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<PAGE> 1
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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, 1996
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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<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 March 31, December 31,
1996 1995
--------------- --------------
<S> <C> <C>
INVESTMENTS:
Fixed maturity securities available for sale, at estimated fair
value (amortized cost: 1996 - $276,346; 1995 - $295,403) $ 281,929 $ 307,596
Equity securities available for sale, at estimated fair value
(cost: 1996 - $3,017; 1995 - $3,017) 4,474 3,534
Mortgage loans on real estate 4,032 4,032
Policy loans on insurance contracts 81,857 82,073
--------------- --------------
Total Investments 372,292 397,235
CASH AND CASH EQUIVALENTS 31,303 17,387
ACCRUED INVESTMENT INCOME 8,255 6,603
DEFERRED POLICY ACQUISITION COSTS 30,431 30,922
FEDERAL INCOME TAXES - DEFERRED 3,720 3,622
REINSURANCE RECEIVABLES 541 493
OTHER ASSETS 9,090 2,653
SEPARATE ACCOUNTS ASSETS 551,702 544,432
--------------- --------------
TOTAL ASSETS $ 1,007,334 $ 1,003,347
=============== ==============
</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 March 31, December 31,
1996 1995
--------------- --------------
<S> <C> <C>
LIABILITIES:
POLICY LIABILITIES AND ACCRUALS:
Policyholders' account balances $ 325,614 $ 337,137
Claims and claims settlement expenses 5,645 2,901
--------------- --------------
Total policy liabilities and accruals 331,259 340,038
OTHER POLICYHOLDER FUNDS 1,086 739
OTHER LIABILITIES 5,965 3,112
FEDERAL INCOME TAXES - CURRENT 670 185
PAYABLE TO AFFILIATES - NET 4,473 4,062
SEPARATE ACCOUNTS LIABILITIES 551,702 544,432
--------------- --------------
Total Liabilities 895,155 892,568
--------------- --------------
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 26,046 24,034
Net unrealized investment gain 927 1,539
--------------- --------------
Total Stockholder's Equity 112,179 110,779
--------------- --------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,007,334 $ 1,003,347
=============== ==============
</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
March 31,
--------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
REVENUES:
Investment revenue:
Net investment income $ 7,113 $ 7,691
Net realized investment gains (losses) 381 (261)
Policy charge revenue 2,706 2,602
--------------- ---------------
Total Revenues 10,200 10,032
--------------- ---------------
BENEFITS AND EXPENSES:
Interest credited to policyholders' account balances 4,213 4,548
Policy benefits (net of reinsurance recoveries: 1996 - $225;
1995 - $400) 637 96
Reinsurance premium ceded 231 313
Amortization of deferred policy acquisition costs 1,046 1,148
Insurance expenses and taxes 1,158 869
--------------- ---------------
Total Benefits and Expenses 7,285 6,974
--------------- ---------------
Earnings Before Federal Income
Tax Provision 2,915 3,058
FEDERAL INCOME TAX PROVISION:
Current 670 182
Deferred 233 888
--------------- ---------------
Total Federal Income Tax Provision 903 1,070
--------------- ---------------
NET EARNINGS $ 2,012 $ 1,988
=============== ===============
</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, 1995 $ 2,200 $ 83,006 $ 13,970 $ (3,363) $ 95,813
Net earnings 0 0 10,064 0 10,064
Net unrealized investment gain 0 0 0 4,902 4,902
------------ ------------ ----------- ----------- -------------
BALANCE, DECEMBER 31, 1995 2,200 83,006 24,034 1,539 110,779
Net earnings 0 0 2,012 0 2,012
Net unrealized investment loss 0 0 0 (612) (612)
------------ ------------ ----------- ----------- -------------
BALANCE, MARCH 31, 1996 $ 2,200 $ 83,006 $ 26,046 $ 927 $ 112,179
============ ============ =========== =========== =============
</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>
Three Months Ended
March 31,
--------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 2,012 $ 1,988
Adjustments to reconcile net earnings to net cash and
cash equivalents provided (used) by operating activities:
Amortization of deferred policy acquisition costs 1,046 1,148
Capitalization of policy acquisition costs (556) (1,370)
(Accretion) and amortization of fixed maturity securities (60) (128)
Net realized investment (gains) losses (381) 261
Interest credited to policyholders' account balances 4,213 4,548
Provision for deferred Federal income tax 233 888
Cash and cash equivalents provided (used) by changes
in operating assets and liabilities:
Accrued investment income (1,652) (818)
Claims and claim settlement expenses 2,744 (418)
Federal income taxes - current 485 182
Other policyholder funds 347 (430)
Payable to affiliates - net 411 1,810
Change in policy loans 216 (68)
Other - net (3,631) 1,481
--------------- ---------------
Net cash and cash equivalents provided by
operating activities 5,427 9,074
--------------- ---------------
INVESTING ACTIVITIES:
Fixed maturity securities sold 35,573 14,689
Fixed maturity securities matured 9,146 11,729
Fixed maturity securities purchased (25,221) (30,088)
--------------- ---------------
Net cash and cash equivalents provided (used) by
investing activities 19,498 (3,670)
--------------- ---------------
</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>
Three Months Ended
March 31,
--------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
FINANCING ACTIVITIES:
Policyholders' account balances:
Deposits 6,574 14,221
Withdrawals (includes transfers to Separate Accounts) (17,583) (21,037)
--------------- ---------------
Net cash and cash equivalents used by financing
activities (11,009) (6,816)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 13,916 (1,412)
CASH AND CASH EQUIVALENTS:
Beginning of year 17,387 20,915
--------------- ---------------
End of period $ 31,303 $ 19,503
=============== ===============
Supplementary Disclosure of Cash Flow Information:
Cash paid for:
Federal income taxes $ 185 $ 0
Intercompany interest $ 112 $ 111
</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)
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, 1996 and
1995 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 1995 Annual Report on Form 10-K ("1995 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, 1996 and December 31, 1995, was
$75.3 million and $72.1 million, respectively. For the three
months ended March 31, 1996 and 1995, statutory net income was
$2.3 million and $0.8 million, respectively.
