STATE OF CONNECTICUT

Transcription

1 STATE OF CONNECTICUT INSURANCE DEPARTMENT ORDER ADOPTING REPORT OF EXAMINATION I, Barbara C. Spear, Acting Insurance Commissioner of the State of Connecticut, having fully considered and reviewed the Examination Report (the "Report") of C. M. LIFE INSURANCE COMPANY (the "Company") as of December 31,2009, do hereby adopt the findings and recommendations contained therein based on the following findings and conclusions, TO WIT: 1. I, Barbara C. Spear, Acting Insurance Commissioner of the State of Connecticut, and as such is charged with the duty of administering and enforcing the provisions of Title 38a of the Connecticut General Statutes; 2. C. M. LIFE INSURANCE COMPANY ("Company") is a domestic insurer authorized to transact the business of insurance in the State of Connecticut; 3. On December 20,2010, the verified Examination Report ofc. M. LIFE INSURANCE COMPANY ("Company") was filed with the Connecticut Insurance Department. 4. In accordance with Conn. Gen. Statues 38a-14(e)(3), C. M. LIFE INSURANCE COMPANY was afforded a period of thirty (30) days within which to submit to the Connecticut Insurance Department a written submission or rebuttal with respect to any matters contained in the Report. 5. On January 20, 2011, the Company filed a written submission indicating that they were in agreement with all the recommendations contained in the Report. A copy of the Report is attached hereto and incorporated herein as Exhibit A. P.O. Box 816 Hartford, CT An Equal Opportunity Employer

2 NOW, THEREFORE, it is ordered as follows: 1. That the Examination Report ofc. M. LIFE INSURANCE COMPANY ("Company") hereby is adopted as filed with the Insurance Department. 2. That C. M. LIFE INSURANCE COMPANY ("Company") shall comply with all of the recommendations set forth in the Report, and that failure by C. M. LIFE INSURANCE COMPANY ("Company") to so comply shall result in sanctions or administrative action as provided by Title 38a ofthe Connecticut General Statutes. Dated at Hartford, Connecticut, this 24 th day ofjanuary ~ Acting Insurance Commissioner

3 Exhibit A ASSOCIATION EXAMINATION REPORT OF THE AS OF DECEMBER 31,2009 BY THE CONNECTICUT INSURANCE DEPARTMENT

4 TABLE OF CONTENTS Salutation Scope of Examination History Organizational Chart Management and Control Related Party Transactions Insurance Coverage Territory and Plan of Operation Reinsurance Information Technology Controls Accounts and Records. Financial Statements Assets Liabilities, Surplus and Other Funds Summary of Operations Capital and Surplus Investments Aggregate Reserves for Life Contracts Liability for Deposit-type Contracts Contract Claims - Life Common Capital Stock Gross Paid in and Contributed Surplus Unassigned Funds (Surplus) Separate Accounts Subsequent Event Conclusion Signature

5 SCOPE OF EXAMINATION The previous examination of the Company was conducted as of December 31, The current examination, which covers the subsequent five year period, through December 31,2009, was conducted under the zone plan of the National Association ofinsurance Commissioners (NAIC) at the primary location of the books and records of the Company. The examination was conducted on a full scope, comprehensive basis in accordance with the procedures outlined in the NAIC Financial Examiners Handbook (the Handbook). The Handbook requires that we plan and perform the examination to evaluate the financial condition and identify prospective risks of the Company by obtaining information about the Company, including corporate governance, identifying inherent risks within the Company, and evaluating system controls and procedures used to mitigate those risks. An examination also includes assessing the principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation, management compliance with Statutory Accounting Principles and Annual Statement Instructions. All accounts and activities of the Company were considered in accordance with the risk-focused examination process. The examination was performed in conjunction with the examination of Massachusetts Mutual Life Insurance Company (MassMutual), the lead company, conducted simultaneously by the Massachusetts Insurance Department (MID). Wherever possible, reliance was placed on the review performed by the MID with respect to processes and controls common to both the COlU1ecticut and Massachusetts domiciled companies. A concurrent examination was also conducted on MML Bay State Life Insurance Company (MML), an affiliated COlU1ecticut domiciled insurance company, which is a member of the Massachusetts Mutual Life Insurance Group of Companies. As part of the examination planning procedures, the Financial Regulation Division of the Connecticut Insurance Department (the Division) reviewed the following materials submitted by the Company: Annual statements filed with the Division; Statements of actuarial opinion; The 2009 audit report by the Company's independent certified public accountants, KPMG, LLP (KPMG); The 2008 and 2009 statutory audit opinions by KPMG, which indicated no material concerns with respect to financial condition or regulatory compliance Issues; Reports of the Company's Internal Audit Department; Minutes of the Board of Directors (Board); affiliate and custodial agreements and; other documents related to significant transactions that require prior approval or requests for deviations from the NAIC Accounting Practices and Procedures Manual (Manual). 2

