1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
Commission File Number: 33-57020
THE MANUFACTURERS LIFE
INSURANCE COMPANY OF AMERICA
(Exact name of registrant as specified in its charter)
MICHIGAN
(State or other jurisdiction of incorporation or organization)
23-2030787
(I.R.S. Employer Identification No.)
500 N. Woodward Avenue
Bloomfield Hills, Michigan 48304
(Address of principal executive offices)
(416) 926-6700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed 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.
__X___ Yes _____ No
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the issuer's sole class of common
stock, as of December 31, 1996 is 4,501,860.
2
PART I - FINANCIAL INFORMATION
3
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The following analysis of the consolidated results of operations and financial
condition of the Manufacturers Life Insurance Company of America, (hereafter
referred to as the Company) should be read in conjunction with the Consolidated
Financial Statements and the related Notes to Consolidated Financial
Statements.
CORPORATE STRUCTURE
The Company is a U.S. direct wholly-owned subsidiary of The Manufacturers Life
Insurance Company (U.S.A.), which in turn is a direct wholly-owned subsidiary
of the Manulife Reinsurance Corporation (U.S.A.) ("MRC"). MRC is an indirectly
wholly-owned subsidiary of The Manufacturers Life Insurance Company
("Manufacturers Life"), a Canadian mutual insurance company. Manufacturers
Life, with consolidated assets under management at December 31, 1996 of $68.6
billion ($Can), actively operates in thirteen countries worldwide.
Manufacturers Life has been doing business in the United States since 1903.
4
REVIEW OF CONSOLIDATED OPERATING RESULTS AND CONSOLIDATED FINANCIAL CONDITION
The discussion that follows focuses on the results for the three months ended
March 31, 1997 compared to the results for the three months ended March 31,
1996.
PREMIUMS
Premiums decreased to $2.0 million in the first quarter of 1997, compared to
$4.6 million in the previous year. This is due to slower sales of individual
insurance in the Taiwan branch operations.
FEE INCOME
Fee income increased to $10.5 million in the first quarter of 1997, compared to
$8.0 million in the previous year. This reflects higher fees on the growing
block of universal life business.
NET INVESTMENT INCOME
Net investment income was $3.3 million in the first quarter of 1997, compared
to $5.7 million in the same period of 1996. This is a result of lower stock
market gains in the first quarter of 1997 compared to the same period in 1996,
and the repayment of the Manufacturers Life Mortgage Securities Corporation
("MLMSC") bonds on March 1, 1997, which resulted in lower assets and therefore
lower investment income.
REALIZED CAPITAL GAINS
Realized gains in the first quarter of 1997 were $0.2 million compared to $0.1
million in the same period of 1996. The Company does not actively trade assets
for capital gains.
POLICYHOLDER BENEFITS
Policyholder benefits were $2.7 million in the first quarter of 1997, compared
to $4.9 million in the first quarter of 1996. The decrease is primarily due to
lower increases in policyholder liabilities in Taiwan, due to lower sales and
higher lapses.
NET INCOME
The loss in the first quarter of 1997 was $1.9 million, compared to a loss of
$1.4 million in the same period of 1996. The increase is primarily due to
reduced premium income and net investment income described above.
ASSETS
Separate account assets were $684 million at the end of the first quarter of
1997, compared to $668 million at the end of 1996. This growth reflects net
cash transfers to the separate accounts of $31.3 million less $15.6 million due
to negative investment performance of the underlying investment funds.
General account assets were $243 million at the end of the first quarter of
1997, compared to $395 million at the end of 1996. This decrease was primarily
due to the repayment on March 1, 1997 of the mortgage backed bonds in MLMSC in
the amount of $159 million. The increase in cash and short-term investments at
the end of the first quarter of 1997 reflects the net cash proceeds remaining in
MLMSC after repayment of the mortgage backed bonds.
5
LIABILITIES
The Company's separate account liabilities increased $15.7 million. Separate
Account liabilities move in tandem with changes in Separate Account assets.
The repayment of the mortgage backed bonds in MLMSC on March 1, 1997 also
decreased general fund liabilities by $159 million.
