|
|
|
|
|
|
|
|
|
<PAGE> 1
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 1994
COMMISSION FILE NUMBER 33-34562; 33-60288
ML LIFE INSURANCE COMPANY OF NEW YORK
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
NEW YORK 16-1020455
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
</TABLE>
100 CHURCH STREET
NEW YORK, NEW YORK 10080-6511
(Address of Principal Executive Offices)
(800) 333-6524
(Registrant's telephone number including area code)
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.
Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
COMMON 220,000
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(A)
AND (B) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE> 2
PART I Financial Information
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(a wholly-owned subsidiary of Merrill Lynch Insurance Group,
Inc.)
- - ----------------------------------------------------------------------------
BALANCE SHEETS
(Dollars in Thousands) (Unaudited)
============================================================================
<TABLE>
<CAPTION>
ASSETS September 30, December 31,
- - ------ 1994 1993
------------ ------------
<S> <C> <C>
INVESTMENTS:
Fixed maturity securities available for sale, at estimated fair
value (amortized cost: 1994 - $314,060; 1993 - $442,008) $ 307,027 $ 458,916
Equity securities available for sale, at estimated fair value
(cost: 1994 - $3,987; 1993 - $8,387) 4,926 7,195
Mortgage loans on real estate 7,939 17,627
Policy loans on insurance contracts 75,827 73,380
------------ -------------
Total Investments 395,719 557,118
CASH AND CASH EQUIVALENTS 8,371 27,464
ACCRUED INVESTMENT INCOME 7,951 10,164
DEFERRED POLICY ACQUISITION COSTS 29,036 24,036
FEDERAL INCOME TAXES - CURRENT 2,029 0
FEDERAL INCOME TAXES - DEFERRED 10,391 10,468
REINSURANCE RECEIVABLES 479 1,685
OTHER ASSETS 8,816 3,765
SEPARATE ACCOUNTS ASSETS 477,701 410,613
------------- -------------
TOTAL ASSETS $ 940,493 $ 1,045,313
============= =============
</TABLE>
See notes to financial statements (Continued)
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(a wholly-owned subsidiary of Merrill Lynch Insurance Group,
Inc.)
- - -------------------------------------------------------------------------------
BALANCE SHEETS
(Concluded) (Dollars in Thousands) (Unaudited)
===============================================================================
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY September 30, December 31,
- - ------------------------------------ 1994 1993
------------- -------------
<S> <C> <C>
LIABILITIES:
POLICY LIABILITIES AND ACCRUALS:
Policyholders' account balances $ 353,581 $ 523,382
Claims and claims settlement expenses 2,322 5,614
------------- -------------
Total policy liabilities and accruals 355,903 528,996
OTHER POLICYHOLDER FUNDS 2,846 1,200
OTHER LIABILITIES 4,438 5,641
FEDERAL INCOME TAXES - CURRENT 0 864
PAYABLE TO AFFILIATES - NET 5,441 5,223
SEPARATE ACCOUNTS LIABILITIES 477,701 410,613
------------- -------------
Total Liabilities 846,329 952,537
------------- -------------
STOCKHOLDER'S EQUITY:
Common stock, $10 par value - 220,000 shares
authorized, issued and outstanding 2,200 2,200
Additional paid-in capital 83,006 83,006
Retained earnings 12,216 8,497
Net unrealized investment loss (3,258) (927)
------------- -------------
Total Stockholder's Equity 94,164 92,776
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 940,493 $ 1,045,313
============= =============
</TABLE>
See notes to financial statements
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(a wholly-owned subsidiary of Merrill Lynch Insurance Group,
Inc.)