6 A comprehensive review was made of the financial analysis files and documents submitted to the Financial Analysis Unit of the Division, as well as Examination Jumpstart and Financial Analysis and Solvency Tracking System reports obtained from the NAIC database. Ernst & Young, LLP (E&Y) was engaged by the Division to assist in the review of the Company's actuarial computed loss reserves and significant ceded reinsurance treaties. E&Y was also retained to assist with the examination of the Company's investment strategies and initiatives. This included the evaluation of the adequacy of the Company's investment risk analysis and action plans, and the review of the Company's processes and policies regarding valuation of derivatives and impainnents. The accounting finn of CCR, LLP (CCR) was engaged by the Division to assist in the examination of the Company. Work papers prepared by KPMG as of December 31, 2009, in connection with its annual statutory audits, were reviewed and relied upon to the extent deemed appropriate. Infonnation technology (IT) controls review work papers prepared by E&Y for the MID, in connection with its examination of MassMutual, were reviewed and relied upon to the extent deemed appropriate. Comments in this report are generally limited to exceptions noted or to items considered to be of a material nature. Failure of items in this report to add to totals, or for totals to agree with captioned amounts, is due to rounding. HISTORY The Company was incorporated on April 25, 1980, by Special Act 81-2 of the Connecticut General Assembly, as a wholly owned subsidiary of the Connecticut Mutual Life Insurance Company (CMLIC). It commenced business on May 12, Effective March 1, 1996, the Company became a wholly owned subsidiary of MassMutual as a result of the merger ofcmlic and MassMutual. Effective August 29, 2002, the Commissioner of the Connecticut Insurance Department approved the contribution by Mass Mutual all its shares ofmml to the Company. 3

7 ORGANIZATIONAL CHART The following is an organizational chart that identifies the relationship between the Company, MassMutual and MML, as of December 31, 2009: MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY (Massachusetts) C.M. LIFE INSURANCE COMPANY (Connecticut) MMLBAY STATE LIFE INSURANCE COMPANY (Connecticut) MANAGEMENT AND CONTROL The Company is managed by employees of MassMutual pursuant to an Administrative Services Agreement (Agreement). The Agreement allows MassMutual to provide services such as accounting, legal, data processing, investment management, tax accounting, and benefit programs. The Agreement documents methods for MassMutual to be reimbursed for the costs of providing such services. The bylaws of the Company provide that an annual meeting of the shareholders for the election of Directors, and for the transaction of such other business, shall be held on any day during the first quarter of each calendar year. Special meetings of the shareholders may be called for any purpose, at any time, by a majority of the Directors, the President or Secretary, and must be called by the President or Secretary upon written request of the holders of the outstanding shares entitled to vote at such special meetings. The presence, in person or by proxy, of the holders of 30% of the outstanding shares entitled to vote, shall be necessary to constitute a quorum for the transaction of business at all meetings of the shareholders. 4

