ML LIFE INSURANCE COMPANY OF NEW YORK, POS AM, 1999-04-02

ML LIFE INSURANCE COMPANY OF NEW YORK
POS AM, 1999-04-02

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 2, 1999

REGISTRATION NO. 333-48983

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-1

POST EFFECTIVE AMENDMENT NO. 1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

ML LIFE INSURANCE COMPANY OF NEW YORK
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

NEW YORK
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)

6312
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)

16-1020455
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)

100 CHURCH STREET, 11TH FLOOR
NEW YORK, NEW YORK 10080-6511
(212) 602-8250
(ADDRESS INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA CODE
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)

------------------------

BARRY G. SKOLNICK, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
ML LIFE INSURANCE COMPANY OF NEW YORK
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(609) 282-1429
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE OF AGENT FOR SERVICE)

------------------------

COPY TO:

STEPHEN E. ROTH, ESQ.
KIMBERLY J. SMITH, ESQ.

SUTHERLAND ASBILL & BRENNAN LLP

1275 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20004

If any of the Securities that have been registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [X]

Pursuant to Rule 429 under the Securities Act of 1933, the prospectus contained
herein also relates to Registration Statement Nos. 33-34562 and 33-60288.

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<PAGE> 2

PROSPECTUS
MAY 1, 1999

ML NY ASSET I (SM)
INDIVIDUAL MODIFIED GUARANTEED ANNUITY CONTRACT
ISSUED BY
ML LIFE INSURANCE COMPANY OF NEW YORK
Home Office: 100 Church Street, 11th Floor, New York, New York 10080-6511
Service Center: P.O. Box 44222, Jacksonville, Florida 32231-4222
4804 Deer Lake Drive East, Jacksonville, Florida 32246
Phone: (800) 333-6524
OFFERED THROUGH
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED

This prospectus describes an INDIVIDUAL MODIFIED GUARANTEED ANNUITY contract
issued by ML Life Insurance Company of New York.

An ANNUITY contract provides for a series of payments that are
made in regular intervals beginning on a specified date. A
MODIFIED GUARANTEED ANNUITY contract additionally provides that
fixed rates of interest will be credited to the contract for
specified periods of time (called guarantee periods). If you
make a withdrawal prior to the end of those periods, we will
adjust the contract value to reflect the difference between the
guaranteed interest rates and the interest rates being offered
at that time.

To purchase a Contract, you must complete an application and pay a single
premium. You must then allocate your premium among one or more subaccounts that
grow at a specified guaranteed rate of interest, which will not be less than 3%,
for the guarantee period.

PURCHASING THIS CONTRACT INVOLVES CERTAIN RISKS. WE WILL APPLY A WITHDRAWAL
CHARGE AND A MARKET VALUE ADJUSTMENT IF YOU MAKE A WITHDRAWAL OR ANNUITIZE
BEFORE THE END OF A GUARANTEE PERIOD. THE MARKET VALUE ADJUSTMENT MAY BE EITHER
POSITIVE OR NEGATIVE. ACCORDINGLY, THE VALUE OF YOUR CONTRACT COULD EITHER
INCREASE OR DECREASE AND YOU COULD LOSE A SUBSTANTIAL PORTION OF THE PREMIUM YOU
INVESTED. YOU SHOULD CAREFULLY CONSIDER YOUR INCOME NEEDS BEFORE PURCHASING A
CONTRACT.

WHEN YOU TAKE WITHDRAWALS FROM A SUBACCOUNT, A FEDERAL INCOME TAX IS IMPOSED ON
THE ENTIRE GAIN IN YOUR CONTRACT AND NOT JUST THE GAIN FROM THAT SUBACCOUNT.
WITHDRAWALS BEFORE AGE 59 1/2 MAY ALSO INCUR A 10% FEDERAL PENALTY TAX.
CAREFULLY DISCUSS YOUR PERSONAL TAX SITUATION WITH YOUR ADVISORS BEFORE YOU
PURCHASE A CONTRACT.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION
NOR ANY STATE SECURITIES COMMISSION HAS APPROVED
OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CAPSULE SUMMARY............................................. 3
DESCRIPTION OF THE CONTRACT................................. 5
THE CONTRACT........................................... 5
APPLICATION AND PREMIUMS............................... 5
SUBACCOUNTS AND SUBACCOUNT VALUES...................... 5
Choices at the End of the Subaccount Guarantee
Period (the Renewal Date)......................... 5
How We Determine the Guaranteed Interest Rates for
Subaccounts....................................... 6
WITHDRAWALS............................................ 7
CHARGES................................................ 7
Market Value Adjustment ("MVA")................... 8
Withdrawal Charge................................. 10
Premium Taxes..................................... 12
DEATH BENEFIT PAYMENTS AND BENEFICIARIES............... 12
Beneficiaries..................................... 12
Death Before to the Annuity Date.................. 13
Death After the Annuity Date...................... 13
ANNUITY PROVISIONS (ANNUITIZATION)..................... 14
OTHER PROVISIONS....................................... 16
Assignment........................................ 16
Notices and Elections............................. 16
Amendment of Contract............................. 16
Free Look Right................................... 17
Guarantee of Contract............................. 17
DISTRIBUTION OF THE CONTRACTS............................... 17
FEDERAL INCOME TAXES........................................ 17
MORE INFORMATION ABOUT ML LIFE INSURANCE COMPANY OF NEW
YORK...................................................... 21
HISTORY AND BUSINESS................................... 21
SELECTED FINANCIAL DATA................................ 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................... 22
REINSURANCE............................................ 31
CONTRACT OWNER ACCOUNT BALANCES........................ 31
INVESTMENTS............................................ 31
COMPETITION............................................ 32
CERTAIN AGREEMENTS..................................... 32
EMPLOYEES.............................................. 33
PROPERTIES............................................. 33
STATE REGULATION....................................... 33
DIRECTORS AND EXECUTIVE OFFICERS............................ 34
EXECUTIVE COMPENSATION...................................... 36
LEGAL PROCEEDINGS........................................... 38
LEGAL MATTERS............................................... 38
EXPERTS..................................................... 38
REGISTRATION STATEMENT...................................... 38
</TABLE>

<PAGE> 4

CAPSULE SUMMARY

THE CONTRACT

This prospectus describes an individual modified guaranteed annuity contract
issued by ML Life Insurance Company of New York ("we" or "us").

APPLICATION

To purchase a Contract, you must complete and return an application to our
Service Center. We have the right to reject any application.

PREMIUMS

We issue one Contract for each single premium payment you make. Your single
premium must be at least $5,000.

SUBACCOUNTS

We maintain one or more subaccounts for the value of your Contract. Each
subaccount grows at a specified interest rate which will not be less than 3%. We
guarantee that we will credit that interest rate for a specified period, called
a Guarantee Period, that corresponds to the subaccount. Currently, we offer
Guarantee Periods of one to ten years. You must tell us how much of your premium
payment you want us to put in each subaccount. You must allocate at least $5,000
to each subaccount you choose. At the end of the Guarantee Period (on the
Renewal Date), you may transfer the value of that subaccount to one or more
subaccounts at the interest rates then in effect.

CHARGES

WITHDRAWAL CHARGE

If you take a withdrawal from a subaccount before the end of the
Guarantee Period, we will deduct a withdrawal charge generally equal to
six months of interest on the amount withdrawn at the guaranteed interest
rate. During the first contract year, the withdrawal charge will not
exceed 10% of the amount withdrawn. This percentage limitation will
decline by one percentage point during each contract year thereafter. We
do not impose a withdrawal charge on withdrawals made after the end of
the tenth contract year. We also do not deduct a withdrawal charge when
the annuitant dies or you die. We also currently do not deduct a
withdrawal charge when we begin to make annuity payments.

MARKET VALUE ADJUSTMENT ("MVA")

If you take a withdrawal from a subaccount before the end of the
Guarantee Period, we will apply an MVA. Generally, we will apply an MVA
at the time we begin to make annuity payments for any subaccount that has
not reached the end of its Guarantee Period. The MVA may be positive or
negative and can affect the value of your Contract. Generally, if the
interest rates for a new Contract are higher than the guaranteed rates of
your Contract, the MVA will be negative. If the interest rates for a new
Contract are lower than the guaranteed rates of your Contract, the MVA
will be positive. For death benefit payments, we only credit a positive
MVA; we do not deduct any negative MVA.

PREMIUM TAXES

We deduct any applicable premium taxes when you annuitize. Premium tax
rates vary from jurisdiction to jurisdiction and currently range from 0%
to 5%. In those jurisdictions that do not allow an insurance company to
reduce its current taxable premium income by the amount of any
withdrawal, surrender, or death benefit paid, we will also deduct a
charge for these taxes on any withdrawal, surrender, or death benefit
payment.

<PAGE> 5

ANNUITY PAYMENTS

You choose the date that you want us to begin to make annuity payments (the
annuity date). You also choose the method under which we make these payments
(the annuity option). You may change the annuity date or annuity option any time
before we begin to make annuity payments. You cannot make withdrawals after we
begin to make annuity payments.

PAYMENT ON DEATH ("DEATH BENEFIT")

BEFORE THE ANNUITY DATE

If you or the annuitant dies prior to the annuity date, we will pay the
designated beneficiary the value of the Contract plus any positive MVA
plus interest until the date of payment at an annual rate we determine
from time to time.

AFTER THE ANNUITY DATE

If you die after we begin making annuity payments, we will continue to
make annuity payments to your beneficiary. If the annuitant dies after we
begin to make annuity payments, the annuitant's designated beneficiary
may request that we either continue to make any remaining guaranteed
annuity payments or pay the present value of those payments in a lump
sum.

WITHDRAWALS

You may take withdrawals any time before we begin to make annuity payments or
before the annuitant's death, whichever is earlier. Withdrawals are subject to
tax and if taken prior to age 59 1/2 may also be subject to a penalty tax.
Certain CHARGES and minimums apply to withdrawals.

FREE LOOK

When you receive your Contract, you should review it carefully to make sure it
is what you intended to purchase. You may return the Contract for a premium
refund within ten days after you receive it. Some states allow a longer period
to return the Contract. To receive a premium refund, you must return the
Contract to our Service Center or to your Merrill Lynch Financial Consultant.

ML LIFE INSURANCE COMPANY OF NEW YORK

We issue the Contracts. Our home office is in New York, New York. Our Service
Center's address and phone number are P.O. Box 44222, Jacksonville, Florida
32231-4222, (800) 333-6524.