- - -------------------------------------------------------------------------------
STATEMENTS OF EARNINGS
(Dollars in Thousands) (Unaudited)
===============================================================================
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1994 1993
------------- -------------
<S> <C> <C>
REVENUES:
Investment revenue:
Net investment income $ 24,900 $ 39,834
Net realized investment gains (losses) (2,148) 4,332
Policy charge revenue 7,630 5,776
------------- -------------
Total Revenues 30,382 49,942
------------- -------------
BENEFITS AND EXPENSES:
Interest credited to policyholders' account balances 18,057 35,646
Market value adjustment expense 130 446
Policy benefits (net of reinsurance recoveries: 1994 - $432;
1993 - $575) 1,246 829
Reinsurance premium ceded 836 877
Amortization of deferred policy acquisition costs 2,944 7,121
Insurance expenses and taxes 2,502 4,005
------------- -------------
Total Benefits and Expenses 25,715 48,924
------------- -------------
Earnings Before Federal Income
Tax Provision 4,667 1,018
FEDERAL INCOME TAX PROVISION (BENEFIT):
Current (383) 1,886
Deferred 1,331 (1,779)
------------- -------------
Total Federal Income Tax Provision 948 107
------------- -------------
NET EARNINGS $ 3,719 $ 911
============= =============
</TABLE>
See notes to financial statements
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(a wholly-owned subsidiary of Merrill Lynch Insurance Group,
Inc.)
- - ---------------------------------------------------------------------------
STATEMENTS OF EARNINGS
(Dollars in Thousands) (Unaudited)
============================================================================
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------------------------
1994 1993
------------- -------------
<S> <C> <C>
REVENUES:
Investment revenue:
Net investment income $ 7,549 $ 12,173
Net realized investment gains (losses) (896) 1,751
Policy charge revenue 2,640 1,793
------------- ------------
Total Revenues 9,293 15,717
------------- -------------
BENEFITS AND EXPENSES:
Interest credited to policyholders' account balances 4,781 10,474
Market value adjustment expense 9 192
Policy benefits (net of reinsurance recoveries: 1994 - $200;
1993 - $165) 98 214
Reinsurance premium ceded 204 281
Amortization of deferred policy acquisition costs 1,009 2,933
Insurance expenses and taxes 793 1,296
------------- -------------
Total Benefits and Expenses 6,894 15,390
------------- -------------
Earnings Before Federal Income
Tax Provision (Benefit) 2,399 327
FEDERAL INCOME TAX PROVISION (BENEFIT):
Current (2,029) 764
Deferred 2,184 (892)
------------- -------------
Total Federal Income Tax Provision 155 (128)
------------- -------------
NET EARNINGS $ 2,244 $ 455
============= =============
</TABLE>
See notes to financial statements
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(a wholly-owned subsidiary of Merrill Lynch Insurance Group,
Inc.)
- - -------------------------------------------------------------------------------
STATEMENTS OF STOCKHOLDER'S EQUITY
(Dollars in Thousands) (Unaudited)
=============================================================================
<TABLE>
<CAPTION>
Net
Additional unrealized Total
Common paid-in Retained investment stockholder's
Stock capital earnings gain (loss) equity
---------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993 $ 2,200 $ 83,006 $ 6,689 $ 352 $ 92,247
Net earnings 0 0 1,808 0 1,808
Net unrealized investment loss 0 0 0 (1,279) (1,279)
---------- ------------ ------------ ------------ -----------
BALANCE, DECEMBER 31, 1993 2,200 83,006 8,497 (927) 92,776
Net earnings 0 0 3,719 0 3,719
Net unrealized investment loss 0 0 0 (2,331) (2,331)
---------- ----------- ------------ ------------ -----------
BALANCE, SEPTEMBER 30, 1994 $ 2,200 $ 83,006 $ 12,216 $ (3,258) $ 94,164
========== =========== ============ ============ ===========
</TABLE>
See notes to financial statements
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(a wholly-owned subsidiary of Merrill Lynch Insurance Group,
Inc.)