8 The Board shall consist of not less than three or more than nine persons. The number of Directors may be changed by an amendment to the bylaws, adopted by the shareholders. Directors are elected at the annual meeting of the shareholders by a plurality vote. The Board shall meet for the election or appointment ofofficer's, and for the transaction of any business, as soon as practicable after the adjournment of the annual meeting of the shareholders. Other regular meetings of the Board shall be held at such time as the Board may from time to time detennine. Special meetings of the Board may be called by the President or any two Directors. At any meeting of the Board, the presence of a majority of the Board shall be necessary to constitute a quorum for the transaction of business. Members of the Board serving the Company at December 31, 2009, were as follows: Director Stuart H. Reese Michael R. Fanning Mark D. Roellig Michael T. Rollings Title and Principal Business Affiliation Chairman and Chief Executive Officer Massachusetts Mutual Life Insurance Company Executive Vice President Massachusetts Mutual Life Insurance Company Executive Vice President and General Counsel Massachusetts Mutual Life Insurance Company Executive Vice President and Chief Financial Officer Massachusetts Mutual Life Insurance Company The executive officers serving the Company at December 31, 2009, were as follows: Name Roger W. Crandall Christine C. Peaslee Todd G. Picken Isadore Jermyn Michael T. Rollings Stuart H. Reese Mark D. Roellig Title President Secretary Treasurer Actuary Executive Vice President and Chief Financial Officer Chairman and Chief Executive Officer Executive Vice President and General Counsel 5

9 RELATED PARTY TRANSACTIONS Administrative Services Agreement The Company entered into the Agreement with MassMutual on January 1, 1997, and amended February 28, 2007, whereby the Company pays a management and support services fee equal to the costs or deductions incurred by MassMutual with respect to such services rendered on behalf of the Company. The service fee is determined using fair and reasonable terms based upon the direct or indirect costs related to the services provided. Those expenses are allocated to the Company in conformity with customary insurance accounting practices consistently applied, and become due and payable no later than thirty days after receipt of the quarterly billing statement. The Agreement requires the books, accounts and records of the Company to be maintained as to clearly and accurately disclose the precise nature and details of the services and the fee. Annually, a detailed written statement of amounts received and expended, pursuant to the Agreement, along with supporting documentation as requested by the Company, is provided to the Company by MassMutual. The services provided to the Company include, but are not limited to, financial accounting and reporting, tax planning and accounting, human resources, computer and data processing, treasury and custodial services, investment management and legal support. Tax Allocation Agreement The Company entered into a tax allocation agreement with MassMutual and its affiliated subsidiaries on January 1, 1997, and amended February 28,2007, whereby the Company and the collective members included in the agreement file a consolidated U.S. income tax return. The members' income tax liability is allocated in accordance to its taxable earnings. Pursuant to the agreement, the members agree to reimburse MassMutual for payment of such tax liability, compensate any member for use of its losses or tax credits, and provide for the allocation and payment of any refund arising from an overpayment, or carry back or carry forward of losses or tax credits. Each of the members is required to maintain all records that are necessary to properly substantiate the information contained in the consolidated return. INSURANCE COVERAGE The Company is covered for employee dishonesty by an insurance company blanket bond policy issued by Lloyds of London. Excess coverage layers are written through various insurers. The policies cover MassMutual and all of its major subsidiaries. The limit of liability is $100,000,000, which exceeds the suggested minimum limits of insurance noted in the Handbook. In addition to fidelity bond insurance, the Company carried other insurance coverages, including the following lines, with the respective insurance companies: Company Continental Casualty Company Lexington Insurance Company Description Directors and Officers Liability Commercial Property 6

10 National Union Fire Insurance Company Of Pittsburgh, PA National Union Fire Insurance Company Of Pittsburgh, PA National Union Fire Insurance Company Of Pittsburgh, PA ACE American Insurance Company ACE American Insurance Company New Hampshire Insurance Company Commercial General Liability Umbrella Liability Commercial Automobile Aircraft Foreign Liability Workers' Compensation and Employers'Liability TERRITORY AND PLAN OF OPERAnON The Company is licensed to sell life insurance and annuities in Puerto Rico, the District of Columbia and all states with the exception of New York. The Company is principally engaged in the sale of life insurance and annuities, primarily flexible premium universal life insurance, corporate owned life insurance and variable annuity products through the general and separate accounts. These products are distributed through career agents, registered financial planners, and brokers. REINSURANCE The Company, through affiliated and non-affiliated insurers, utilizes a variety of ceded reinsurance agreements. AfnIiated Reinsurance Ceded The Company has a modified coinsurance quota-share agreement with MassMutual, effective January 1,1985, whereby the Company cedes 75% of the premium on certain universal life policies. The Company also has a stop-loss agreement with MassMutual under which the Company cedes claims, which in aggregate, exceed 0.72% of the covered volume for any year, with maximum coverage of $25 million above the aggregate limit. The aggregate limit was $84 million in 2009 and $42 million in 2008, and was not exceeded in any of those years. In addition, the Company has coinsurance agreements with MassMutual whereby the Company cedes substantially 100% of the premium on certain universal life policies. 7