You should address all communications concerning your Contract to our Service
Center.

<PAGE> 6

DESCRIPTION OF THE CONTRACT

THE CONTRACT

The Contract describes your rights and benefits under the contract. You can
exercise these rights and benefits at any time.

We will issue Contracts in connection with non-qualified retirement plans or
plans qualifying for special tax treatment such as "H.R. 10" plans, Individual
Retirement Annuities or Accounts, corporate pension and profit-sharing plans, or
Section 457 deferred compensation plans.

APPLICATION AND PREMIUM

You can purchase a Contract by completing an application and paying a premium.
The minimum premium you can pay is $5,000. The maximum premium you can pay
without our consent is $500,000. You must send the application and premium to
our Service Center.

We issue a separate Contract for each premium you pay. You must complete a new
application for each premium payment. You can only purchase one Contract a day.
We can reject any application.

SUBACCOUNTS AND SUBACCOUNT VALUES

Your Contract consists of one or more subaccounts. You must tell us how to
distribute your single premium among these subaccounts. The minimum amount you
can put in a subaccount is $5,000.

Each subaccount grows at a specified guaranteed rate of interest, which will not
be less than 3% per year. The initial rates that will apply to your subaccounts
are those in effect on the day we receive your premium. We guarantee that we
will credit a particular interest rate to the subaccount for the designated
number of years you select called the Guarantee Period. Currently, we offer ten
Guarantee Periods ranging from one to ten years. We can change the number of the
Guarantee Periods we offer, but no Guarantee Period offered will exceed ten
years. The end of the Guarantee Period for a subaccount is its Renewal Date. You
cannot change the Guarantee Period or make a transfer to a different subaccount
prior to the Renewal Date.

We credit the guaranteed interest rate for a subaccount daily (except on
February 29th). The Subaccount Value initially equals the amount of premium that
you allocate to or the amount you reinvest in a subaccount. The Subaccount Value
fluctuates depending on the interest credited to that subaccount, any Market
Value Adjustment (see MVA) and any withdrawals and Withdrawal Charges (see
Withdrawals). The total of all the Subaccount Values is your Contract Value. We
will compound interest on each Contract anniversary.

The following is an example of how you can allocate a $15,000 single premium on
May 1, 1999 among three subaccounts, and shows subaccount values as of the
Renewal Date assuming no withdrawals.

SUBACCOUNT SUBACCOUNT VALUE
AMOUNT ALLOCATED INTEREST RATE GUARANTEE PERIOD RENEWAL DATE AS OF RENEWAL DATE
<S> <C> <C> <C> <C>
$5,000 3.80% One Year May 1, 2000 $5,190.00
$5,000 4.25% Two Years May 1, 2001 $5,434.03
$5,000 4.90% Six Years May 1, 2005 $6,662.28
</TABLE>

CHOICES AT THE END OF THE SUBACCOUNT GUARANTEE PERIOD (THE RENEWAL DATE)

We will send you a notice 30 days before a subaccount's Renewal Date. You
may currently notify us no later than five business days after the
Renewal Date that you wish to transfer the Subaccount Value to one or
more new subaccounts. You can choose any of the Guarantee Periods offered
on the Renewal Date. The minimum amount you can transfer to a subaccount
is $5,000 unless the total Subaccount Value is less than $5,000. The
transfer will be effective as of the Renewal Date. The interest rate(s)
for the Guarantee Period(s) you choose will be those in effect for a new
Contract on the Renewal Date, but will not be less than 3%.

<PAGE> 7

If your Contract's annuity date is less than one year from the Renewal
Date, we will transfer the Subaccount Value to a new subaccount with a
one-year Guarantee Period. You may change your annuity date so that the
Guarantee Period of the new subaccount will end on or prior to the
annuity date. See CHANGE OF ANNUITY DATE, ANNUITANT OR ANNUITY OPTIONS
for more information.

If we do not receive timely transfer instructions, we will transfer the
Subaccount Value to a subaccount with a one-year Guarantee Period. If,
however, you have chosen the Maximum Guarantee Period Option and we do
not receive timely transfer instructions, we will transfer the Subaccount
Value to the subaccount with the longest Guarantee Period that we offer
at that time that:

1. is available on the Renewal Date;

2. is not longer than your longest Guarantee Period immediately
before transfer; and

3. ends on or before the annuity date.

For example, you allocate your premium as of May 1, 1999 among
three subaccounts with Renewal Dates of May 1, 2000; May 1,
2001; and May 1, 2005. If you do not select the Maximum
Guarantee Period Option and we do not receive timely transfer
instructions on or within five business days of the first
Renewal Date (May 1, 2000), we will transfer the Subaccount
Value to the one-year subaccount. If you have selected the
Maximum Guarantee Period Option, we will transfer the
Subaccount Value to the subaccount with the May 1, 2006
Renewal Date.

HOW WE DETERMINE THE GUARANTEED INTEREST RATES FOR SUBACCOUNTS

We have no specific formula for setting the guaranteed interest rates.
However, no subaccount will ever have a guaranteed interest rate of less
than 3% per year.

Rates will be influenced by, but not necessarily correspond to, interest
rates available on fixed income investments that we may acquire with the
amounts we receive as premiums. You will have no direct or indirect
interest in the investments we make with the premiums. We will invest
these amounts primarily in investment-grade fixed income securities
including:

- securities issued by the United States Government or its
agencies or instrumentalities, which may or may not be
guaranteed by the United States Government;

- debt securities that have an investment grade, at the
time of purchase, within the four highest grades assigned
by Moody's Investor Services, Inc. (Aaa, Aa, A or Baa),
Standard & Poor's Corporation (AAA, AA, A or BBB) or any
other nationally recognized rating service;

- mortgage-backed securities collateralized by real estate
mortgage loans, or securities collateralized by other
assets, that are insured or guaranteed by the Federal
Home Loan Mortgage Association, the Federal National
Mortgage Association or the Government National Mortgage
Association, or that have an investment grade at the time
of purchase within the four highest grades described
above;

- other debt instruments;

- commercial paper; and

- cash or cash equivalents.

We will also consider other factors in determining the guaranteed rates,
including regulatory and tax requirements, sales commissions and
administrative expenses that we must pay, general economic trends and
competitive factors. WE WILL MAKE THE FINAL DETERMINATION OF THE
GUARANTEED RATES WE DECLARE. WE CANNOT PREDICT OR GUARANTEE THE LEVEL OF
FUTURE INTEREST RATES.

<PAGE> 8

WITHDRAWALS

You may make a withdrawal of all or part of Net Contract Value or Net Subaccount
Value any time before the earliest of:

Net Subaccount Value equals
the subaccount value after
adjustment for any MVA and
withdrawal charge which we
would apply in connection
with a full withdrawal,
annuitization or the payment
of death benefits on the death
of the participant or annuitant
prior to the annuity date.

1. the annuity date;
2. your death; or
3. the annuitant's death.
Withdrawals must meet the following requirements:
1. We must receive a written request
from you at our Service Center.
2. You must return your Contract to
us if you want to make a full
withdrawal.
3. You must specify the subaccounts
from which you want to make the
withdrawal. If you have two or
more subaccounts with the same
Guarantee Period, we will first
take the withdrawal from the
subaccount with the shortest
period of time remaining in its
Guarantee Period to the maximum
extent possible.

4. The minimum partial withdrawal you can make is $500 and any remaining
Net Subaccount Value must be at least $1,000.

5. You can withdraw any Subaccount Value that is less than $500 but you
cannot leave any remaining amount in that subaccount.

6. The remaining Contract Value after a partial withdrawal must be at
least $5,000.

We will send you a notice at least 45 days, but not more than 75 days, prior to
the Renewal Date of a subaccount. This notice will inform you that you must
notify us in writing within 30 days prior to the Renewal Date if you intend to
make a withdrawal from the subaccount without application of an MVA or
withdrawal charge on the Renewal Date.

Net Contract Value equals
the sum of all Net
Subaccount Value.

WITHDRAWALS ARE SUBJECT TO INCOME TAXES. IF THE WITHDRAWAL IS MADE PRIOR TO AGE
59 1/2, YOU MAY ALSO HAVE TO PAY A FEDERAL PENALTY TAX OF 10% OR MORE. We
reserve the right to defer payments of withdrawals for up to six months. If you
take a partial withdrawal, we will pay you the amount you request. We then
deduct any Withdrawal Charge directly from and apply any MVA to the subaccount
from which a partial withdrawal is made (see Withdrawal Charge and MVA for more
details regarding how charges are applied to withdrawals). If you withdraw an
entire Subaccount Value, we adjust the amount withdrawn for any applicable
withdrawal charge or MVA. This may reduce the amount you receive.

Under qualified plans, withdrawals may be permitted only under the circumstances
specified in the plan, the consent of your spouse may be required, and under
certain Section 401 plans, withdrawals attributable to contributions made under
a salary reduction agreement may be made only after you reach age 59 1/2 and in
other limited circumstances.

CHARGES

We impose two types of charges: a Market Value Adjustment and a Withdrawal
Charge. We may also deduct any applicable Premium Taxes.

<PAGE> 9

MARKET VALUE ADJUSTMENT ("MVA")

We impose an MVA in three circumstances:

1. WITHDRAWALS TAKEN FROM A SUBACCOUNT BEFORE THE END OF ITS GUARANTEE
PERIOD: We will not apply an MVA if we receive your withdrawal
instructions by the fifth business day after the Renewal Date. In
this case, we consider the withdrawal to be effective as of the
Renewal Date.

2. ANNUITIZATION: If the annuity date (the date we begin making annuity
payments) precedes the end of a Guarantee Period, we generally apply
an MVA on the annuity date. We may also deduct any applicable premium
taxes. We apply the MVA before any annuity payments are calculated.

For Contracts issued before we obtain regulatory
approval, we will
not apply an MVA on the annuity date if

(i) the combined MVAs of all affected
subaccounts would reduce your Contract
Value; and

(ii) annuity payments will be made for at
least ten years or you have chosen a life
contingency or life expectancy annuity
option.

You should refer to your Contract to determine if this
applies to you.
3. DEATH BENEFIT
PAYMENTS: We apply any
net positive MVA to
payments made at the time
of your death or the
annuitant's death prior
to the annuity date. If
the net MVA is negative,
we will not deduct it.
NET MVA refers to the sum of the MVAs on all
subaccounts, some of which may be positive and
some of which may be negative. If the sum is
positive, it is referred to as a NET POSITIVE MVA.

