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.
Results of Operations --------------------- For the Year Ended December 31, 1996 ------------------------------------ Compared to the Year Ended December 31, 1995 --------------------------------------------
The following table sets forth premium, sales and other information for C.M. Life's products.
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.
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).
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.
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%