11 Non-afnJiated Reinsurance Ceded The Company has predominantly automatic yearly renewal tenn reinsurance agreements for its universal and tenn products with various companies. These policies are reinsured on a first dollar quota share basis with the Company typically retaining 10% up to a limit specified in the agreements, from the first $25 million to $50 million. The reinsured portion also varies by agreement. H.JFORMATION TECHNOLOGY CONTROLS The MID engaged E&Y to review the Company's IT Controls. This work was reviewed and relied upon by the Division. The scope of the review included identification, evaluation and assessment of the significant controls, as represented by the Company's responses to the Handbook's Infonnation Systems Questionnaire. The focus of the evaluation of IT Controls review included the following: Management and organization Logical and physical access Environment System acquisition and development Documentation and program change Computer operations Contingency planning and disaster recovery The internal control structure of the Company and selected accounting procedures were reviewed and discussed with management through questionnaires, observation and attribute testing. The reconciliation of accounts and the internal control review noted that the operating environment is conducive to producing reliable accounting infonnation, and the review did not disclose any material data integrity issues. ACCOUNTS AND RECORDS Financial accounting records are processed and maintained through the "SAP" general ledger system, a software application developed by an external vendor. The system maintains the Company's financial accounting records, and supports all statutory reporting and accounting requirements processed and maintained through the Company's general ledger system. The Company utilizes "Wings", a product of Eagle Technology Management, Inc., for the preparation of its annual statement. General ledger account balances for the general and separate accounts were reconciled and traced to the amounts reported in the 2009 Annual Statement. Further detailed analyses were perfonned on the individual accounts throughout the examination. 8

12 C.M. LIFE INSlJRANCE COMPANY FINANCIAL STATEMENTS The following statements, as filed by the Company and as determined by the examination, reflect the assets, liabilities, surplus and other funds, and summary of operations of the Company, as of December 31,2009: ASSETS Account Description Assets Nonadmitted Assets Net Admitted Assets Bonds $3,928,160,853 $3,928,160,853 Preferred stocks 7,425,251 7,425,251 Common stocks 168,695, ,695,100 Mortgage loans on real estate - first liens 1,072,955,531 1,072,955,531 Real Estate - properties held for the production of income 16,193,814 16,193,814 Cash, cash equivalents and short-term investments 459,094, ,094,311 Contract loans 186,211,042 $12, ,198,591 Other invested assets 252,296,506 7,793, ,503,473 Receivables for securities 9,769,722 9,769,722 Aggregate write-ins for invested assets 141,409, ,409,486 Investment income due and accrued 49,651, ,968 49,069,081 Premiums and considerations - uncollected premium and agents' balances in the course of collection 994,137 1, ,499 Premiums and considerations - deferred premiums, agents' balances and installments booked but deferred and not yet due (17,108,981) (17,108,981) Reinsurance - amounts recoverable from reinsurers 8,847,115 8,847,115 Reinsurance - other amounts receivable under reinsurance contracts 13,140,461 13,140,461 Net deferred tax asset 159,513, ,274,955 56,238,415 Guaranty funds receivable or on deposit 3,169,676 3,169,676 Net adjustment in assets and liabilities due to foreign exchange rates (2,627) (2,627) Receivables from parent; subsidiaries and affiliates 402, ,836 Aggregate write-ins for other than invested assets 54,579,740 54,517,985 61,755 Total assets excluding Separate Accounts 6,515,398, ,182,032 6,349,216,359 From Separate Accounts 1,821,384,636 1,821,384,636 Totals $3 "1fl 7R1 O?7 q:lhh ~ $R.17() h()() QQ'\ 9