The MVA reflects the relationship on a given day between interest rates
offered to new Contracts and the guaranteed interest rates of your
Contract. The greater the difference in interests rates, the greater the
effect the MVA will have on your subaccount value. The amount of time
remaining in a Guarantee Period also affects the MVA. The MVA can be
positive or negative and can substantially impact the values in your
Contract. If the guaranteed interest rate for your subaccount is lower
than the interest rate offered to new Contracts for a period equal to the
remaining time in your subaccount, the MVA will decrease your subaccount
value. If the guaranteed interest rate for your subaccount is higher than
the interest rates offered to new Contracts for a period equal to the
remaining time in your subaccount, the MVA will increase your subaccount
value. If the adjustment is positive, we will credit the additional
amount to the subaccount; if negative, we will deduct the amount from the
subaccount value. You directly bear any investment risk of the MVA.

We determine the MVA based on the following formula:

<PAGE> 10

Where:

<TABLE>
<S> <C> <C> <C>
A = i. the amount withdrawn in the case of partial withdrawals, or

ii. net subaccount value, in the case of full withdrawals,
annuitizations, or payments due to your death or the
annuitant's death prior to the annuity date;

</TABLE>

NET SUBACCOUNT VALUE =

Subaccount Value
------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C> <C> <C> <C> <C>
n/365
1 + Current Interest Rate
Withdrawal Factor + ( ---------------------------- )
1 + Guaranteed Interest Rate
</TABLE>

<TABLE>
<S> <C> <C> <C>
Where "n" is the number of days remaining in the Guarantee
Period of the subaccount, but not less than 365.

The Withdrawal Factor equals: the lesser of the guaranteed
interest rate divided by two or
</TABLE>

<TABLE>
<S> <C>
10% in Contract Year 1 5% in Contract Year 6
9% in Contract Year 2 4% in Contract Year 7
8% in Contract Year 3 3% in Contract Year 8
7% in Contract Year 4 2% in Contract Year 9
6% in Contract Year 5 1% in Contract Year 10
0% in Contract Year 11 and later
</TABLE>

n = the number of days remaining in the Guarantee Period of the
subaccount(s) we are adjusting;

B = the current guaranteed interest rate offered to Guarantee Periods in
years equal to "n"/365;

C = the guaranteed interest rate for your subaccount.
</TABLE>

If the remaining period of time in the Guarantee Period is not a whole
number of years, we base the current interest rate for "B" on the
guaranteed interest rates currently offered for the Guarantee Periods
nearest the remaining period of time. We make this determination by
straight-line interpolation, except where the remaining period of time is
less than one year, in which case we use the current guaranteed rate for
a Guarantee Period of one year.

Alternative Guaranteed Interest Rate. We will use an alternative
guaranteed interest rate for "B" above in the event that a current
guaranteed interest rate is not offered:

(i) upon transfer at the end of a Guarantee Period or

(ii) when we apply an MVA.

In these circumstances, we will use an interest rate equal to the yield
to maturity on Stripped United States Treasury Bills with a maturity date
in the same month (or, if unavailable, the next nearest following month)
as of the Renewal Date of the subaccount to which the transfer is made or
to which we apply an MVA. Such yield to maturity is defined as the yield
to maturity published in The Wall Street Journal (Eastern Edition) on the
date of such transfer or on which we apply such MVA. If the yield to
maturity is not published on such date, we will use the yield to maturity
published on the most recent date immediately preceding the date of the
transfer or on which we apply the MVA.
9

<PAGE> 11

The following example illustrates calculation of the MVA.

ASSUMPTIONS.

a withdrawal of $20,000 is made;
from a subaccount with 4.75 years (1,734 days) remaining in the
Guarantee Period; and
a guaranteed interest rate of 4.5%.

Assume also that the guaranteed interest rates currently offered are:

4.6% for a Guarantee Period of 4 years; and
4.8% for a Guarantee Period of 5 years.

DETERMINING THE VALUE OF "B". Because the remaining period of time in
the Guarantee Period is not a whole number of years, we base the
current interest rate for "B" on straight-line interpolation. The
interpolated guaranteed interest rate equals the sum of one-fourth of
the four year rate and three-fourths of the five year rate. Since the
four year rate is 4.6% and the five year rate is 4.8%, the interpolated
rate for "B" equals 4.75% (4.6% times 0.25 plus 4.8% times 0.75).

CALCULATING THE MVA. To calculate the MVA, we divide the sum of 1 and
"B", 1.0475, by the sum of 1 and the guaranteed interest rate for the
affected subaccount, 1.045. The resulting figure, 1.0023923, is then
taken to the "n"/365 power, or 4.75 (1,734/365), which is 1.0114147. We
subtract 1.0114147 from 1 and multiply the resulting figure, -.0114147,
by the amount of the withdrawal, $20,000, to give -$228.29. Because
this figure is a negative number, we subtract it from the remaining
subaccount value together with any applicable Withdrawal Charge.

If "B" has been 4.25%, instead of 4.75%, the MVA would have been
+226.26, which would have added to the remaining subaccount value.

Greater differences in interest rates result in larger MVAs. If in the
above example "B" had been 6%, 7%, and 8%, the Market Value Adjustment
would have been -$1,400.82, -$2,376.93 and -$3,387.86, respectively. The
Market Value Adjustment is also affected by the remaining period in the
Guarantee Period of the subaccount from which the withdrawal is made,
which is "n" in the formula. Thus, if in the first example above "n"/365
were 2.5 or 1.5, the Market Value Adjustment would be -$119.83 or
-$71.81, respectively.

THE APPENDIX CONTAINS TABLES THAT SHOW THE APPLICATION OF THE MVA IN THE
CONTEXT OF FULL WITHDRAWALS FROM A HYPOTHETICAL SUBACCOUNT.

WITHDRAWAL CHARGE

We will deduct a Withdrawal Charge if you make a full or partial
withdrawal from a subaccount prior to the end of its Guarantee Period. We
will not deduct a Withdrawal Charge for withdrawals made at the end of
the Guarantee Period (on the Renewal Date). To avoid the Withdrawal
Charge, we must receive your written instructions to take a withdrawal
from a subaccount(s) no later than five business days after the Renewal
Date of the subaccount. You can send your written instructions to our
Service Center. If we receive your written instructions within this time
period, we will process the withdrawal effective on the Renewal Date and
we will not impose a Withdrawal Charge.

<PAGE> 12

The charge equals six
months of interest on the
amount withdrawn (in the
case of partial
withdrawals) or the net
subaccount value (in the
case of full
withdrawals).
Specifically, we
calculate the Withdrawal
Charge by multiplying the
withdrawn amount by 1/2
of the guaranteed
interest rate for the
subaccount from which the
withdrawal is made.
For example, if you make a withdrawal from
a subaccount with a guaranteed interest rate of
5%, we will apply a withdrawal charge of 2.5%
1/2 of 5%) to the amount you withdraw from
that subaccount if you make a partial
withdrawal or to the net subaccount value if
you make a full withdrawal.

For full withdrawals, we deduct the
Withdrawal Charge from the proceeds
of the withdrawal.

Withdrawal Charge =

Net Subaccount Value X Guaranteed Interest Rate
------------------------
2

For partial withdrawals, we deduct
a Withdrawal Charge directly from
the subaccount.
Withdrawal Charge =

Amount Withdrawn X Guaranteed Interest Rate
------------------------
2

However, the withdrawal charge we impose cannot exceed a specified
maximum percentage of the amount withdrawn that depends on the contract
year in which you make the withdrawal. Specifically, we will not deduct a
withdrawal charge that exceeds the product of the amount withdrawn and
the applicable percentage set forth below for a particular contract year:

<TABLE>
<CAPTION>
CONTRACT YEAR MAXIMUM PERCENTAGE OF AMOUNT WITHDRAWN
------------- --------------------------------------
<S> <C>
1........... 10%
2........... 9%
3........... 8%
4........... 7%
5........... 6%
6........... 5%
7........... 4%
8........... 3%
9........... 2%
10.......... 1%
11 and
later..... 0%
</TABLE>

Accordingly, we will not impose a withdrawal charge after the tenth
contract year.

<PAGE> 13

The following example illustrates how the MVA and Withdrawal Charge are
applied to a withdrawal:

Your contract has two subaccounts:

- a five-year guarantee period with a guaranteed interest rate of 4.8%
and

- a three-year guarantee period with a guaranteed interest rate of
4.5%.

Each subaccount has a value of $5,000.

You withdraw $7,000 and instruct us to take this withdrawal from the
five-year subaccount to the maximum extent possible and the rest from
the three-year subaccount. The maximum amount you can withdraw from the
five-year subaccount is $4,550 ($5,000 less $340.80 MVA and $109.20
Withdrawal Charge (4.8% / 2 X $4,550)). The remaining $2,450 is
deducted from the three-year subaccount leaving $2,431.17 in the
three-year subaccount ($5,000 minus $2,450 withdrawal minus $63.70 MVA
minus $55.13 Withdrawal Charge (4.5% / 2 X $2,450)).

If, however, you made a $3,000 withdrawal in the tenth contract year,
the applicable maximum percentage (1%) would be less than one-half of
the guaranteed interest rate (4.5% divided by 2, or 2.25%). The
withdrawal charge, therefore, would be $30 (1% of $3,000).

Currently, we do not deduct a Withdrawal Charge at annuitization.
However, we reserve the right to do so on any subaccount with a
Guarantee Period that extends beyond the annuity date. We also do not
deduct a Withdrawal Charge from death benefit payments or annuity
payments.

PREMIUM TAXES

We deduct any applicable premium taxes when you annuitize. Premium taxes
imposed by states and local jurisdictions currently range from 0% to 5%
depending on the tax treatment of the Contract. No premium taxes are
currently imposed by the State of New York, but we cannot guarantee that
such taxes will not be assessed by New York in the future. If a
jurisdiction does not allow us to reduce our current taxable premium
income by the amount of withdrawals, surrenders or death benefit
payments, we also deduct a charge for premium taxes when we make those
payments.

DEATH BENEFIT PAYMENTS AND BENEFICIARIES

We will pay a death benefit to the designated beneficiary after we receive proof
of your death or the death of the annuitant. Acceptable proof may include a
certified copy of a death certificate, beneficiary claim statement, and any
other documents we may require. We will pay the death benefit in a lump sum
unless the beneficiary chooses an annuity option within 60 days from our receipt
of the proof of death.

