<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  June 30, 1997              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 June 30, 1997, 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


PART I:   Financial Information
          ---------------------


          Item 1:  Condensed Financial Statements:

                     Statutory Statement of Financial Position -
                      June 30, 1997 and December 31, 1996.  .  .  .  .  . 3

                     Statutory Statement of Income -
                      Three Months Ended
                      June 30, 1997 and 1996.  .  .  .  .  .  .  .  .  .  4

                     Statutory Statement of Income -
                      Six Months Ended
                      June 30, 1997 and 1996.  .  .  .  .  .  .  .  .  .  5
 
                     Statutory Statement of Shareholder's Equity -
                      Six Months Ended
                      June 30, 1997 and 1996.  .  .  .  .  .  .  .  .  .  6

                     Statutory Statement of Cash Flows -
                      Six Months Ended
                      June 30, 1997 and 1996.  .  .  .  .  .  .  .  .  .  7

                     Condensed Notes to Financial Statements  .  .  .  .  8

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

          Item 3: Not Applicable


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

          Item 1:  None.

          Item 2:  Not applicable.

          Item 3:  Not applicable.

          Item 4:  Not applicable.

          Item 5:  None.

          Item 6:  Exhibits.  .  .  .  .  .  .  .  .  .  .  .  .  .  .   17 

                                       2
<PAGE>
 
                          C.M. LIFE INSURANCE COMPANY

             STATUTORY STATEMENT OF FINANCIAL POSITION (Unaudited)

<TABLE>
<CAPTION>
                                                June 30,   December 31,
                                                  1997         1996
                                                --------   ------------
 
                                                (In Thousands Except for
                                                  Share Information)
<S>                                            <C>           <C>

Assets:
 
Bonds                                          $  734,106    $  736,524
Common stocks                                      61,010        55,642
Mortgage loans                                     77,869        33,791
Policy loans                                      139,052       132,942
Cash and short-term instruments                    33,197        63,688
                                               ----------    ----------
  Total invested assets                         1,045,234     1,022,587
 
Investment and insurance amounts receivable        26,001        32,783
Transfer due from separate account                 30,646        24,278
Federal income tax receivable                         383         7,094
Other assets                                           87            87
Separate account assets                           941,596       779,742
                                               ----------    ----------
 
                                               $2,043,947    $1,866,571
                                               ==========    ==========

<CAPTION> 
Liabilities:
 
Policyholders' reserves and funds              $  927,268    $  907,492
Policy claims and other benefits                    5,042         3,843
Payable to parent and affiliates                   14,730         9,654
Asset valuation reserve                            21,285        18,475
Investment reserves                                 4,062         3,329
Other liabilities                                  19,979        34,292
Separate account reserves and liabilities         941,596       779,742
                                               ----------    ----------
 
                                                1,933,962     1,756,827
                                               ----------    ----------
 
<CAPTION> 
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
Retained earnings                                  63,726        63,485
                                               ----------    ----------
                                                  109,985       109,744
                                               ----------    ----------
                                               $2,043,947    $1,866,571
                                               ==========    ==========
</TABLE>

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

                                       3
<PAGE>
 
                          C.M. LIFE INSURANCE COMPANY

                   STATUTORY STATEMENT OF INCOME (Unaudited)

<TABLE>
<CAPTION>
                                          Three Months Ended June 30,
 
                                                  1997       1996
                                                  ----       ----
                                                   (In Thousands)
<S>                                            <C>        <C> 
Income:
 
Premium income                                 $76,765    $71,951
Net investment and other income                 17,503     21,220
                                               -------    -------
 
                                                94,268     93,171
                                               -------    -------

Benefits and expenses:
     
Policy benefits and payments                    26,564     24,040
Addition to policyholder's reserves, funds
  and separate accounts                         48,158     50,184
Operating expenses                               8,986      6,117
Commissions                                      5,249      5,440
State taxes, licenses and fees                   1,021        832
                                               -------    -------
                                                89,978     86,613
Net gain from operations before federal
  income taxes                                   4,290      6,558
 
Federal income taxes                             6,149      3,312
                                               -------    -------
Net gain (loss) from operations                 (1,859)     3,246
 
Net realized capital loss                            5         42
                                               -------    -------
 
Net income (loss)                              $(1,864)   $ 3,204
                                               =======    =======
</TABLE>



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

                                       4
<PAGE>
 
                          C.M. LIFE INSURANCE COMPANY

                   STATUTORY STATEMENT OF INCOME (Unaudited)