13 LIABILITIES, SURPLUS AND OTHER FUNDS Aggregate reserve for life contracts Liability for deposit-type contracts Contract claims: Life Premiums and annuity considerations for life and accident and health contracts received in advance Contract liabilities not included elsewhere: Other amounts payable on reinsurance General expenses due or accrued Transfers to Separate Accounts due or accrued Taxes; licenses and fees due or accrued; excluding federal income taxes Current federal and foreign income taxes Unearned investment income Amounts withheld or retained by company as agent or trustee Remittances and items not allocated Miscellaneous liabilities: Asset valuation reserve Payable to parent; subsidiaries and affiliates Payable for securities Aggregate write-ins for liabilities $5,111,973,969 16,800,979 12,632,799 82,451 7,055,968 8,905 (13,530,509) 4,393,671 2,475,333 29, ,208 13,020,292 11,867,383 23,165,031 2,034, ,265,073 Total liabilities excluding Separate Accow1ts 5,631,688,223 From Separate Accounts 1,821,384,636 Total liabilities 7,453,072,859 Common capital stock 2,500,000 Gross paid in and contributed surplus 450,276,208 Aggregate write-ins for special surplus funds 23,047,300 Unassigned funds (surplus) 241,704,628 Surplus 715,028,136 Total capital and surplus 717,528,136 Total liabilities and surplus $8,170,600,995 10

14 SUMMARY OF OPERATIONS Premiums and annuity considerations for life and accident and health contracts $871,148,973 Considerations for supplementary contracts with life contingencies 731,367 Net investment income 327,070,128 Amortization of interest maintenance reserve (3,693,049) Commissions and expense allowances on reinsurance ceded 22,530,030 Reserve adjustments on reinsurance ceded (23,642,314) Miscellaneous income: Income from fees associated with investment management; administration and contract guarantees from Separate Accounts 50,781,281 Aggregate write-ins for miscellaneous income 2,158,655 Totals 1,247,085,071 Death benefits 88,961,823 Annuity benefits 89,175,233 Disability benefits and benefits under accident and health contracts 755,754 Surrender benefits and withdrawals for life contracts 730,715,430 Interest and adjustments on contract or deposit-type contract funds 1,495,324 Payments on supplementary contracts with life contingencies 454,779 Increase in aggregate reserves for life and accident and health contracts 319,152,861 Totals 1,230,711,204 Commissions on premiums; aruluity considerations and deposit-type contract funds 49,566,879 General insurance expenses 62,580,819 Insurance taxes; licenses and fees; excluding federal income taxes 10,492,688 Increase in loading on deferred and uncollected premiums 847,833 Net transfers to or (from) Separate Accounts net of reinsurance (206,050,722) Aggregate write-ins for deductions 341,464 Totals 1,148,490,164 Net gain from operations before dividends to policyholders and federal income taxes 98,594,907 Net gain from operations after dividends to policyholders and before federal income taxes Federal and foreign income taxes incurred (excluding tax on capital gains) 98,594,907 5,119,122 Net gain from operations after dividends to policyholders and federal income tax and before realized capital gains or (losses) 93,475,784 Net realized capital gains or (losses) (excluding gains (losses) transferred to the lmr) less capital gains tax (49,723,672) Net income $41_752_1 ]3 11

15 CAPITAL AND SURPLUS Capital and surplus; December 31; prior year $707,773,321 Net income 43,752,113 Change in net unrealized capital gains (losses) less capital gains tax (102,690,142) Change in net unrealized foreign exchange capital gain (loss) 7,365,624 Change in net deferred income tax 6,217,075 Change in nonadmitted assets (28,951,839) Change in asset valuation reserve 6,223,367 Cumulative effect of changes in accounting principles (1,948,430) Paid in (surplus adjustments) 60,000,000 Aggregate write-ins for gains and losses in surplus 19,787,048 Net change in capital and surplus for the year 717,528,136 Capital and surplus; December 31; current year $717S)~ 11(; INVESTMENTS The Division engaged E&Y to examine the Company's and MML's investment and general risk management practices. The scope of the review included the following: Gain an understanding of the investment strategy and portfolio composition to assess the investment strategy and initiatives compared to the business objectives; Assess the investment risk management function and practices to identify, measure, manage and monitor/report risks; Assess the valuation and price verification process; Review the watch list and impairment processes. The focus of E&Y's review and analysis included the following risk areas: Asset pricing and fair value determination; Other-than-temporary impairment (OTTI) determinations; Commercial mortgage backed securities (CMBS) and other securitized assets; Derivative investment and hedge programs; Mortgage loans and collateralized real estate; Private placement program; Liquidity and funding risks. 12