BENEFICIARIES

When you complete the application, you must select a beneficiary to
receive the death benefit in the event you die. You also must select a
beneficiary to receive the death benefit in the event the annuitant dies.
If you are also the annuitant, the beneficiaries must be the same.

You can designate a beneficiary as revocable or irrevocable. If you name
a revocable beneficiary, you can change that beneficiary at any time
prior to your death. If you designate an irrevocable beneficiary, that
beneficiary must approve any beneficiary change in writing.

If no beneficiary survives the annuitant, payment will be made to you, if
living, or to your estate. If your beneficiary dies before you, the death
benefit payable at your death will be paid to your estate.

The estate or heirs of the annuitant's beneficiary or your beneficiary
have no rights under the Contract if the beneficiary dies before the
annuitant or you, respectively.
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<PAGE> 14

DEATH BEFORE THE ANNUITY DATE

Your Death

If you die before the annuity date, we will pay the death benefit
to your beneficiary. The death benefit equals the Contract Value
plus any net positive MVA as of the date of death plus interest
until the date of payment at an interest rate we determine. Your
beneficiary may select a payment option under which payments begin
within one year of your death and do not extend beyond the
beneficiary's life expectancy. If no payment option is selected,
we will pay this death benefit in a lump sum within five years of
your death.

If there is more than one owner under the same Contract, we pay
the death benefit to the designated beneficiary when the first
such owner dies. If a surviving spouse is also the beneficiary, he
or she can choose to become the new owner and continue the
Contract with the same rights and benefits as the deceased owner
had before death. Thereafter, the surviving spouse will be the
owner and the annuitant. If the surviving spouse chooses to become
the new owner and continue the Contract, no death benefit will be
paid until he or she dies.

Death of the Annuitant

If the annuitant (other than you) dies before the annuity date
(unless you have selected a contingent annuitant as described
below), we will pay the designated beneficiary the Contract Value
plus any net positive MVA as of the date of payment. We will pay
this death benefit in a lump sum unless the beneficiary selects an
annuity option.

If you are not the annuitant, you can irrevocably select a
contingent annuitant. You must make this selection before the
annuity date and the death of the annuitant. If you elect this
option, we will not pay a death benefit when the primary annuitant
dies. The contingent annuitant will become the annuitant upon the
death of the original annuitant before the annuity date. This
option is only available when you and any other owner under the
same Contract are "natural persons" or with certain qualified
plans entitled to special tax treatment under Sections 401 or 408
of the Internal Revenue Code ("IRC"). If any owner of a
non-qualified Contract is not an individual, we treat the death of
any annuitant as the death of an owner and we pay the death
benefit.

DEATH AFTER THE ANNUITY DATE

Your Death

If you or any other owner under the same Contract dies after the
annuity date, we will continue to make annuity payments to your
beneficiary in the same manner as before death.

Death of the Annuitant

If the annuitant dies after the annuity date, the annuitant's
beneficiary can request that we continue to make the annuity
payments for the period of time required under the chosen annuity
option or until the amount guaranteed has been paid (see Annuity
Provisions). Alternatively, the designated beneficiary can request
that we pay the remaining guaranteed payments in a lump sum based
on the present value. This payment will be less than the sum of
the remaining guaranteed payments. We determine this payment based
on the interest rate used in determining the annuity payments.

If the annuitant's beneficiary dies while guaranteed amounts
remain unpaid, we will pay the present value of the remaining
guaranteed payments to the estate of the annuitant's beneficiary
in a lump sum.
13

<PAGE> 15

ANNUITY PROVISIONS (ANNUITIZATION)

We make annuity payments to you commencing on the annuity date designated in
your Contract. In calculating annuity payments, we apply an MVA to any
subaccount that has a Guarantee Period that extends beyond the annuity date. We
also deduct any applicable premium taxes. For this section, we will refer to the
Contract Value plus or minus the MVA and minus premium taxes as the Net Contract
Value.

Net Contract Value = Contract Value +/- MVA - premium taxes

We calculate annuity payments by applying the Net Contract Value to the annuity
option you choose using our annuity rates in effect at that time. These rates
are guaranteed not to be lower than the minimum guaranteed annuity rates shown
in the applicable annuity table in your Contract.

The tables in your Contract show the minimum guaranteed amount of each
monthly annuity payment for each $1,000 applied according to the age and
sex of the annuitant on the annuity date. We based these tables on the 1983
Table "a" projected forward to 1995 for Individual Annuity Valuation with
current mortality adjustments. When required by state law, we will not
differentiate by sex. The Contract contains a formula for adjusting the age
of the annuitant based on the annuity date in order to determine minimum
monthly annuity payments. If the annuity date is prior to the year 2000,
there is no age adjustment. If the annuity date is between the years 2000
and 2009, the annuitant's age is reduced by one year. For each decade
thereafter, the annuitant's age is reduced one additional year. The maximum
age adjustment is four years. An age adjustment results in a reduction in
the minimum monthly annuity payments that would otherwise be made.
Therefore, if the rates we are using are the minimum rates shown in the
annuity tables in the Contract, you may want to select an annuity date that
immediately precedes the date on which an age adjustment would occur.

For example, the annuity payment rates in the annuity tables for an annuitant
with an annuity date in the year 2010 are the same as those for an annuity date
twelve months earlier, even though the annuitant is one year older, because the
new decade results in the annuitant's age being reduced by an additional year.
Current annuity rates, unlike the guaranteed rates, do not involve any age
adjustment.

We will send your annuity payments monthly unless you choose to have payments
made less frequently or choose the Qualified Plan Option. Each annuity payment
must be at least $20 or we can change the frequency of the annuity payments so
that they are at least $20. If your Net Contract Value is less than $2,000
($3,500 for certain qualified Contracts) on the annuity date, we can pay such
amount to you in a lump sum.

For Contracts issued before we obtain regulatory approval, we will not
apply an MVA at the annuity date if:

(i) the combined MVAs of all affected subaccounts would reduce the
value of your Contract; and

(ii) annuity payments will be made for at least ten years or you chose
a life contingency or life expectancy annuity option.

You should refer to your Contract to determine if this applies to you.

You select the Annuity Date, Annuitant, and Annuity Option at the time of the
application.

ANNUITY DATE

We will make payments to you beginning on the annuity date. The annuity
date can be any day of a calendar month. However, it cannot be later than
the first day of the month after the annuitant's 85th birthday. If you do
not select an annuity date at the time of application, the annuity date
will be the first day of the month after the annuitant's 75th birthday.
14

<PAGE> 16

For qualified Contracts other than IRAs, the annuity date generally may
not be later than April 1 of the calendar year after the later of the
calendar year in which the annuitant attains age 70 1/2 or retires. For
IRAs, the annuity date generally may not be later than April 1 of the
calendar year after the calendar year in which the annuitant attains age
70 1/2.

ANNUITANT

You can select one or two annuitants. If co-annuitants are selected, we
consider the annuitant's death to occur at the last surviving annuitant's
death. Annuity payments are based on the annuitant's age and sex. We may
require proof of age, sex or survival from the annuitant. If you give us
incorrect information, we will adjust the amount of the annuity payments
to reflect the correct age and sex. If previous payments were overpaid,
we will deduct the overpaid amount from the next payments due. If
previous payments were underpaid, we will add the underpaid amount to the
next payment.

ANNUITY OPTIONS

You can select any one of the following annuity options. We can offer
additional annuity options. If you do not select an annuity option, we
will choose a life annuity with payments guaranteed for 10 years.

1. Payments of a Fixed Amount: You can choose the amount of each
annuity payment. We will make equal payments of the amount chosen
until the Net Contract Value is gone. The Net Contract Value must be
sufficient so that we can make payments for at least five years.

2. Payments for a Fixed Period: You can choose a time period during
which you wish to receive annuity payments. We will pay the Net
Contract Value in equal payments over this time period. The period
for these payments cannot be less than five years.

3. *Life Annuity: We will make payments as long as the annuitant lives.
Payments will stop at the last payment due before the death of the
annuitant. The Net Contract Value will be applied to determine the
amount of the annuity payments based on the annuitant's age, sex and
life expectancy.

4. Life Annuity with Payments Guaranteed for 10 or 20 Years: We will
make payments for the guaranteed period chosen (10 or 20 years) and
as long thereafter as the annuitant lives.

5. Life Annuity with Guaranteed Return of Net Contract Value: We will
make annuity payments until the total of the annuity payments equals
the Net Contract Value applied to this option, and as long thereafter
as the annuitant lives.

6. *Joint and Survivor Life Annuity: Payments will be made for as long
as the annuitant and co-annuitant live. We will not make any payments
after the death of the last surviving annuitant. We apply the Net
Contract Value based on the annuitant's and co-annuitant's ages, sex
and life expectancy to determine the amount of the annuity payments.

7. Qualified Plan Option: This option is available only under qualified
Contracts issued in connection with plans qualified under Section
401(a), 403, 404, 408 or 457 of the Internal Revenue Code. Payments
may be based on:
(a) the life expectancy of the annuitant,
(b) the joint life expectancy of the annuitant and his or her spouse,
or
(c) the life expectancy of the surviving spouse if the annuitant dies
before the annuity date.

Payments will be made annually. Each payment will be equal to the Net
Contract Value as of the annuity date, plus credited interest and
minus aggregate annuity payments previously made, in each case as of
the first day of that calendar year, divided by the applicable current
life expectancy, as defined by Internal Revenue Service regulations.
We make each subsequent payment on the anniversary of the annuity
date. We credit interest at our then
15

<PAGE> 17

current rate for this option. The rate will not be less than the rate
shown in the Contract. On the death of the measuring life or lives, we
will pay any unpaid net Contract Value to the beneficiary in a lump
sum.

*CAUTION: THESE OPTIONS ARE "PURE" LIFE ANNUITIES. THEREFORE, IT IS
POSSIBLE FOR THE PAYEE TO RECEIVE ONLY ONE ANNUITY PAYMENT IF THE
PERSON (OR PERSONS) ON WHOSE LIFE (LIVES) PAYMENT IS BASED DIES AFTER
ONLY ONE PAYMENT OR TO RECEIVE ONLY TWO ANNUITY PAYMENTS IF THAT
PERSON (THOSE PERSONS) DIES AFTER ONLY TWO PAYMENTS, ETC. CAREFULLY
CONSIDER YOUR NEEDS BEFORE YOU CHOOSE THIS OPTION.