<TABLE>
<CAPTION>
                                              Six Months Ended June 30,

                                                   1997        1996
                                                   ----        ----
                                                    (In Thousands)
<S>                                           <C>         <C> 
Income:
 
Premium income                                 $154,863    $153,584
Net investment and other income                  34,327      39,698
                                               --------    --------
 
                                                189,190     193,282
                                               --------    --------
 
Benefits and expenses:
 
Policy benefits and payments                     53,577      45,809
Addition to policyholder's reserves, funds
  and separate accounts                          87,592     107,371
Operating expenses                               20,648      12,199
Commissions                                      12,724       8,603
State taxes, licenses and fees                    2,185       2,097
                                               --------    --------
                                                176,726     176,079
Net gain from operations before federal
  income taxes                                   12,464      17,203
 
Federal income taxes                             10,051       7,545
                                               --------    --------
Net gain from operations                          2,413       9,658
 
Net realized capital gain (loss)                   ( 15)      2,271
                                               --------    --------
 
Net income                                     $  2,398    $ 11,929
                                               ========    ========
</TABLE>



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

                                       5
<PAGE>
 
                          C.M. LIFE INSURANCE COMPANY

      STATUTORY STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY (Unaudited)

<TABLE> 
<CAPTION> 
                                         Six Months Ended June 30,

                                              1997       1996
                                              ----       ----
                                               (In Thousands)
 
<S>                                         <C>        <C>
Shareholder's equity, beginning of year     $109,744   $113,199
Increases (decreases) due to:
Net income                                     2,398     11,929
Change in asset valuation and investment
  reserves                                    (3,542)    (4,916)
Change in non-admitted assets                   (514)      (287)
Net unrealized capital gain                    1,899        335
                                            --------   --------
 
                                                 241      7,061
                                            --------   --------
 
Shareholder's equity, end of period         $109,985   $120,260
                                            ========   ========
</TABLE>



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

                                       6
<PAGE>
 
                          C.M. LIFE INSURANCE COMPANY

                 STATUTORY STATEMENT OF CASH FLOWS (Unaudited)

<TABLE> 
<CAPTION>         
                                                                 Six Months Ended June 30,

                                                                    1997       1996
                                                                    ----       -----

                                                                     (In Thousands)
<S>                                                              <C>         <C>
Operating activities:
 
    Net income                                                   $   2,398   $  11,929
    Additions to policyholder's reserves, funds,
      and other benefits                                            20,975      15,443
    Net realized capital (gain) loss                                    15      (2,271)
    Change in payable from parent                                    5,076       5,736
    Other changes                                                   (1,851)      5,506
                                                                 ---------   ---------
 
    Net cash provided by operating activities                       26,613      36,343
 
Investing activities:
    Loans and purchases of investments                            (181,333)   (102,473)
    Sales or maturities of investments and
      receipts from repayment of loans                             129,040      80,896
                                                                 ---------   ---------
 
    Net cash used in investing activities                          (52,293)    (21,577)
 
Financing and miscellaneous activities:
    Changes in remittances and items not allocated, and other       (4,811)     62,728
                                                                 ---------   ---------
 
Increase (decrease) in short-term investments                      (30,491)     77,494
 
Cash and short-term investments, beginning of
  year                                                              63,688      15,069
                                                                 ---------   ---------
 
Cash and short-term investments, end of period                   $  33,197   $  92,563
                                                                 =========   =========
</TABLE>


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

                                       7
<PAGE>
 
                          C.M. LIFE INSURANCE COMPANY
                         NOTES TO FINANCIAL STATEMENTS
                                 JUNE 30, 1997
                                  (UNAUDITED)


1.  General:
    --------

    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.

    In the opinion of C.M. Life these financial statements contain all
    adjustments, consisting of only normal recurring adjustments, necessary to
    present fairly its financial position in accordance with statutory
    accounting principles, as of June 30, 1997 and December 31, 1996, the
    results of its operations for the three month and six month periods ended
    June 30, 1997 and 1996 and shareholder's equity and its cash flows for the
    six months ended June 30, 1997 and 1996.