- - -----------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
(Dollars in Thousands) (Unaudited)
=============================================================================
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------------
1994 1993
------------- -------------
<S>
OPERATING ACTIVITIES: <C> <C>
Net earnings $ 3,719 $ 911
Adjustments to reconcile net earnings to net cash and
cash equivalents provided (used) by operating activities:
Amortization of deferred policy acquisition costs 2,944 7,121
Capitalization of policy acquisition costs (6,958) (4,415)
Amortization of fixed maturity securities (262) 1,015
Net realized investment (gains) losses 2,148 (4,332)
Interest credited to policyholders' account balances 18,057 35,646
Provision (benefit) for deferred Federal income tax 1,331 (1,779)
Cash and cash equivalents provided (used) by changes in
operating assets and liabilities:
Accrued investment income 2,213 2,158
Claims and claim settlement expenses (3,292) (907)
Federal income taxes - current (2,893) 2,218
Other policyholder funds 1,646 3,049
Payable to affiliates - net 218 4,825
Change in policy loans (2,447) (4,953)
Other - net (5,051) 5,154
Net cash and cash equivalents provided by ------------- -------------
operating activities 11,373 45,711
------------- -------------
INVESTING ACTIVITIES:
Fixed maturity securities sold 91,690 53,659
Fixed maturity securities matured 79,814 234,208
Fixed maturity securities purchased (45,282) (210,882)
Equity securities available for sale sold 4,955 2,883
Equity securities available for sale purchased (28) (109)
Mortgage loans on real estate principal payments received 9,000 4,384
Net cash and cash equivalents provided by ------------- -------------
investing activities 140,149 84,143
------------- -------------
</TABLE>
See notes to financial statements (continued)
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(a wholly-owned subsidiary of Merrill Lynch Insurance Group,
Inc.)
- - -------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
(Concluded) (Dollars in Thousands) (Unaudited)
===============================================================================
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------------
1994 1993
------------- ------------
<S> <C> <C>
FINANCING ACTIVITIES:
Policyholders' account balances:
Deposits 45,800 23,689
Withdrawals (includes transfers to Separate Accounts) (216,415) (190,336)
Net cash and cash equivalents used by financing ------------- -------------
activities (170,615) (166,647)
------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (19,093) (36,793)
CASH AND CASH EQUIVALENTS:
Beginning of year 27,464 41,122
------------- -------------
End of period $ 8,371 $ 4,329
============= =============
</TABLE>
See notes to financial statements
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(a wholly-owned subsidiary of Merrill Lynch Insurance Group,
Inc.)
- - -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1994
===============================================================================
NOTE 1: BASIS OF PRESENTATION:
ML Life Insurance Company of New York (the "Company") is a
wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.
("MLIG"). The Company is an indirect wholly-owned subsidiary of
Merrill Lynch & Co., Inc. ("Merrill Lynch & Co."). The Company
sells life insurance and annuity products, including variable
life insurance and variable annuities.
The condensed financial statements included herein have been
prepared by the Company without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. In the opinion of
management, the unaudited financial statements presented herein
include all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation of the financial
position and the results of operations in accordance with
generally accepted accounting principles for the periods
presented. Results for the three and nine months ended September
30, 1994 and 1993 are not necessarily indicative of annual
results. To facilitate comparison with the current periods,
certain amounts in the prior periods have been reclassified.
These unaudited financial statements should be read in
conjunction with the financial statements and the notes thereto
included in the Company's 1993 Annual Report on Form 10-K ("1993
Report").
The Company paid (recovered) Federal income taxes of $2.5
million and $(0.3) million for the nine months ended September
30, 1994 and 1993, respectively. The Company paid interest on
affiliated borrowings of $0.1 million and $0.3 million for the
nine months ended September 30, 1994 and 1993, respectively.
NOTE 2. STATUTORY ACCOUNTING PRACTICES:
The Company maintains its statutory accounting records in
conformity with accounting practices prescribed or permitted by
the Insurance Department of the State of New York and the
National Association of Insurance Commissioners. Statutory
capital and surplus at September 30, 1994 and December 31, 1993,
was $66.7 million and $57.3 million, respectively. For the nine
months ended September 30, 1994 and 1993, statutory net income
was $3.7 million and $4.8 million, respectively.