CHANGE OF ANNUITY DATE, ANNUITANT OR ANNUITY OPTION

In order to change the annuity date, the annuitant, and/or the annuity
option, we must receive your written instructions no later than 30 days
before the existing annuity date. You can send your written instructions
to our Service Center. You can also make annuity date and annuity option
changes via telephone if you have submitted a proper telephone
authorization form. Please contact our Service Center for more
information.

Changes of the annuity date are subject to federal tax restrictions.

OTHER PROVISIONS

ASSIGNMENT

You may not assign your rights under a Contract to a creditor as security for a
debt. However, you may assign your Contract upon written notice to us prior to
the annuity date, other than as collateral or security for a loan. Any
irrevocable beneficiary must consent to such an assignment. This does not change
the ownership of your Contract.

If the Contract is issued pursuant to a qualified plan, your rights under the
Contract may not be assigned, pledged or transferred, unless permitted by law.
We assume no responsibility for the validity of any assignment or for any
actions we take prior to receipt of written notice of an assignment. An
assignment of the Contract may have federal income tax consequences.

NOTICES AND ELECTIONS

You must send any changes, notices, and/or choices for your Contract to our
Service Center. These requests must be in writing and signed unless you have
submitted a telephone authorization form. We will effect any request regarding
beneficiary changes or choices as of the date you sign the request, unless we
already acted in reliance on your prior status before receiving your notice. If
you have submitted a telephone authorization form, you may make the following
choices via telephone:

1. Subaccount selections at the end of a Guarantee Period, including
election of the Maximum Guarantee Period Option

2. Subaccounts from which you wish to make partial withdrawals

3. Annuity Date Changes

4. Annuity Option Changes

We will use reasonable procedures to confirm that a telephone request is proper.
These procedures may include possible tape recording of telephone calls and
obtaining appropriate identification before effecting any telephone
transactions. We do not have any liability if we act on a request that we
reasonably believe is proper.

AMENDMENT OF CONTRACT

We may amend any Contract at any time if required to comply with applicable law,
regulation or ruling issued by a governmental agency.
16

<PAGE> 18

FREE LOOK RIGHT

You should carefully review your Contract when you receive it to make sure it is
what you intended to purchase. You may return the Contract for a refund of
premium within ten days after you receive it. Some states allow a longer time to
return the Contract. You must return the Contract to either our Service Center
or your Merrill Lynch Financial Consultant within this time period in order to
receive a refund of your premium. We will them deem your Contract void from the
beginning. If you cancel your Contract under this provision, you cannot submit
another application for a Contract for at least 90 days.

GUARANTEE OF CONTRACT

Neither the federal government nor its instrumentalities guarantee your
Contract. We stand behind the guarantees in the Contract.

DISTRIBUTION OF THE CONTRACTS

Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") is the principal
underwriter of the Contract. MLPF&S was organized in 1958 under the laws of the
state of Delaware and is registered as a broker-dealer under the Securities
Exchange Act of 1934. It is a member of the National Association of Securities
Dealers, Inc. ("NASD"). The principal business address for MLPF&S is World
Financial Center, 250 Vesey Street, New York, New York 10281.

Registered representatives (Financial Consultants) of MLPF&S sell these
Contracts. These Financial Consultants are also licensed through various Merrill
Lynch Life Agencies ("MLLA") as our insurance agents. We have entered into a
distribution agreement with MLPF&S and companion sales agreements with MLLA.
These agreements allow Financial Consultants to sell Contracts and receive
compensation. The maximum commission MLLA pays to the Financial Consultant is
2.3% of each premium. In addition, the maximum compensation MLLA pays to the
Financial Consultant for each reinvestment through the tenth contract year is
2.1% of premium reinvested. The maximum additional compensation paid to the
Financial Consultant in each year beyond the tenth contract year that the
Contract remains in force is 0.31% of the Contract Value.

The maximum commission we will pay to MLLA to be used to pay commissions to
Financial Consultants is 3.5% of each premium.

MLPF&S may arrange for sales of the Contract by other broker-dealers who are
registered under the Securities Exchange Act of 1934 and are members of the
NASD.

FEDERAL INCOME TAXES

The following summary discussion is based on our understanding of current
federal income tax law as the Internal Revenue Service (IRS) now interprets it.
We can't guarantee that the law or the IRS's interpretation won't change. It
does not purport to be complete or to cover all tax situations. This discussion
is not intended as tax advice. Counsel or other tax advisors should be consulted
for further information.

We haven't considered any applicable federal gift, estate or any state or other
tax laws. Of course, your own tax status or that of your beneficiary can affect
the tax consequences of ownership or receipt of distributions.

When you invest in an annuity contract, you usually do not pay taxes on your
investment gains until you withdraw the money -- generally for retirement
purposes. If you invest in an annuity as part of a pension plan or
employer-sponsored retirement program, your contract is called a
QualifiedContract. If your annuity is independent of any formal retirement or
pension plan, it is termed a Non-Qualified Contract. The tax rules applicable to
Qualified Contracts vary according to the type of retirement plan and the terms
and conditions of the plan. The ultimate effect of federal income taxes on the
amounts held under an annuity contract, on annuity payments, and on the economic
benefit to the owner, the annuitant or the beneficiary depends on the type of
retirement plan, on the tax status of the individual concerned and on our tax
status.
17

<PAGE> 19

TAX STATUS OF THE CONTRACTS

REQUIRED DISTRIBUTIONS

In order to be treated as an annuity contract for Federal income tax
purposes, Section 72(s) of the IRC requires any Non-Qualified Contract to
contain certain provisions specifying how your interest in the Contract
will be distributed in the event of your death. Specifically, section
72(s) requires that (a) if any owner dies on or after the annuity
starting date, but prior to the time the entire interest in the contract
has been distributed, the entire interest in the contract will be
distributed at least as rapidly as under the method of distribution being
used as of the date of such owner's death; and (b) if any owner dies
prior to the annuity starting date, the entire interest in the contract
will be distributed within five years after the date of such owner's
death. These requirements will be considered satisfied as to any portion
of an owner's interest which is payable to or for the benefit of a
designated beneficiary and which is distributed over the life of such
designated beneficiary or over a period not extending beyond the life
expectancy of that beneficiary, provided that such distributions begin
within one year of the owner's death. The designated beneficiary refers
to a natural person designated by the owner as a beneficiary and to whom
ownership of the contract passes by reason of death. However, if the
designated beneficiary is the surviving spouse of the deceased owner, the
contract may be continued with the surviving spouse as the new owner.

The Non-Qualified Contracts contain provisions that are intended to
comply with these requirements, although no regulations interpreting
these requirements have yet been issued. We intend to review such
provisions and modify them if necessary to assure that they comply with
the applicable requirements when such requirements are clarified by
regulation or otherwise.

Other required distribution rules may apply to Qualified Contracts.

TAXATION OF ANNUITIES

IN GENERAL

IRC Section 72 governs annuity taxation generally. We believe that an
owner who is a natural person usually won't be taxed on increases in the
value of a contract until there is a distribution (i.e., the owner
withdraws all or part of the accumulation or takes annuity payments).
Assigning, pledging, or agreeing to assign or pledge any part of the
accumulation usually will be considered a distribution. Withdrawals of
accumulated investment earnings are taxable as ordinary income. Generally
under the IRC, withdrawals are first allocated to investment earnings.

An owner of any annuity contract who is not a natural person generally
must include in income any increase in the excess of the accumulation
over the "investment in the contract" during the taxable year. There are
some exceptions to this rule and a prospective owner that is not a
natural person may wish to discuss them with a competent tax advisor.

The following discussion applies generally to contracts owned by a
natural person.

PARTIAL WITHDRAWALS AND SURRENDERS

When a withdrawal from a Non-Qualified Contract occurs, the amount
received generally will be treated as ordinary income subject to tax up
to an amount equal to the excess (if any) of the Contract Value
immediately before the distribution over the investment in the contract
(generally, the premiums or other consideration paid for the Contract,
reduced by any amount previously distributed from the Contract that was
not subject to tax) at that time. The Contract Value immediately before a
withdrawal may have to be increased by any positive Market Value
Adjustments which result from a withdrawal. There is, however, no
definitive guidance on the proper tax treatment of Market Value
Adjustments, and you may want to discuss the potential tax consequences
of a Market Value Adjustment with your tax adviser. Other rules apply to
withdrawals from qualified Contracts.
18

<PAGE> 20

You should note that this is an integrated annuity contract for IRC
purposes. Therefore, when we determine the extent to which a withdrawal
from one subaccount is taxable, we will use the Contract Value and
"investment in the contract" for the entire Contract and not just of the
subaccount from which the withdrawal is made.

If you withdraw your entire accumulation under a contract, you will be
taxed only on the part that exceeds your investment in the contact.

ANNUITY PAYMENTS

Although tax consequences may vary depending on the payout option elected
under an annuity contract, a portion of each annuity payment is generally
not taxed and the remainder is taxed as ordinary income. The non-taxable
portion of an annuity payment is generally determined in a manner that is
designed to allow you to recover your investment in the contract ratably
on a tax-free basis over the expected stream of annuity payments, as
determined when annuity payments start. Once your investment in the
contract has been fully recovered, however, the full amount of each
annuity payment is subject to tax as ordinary income.

TAXATION OF DEATH BENEFIT PROCEEDS

Amounts may be paid from a contract because an owner, the annuitant or
the co-annuitant has died. If the payments are made in a single sum,
they're taxed the same way a full withdrawal from the contract is taxed.
If they are distributed as annuity payments, they're taxed as annuity
payments.

PENALTY TAX ON SOME WITHDRAWALS

You may have to pay a penalty tax (10 percent of the amount treated as taxable
income) on some withdrawals. However, there is usually no penalty on
distributions:

(1) on or after you reach age 59 1/2;

(2) after you die (or after the annuitant dies, if the owner isn't an
individual);

(3) after you become disabled; or

(4) that are part of a series of substantially equal periodic (at least
annual) payments for your life (or life expectancy) or the joint
lives (or life expectancies) of you and your beneficiary.

Other exceptions may be applicable under certain circumstances and special rules
may be applicable in connection with the exceptions enumerated above. Also,
additional exceptions apply to distributions from a Qualified Contract. You
should consult a tax adviser with regard to exceptions from the penalty tax.

TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF A CONTRACT

Transferring or assigning ownership of the contract, designating an annuitant,
payee or other beneficiary who is not also the owner, or exchanging a contract
can have other tax consequences that we don't discuss here. If you're thinking
about any of those transactions, contact a tax advisor.

