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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 MARCH 31, 1995
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.
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PART I Financial Information
I-1
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<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 March 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
INVESTMENTS:
Fixed maturity securities available for sale, at estimated fair
value (amortized cost: 1995 - $301,460; 1994 - $297,551) $ 298,387 $ 286,078
Equity securities available for sale, at estimated fair value
(cost: 1995 - $3,614; 1994 - $3,987) 4,308 4,301
Mortgage loans on real estate 7,955 7,941
Policy loans on insurance contracts 77,895 77,827
------------ ------------
Total Investments 388,545 376,147
CASH AND CASH EQUIVALENTS 19,503 20,915
ACCRUED INVESTMENT INCOME 8,172 7,354
DEFERRED POLICY ACQUISITION COSTS 28,235 31,031
FEDERAL INCOME TAXES - DEFERRED 8,667 9,749
REINSURANCE RECEIVABLES 787 605
OTHER ASSETS 2,601 3,265
SEPARATE ACCOUNTS ASSETS 482,749 471,656
------------ ------------
TOTAL ASSETS $ 939,259 $ 920,722
============ ============
</TABLE>
See notes to financial statements (Continued)
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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 March 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
LIABILITIES:
POLICY LIABILITIES AND ACCRUALS:
Policyholders' account balances $ 343,820 $ 340,882
Claims and claims settlement expenses 3,896 4,314
------------ ------------
Total policy liabilities and accruals 347,716 345,196
OTHER POLICYHOLDER FUNDS 1,102 1,532
OTHER LIABILITIES 3,129 2,113
FEDERAL INCOME TAXES - CURRENT 352 170
PAYABLE TO AFFILIATES - NET 6,052 4,242
SEPARATE ACCOUNTS LIABILITIES 482,749 471,656
------------ ------------
Total Liabilities 841,100 824,909
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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 15,958 13,970
Net unrealized investment loss (3,005) (3,363)
------------ ------------
Total Stockholder's Equity 98,159 95,813
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TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 939,259 $ 920,722
============ ============
</TABLE>
See notes to financial statements
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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
March 31,
------------------------------
1995 1994
------------ ------------
<S> <C> <C>
REVENUES:
Investment revenue:
Net investment income $ 7,691 $ 9,615
Net realized investment gains (losses) (261) 35
Policy charge revenue 2,602 2,380
------------ ------------
Total Revenues 10,032 12,030
------------ ------------
BENEFITS AND EXPENSES:
Interest credited to policyholders' account balances 4,548 7,328
Policy benefits (net of reinsurance recoveries: 1995 - $400;
1994 - $121) 96 331
Reinsurance premium ceded 313 320
Amortization of deferred policy acquisition costs 1,148 1,034
Insurance expenses and taxes 869 794
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Total Benefits and Expenses 6,974 9,807
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Earnings Before Federal Income
Tax Provision 3,058 2,223
FEDERAL INCOME TAX PROVISION (BENEFIT):
Current 182 1,104
Deferred 888 (326)
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Total Federal Income Tax Provision 1,070 778
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NET EARNINGS $ 1,988 $ 1,445
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</TABLE>
See notes to financial statements
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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 loss equity
---------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 $ 2,200 $ 83,006 $ 8,497 $ (927) $ 92,776
Net earnings 0 0 5,473 0 5,473
Net unrealized investment loss 0 0 0 (2,436) (2,436)
---------- ---------- ---------- ----------- -------------
BALANCE, DECEMBER 31, 1994 2,200 83,006 13,970 (3,363) 95,813
Net earnings 0 0 1,988 0 1,988
Net unrealized investment gain 0 0 0 358 358
---------- ---------- ---------- ----------- -------------
BALANCE, MARCH 31, 1995 $ 2,200 $ 83,006 $ 15,958 $ (3,005) $ 98,159
========== ========== ========== =========== =============
</TABLE>
See notes to financial statements
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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>
Three Months Ended
March 31,
------------------------------
1995 1994
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 1,988 $ 1,445
Adjustments to reconcile net earnings to net cash and
cash equivalents provided (used) by operating activities:
Amortization of deferred policy acquisition costs 1,148 1,035
Capitalization of policy acquisition costs (1,370) (2,393)
Amortization of fixed maturity securities (128) 4
Net realized investment (gains) losses 261 (35)
Interest credited to policyholders' account balances 4,548 7,328
Provision (benefit) for deferred Federal income tax 888 (326)
Cash and cash equivalents provided (used) by changes
in operating assets and liabilities:
Accrued investment income (818) 1,033
Claims and claim settlement expenses (418) (39)
Federal income taxes - current 182 1,104
Other policyholder funds (430) 2,582
Payable to affiliates - net 1,810 (92)
Change in policy loans (68) (1,600)
Other - net 1,481 (153)
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Net cash and cash equivalents provided by
operating activities 9,074 9,893
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INVESTING ACTIVITIES:
Fixed maturity securities sold 14,689 33,695
Fixed maturity securities matured 11,729 29,513
Fixed maturity securities purchased (30,088) (20,533)
Equity securities available for sale sold 0 68
Equity securities available for sale purchased 0 (31)
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Net cash and cash equivalents provided (used) by
investing activities (3,670) 42,712
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</TABLE>
See notes to financial statements
(continued)
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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>
Three Months Ended
March 31,
------------------------------
1995 1994
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<S> <C> <C>
FINANCING ACTIVITIES:
Policyholders' account balances:
Deposits 14,221 14,658
Withdrawals (includes transfers to Separate Accounts) (21,037) (80,443)
------------ ------------
Net cash and cash equivalents used by financing
activities (6,816) (65,785)
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NET DECREASE IN CASH AND CASH EQUIVALENTS (1,412) (13,180)
CASH AND CASH EQUIVALENTS:
Beginning of year 20,915 26,919
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End of period $ 19,503 $ 13,739
============ ============
Supplementary Disclosure of Cash Flow Information:
Cash paid for:
Federal income taxes $ 0 $ 0
Intercompany interest $ 111 $ 88
</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 (UNAUDITED)
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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 months ended March 31, 1995 and
1994 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 1994 Annual Report on Form 10-K ("1994 Report").