16 E&Y's approach to conducting the risk review included the following: Reviewed investment policy and guideline documentation; Reviewed investment strategy documentation for a sample of product lines; Reviewed audited statutory financial statements as of December 31, 2009; Interviewed key senior staff; Reviewed operating plan and key priorities; Reviewed investment management monthly operating reports; Analyzed investment portfolio by asset class, bond type, credit ratings and other similar characteristics; Reviewed derivative program and counterparty exposure reports; Reviewed commercial mortgage loan portfolio monitoring and reporting; Reviewed problem asset and impairment review meeting materials, including underwater securities report, problem bond report and commercial mortgage problem loan reports; Reviewed accounting policy on OTTI; Reviewed documentation of valuation policies and methodology for each asset class; Reviewed derivatives use plan quarterly program review reports. The Company's investment strategy appears to be fundamentally sound and portfolio strategies exist at the product level, which recognize the product liability and liquidity needs. The Company employs numerous reports used to manage investment risk and perfonnance and analyzes investment performance relative to plan. Internal committees and senior management review forums' focus on risk management and provides for a disciplined impairment review process. AGGREGATE RESERVE FOR LIFE CONTRACTS $5,111,973,969 LIABILITY FOR DEPOSIT-TYPE CONTRACTS $16,800,979 CONTRACTCLAIMS-LWE $12,632,799 The Division retained E&Y to assist in reviewing the accuracy and theoretical correctness of reserve calculations and to review the asset adequacy analysis performed by the appointed actuary as of December 31,2009. Consistent with the risk focused approach to the examination, E&Y relied upon analyses and tests documented by the Company and in the working papers of the Company's independent auditors along with supplemental analyses created by E&Y to perform its work. Formula Reserves-Scope Reviews of the Company's primary lines of business were conducted to determine whether the Company's reserves were established in accordance with minimum standards for the valuation of liabilities specified in the Connecticut Standard Valuation Law, Actuarial Guidelines and applicable Actuarial Standards of Practice. In performing the reserve review and analysis, E&Y conducted the following tests: 13

17 Reviewed and analyzed statutory Annual Statements for 2009 and inquired into other recent years covered under the examination period; Met with Company management to understand the business of the Company, its procedures around actuarial calculations, its approach to risk management and its likely areas of financial and business risk; Analyzed assumptions and methodologies used to calculate reserves and related actuarial items and compared them to statutory guidance, focusing on new products and new guidance introduced since the last examination. This primarily meant the application of Actuarial Guideline 43 as it applies to variable annuities with guaranteed minimum benefits; Reviewed tests performed by the Company's actuaries and its independent auditors, and performed independent supplemental reserve calculation tests; Reviewed experience study information compiled and provided by the Company in support of the major assumptions used in the asset adequacy analysis; Reviewed and analyzed the Company's Statement of Actuarial Opinion, including the 2009 Actuarial Memorandum, and inquired into other recent years covered under the examination period. Reinsurance Agreements-Scope A review was performed of items recorded on Schedule S of the Company's Annual Statement. The review included an understanding of reinsurance reserve implications. As no new reinsurance treaties or significant amendments were entered into during the examination period, treaty language was not evaluated to ensure compliance with Connecticut Regulations and risk transfer requirements. However, significant reinsurance reserve credits were identified and reviewed for continued applicability of prior treatment. Asset Adequacy-Scope The appropriateness of the assumptions and methods used to project asset and liability cash flows, by major line of business, was independently analyzed and validated to ensure assets supporting the Company's reserves were adequate based on various environmental scenarios. In reviewing the asset adequacy analysis, E&Y conducted the following tests: Reconciled assets and liabilities to the annual statement; Reviewed and analyzed material liabilities in relation to contract provisions that impact future liability cash flows; Reviewed material asset types, changes in the mix and structure, and the employment of derivatives instruments; Reviewed experience studies and unit expense analysis supporting the lapse, mortality, partial withdrawal, morbidity and expense assumptions used in the asset adequacy analysis; Reviewed testing methodology, including the interaction of assets and liabilities; Reviewed the testing results and sensitivity tests that the Company used to arrive at its conclusions of asset adequacy. 14