WITHHOLDING

Annuity distributions usually are subject to withholding for the recipient's
federal income tax liability at rates that vary according to the type of
distribution and the recipient's tax status. However, recipients can usually
choose not to have tax withheld from distributions.

MULTIPLE CONTRACTS

All non-qualified deferred annuity contracts that we (or our affiliates) issue
to the same owner during any calendar year are treated as one annuity contract
for purposes of determining the amount includible in such owner's income when a
taxable distribution occurs. This could affect when income is taxable and how
much is subject to the ten percent penalty tax discussed above.
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<PAGE> 21

POSSIBLE CHANGES IN TAXATION

Although the likelihood of legislative change is uncertain, there is always the
possibility that the tax treatment of the contracts could change by legislation
or other means. It is also possible that any change could be retroactive (that
is, effective prior to the date of the change). A tax adviser should be
consulted with respect to legislative developments and their effect on the
contract.

TAXATION OF QUALIFIED CONTRACTS

The tax rules applicable to Qualified Contracts vary according to the type of
retirement plan and the terms and conditions of the plan. Your rights under a
Qualified Contract may be subject to the terms of the retirement plan itself,
regardless of the terms of the Qualified Contract. Adverse tax consequences may
result if you do not ensure that contributions, distributions and other
transactions with respect to the contract comply with the law.

INDIVIDUAL RETIREMENT ACCOUNTS (IRAS)

Individual Retirement Accounts (IRAs), as defined in Section 408 of the
IRC, permit individuals to make annual contributions of up to the lesser
of $2,000 or 100% of adjusted gross income. The contributions may be
deductible in whole or in part, depending on the individual's income.
Distributions from certain pension plans may be "rolled over" into an IRA
on a tax-deferred basis without regard to these limits. Amounts in the
IRA (other than nondeductible contributions) are taxed when distributed
from the IRA. A 10% penalty tax generally applies to distributions made
before age 59 1/2, unless certain exceptions apply.

SIMPLE IRAS

SIMPLE IRAs permit certain small employers to establish SIMPLE plans as
provided by Section 408(p) of the IRC, under which employees may elect to
defer to a SIMPLE IRA a percentage of compensation up to $6,000 (as
increased for cost of living adjustments). The sponsoring employer is
required to make matching or non-elective contributions on behalf of
employees. Distributions from SIMPLE IRAs are subject to the same
restrictions that apply to IRA distributions and are taxed as ordinary
income. Subject to certain exceptions, premature distributions prior to
age 59 1/2 are subject to a 10% penalty tax, which is increased to 25% if
the distribution occurs within the first two years after the commencement
of the employee's participation in the plan.

SIMPLIFIED EMPLOYEE PENSION (SEP) IRAS

Simplified Employee Pension (SEP) IRAs may be established by employers
under section 408(k) of the IRC to provide IRA contributions on behalf of
their employees. In addition to all of the general rules of the IRC
governing IRAs, such plans are subject to certain requirements regarding
participation and amounts of contributions.

ROTH IRAS

A Contract is available for purchase by an individual who has separately
established a Roth IRA custodial account with Merrill Lynch, Pierce,
Fenner & Smith Incorporated. Roth IRAs, as described in section 408A of
the IRC, permit certain eligible individuals to contribute to make
non-deductible contributions to a Roth IRA in cash or as a rollover or
transfer from another Roth IRA or other IRA. A rollover from or
conversion of an IRA to a Roth IRA is generally subject to tax and other
special rules apply. You may wish to consult a tax adviser before
combining any converted amounts with any other Roth IRA contributions,
including any other conversion amounts from other tax years.
Distributions from a Roth IRA generally are not taxed, except that, once
aggregate distributions exceed contributions to the Roth IRA, income tax
and a 10% penalty tax may apply to distributions made (1) before age
59 1/2 (subject to certain exceptions) or (2) during the five taxable
years starting with the year in which the first contribution is made to
any Roth IRA. A 10% penalty tax may apply to amounts attributable to a
conversion from an
20

<PAGE> 22

IRA if they are distributed during the five taxable years beginning with
the year in which the conversion was made.

CORPORATE PENSION AND PROFIT-SHARING PLANS

Corporate pension and profit-sharing plans under Section 401(a) of the
IRC allow corporate employers to establish various types of retirement
plans for employees, and self-employed individuals to establish qualified
plans for themselves and their employees. Adverse tax consequences to the
retirement plan, the owner or both may result if the Contract is
transferred to any individual as a means to provide benefit payments,
unless the plan complies with all the requirements applicable to such
benefits prior to transferring the Contract.

TAX SHELTERED ANNUITIES

Tax Sheltered Annuities under section 403(b) of the IRC allow employees
of certain Section 501(c)(3) organizations and public schools to exclude
from their gross income the premium payments made, within certain limits,
on a contract that will provide an annuity for the employee's retirement.
These premium payments may be subject to FICA (social security) tax.
Distributions of (1) salary reduction contributions made in years
beginning after December 31, 1988; (2) earnings on those contributions;
and (3) earnings on amounts held as of the last year beginning before
January 1, 1989, are not allowed prior to age 59 1/2, separation from
service, death or disability. Salary reduction contributions may also be
distributed upon hardship, but would generally be subject to penalties.

SECTION 457 PLANS

Section 457 Plans, while not actually providing for a qualified plan as
that term is normally used, provides for certain deferred compensation
plans with respect to service for state governments, local governments,
political subdivisions, agencies, instrumentalities and certain
affiliates of such entities, and tax exempt organizations. The Contract
can be used with such plans. Under such plans a participant may specify
the form of investment in which his or her participation will be made.
All such investments, however, are owned by and are subject to, the
claims of the general creditors of the sponsoring employer. In general,
all amounts received under a section 457 plan are taxable and are subject
to federal income tax withholding as wages.

OTHER TAX ISSUES

Qualified Contracts have minimum distribution rules that govern the
timing and amount of distributions. You should refer to your retirement
plan, adoption agreement, or consult a tax advisor for more information
about these distribution rules.

Distributions from Qualified Contracts generally are subject to
withholding for the owner's federal income tax liability. The withholding
rate varies according to the type of distribution and the owner's tax
status. The owner will be provided the opportunity to elect not have tax
withheld from distributions.

"Eligible rollover distributions" from section 401(a) plans are subject
to a mandatory federal income tax withholding of 20%. An eligible
rollover distribution is the taxable portion of any distribution from
such a plan, except certain distributions such as distributions required
by the IRC or distributions in a specified annuity form. The 20%
withholding does not apply, however, if the owner chooses a "direct
rollover" from the plan to another tax-qualified plan or IRA.

MORE INFORMATION ABOUT
ML LIFE INSURANCE COMPANY OF NEW YORK

HISTORY AND BUSINESS:

We sell life insurance and annuity products. We are a stock life insurance
company organized under the laws of the State of New York on November 28, 1973.
We are a direct wholly owned subsidiary of Merrill
21

<PAGE> 23

Lynch Insurance Group ("MLIG"). MLIG is an indirect wholly owned subsidiary of
Merrill Lynch & Co., Inc. ("Merrill Lynch & Co."), which is a publicly owned
company.

Information about contract owner deposits, contract owner account balances, and
capital contributions can be found in our financial statements which are
contained herein.

We are currently licensed to conduct life insurance and annuity business in 9
states. We currently sell our annuity products and variable life insurance
products only in the state of New York. During 1998, premium payments for
annuity and life insurance products were made principally in New York (87%, as
measured by total contract owner deposits).

We sell insurance products primarily through licensed agents affiliated with
MLLA. Career life insurance agents whose sole responsibility is the sale and
servicing of insurance and Financial Consultants of MLPF&S who are also licensed
as insurance agents make all our insurance sales. At December 31, 1998,
approximately 1,976 agents of MLLA were authorized to act for us.

SELECTED FINANCIAL DATA

You should read the following selected financial data in conjunction with the
financial statements and notes thereto included in this prospectus.

<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
FOR THE PERIODS ENDED DECEMBER 31,
--------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net Investment Income.............. $ 21,549 $ 25,465 $ 27,520 $ 29,819 $ 32,679
Earnings Before Federal Income
Tax.............................. $ 6,642 $ 14,665 $ 13,809 $ 15,242 $ 7,291
Net Earnings....................... $ 4,770 $ 9,692 $ 9,219 $ 10,064 $ 5,473
Total Assets....................... $1,247,482 $1,138,581 $1,008,067 $1,003,347 $ 920,722
Stockholder's Equity............... $ 81,954 $ 77,781 $ 84,554 $ 110,779 $ 95,813
</TABLE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

This Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Financial Statements and Notes
to Financial Statements included herein.

BUSINESS ENVIRONMENT

We conduct our business in the life insurance and annuity markets of the
financial services industry. These markets are faced with an increased
strengthening of the regulatory environment with particular emphasis on
company solvency and sales practice monitoring. Significant mergers
within the financial services industry, as well as legislative and
judicial processes, are challenging the legal barriers that have
historically segregated many of its markets. The distribution channels
for life insurance and annuity products continue to diversify and now
include banks, full service and discount securities brokers, financial
planners and the Internet.

Tax legislation, enacted during the third quarter 1997, increased the
competitiveness of non-insurance products in the individual retirement
market by reducing the long-term capital gains tax rate and creating new
non-deductible Individual Retirement Accounts (i.e., Roth IRAs).
Additionally, current tax legislative proposals, which are in various
stages of the political process, may have a material impact on the life
insurance industry by reducing or eliminating the tax advantages on
certain products.

Demographically, the population is aging, which favors life insurance and
annuity products. In particular, management anticipates that markets will
expand for estate planning products and annuities, albeit in a more
competitive environment.
22

<PAGE> 24

ECONOMIC ENVIRONMENT

During 1998, the propagation of economic instability among certain Asian,
Eastern European and Latin American economies, and its influence on
investors worldwide, contributed to the emergence of three important
economic factors in the U.S.:

- lower interest rates

- widening credit spreads

- equity market volatility

Investors' flight to quality resulted in an 83 basis point decrease on
the interest rate of the 30 year U.S. Treasury Bond, dropping its yield
to 5.09% at December 31, 1998. Similarly, rates on medium term U.S.
Treasury securities, defined as 1 to 10 year terms, decreased 108 basis
points to yield, on average, 4.56%.

In the corporate bond market, the combined effects of record levels of
debt issuance, investor concern regarding corporate earnings and the
disappearance of liquidity in certain markets resulted in a significant
widening of interest rate spreads as compared to U.S. Treasury
securities. The spread between the 5-year U.S. Treasury Bond Index and
the 5-year Corporate Financial Bond Index increased from approximately 58
basis points at December 1997 to approximately 168 basis points at
December 1998.