6
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
CONSOLIDATED BALANCE SHEETS
AS AT AS AT
MARCH 31 DECEMBER 31
ASSETS ($thousands) 1997 1996
- --------------------------------------------------------------------------------------------
(UNAUDITED)
Investments:
Securities available-for-sale, at fair value:
Fixed maturity (amortized cost: 1997 $51,027; 1996 $50,456) $50,536 $51,708
Equity (cost: 1997 $18,413; 1996 $19,450) 20,220 21,572
Mortgage loans 624 645
Policy loans 10,794 9,822
Cash and short-term investments 31,578 17,493
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $113,752 $101,240
============================================================================================
Guaranteed annuity contracts - 171,691
Deferred acquisition costs 106,608 102,610
Income taxes recoverable 11,564 10,549
Deferred income taxes 1,776 1,041
Other assets 8,910 7,378
Separate account assets 683,773 668,094
- --------------------------------------------------------------------------------------------
TOTAL ASSETS $926,383 $1,062,603
============================================================================================
LIABILITIES, CAPITAL AND SURPLUS ($thousands) 1997 1996
- --------------------------------------------------------------------------------------------
Liabilities:
Policyholder liabilities and accruals $94,147 $91,915
Bonds payable - 158,760
Surplus note 8,500 8,500
Due to affiliates 17,299 11,122
Other liabilities 8,575 7,582
Separate account liabilities 683,773 668,094
- --------------------------------------------------------------------------------------------
TOTAL LIABILITIES $812,294 $945,973
============================================================================================
Capital and Surplus:
Common shares 4,502 4,502
Preferred shares 10,500 10,500
Contributed surplus 98,569 98,569
Retained earnings (deficit) (193) 1,726
Net unrealized gain on securities
available-for-sale 711 1,333
- --------------------------------------------------------------------------------------------
TOTAL CAPITAL AND SURPLUS 114,089 116,630
- --------------------------------------------------------------------------------------------
TOTAL LIABILITIES, CAPITAL AND SURPLUS $926,383 $1,062,603
============================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
7
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31
($ thousands) 1997 1996
- --------------------------------------------------------------
REVENUE:
Premiums $1,955 $4,635
Fee income 10,503 8,048
Net investment income 3,282 5,749
Realized investment gains 166 57
Other 323 1,034
- --------------------------------------------------------------
TOTAL REVENUE $16,229 $19,523
- --------------------------------------------------------------
BENEFITS AND EXPENSES:
Policyholder benefits and claims $2,747 $4,863
Operating costs and expenses 8,526 9,373
Commissions 1,333 1,583
Amortization of deferred acquisition costs 3,600 2,325
Interest expense 2,156 3,046
Policyholder dividends 822 344
- --------------------------------------------------------------
TOTAL BENEFITS AND EXPENSES $19,184 $21,534
- --------------------------------------------------------------
LOSS BEFORE INCOME TAXES (2,955) (2,011)
- --------------------------------------------------------------
INCOME TAX BENEFIT 1,036 583
- --------------------------------------------------------------
NET LOSS $(1,919) $(1,428)
- --------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
8
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS (UNAUDITED)
NET UNREALIZED
RETAINED GAINS (LOSSES) ON TOTAL
FOR THE THREE MONTHS ENDED MARCH 31, 1997 CAPITAL CONTRIBUTED EARNINGS SECURITIES CAPITAL
($thousands) STOCK SURPLUS (DEFICIT) AVAILABLE-FOR-SALE AND SURPLUS
- -----------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 $15,002 $98,569 $1,726 $1,333 $116,630
Net loss during the period (1,919) (1,919)
Change in unrealized gain(loss) ,net of taxes (622) (622)
- -----------------------------------------------------------------------------------------------------------------
BALANCE, MARCH 31, 1997 $15,002 $98,569 $(193) $711 $114,089
=================================================================================================================
9
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31
($thousands) 1997 1996
- ------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net loss $(1,919) $(1,428)
Adjustments to reconcile net loss to net cash used in operating activities:
Additions to policy liabilities 841 1,636
Deferred acquisition costs (7,598) (11,683)
Amortization of deferred acquisition costs 3,600 2,325
Realized gain on investments (166) (57)
Decreases (additions) to deferred income taxes (735) 665
Other 6,141 13,461