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 March 31, 1995 and December 31, 1994, was
$66.8 million and $64.9 million, respectively. For the three
months ended March 31, 1995 and 1994, statutory net income was
$0.8 million and $3.1 million, respectively.
NOTE 3. ACCOUNTING CHANGES:
In the first quarter of 1995, the Company adopted Statement of
Financial Accounting Standards (SFAS") No. 114, "Accounting by
Creditors for Impairment of a Loan" and SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures". SFAS No. 114 establishes
accounting standards for creditors to measure the impairment of
certain loans. SFAS No. 118 amends SFAS No. 114 to allow
creditors to use existing methods for recognizing interest
income on an impaired loan, rather than the method originally
required by SFAS No. 114. The impact of these pronouncements on
the Company's financial statements as of March 31, 1995 was not
material.
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 1994
Financial Statements and Notes to Financial Statements and the
Management's Discussion and Analysis of Financial Condition and
Results of Operations in the 1994 Report.
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 in-force contracts.
New life insurance premium and annuity deposits received in the
first three months of 1995 and 1994 were $14.2 million and $14.7
million, respectively. During the first quarter of 1995, investor
demand continued to shift from variable annuity products to fixed
interest rate products contributing to the declines in variable
annuity sales for both the industry and the Company. Variable
annuity deposits received during the first quarter of 1995
decreased $10.7 million to $2.7 million as compared to the same
period in 1994. However, modified guaranteed annuity sales
increased $10.2 million from $.1 million during the first
quarter 1994 to $10.3 million during the first quarter 1995. The
Company is facing increased competition by non-affiliated
insurers whose products are also sold through Merrill Lynch &
Co.'s retail network.
During 1995, approximately $45.0 million of fixed deferred
annuity liabilities will reach the expiration of their interest
rate guarantee period. During the first three months of 1995,
approximately $17.0 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 three months of
1995 and 1994:
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<TABLE>
<CAPTION>
1995 1994
--------------- -----------------
Amount % Amount %
------ ---- ------ ----
(Dollars in Millions)
<S> <C> <C> <C> <C>
Renewed with an adjustment to the
applicable interest crediting rate $ 4 24% $ 12 16%
Exchanged into either the variable annuity
product or the market value adjusted
annuity product offered by the Company 8 47% 40 51%
Surrendered 5 29% 25 33%
------ ---- ------- ----
Total $ 17 100% $ 77 100%
====== ==== ======= ====
</TABLE>
The rates of renewal, exchange and surrender experienced are
consistent with management's expectations.
To fund all business activities, the Company maintains a high
quality and liquid investment portfolio. As of March 31, 1995,
the Company's assets included $237.6 million of cash, short-term
investments and investment grade publicly traded fixed maturity
securities that could be liquidated if funds were required.
As of March 31, 1995, approximately $26.7 million (8.9%) 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 three month periods ended March 31, 1995 and 1994, the
Company reported net earnings of $3.1 million and $2.2 million,
respectively.
Net investment income and interest credited to policyholders'
account balances for the three months ended March 31, 1995 as
compared to the same period in 1994 have declined by
approximately $1.9 million and $2.8 million, respectively,
resulting in a net increase in interest spread of $0.9 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 $0.3 million for
the three months ended March 31, 1995 as compared to the same
period in 1994. The change in realized investment losses is
primarily attributable to normal sales activity from the
available for sale portfolios.
Policy charge revenue increased $0.2 million during the current
three month period as compared to the same period during 1994.
The increase in policy charge revenue is primarily attributable
to the increase in policyholders' account balances of the
variable annuity product.
Policy benefits decreased approximately $0.2 million from $0.3
million for the first three months of 1994 to $0.1 million for
the current three month period. This decrease is primarily
attributable to a decrease in mortality claims during the
current three month period as compared to the same period during
1994.
Amortization of deferred policy acquisition costs increased
approximately $0.1 million during the three months ended March
31, 1995 as compared to the same period in 1994. The increase in
amortization is primarily attributable to the increase in
variable annuity contracts in-force.
<PAGE>
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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.
Financial Data Schedule.
(b) Reports on Form 8-K.
None.
I-2
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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: May 12, 1995
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EXHIBIT INDEX
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Exhibit
No. Description
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27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<DEBT-HELD-FOR-SALE> 298,387
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 4,308
<MORTGAGE> 7,955
<REAL-ESTATE> 0
<TOTAL-INVEST> 388,545
<CASH> 19,503
<RECOVER-REINSURE> 787
<DEFERRED-ACQUISITION> 28,235
<TOTAL-ASSETS> 939,259
<POLICY-LOSSES> 3,896
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 1,102
<POLICY-HOLDER-FUNDS> 343,820
<NOTES-PAYABLE> 0
<COMMON> 2,200
0
0
<OTHER-SE> 95,959
<TOTAL-LIABILITY-AND-EQUITY> 939,259
0
<INVESTMENT-INCOME> 7,691
<INVESTMENT-GAINS> (261)
<OTHER-INCOME> 2,602
<BENEFITS> 96
<UNDERWRITING-AMORTIZATION> 1,148
<UNDERWRITING-OTHER> 869
<INCOME-PRETAX> 3,058
<INCOME-TAX> 1,070
<INCOME-CONTINUING> 1,988
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,988
<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>