Equity market volatility was prevalent primarily during the second half
of 1998. After increasing approximately 17% through mid-year, the
Standard & Poor's 500 Composite Stock Price Index ("S&P Index") dipped
10% during the third quarter before rebounding 21% during the fourth
quarter.

SUMMARY

We sell variable and interest sensitive life insurance and annuity
products through Merrill Lynch & Co.'s retail network of Financial
Consultants. We compete for Merrill Lynch & Co.'s clients' life insurance
and annuity business with non-affiliated insurers whose products are also
sold through Merrill Lynch & Co.'s retail network ("non-proprietary
products"), and with insurers who solicit this business directly. The
product lines that we offer are focused in the highly competitive market
segments of retirement and estate planning. We compete in these market
segments by integrating our products into Merrill Lynch & Co.'s
planning-based financial management program.

Our financial management is based on prudent investment and liability
management and regular monitoring of our risk profile. We also seek to
provide superior customer service and financial management to promote the
competitiveness of our products. Our customer service centers have
established standards of performance that are monitored on a regular
basis. Managers and employees in the customer service centers are
periodically evaluated based on their performance in meeting these
standards.

We have strategically placed our marketing emphasis on the sale of
variable annuities, modified guaranteed annuities and variable life
insurance products. These products are designed to address the retirement
and estate planning needs of Merrill Lynch & Co.'s clients. The variable
annuity product provides tax-deferred savings with the opportunity for
diversified investing in a wide selection of underlying mutual fund
portfolios. The modified guaranteed annuity product provides a guaranteed
fixed interest-crediting rate for a period selected by the contract
owner, but imposes a market value adjustment for withdrawals prior to the
expiration of the guarantee period. We offer a variable life insurance
product that provides life insurance protection and allows the

<PAGE> 25

policyholder to allocate the cash value of the policy to underlying
mutual fund portfolios. The following table summarizes our sales activity
for the three years ending December 31, 1998:

<TABLE>
<CAPTION>
PREMIUMS COLLECTED % CHANGE
-------------------- -------------------------
1998 1997 1996 1998 - 1997 1997 - 1996
---- ---- ---- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Variable Annuities....................... $ 97 $101 $24 (4)% 321%
Modified Guaranteed Annuities............ 2 5 5 (60)% 0%
Variable Life Insurance.................. 10 11 8 (9)% 38%
---- ---- --- --- ----
Total Premiums................. $109 $117 $37 (7)% 216%
==== ==== === === ====
</TABLE>

During 1998, our total sales decreased 7%, but remained strong overall,
exceeding the $100 million level for the second consecutive year.
Variable annuity products continued to dominate overall sales by
comprising 89%, 86% and 65% of total sales volume for the years ended
1998, 1997 and 1996, respectively.

During 1997, we changed our distribution structure. Previously,
specialists supporting the sales force were responsible for both life and
annuity products. Beginning in 1997 and culminating during the second
quarter 1998, we created two specialist positions within each sales
district where it was geographically feasible. The new distribution
structure has resulted in a greater and more focused coverage of our
sales force and has, in management's view, contributed to the continued
strength in variable product sales.

Variable annuity sales decreased 4% during 1998 as compared to record
sales levels in 1997. During 1997, variable annuity sales increased 321%
as compared to 1996. The decrease in 1998 sales occurred primarily during
the second half of the year amid increased volatility in the equity
markets. Overall, variable annuity sales have remained strong over the
last two years. Management attributes the strong variable annuity sales
to enhanced sales efforts related to the addition of new investment
options. Since December 1996, we have added ten new investment options to
certain of our variable annuity products, some of which are managed by
unaffiliated investment advisors. A number of these mutual fund
portfolios generally have aggressive growth investment objectives that
complement the underlying portfolios managed by Merrill Lynch Asset
Management, LP ("MLAM"), an indirect subsidiary of Merrill Lynch & Co.
Additionally, management believes that the generally favorable equity
markets over the past three years has also contributed to the strength of
variable annuity sales. During 1998, 1997 and 1996, the S&P Index has
risen 27%, 31% and 20%, respectively. Future variable annuity sales could
be negatively impacted by continued volatility in the equity markets.

Merrill Lynch & Co. offers an asset allocation service to our variable
annuity contract owners. An investment advisor allocates the
participating contract owner's account value among the available
underlying mutual fund portfolios based on the contract owner's
investment objectives and risk tolerance. We do not receive any financial
remuneration from Merrill Lynch & Co. for this service; however,
management believes that its availability has had a positive effect on
variable annuity sales volume.

As previously stated, one of our core goals is to provide superior
customer service to our clients. As evidence of progression towards this
goal, we received the DALBAR Annuity Service Award for our Retirement
Plus variable annuity during both 1998 and 1997.

During 1998, policy and contract surrenders increased $16.6 million (or
32%) to $68.0 million as compared to 1997. During 1998, variable annuity
surrenders increased $4.1 million (or 40%) to $14.5 million primarily due
to growth of that block of business. During the same period, modified
guaranteed annuity surrenders increased $8.4 million (or 45%) to $26.8
million due to the lower interest rate environment during 1998 as
compared to 1997. During periods of lower interest rates, modified
guaranteed annuity contractholders are more inclined to surrender their
contracts for two reasons. First, contractholders can lock-in gains
resulting from the market value adjustment, which
24

<PAGE> 26

is applied to withdrawals made prior to the expiration of the stated
guarantee period. The market value adjustment has an inverse relationship
to changes in interest rates. Second, interest-crediting rates offered
upon renewal are generally lower than the rates that had been credited
prior to the renewal date.

FINANCIAL CONDITION

At December 31, 1998, our assets were $1.2 billion, or $109 million
higher than the $1.1 billion in assets at December 31, 1997. The increase
in assets is attributable to increases in separate account assets. During
1998, separate account assets increased $147 million (or 20%) to $887
million. The increase is attributable to two factors. First, the separate
accounts benefited from strong investment performance associated with the
generally rising equity markets. During 1998, the separate accounts
increased $92 million due to price appreciation in the underlying mutual
funds supporting the variable products. Second, net cash inflow to the
variable products contributed $55 million to the growth in separate
account assets. General account assets decreased $38 million primarily
due to the declining number of fixed-rate contracts in-force.

Despite the moderate decrease in sales and increase in policy and
contract surrenders during 1998, we experienced deposits that exceeded
contract owner withdrawals. Deposits for 1998 were $94 million compared
to withdrawals of $75 million, resulting in a net cash inflow from
contract owner activity of $19 million.

We maintain a conservative general account investment portfolio. We have
no mortgage or real estate investments. The following schedule identifies
our general account invested assets by type:

<TABLE>
<S> <C>
Investment Grade Fixed Maturity Securities.................. 63%
Policy Loans................................................ 29%
Equity Securities........................................... 5%
Non-Investment Grade Fixed Maturity Securities.............. 3%
---
100%
===
</TABLE>

Our investment in collateralized mortgage obligations ("CMO") and
mortgage backed securities ("MBS") had a carrying value of $14 million as
of December 31, 1998. At December 31, 1998, approximately 99% of our CMO
and MBS holdings were fully collateralized by the Government National
Mortgage Association, the Federal National Mortgage Association or the
Federal Home Loan Mortgage Corporation. CMO and MBS securities are
structured to allow the investor to determine, within certain limits, the
amount of interest rate risk, prepayment risk and default risk that the
investor is willing to accept. It is this level of risk that determines
the degree to which the yields on CMO and MBS securities will exceed the
yields that can be obtained from similarly rated corporate securities.

As of December 31, 1998, we had 3,180 life insurance and annuity
contracts in-force with interest rate guarantees. The estimated average
rate of interest credited on behalf of contract owners was 5.46% during
1998. Invested assets with an estimated effective yield of 6.61%
supported the liabilities related to insurance contracts with interest
rate guarantees during 1998.

MARKET RISK

Market risk is the potential change in a financial instrument's value
caused by fluctuations in certain underlying risk factors. We are
primarily subject to market risk resulting from fluctuations in interest
rates and credit spreads.

Interest Rate Risk

Interest rate risk arises from the possibility that changes in
interest rates will affect the value of investments, primarily
fixed maturity securities and preferred equity securities, as well
as interest sensitive liabilities. Changes in interest rates have
an inverse relationship
25

<PAGE> 27

to the value of investments and interest sensitive liabilities. We
manage interest rate risk as part of our asset/liability
management strategy. For each portfolio, management monitors the
expected changes in assets and liabilities, as produced by our
model, resulting from various interest rate scenarios. Based on
these results, management closely matches the duration and
convexity of insurance liabilities to the duration and convexity
of assets supporting those liabilities.

The following table presents the estimated net impact on the fair
value of non-trading investments and interest sensitive
liabilities resulting from various hypothetical interest rate
scenarios, based on assumptions contained in our model:

<TABLE>
<CAPTION>
CHANGE IN INTEREST RATES CHANGE IN FAIR VALUE
<S> <C>
+ 100 basis points ($2.6)
+ 50 basis points ($1.4)
- 50 basis points $1.5
- 100 basis points $3.0
</TABLE>

Our model is based on existing business inforce as of year-end
1998 without considering the impact of new life insurance and
annuity sales on assets or liabilities. The model incorporates our
fixed maturity securities and preferred equity investments
excluding variable rate securities with rate resettings in less
than ninety days, securities with a maturity of less than ninety
days, and securities that are in or near default. The changes in
interest rate scenarios, noted above, assume parallel shifts in
the yield curve occurring uniformly throughout the year.

Additionally, certain products have features that mitigate the
impact of interest rate risk. Examples include surrender charges,
market value adjustments, and resetting of interest credited rates
(subject to certain guaranteed minimum crediting rates). For
interest sensitive life products the guaranteed minimum rate is
4%. For interest sensitive annuity products the guaranteed minimum
rates range from 3% to 5%, with the greatest concentration in the
3% to 4% range.

Credit Spread Risk

Credit spread risk arises from the possibility that changes in
credit spreads will affect the value of investments. Credit
spreads represent the credit risk premiums required by market
participants for a given credit quality, i.e., the additional
yield that a debt instrument issued by a AA-rated entity must
produce over a risk-free alternative (e.g., U.S. Treasury
instrument).

