are most likely to affect C.M. Life's
     business include changes to: (a) the taxation of life insurance companies;
     (b) the tax treatment of insurance products; (c) the securities laws,
     particularly as they relate to insurance and annuity products; (d) the
     "business of insurance" exemption from any of the provisions of the anti-
     trust laws; and (e) declining barriers which prevent most banks from
     selling or underwriting insurance.

12
<PAGE>
 
                                    ITEM 6.
                       EXHIBITS AND REPORTS ON FORM 8-K

     Form 8-K was filed on February 29, 1996 to disclose a Change in Control of
     Registrant. The Registrant's sole shareholder, Connecticut Mutual Life
     Insurance Company was merged with and into Massachusetts Mutual Life
     Insurance Company with MassMutual as the surviving company on February 29,
     1996 at 11:59 pm.

     Form 8-K was filed on October 4, 1996 to disclose a change in Registrants
     Certifying Accountant. The Registrant's previous certifying accountant was
     Arthur Anderson, LLP. Effective October 2, 1996, the Registrants new
     certifying accountant is Coopers & Lybrand, LLP.

13
<PAGE>
 
                                  SIGNATURES



     Pursuant to the requirements of the Securities Exchange 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
                                          
                                          
Date November 12, 1996                     /s/ David E. Sams
     -----------------                    ------------------------------
                                                 David E. Sams, Jr.
                                                 Director and President
                                          
                                          
                                          
Date November 12, 1996                     /s/ John Miller, Jr
     -----------------                    ------------------------------   
                                                 John Miller, Jr.
                                                 Vice President and Comptroller

14