<PAGE>
Item 2 Management's Narrative Analysis of the Results of
Operations
This Management's Narrative Analysis of the Results of
Operations should be read in conjunction with the accompanying
financial statements and notes thereto, in addition to the 1993
Financial Statements and Notes to Financial Statements and the
Management's Discussion and Analysis of Financial Condition and
Results of Operations in the 1993 Report.
Changes in revenues and expenses in most cases are similar for
the three and nine months periods. Therefore, the discussion
emphasizes the comparison between the nine months of 1994 and
1993, with additional information on the three month periods
presented where appropriate.
Business Overview
- - -----------------
The Company's earnings are principally derived from two sources:
the net income from investment of fixed rate life insurance and
annuity contract owner deposits less interest credited to
contract owners, commonly known as spread, and fees charged to
variable life insurance and variable annuity contract owners.
The costs associated with acquiring contract owner deposits are
amortized over the period in which the Company anticipates
holding those funds. In addition, the Company incurs expenses
associated with the maintenance of inforce contracts.
Life insurance and annuity deposits received in the first nine
months of 1994 increased $22.1 million to $45.8 million, when
compared to the same period in 1993. The increase was primarily
attributable to an increase in sales of the Company's variable
annuity product.
During 1994, approximately $228.0 million of fixed deferred
annuity liabilities will reach the expiration of their interest
rate guarantee period. This represents approximately 44% of the
Company's policy liabilities and accruals as of the beginning of
1994. During the first nine months of 1994, approximately $192.0
million of these fixed deferred annuity liabilities reached the
expiration of their interest rate guarantee period. At the
expiration of an interest rate guarantee period, the contract
owner has an option to either surrender without incurring a
surrender charge, or to "renew" with an adjustment of the
interest crediting rate to the prevailing rate at the time of
renewal. The Company has offered those contract owners electing
to surrender the opportunity to exchange their contract for
either a variable annuity or market value adjusted annuity
contract. The following table summarizes the contract owners'
selections for the first nine months of 1994 and for the year
ended December 31, 1993:
<PAGE>
<TABLE>
<CAPTION>
1994 1993
---------------- ----------------
Amount % Amount %
-------- ---- -------- ----
(Dollars in Millions)
<S> <C> <C> <C> <C>
Renewed with an adjustment to the
applicable interest crediting rate $ 23 12% $ 76 25%
Exchanged into either the variable annuity
product or the market value adjusted
annuity product offered by the Company 96 50% 101 33%
Surrendered 73 38% 127 42%
-------- ---- -------- ----
Total $ 192 100% $ 304 100%
======== ==== ======== ====
</TABLE>
The rates of renewal, exchange and surrender experienced are
consistent with management's expectations. For 1995 and 1996,
fixed deferred annuity liabilities which will reach the
expiration of their interest rate guarantee period will decline
significantly from the 1993 and 1994 levels to $45.0 million and
$8.0 million, respectively.
To fund all business activities, the Company maintains a high
quality and liquid investment portfolio. As of September 30,
1994, the Company's invested assets and cash equivalents less
policy loans consisted of approximately 66% liquid or readily
marketable securities.
As of September 30, 1994, approximately $28.8 million (9.4%) of
the Company's fixed maturity securities, were considered non-
investment grade. The Company defines non-investment grade as
unsecured corporate debt obligations which do not have a rating
equivalent to Standard and Poor's BBB or higher (or similar
rating agency), and are not guaranteed by an agency of the
federal government. Non-investment grade securities are
speculative and are subject to significantly greater risks
related to the creditworthiness of the issuers and the liquidity
of the market for such securities. The Company carefully
selects, and closely monitors, such investments.
Results of Operations
- - ---------------------
For the nine month periods ended September 30, 1994 and 1993,
the Company reported net earnings of $3.7 million and $0.9
million, respectively. For the three month periods ended
September 30, 1994 and 1993, the Company reported $2.2 million
and $0.5 million, respectively.