    The accompanying unaudited interim financial statements have been prepared
    in accordance with the instructions to Form 10-Q and the rules and
    regulations of the Securities and Exchange Commission. These financial
    statements have been prepared under the presumption that users of the
    interim financial information have either read or have access to C.M. Life's
    audited financial statements for the year ended December 31, 1996.
    Accordingly, footnote disclosures, which would substantially duplicate the
    disclosures contained in C.M. Life's December 31, 1996 audited financial
    statements, have been omitted from these interim financial statements.
    Certain information and footnote disclosures normally included in financial
    statements prepared in accordance with statutory accounting principles have
    been condensed or omitted pursuant to instructions, rules and regulations.
    Although C.M. Life believes that the disclosures are adequate to make the
    information presented not misleading, it is suggested that these unaudited
    interim financial statements be read in conjunction with the audited
    financial statements and the notes thereto included in C.M. Life's annual
    report on Form 10-K for the year ended December 31, 1996.

    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

    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.

                                       8
<PAGE>
 
    The preparation of financial statements requires management to make
    estimates and assumptions that affect the reported amounts of assets and
    liabilities, as well as disclosures of contingent assets and liabilities, at
    the date of the 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.
      
 
2.  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 C.M. Life pursuant to a management
    services agreement with MassMutual.  Fees incurred under the terms of the
    agreement were $10,910 thousand and $21,068 thousand for the three and six
    month periods ended June 30, 1997 and $6,542 thousand and $12,360 thousand
    for the same periods 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.

    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 and 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 certain universal
    life policies with issue dates on or after January 1, 1986.  In return,
    MassMutual pays C.M. Life a stipulated expense allowance, death benefits,
    surrender charges, and a modified coinsurance adjustment.  Reserves for
    payment of future benefits for the ceded policies are retained by C.M. Life.
 
<TABLE> 
<CAPTION>  

3   Net Investment Income
    ---------------------
                                                   Three Months Ended      Six Months Ended
                                                         June 30,              June 30,
                                                    1997          1996      1997      1996
                                                  -------        -------   -------   -------
                                                                  (in Thousands)
<S>                                               <C>            <C>       <C>       <C> 
Gross Investment Income
 Bonds                                            $13,758        $14,237   $27,364   $28,366
 Common and preferred stock                           650            120       828       292
 Mortgage loans                                     1,187          2,145     1,874     2,870
 Policy loans                                       2,669          2,460     5,300     4,990
 Cash and short-term investments                      612            909     1,385     1,256
 Other                                                 59            246        61      (127)
                                                  -------        -------   -------   -------
 Total gross investment income                     18,935         20,117    36,812    37,647
Less: investment expenses                             303            161       561       322
                                                  -------        -------   -------   -------
Net investment income                             $18,632        $19,956   $36,251   $37,325
                                                  =======        =======   =======   =======
</TABLE>


4.  Recent Accounting Pronouncements
    --------------------------------

    In February 1997, the Financial Accounting Standards Board ("FASB") issued
    Statement of Financial Accounting Standards No. 129, "Disclosure of
    information about Capital Structure", and is effective for financial
    statements issued for periods ending after December 15, 1997. The adoption
    of this pronouncement is expected to have no impact on the financial
    statements of C. M. Life.

    In June of 1997, the FASB issued two pronouncements, Statement of Financial
    Accounting Standards No. 130, "Reporting Comprehensive Income," and No. 131,
    "Disclosures about Segments of an Enterprise and Related

                                       9
<PAGE>
 
    Information." and are effective for financial statements issued for periods
    beginning after December 15, 1997. The adoption of these pronouncements is
    expected to impact the presentation of financial information only.


                                        
5.  Other
    -----

    Certain prior year amounts have been reclassed to conform to 1997
    presentation.

                                        
                                        
                                    ITEM 2.
               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS
                                        
Results of Operations
---------------------
For the Three Months Ended June 30, 1997
----------------------------------------
    Compared to the Three Months Ended June 30, 1996
    ------------------------------------------------
For the three months ended June 30, 1997, C.M. Life had a net loss of $1,864
thousand, as compared with net income of $3,204 thousand for the same period in
1996. The decrease in net income of $5,068 thousand is attributable to increased
sales of Universal Life policies, which in the year of issuance, generate
acquisition costs which exceed the revenues received, a decrease in investment
and other income and an increase in federal income tax expense attributable to
taxable income in excess of book income.

Premium income, net of reinsurance ceded, increased $4,814 thousand to $76,765
thousand for the three months ended June 30, 1997 from $71,951 thousand for the
same period during 1996. The 6.7% increase in premiums is attributable to a
decrease in variable annuity products of 10.8% from the prior year, offset by a
65.3% increase in Universal Life premiums, the result is a change in C.M. Life's
mix of business in which Universal and other life products represented 36% of
total premium income during 1997 compared to 23% for 1996, while annuity
products represented 64% during 1997 compared to 77% in 1996.