- ------------------------------------------------------------------------------------------------
Net cash provided by operating activities 164 4,919
- ------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Fixed maturity securities sold 36,832 22,688
Fixed maturity securities purchased (36,094) (25,490)
Equities sold 2,091 2,850
Equities purchased (2,237) (675)
Mortgage loans repaid (21) (1,978)
Policy loans advanced, net (972) (531)
Guaranteed annuity contracts 171,691 (1,739)
- ------------------------------------------------------------------------------------------------
Cash provided by (used in) investing activities 171,290 (4,875)
- ------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Receipts from variable life and annuity policies
credited to policyholder account balances 1,960 1,624
Withdrawals of policyholder account balances on
variable life and annuity policies (569) (1,217)
Issuance of shares - 15,000
Repayment of bonds payable (158,760) (10,271)
- ------------------------------------------------------------------------------------------------
Cash provided by (used in) financing activities (157,369) 5,136
- ------------------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS:
Increase during the period 14,085 5,180
Balance, beginning of year 17,493 17,881
- ------------------------------------------------------------------------------------------------
BALANCE, END OF PERIOD $31,578 $23,061
================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
10
THE MANUFACTURERS LIFE INSURANCE COMPANY OF AMERICA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
1. ORGANIZATION
The Manufacturers Life Insurance Company of America ("ManAmerica" or the
"Company") is a wholly-owned subsidiary of The Manufacturers Life
Insurance Company (U.S.A.) ("ManUSA" or the "Parent"), which is in turn
an indirect wholly-owned subsidiary of The Manufacturers Life Insurance
Company ("Manulife Financial"), a Canadian-based mutual life insurance
company. The Company markets variable annuity and variable life products
in the United States and traditional insurance products in Taiwan.
2. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of The
Manufacturers Life Insurance Company of America and its wholly-owned
subsidiaries have been prepared in accordance with generally accepted
accounting principles ("GAAP"), except that they do not contain complete
notes. However, in the opinion of management, these statements include
all normal recurring adjustments necessary for a fair presentation of the
results. These financial statements should be read in conjunction with
the financial statements and the related notes included in ManAmerica's
annual report on Form 10-K for the year ended December 31, 1996.
Operating results for the three months ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the full
year ending December 31, 1997.
3. GUARANTEED ANNUITY CONTRACTS AND BONDS PAYABLE
The Company's wholly-owned subsidiary, Manufacturers Life Mortgage
Securities Corporation, has historically invested amounts received as
repayments of mortgage loans in annuities issued by ManUSA. These
annuities were collateral for the 8 1/4 % mortgage-backed bonds payable.
On March 1, 1997 the annuities matured and the proceeds were used to
repay the bonds payable.
11
PART II - OTHER INFORMATION
12
Item 1 - Legal Proceedings
Nothing to report.
Item 2 - Changes in Securities
Nothing to report.
Item 3 - Defaults upon Senior Securities
Nothing to report.
Item 4 - Submission of Matters to a Vote
of Security Holders
Nothing to report.
Item 5 - Other Information
Nothing to report.
Item 6A - Exhibits
13
Page in Sequential
Numbering System
Where Exhibit
Exhibit No. Description Located
- ----------- ----------- ------------------
(1) Not applicable
(2) None
(3)(a)(i) Restated Articles of Filed as Exhibit 3
Redomestication of The (A)(i) to Post-
Manufacturers Life Effective Amendment
Insurance Company of No. 6 on Form S-1
America** filed by The
Manufacturers Life
Insurance Company of
America on December
9, 1996 (File No.
33-57020)
(3)(b)(i) By-Laws of The Filed as Exhibit 3
Manufacturers Life (b)(i) to Post-
Insurance Company of Effective Amendment
America** No. 6 on Form S-1
filed by The
Manufacturers Life
Insurance Company of
America on December
9, 1996 (File No.
33-57020)
(4)(a) Form of Multi-Account Incorporated
Flexible Variable reference to Exhibit
(4)(a) to Pre-
Effective Amendment
No. 1 on Form S-1
filed by The
Manufacturers Life
Insurance Company of
America on February
10, 1994 (File No.
33-57020).
(4)(b)(i) Individual Retirement Incorporated by
Annuity Rider reference to Exhibit
(4)(b)(i) to Pre-
Effective Amendment
No. 1 on Form S-1
filed by The
Manufacturers Life
Insurance Company of
America on February
10, 1994 (File No.
33-57020).