Net investment income and interest credited to policyholders
account balances for the nine months ended September 30, 1994 as
compared to the same period in 1993 have declined by
<PAGE>
approximately $14.9 million and $17.6 million, respectively,
resulting in a net increase in interest spread of $2.7 million.
This increase in interest spread is primarily attributable to
the adjustment of the guaranteed interest crediting rate on
those contracts which have reached the end of their interest
rate guarantee period and were renewed at the prevailing rate.
Net realized investment gains (losses) declined $6.5 million for
the nine months ended September 30, 1994 as compared to the same
period in 1993. The decline was a result of dispositions
resulting in substantially reduced net realized investment gains
during the current nine month period as compared to the same
period during 1993. During the first nine months of 1994,
interest rates rose from the historically low levels reached
during 1993 generally reducing the fair value of the fixed
maturity securities portfolio.
Policy charge revenue increased $1.9 million during the current
nine month period as compared to the same period during 1993.
This is primarily attributable to an 124% increase in
policyholders account balances, as compared to December 31,
1993, of the variable annuity product.
Amortization of deferred policy acquisition costs decreased
approximately $4.2 million during the nine months ended
September 30, 1994 as compared to the same period in 1993. The
Company adjusts the amortization of deferred policy acquisition
costs based on realized investment gains recognized on normal
dispositions in the Company's investment portfolios. The decline
in realized investment gains during the current nine month
period as compared to the same period during 1993 contributed to
the reduction in amortization of deferred acquisition costs.
Additionally, contributing to the decrease in amortization is a
decline in fixed annuity contracts inforce partially offset by
the increase in the variable annuity contracts inforce.
Insurance expenses and taxes decreased approximately $1.5
million during the current nine month period as compared to the
same period during 1993. The reduction in expenses is
attributable to operational efficiencies and the completion
during 1993 of certain policy administration system
enhancements.
The Company's effective federal income tax rate increased from
11% during the first nine months of 1993 to 20% for the same
period during 1994. During the third quarter 1993, the Federal
<PAGE>
corporate income tax rate was increased from 34% to 35%. The
increased rate was utilized in revaluing the deferred tax asset
and resulted in a $0.2 million increase in deferred tax benefit.
During the third quarter 1994, the Company recorded a $0.6
million reduction to prior years tax liabilities during the
current period.
I-1
<PAGE> 3
PART II Other Information
Item 1. Legal Proceedings.
Nothing to report.
Item 5. Other Information.
Nothing to report.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 27.
Financial Data Schedule.
(b) Reports on Form 8-K.
None.
I-2
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ML LIFE INSURANCE COMPANY OF NEW YORK
/s/ JOSEPH E. CROWNE
-------------------------------------
Joseph E. Crowne
Senior Vice President and
Chief Financial Officer
Date: November 11, 1994
I-3
<PAGE> 5
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION
----------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENT OF THE ML LIFE INSURANCE COMPANY OF NEW YORK FOR THE QUARTER
ENDED SEPTEMBER 30, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<DEBT-HELD-FOR-SALE> 307,027
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 4,926
<MORTGAGE> 7,939
<REAL-ESTATE> 0
<TOTAL-INVEST> 395,719
<CASH> 8,371
<RECOVER-REINSURE> 479
<DEFERRED-ACQUISITION> 29,036
<TOTAL-ASSETS> 940,493
<POLICY-LOSSES> 2,322
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 2,846
<POLICY-HOLDER-FUNDS> 353,581
<NOTES-PAYABLE> 0
<COMMON> 2,200
0
0
<OTHER-SE> 91,964
<TOTAL-LIABILITY-AND-EQUITY> 940,493
0
<INVESTMENT-INCOME> 24,900
<INVESTMENT-GAINS> (2,148)
<OTHER-INCOME> 7,630
<BENEFITS> 1,246
<UNDERWRITING-AMORTIZATION> 2,944
<UNDERWRITING-OTHER> 2,502
<INCOME-PRETAX> 4,667
<INCOME-TAX> 948
<INCOME-CONTINUING> 3,719
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,719
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
|
|