The following table sets forth premium information for C.M. Life's products.

<TABLE>
<CAPTION>
                                          Three Months Ended June 30,
                                       1997                          1996
                                       ----                          ----
                                                (In Thousands)
      <S>                              <C>                  <C>         
      Premium income
          Universal and other life     $27,290    36%       $16,506  23%
          Annuities                     49,475    64%        55,445  77%
                                       -------              -------
          Total                        $76,765              $71,951
                                       =======              =======
</TABLE>

Net investment and other income decreased $3,717 thousand to $17,503 thousand in
1997 from $21,220 thousand in 1997. Other income from reinsurance ceded
decreased by $2,393 thousand primarily due to reserve adjustments in excess of 
Commission and expense allowances due to growth in the reinsured block of 
business. Net investment income decreased by $1,324 thousand which was
attributable to a slight decline in the gross yield for the portfolio.

Policy benefits and payments increased $2,524 thousand to $26,564 thousand in
1997 from $24,040 thousand in 1996. Surrender benefits increased by $3,728
thousand, essentially due to increased variable and fixed annuity withdrawals
and contract surrenders.

                                       10
<PAGE>
 
Addition to policyholder reserves, funds and separate accounts decreased $2,026
thousand to $48,158 thousand in 1997 from $50,184 thousand in 1996. The decrease
is attributable to an increase in life insurance reserves of $8,311 thousand and
a decrease in annuity reserves of $10,337 thousand.

Acquisition costs and operating expenses increased $2,678 thousand to $14,235
thousand in 1997 from $11,557 thousand in 1996. The increase is primarily
related to the increased expenses associated with the production of new business
primarily resulting from the change in the mix of business, more Universal Life
sales, 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 increased $2,837 thousand to $6,149 thousand from
$3,312 thousand as a result of increased taxable income. Taxable income
increased $8,071 thousand to $17,519 thousand in 1997 from $9,448 thousand in
1996. The increase in taxable income is primarily attributable to the difference
between statutory and tax reserves basis. Other book tax differences include the
timing of the deductibility of acquisition costs and other items.

Realized capital losses of $5 thousand were recorded for the three months ended
June 30, 1997 as compared to realized capital losses of $42 thousand for the
same period in 1996, a decrease of $37 thousand from the prior year.

Results of Operations
---------------------
For the Six Months Ended June 30, 1997
--------------------------------------
    Compared to the Six Months Ended June 30, 1996
    ----------------------------------------------

For the six months ended June 30, 1997, C.M. Life had net income of $2,398
thousand, as compared with net income of $11,929 thousand for the same period in
1996. The decrease in net income of $9,531 thousand is attributable to increased
sales of Universal Life policies, which in the year of issuance, generate
acquisition costs which exceed the revenues received, increased death claims, a
decrease in investment and other income, a decrease in realized capital gains
and an increase in federal income tax expense attributable to taxable income in
excess of book income.

Premium income, net of reinsurance ceded, increased $1,279 thousand to $154,863
thousand for the six months ended June 30, 1997 from $153,584 thousand for the
same period during 1996. The 0.8% increase in premiums is attributable to a
decrease in variable annuity products of 13.0% from the prior year, offset by a
50.5% increase in Universal Life premiums, the result is a change in C.M. Life's
mix of business in which Universal and other life products represented 33% of
total premium income during 1997 compared to 22% for 1996, while annuity
products represented 67% during 1997 compared to 78% in 1996.

The following table sets forth premium information for C.M. Life's products.

<TABLE>
<CAPTION> 
                                        Six Months Ended June 30,
                                             1997             1996
                                             ----             ----
                                               (In Thousands)
        <S>                           <C>              <C>           
        Premium income
          Universal and other life    $ 50,432  33%    $ 33,510  22%
          Annuities                    104,431  67%     120,074  78%
                                      --------         --------     
        Total                         $154,863         $153,584     
                                      ========         ========      
</TABLE>

Net investment and other income decreased $5,371 thousand to $34,327 thousand in
1997 from $39,698 thousand in 1996. Other income from reinsurance ceded
decreased $4,327 thousand primarily due to reserve adjustments in excess of
commission and expense allowances due to growth in the reinsured block of
business. Net

                                       11
<PAGE>
 
investment income decreased by $1,044 thousand which was attributable to a
slight decline in the gross yield for the portfolio.