14
(4)(b)(i)(a) Trustee-Owned Policies Incorporated by
Annuity Rider reference to Exhibit
(4)(b)(i)(a)to Pre-
Effective Amendment
No.1 on Form S-1
filed by The
Manufacturers Life
Insurance Company of
America on February 10,1994
(File No. 33-57020).
(4)(b)(ii) Unisex Endorsement Incorporated by
reference to Exhibit
(4)(b)(ii) to the
registration state-
ment on Form N-4
filed by The
Manufacturers Life
Insurance Company of
America on January
13, 1993 (File No.
33-57018).
15
Page in Sequential
Numbering System
Where Exhibit
Exhibit No. Description Located
- ----------- ----------- ---------------------
(5) Not Applicable
(6) Not Applicable
(7) Not Applicable
(8) Not Applicable
(9) Not Applicable
(10)(a) Reinsurance Agreement Incorporated by
reference
to Exhibit (10)(a)
to Pre-Effective
Amendment No. 1 on
Form S-1 filed by
The Manufacturers
Life Insurance Company
of America on February 10,
1994 (File No. 33-57020).
(10)(b)(i) Service Agreement Incorporated by
between Manufacturers reference to Exhibit
Life of America and 8(a) to the registration
The Manufacturers statement on Form N-4
Life Insurance filed by The Manufacturers
Company Life Insurance Company of
America on January 13, 1993
(File No. 33-57018).
(10)(b)(ii) Amendment to Service Incorporated by
Agreement reference to Exhibit (8)(b)
to the registration state-
ment on Form N-4 filed by The
Manufacturers Life Insurance
Company of America on
January 13, 1993
(File No. 33-57018).
16
(10)(b)(iii) Second Amendment to Incorporated by
Service Agreement reference to Exhibit
(10)(b)(iii) to the
registration state-
ment on Form N-4
filed by The
Manufacturers Life
Insurance Company of
America on April 29,
1994 (File No. 33-
57018).
17
Page in Sequential
Numbering System
Where Exhibit
Exhibit No. Description Located
- ----------- ------------------------- --------------------
(10)(b)(iv) Service Agreement between Incorporated by
The Manufacturers Life reference to Exhibit
Insurance Company and (8)(d) to Post-
ManEquity, Inc. dated Effective Amendment
January 2, 1991 as amended No. 1 statement on
March 1, 1994 Form N-4 filed by
The Manufacturers
Life Insurance
Company of America
on May 2, 1994 (File
No. 33-57018).
(10)(c) Specimen Agreement between Incorporated by
ManEquity, Inc. and reference to Exhibit
registered representatives (3)(b)(i) to the
registration state-
ment on Form N-4
filed by The
Manufacturers Life
Insurance Company of
America on January
13, 1993 (File No.
33-57018).
(10)(d) Specimen Agreement between Incorporated by
Incorporated by ManEquity, reference to
and Dealers Exhibit(3)(b)(ii) to
the registration state-
ment on Form N-4
filed by The
Manufacturers Life
Insurance Company of
America on January
13,1993 (File No.
33-57018).
(11) None
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15) None
(16) Not Applicable
18
(17) Not Applicable
(18) None
19
Page in Sequential
Numbering System
Where Exhibit
Exhibit No. Description Located
- ----------- ------------ ------------------
(19) None
(20) Not Applicable
(21) Not Applicable
(22) None
(23) None
(24) Power of Attorney** Filed as Exhibit
(12) to Post-
Effective Amendment
No. 10 on Form S-6
filed by The
Manufacturers Life
Insurance Company of
America on February
28, 1997 (File No.
33-52310)
(25) Not Applicable
(26) Not Applicable
(27) Financial Data
Schedule
(28) Not Applicable
** Filed Electronically
Item 6B - Reports on Form 8-K
No reports on Form 8-K were filed during the
quarter.
20
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE MANUFACTURERS LIFE
INSURANCE COMPANY OF AMERICA
(Registrant)
May 14, 1997 By: /s/ DOUGLAS H. MEYERS
- ------------ ---------------------
Date DOUGLAS H. MEYERS
Vice President, Finance
(Principal Financial Officer)
May 14, 1997 By: /s/ DONALD A. GULOIEN
- ------------ ---------------------
Date DONALD A. GULOIEN
President & Director
(Principal Executive Officer)