NOTE 3. INVESTMENTS:
The Company's investments in debt and equity securities are
classified as available for sale and are recorded at fair value.
The Company is required to adjust deferred policy acquisition
costs and certain policyholder liabilities associated with
investments classified as available for sale. These adjustments
are recorded in stockholder's equity and assume that the
unrealized gain or loss on available for sale securities was
realized. These investments primarily support in-force,
universal life-type contracts. The following reconciles the net
unrealized investment gain recorded in stockholder's equity at
March 31, 1996 and December 31, 1995:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
(In Thousands)
<S> <C> <C>
Assets:
Fixed maturity securities available for sale $ 5,583 $ 12,193
Equity securities available for sale 1,457 517
Federal income taxes - deferred (498) (829)
------------ ------------
6,542 11,881
------------ ------------
Liabilities:
Policyholders' account balances 5,615 10,342
------------ ------------
Stockholder's equity:
Net unrealized investment gain $ 927 $ 1,539
============ ============
</TABLE>
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 1995
Financial Statements and Notes to Financial Statements and the
Management's Discussion and Analysis of Financial Condition and
Results of Operations in the 1995 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 1996 and 1995 were $6.6 million and $14.2
million, respectively. Investor demand experienced a shift to
variable annuity products from fixed rate interest products
during the first quarter of 1996 as compared to the first
quarter 1995. During the first quarter 1996, interest rates were
approximately 170 basis points, on average, lower than for the
first quarter 1995. Management attributes the shift in investor
demand from fixed rate interest products to variable products to
the low interest rate environment and the generally rising
equity markets during the preceding year. The Company's modified
guaranteed annuity product, a fixed interest rate product,
experienced a $10.2 million (99%) decline in sales during the
first quarter of 1996 as compared to the same period during
1995. Partially offsetting this decline in sales, variable
annuity deposits received during the first quarter of 1996
increased $2.2 million (82%) to $4.9 million as compared to the
same period in 1995.
To fund all business activities, the Company maintains a high
quality and liquid investment portfolio. As of March 31, 1996,
the Company's assets included $251 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, 1996, approximately $14.6 million (5.2%) 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 each of the three month periods ended March 31, 1996 and
1995, the Company reported net earnings of $2.0 million.
Net investment income and interest credited to policyholders'
account balances for the three months ended March 31, 1996 as
compared to the same period in 1995 have declined by
approximately $0.6 million and $0.3 million, respectively,
resulting in a net decrease in interest spread of $0.3 million.
The reductions in net investment income, interest credited to
policyholders' account balances and interest spread are
primarily attributable to the reduction in fixed rate contracts
in-force.
Net realized investment gains (losses) increased $0.6 million
for the three months ended March 31, 1996 as compared to the
same period in 1995. The change in realized investment losses is
primarily attributable to normal sales activity from and
management of the available for sale portfolios and reflects the
declines in the interest rate environment.
Policy charge revenue increased $0.1 million during the current
three month period as compared to the same period during 1995.
The increase in policy charge revenue is primarily attributable
to the increase in policyholders' account balances of the
variable annuity product.
Policy benefits increased approximately $0.5 million from $0.1
million for the first three months of 1995 to $0.6 million for
the current three month period. This increase is primarily
attributable to an increase in mortality claims during the
current three month period as compared to the same period during
1995.
Insurance expenses and taxes increased $0.3 million to $1.2
million, during the current three month period as compared to
the same period during 1995. Approximately $0.1 million of the
increase was attributable to normal increases in operating
expenses and product development initiatives. Implementation of
modifications to MLIG's cost allocation system resulted in a
$0.1 million increase in expense allocations to the Company.
These modifications were implemented to improve the Company's
compliance with New York insurance law. Additionally, $0.1
million of the increase was attributable to a reduction in the
amount of expenses which were capitalized reflecting the decline
in sales volume of the Company's annuity products.
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.
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: May 14, 1996
I-3
<PAGE> 5
EXHIBIT INDEX
-------------
Exhibit
No. Description
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 281,929
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 4,474
<MORTGAGE> 4,032
<REAL-ESTATE> 0
<TOTAL-INVEST> 372,292
<CASH> 31,303
<RECOVER-REINSURE> 541
<DEFERRED-ACQUISITION> 30,431
<TOTAL-ASSETS> 1,007,334
<POLICY-LOSSES> 5,645
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 1,086
<POLICY-HOLDER-FUNDS> 325,614
<NOTES-PAYABLE> 0
0
0
<COMMON> 2,200
<OTHER-SE> 109,979
<TOTAL-LIABILITY-AND-EQUITY> 1,007,334
0
<INVESTMENT-INCOME> 7,113
<INVESTMENT-GAINS> 381
<OTHER-INCOME> 2,706
<BENEFITS> 637
<UNDERWRITING-AMORTIZATION> 1,046
<UNDERWRITING-OTHER> 1,158
<INCOME-PRETAX> 2,915
<INCOME-TAX> 903
<INCOME-CONTINUING> 2,012
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,012
<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>
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