Policy benefits and payments increased $7,768 thousand to $53,577 thousand in
1997 from $45,809 thousand in 1996. Death claims, net of reinsurance, grew to
$15,531 thousand in 1997 from $7,068 thousand in 1996, which is in line with the
increase in the life insurance in force.
 
Addition to policyholder reserves, funds and separate accounts decreased $19,779
thousand to $87,592 thousand in 1997 from $107,371 thousand in 1996. The
decrease is attributable to an increase in life insurance reserves of $5,237
thousand offset by a decrease in annuity reserves of $25,016 thousand which is
primarily the result lower annuity premiums and increased annuity surrenders.

Acquisition costs and operating expenses increased $12,570 thousand to $33,372
thousand in 1997 from $20,802 thousand in 1996. The increase is primarily
related to the following factors; increased expenses associated with the
production of new business primarily resulting from the change in the mix of
business towards greater Universal Life sales, increased fees from C.M. Life's
management services agreement with MassMutual, 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 increased $2,506 thousand to $10,051 thousand from
$7,545 thousand as a result of increased taxable income. Taxable income
increased $7,136 thousand to $28,620 thousand in 1997 from $21,848 thousand in
1996. The increase in taxable income is primarily attributable to the difference
between statutory and tax reserves basis. Other book tax differences include the
timing of the deductibility of acquisition costs and other items.
 
Realized capital losses of $15 thousand were recorded for the six months ended
June 30, 1997 as compared to realized capital gains of $2,271 thousand for the
same period in 1996. The decrease of $2,286 thousand from the prior year is
primarily attributable to gains generated during the first quarter of 1996 on
the sale of common stock investments.

Statement of Financial Position
-------------------------------

Total assets increased by $171,376 thousand or 9.5% to $2,043,947 thousand at
June 30, 1997 from $1,866,571 thousand at year end 1996. Much of this increase
was due to continued growth in C.M. Life's separate investment accounts, which
assets increased by $161,854 thousand.

Mortgage loans increased $44,078 thousand to $77,869 thousand, offset
partially by a decrease in cash and short-term investments of $30,491.

Total liabilities increased in 1997 by $177,135 thousand or 10.1% to $1,933,962
thousand from $1,756,827 thousand at year end 1996. 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 continued
variable annuity sales and deposits.

Liquidity
---------

Net cash provided by operating activities was $26,613 thousand and $36,343
thousand for the six months ended June 30, 1997 and 1996, respectively. In 1997,
net cash provided by operating activities declined by $9,730 thousand as
compared to 1996, primarily due to increased surrender and death benefits and
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.

                                       12
<PAGE>
 
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 proceeds from maturities 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 $33,197 thousand at June 30,
1997.

The liquidity position of C.M. Life is proactively managed on an ongoing basis
to meet cash needs while minimizing adverse impacts on investment 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.

Capital Resources
-----------------

As of June 30, 1997, C.M. Life's total adjusted capital as defined by the NAIC
was $131,270 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 June 30, 1997 and 1996. 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
-------------------

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 for the six months ended June 30, 1997 and 1996.

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.

Investments
-----------

                                       13
<PAGE>
 
June 30, 1997, C.M. Life had $1,045,234 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.

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 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). In April 1997, Duff & Phelps Credit Rating Company reaffirmed C.M. Life's
AAA rating.

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. In April 1997 Duff
& Phelps Credit Rating Company and Moody's Investor Service, Inc. again
reaffirmed their previous ratings.
 
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.

                                       14
<PAGE>
 
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.

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 accordance with the Financial Accounting
Standards Board ("FASB") interpretation No. 40 ("Fin. 40"), "Applicability of
Generally Accepted Accounting Principles to Mutual Life Insurance and Other
Enterprises", 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 recently issued an exposure draft on codification changes to existing
statutory accounting practices. At this time, C.M. Life has not determined the
impact of these changes.

                                       15
<PAGE>
 
                                  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)
                                                  


Date:   August 13, 1997                By: /s/ Lawrence V. Burkett, Jr.
                                          ------------------------------
                                       Lawrence V. Burkett, Jr.
                                       President and Chief Executive Officer
                                       (Principal Executive Officer)
                                        
Date:   August 13, 1997                By: /s/ John Miller, Jr.
                                          ------------------------------
                                       John Miller, Jr.
                                       Comptroller
                                       (Chief Accounting Officer)
                                       

                                       16