18 It was determined that the Company's cited reserve base and methods make adequate provision for Connecticut minimum statutory reserves and are consistent with actuarial guidelines. COMMON CAPITAL STOCK $2,500,000 At December 31, 2009, the Company reported 50,000 shares of common stock authorized, with 12,500 shares issued and outstanding, having a par value of $200. All issued shares are owned by MassMutual. GROSS PAID IN AND CONTRIBUTED SURPLUS $450,276,208 The following exhibit reflects the balance of this account during the period under review: 2008 $390,276, $390,276, $390,276, $390,276,208 The increases in paid in and contributed surplus was due to a $60 million capital contribution from MassMutual in UNASSIGNED FUNDS (SURPLUS) $241,704,628 The following exhibit reflects the balance of this account during the period under review: 2008 $314,997, $215,072, $110,206, $41,420,592 SEPARATE ACCOUNTS Under the authority granted by Section 33a-459 of the CGS, the Company has established separate accounts to which it allocates certain amounts received under variable life and variable annuity business. The allocation is in accordance with the provisions of Section 38a-433 of the CGS. The Company, through its general and separate accounts, offers individual and group variable life insurance, and individual variable annuity products. Compensation is earned in the form of investment management fees, investment margin and asset value expense charges. 15

19 The following exhibit summarizes the balance sheet of the separate accounts as of December 31, 2009: ASSETS Common Stocks Investment income due and accrued General Account Basis Fair Value Basis $ J,821,384, Total $1,821,384, Totals $I,82L3-.84,636 $ ,616 Aggregate reserve for life, annuity and accident and health contracts Charges for investment management, administration and contract guarantees dues or accrued Other transfers to general account due or accrued Aggregate write-ins for liabilities LlABILITES AND SURPLUS General Account Basis Fair Value Basis $1,807,739,969 Total $1,807,739,969 60,416 13,470, ,157 60,416 13,470, ,157 Total Liabilities 1,821,384,636 1,821,384,636 Totals $I.R $ SUBSEQUENT EVENT Commencing in 2010, the Company and MML ceased writing new business. All new business will be written through MassMutual. CONCLUSION The results of this examination disclosed that, as of December 31,2009, the Company had admitted assets of $8, 170,600,995, liabilities of $7,453,072,859, and surplus of $717,528,136. During the period under examination, admitted assets decreased $821,642,478, liabilities decreased $1,142,384,644, and surplus as regards policyholders increased $320,742,166. It was determined that the Company's assets were fairly stated in accordance with guidance outlined in the Manual. Assets were acceptable under Section 38a-l 02 of the CGS. The liabilities established were adequate to cover the Company's obligations to policyholders. 16

20 SIGNATURE In addition to the undersigned, the following members of the State of Connecticut Insurance Department participated in the examination: William Arfanis, CFE; Daniel Levine, CPA; Robert Linnell, CFE; Kenneth Roulier, AFE, AES, CISA; Alan Sundell, AFE; the CPA firm of CCR; and the actuarial and investment consulting firm of E&Y. I, Thomas H. Corrigan, CFE, solemnly swear that the foregoing report on examination is hereby represented to be a full and true statement ofthe condition and affairs of the subject insurer as ofdecember 31, 2009, to the best of my information, knowledge and belief. Respectfully submitted, State of Connecticut ss. Hartford County ofhartford Subscribed and sworn to before me, f{<f.",~1, rnl~", Notary Public on this /)..tj-i:1:j... day of t..l d'rij,_itl, 2010.!ldfi~ Notary PU6ic h,~ My Commission Expires & l.!jtj/.j-01 S 17

21 STATE OF CONNECTICUT INSURANCE DEPARTMENT CERTIFIED COPY I, BARBARA C. SPEAR, ACTING INSURANCE COMMISSIONER OF THE STATE OF CONNECTICUT, HAVE COMPARED THE A1'1NEXED COPY WITH THE ORIGINAL RECORD ON FILE WITH THE DEPARTMENT OF INSURANCE AND DO HEREBY CERTIFY THAT IT IS A WHOLE, TRUE AND CORRECT COpy OF THE ORIGINAL RECORD. WITNESS MY HAND AND SEAL OF THE INSURANCE COMMISSIONER OF THE STATE OF CONNECTICUT THIS 24th DAY OF JANUARY 2011 ~~ Acting Insurance Commissioner P.O. Box 816 Hartford, CT 06l An Equal Opportunity Employer