The following table presents the estimated net impact on the fair
value of non-trading investments resulting from various
hypothetical fluctuations in credit spreads, based on assumptions
contained in our model:

<TABLE>
<CAPTION>
CHANGE IN CREDIT SPREADS CHANGE IN FAIR VALUE
<S> <C>
+ 50 basis points ($2.9)
+ 10 basis points ($0.6)
- 10 basis points $0.6
- 50 basis points $3.0
</TABLE>

Our model is based on existing business inforce as of year-end
1998 without considering the impact of new life insurance and
annuity sales on assets. The model incorporates our fixed maturity
securities and preferred equity investments excluding securities
with a maturity of less than ninety days and securities that are
in or near default. The changes in credit spreads, noted above,
assume a uniform occurrence throughout the year.

Liability valuations for modified guaranteed annuities mitigate
our exposure to credit spread risk. Contractholder surrender
values reflect changes in spread between corporate
26

<PAGE> 28

bonds and U.S. Treasury securities since the market value adjusted
account value is based on current crediting rates for new and
renewal contracts. These crediting rates are adjusted weekly and
reflect current market conditions.

CREDIT RISK

Credit risk represents the loss that we would incur if an issuer
fails to perform its contractual obligations and the value of the
security held has been permanently impaired or is deemed
worthless. We manage our credit risk by setting investment policy
guidelines that assure diversification with respect to investment,
issuer, geographic location and credit quality. Management
regularly monitors compliance of each investment portfolio's
status with the investment policy guidelines, including timely
updates of credit-related securities.

A number of assumptions must be made to obtain the expected fair
value changes noted above. There is no reason to believe that
historically simulated interest rate and credit spread movements
have any predictive power for future fair value changes. The
unprecedented volatility experienced during the third quarter 1998
demonstrates the limitations of these models.

LIQUIDITY AND CAPITAL RESOURCES

Our liquidity requirements include the payment of sales commissions and
other underwriting expenses and the funding of our contractual
obligations for the life insurance and annuity contracts we have
in-force. We have developed and utilize a cash flow projection system and
regularly perform asset/liability duration matching in the management of
our asset and liability portfolios. We anticipate funding all our cash
requirements utilizing cash from operations, normal investment maturities
and anticipated calls and repayments, consistent with prior years. As of
December 31, 1998, our assets included $191 million of cash, short-term
investments and investment grade publicly traded available-for-sale
securities that could be liquidated if funds were required.

In order to continue to market life insurance and annuity products, we
must meet or exceed the statutory capital and surplus requirements of the
insurance departments of the states in which we conduct business.
Statutory accounting practices differ from generally accepted accounting
principles ("GAAP") in two major respects. First, under statutory
accounting practices, the acquisition costs of new business are charged
to expense, while under GAAP they are amortized over a period of time.
Second, under statutory accounting practices, the required additions to
statutory reserves for new business in some cases may initially exceed
the statutory revenues attributable to such business. These practices
result in a reduction of statutory income and surplus at the time of
recording new business.

The National Association of Insurance Commissioners utilizes the Risk
Based Capital ("RBC") adequacy monitoring system. The RBC calculates the
amount of adjusted capital that a life insurance company should have
based upon that company's risk profile. As of December 31, 1998 and 1997,
based on the RBC formula, our total adjusted capital level was well in
excess of the minimum amount of capital required to avoid regulatory
action.

We have received claims paying ability ratings from the major insurance
rating agencies as follows: Standard and Poors -- "AA-", Fitch Investor
Services -- "AA" and Moody's -- "Aa3". Additionally, during 1998, our
A.M. Best rating was upgraded from "A" to "A+".

We have developed a comprehensive capital management plan that will
continue to provide appropriate levels of capital for the risks that we
assume, but will allow us to reduce our absolute level of surplus. In
implementing this plan, we paid a dividend to MLIG of $15 million and $35
million during 1997 and 1996, respectively. No dividends were paid during
1998.

We believe that we will be able to fund the capital and surplus
requirements of projected new business from current statutory earnings
and existing statutory capital and surplus. If sales of new business
significantly exceed projections, we may have to look to our parent and
other affiliated
27

<PAGE> 29

companies to provide the capital or borrowings necessary to support our
current marketing efforts. Our future marketing efforts could be hampered
should our parent and/or affiliates be unwilling to commit additional
funding.

YEAR 2000 COMPLIANCE

As the millennium approaches, we have undertaken initiatives to address
the Year 2000 problem (the "Y2K problem") in conjunction with the Merrill
Lynch & Co. Year 2000 Compliance Initiative. The Y2K problem is the
result of a widespread programming technique that causes computer systems
to identify a date based on the last two numbers of a year, with the
assumption that the first two numbers of the year are "19." As a result,
the year 2000 would be stored as "00," causing computers to incorrectly
interpret the year as 1900. Left uncorrected, the Y2K problem may cause
information technology systems (e.g., computer databases) and non-
information technology systems (e.g., elevators) to produce incorrect
data or cease operating completely.

We believe that we have identified and evaluated our internal Y2K problem
and are devoting sufficient resources to renovating technology systems
that are not already Year 2000 compliant. The resource-intensive
renovation phase (as discussed further) of our Year 2000 efforts was
approximately 92% completed as of year-end 1998. We will focus primarily
on completing our renovation efforts and testing and on integration of
the Year 2000 programs during the remainder of 1999. In order to focus
attention on the Y2K problem, management has deferred certain other
technology projects; however this deferral is not expected to have a
material adverse effect on our business, results of operations, or
financial condition.

The failure of our technology systems relating to a Y2K problem would
likely have a material adverse effect on our business, results of
operations, or financial condition. This effect could include disruption
of normal business transactions, such as the processing of contractholder
transactions, the valuation of contractholder liabilities and the
recording and valuation of assets. The Y2K problem could also increase
our exposure to risk and our need for liquidity.

In 1995, Merrill Lynch & Co. established the Year 2000 Compliance
Initiative, which is an enterprisewide effort to address the risks
associated with the Y2K problem, both internal and external. The Year
2000 Compliance Initiative's efforts to address the risks associated with
the Y2K problem have been organized into six segments or phases:
planning, pre-renovation, renovation, production testing, certification,
and integration testing.

The planning phase involved defining the scope of the Year 2000
Compliance Initiative, including its annual budget and strategy, and
determining the level of expert knowledge available within Merrill Lynch
& Co. regarding particular systems or applications. The pre-renovation
phase involved developing a detailed enterprisewide inventory of
applications and systems, identifying the scope of necessary renovations
to each application or system, and establishing a conversion schedule.
During the renovation phase, source codes are actually converted, date
fields are expanded or windowed (windowing is used on an exception basis
only), test data is prepared, and each system or application is tested
using a variety of Year 2000 scenarios. The production testing phase
validates that a renovated system is functionally the same as the
existing production version, that renovation has not introduced defects,
and that expanded or windowed date fields continue to handle current
dates properly. The certification phase validates that a system can run
successfully in a Year 2000 environment. The integration testing phase,
which will occur throughout 1999, validates that a system can
successfully interface with both internal and external systems. Finally,
as we continue to implement new systems, they are also being tested for
Year 2000 readiness.

In 1996 and 1997, as part of the planning and pre-renovation phases, both
plans and funding of plans for inventory, preparation, renovation, and
testing of computer systems for the Y2K problem were approved. All plans
for both mission-critical and non-mission-critical systems are tracked
and monitored. The work associated with the Year 2000 Compliance
Initiative has been accomplished by Merrill Lynch & Co. employees, with
the assistance of consultants where necessary.
28

<PAGE> 30

As part of the production testing and certification phases, we have
performed, and will continue to perform, both internal and external Year
2000 testing intended to address the risks from the Y2K problem. As of
year-end 1998, production testing was approximately 92% completed.

We continue to survey and communicate with third parties whose Y2K
readiness is important to us. Information technology and non-information
technology vendors and service providers are contacted in order to obtain
their Y2K compliance plans. Based on the nature of the response and the
importance of the product or service involved, we determine if additional
testing is needed. The results of these efforts are maintained in a
database that is accessible throughout Merrill Lynch & Co. Third parties
that have been contacted include vendors and service providers; a process
to access and rate their responses has been developed. This information
will be used by us to manage risk resulting from the Y2K problem.
Management is unable at this point to ascertain whether all significant
third parties will successfully address the Y2K problem. We will continue
to monitor third parties' Year 2000 readiness to determine if additional
or alternative measures are necessary. In connection with information
technology and non-information technology products and services,
contingency plans may include selection of alternate vendors or service
providers and changing business practices so that a particular system is
not needed. In light of the interdependency of the parties in or serving
the financial markets, however, there can be no assurance that all Y2K
problems will be identified and remediated on a timely basis or that all
remediation will be successful. The failure of exchanges, clearing
organizations, vendors, service providers, counterparties, regulators, or
others to resolve their own processing issues in a timely manner could
have a material adverse effect on our business, results of operations,
and financial condition.

The primary costs associated with the Year 2000 Compliance Initiative are
incurred by Merrill Lynch & Co. and are not directly allocated to the
various business units. These costs include planning and oversight of the
Year 2000 Compliance Initiative, as well as certain Information Systems
personnel costs involved in implementation and testing. All other costs
incurred by us, primarily non-Information Systems personnel costs,
systems upgrades and replacement of desk-top software, have not been
material to our results of operations or financial condition. However,
there can be no assurance that the costs associated with remediation
efforts or the possible failure of remediation efforts would not have a
material adverse effect on our business, results of operations, and
financial condition.

RESULTS OF OPERATIONS

Our gross earnings are principally derived from two sources:

- the net earnings from investment of fixed rate life insurance
and annuity contract owner deposits less interest credited to
contract owners, commonly known as spread, and

- the charges imposed on variable life insurance and variable
annuity contracts

The costs associated with acquiring contract owner deposits are amortized
over the period in which we anticipate holding those funds. In addition,
we incur expenses associated with the maintenance of in-force contracts.

1998 compared to 1997

We recorded net earnings of $4.8 million and $9.7 million for 1998
and 1997, respectively.

Net earnings derived from interest spread decreased $3.2 million
during 1998 as compared to 1997. During 1997, we determined that
certain policyholder reserves exceeded amounts required resulting
in reductions to those reserves. Excluding these reductions,
interest spread decreased $2.2 million during 1998 as compared to
1997. The reduction in interest spread is primarily a result of
our $15 million dividend payment to MLIG during the fourth quarter
1997 and the declining number of fixed rate contracts in-force.
29

<PAGE> 31

Net realized investment losses were $2.0 million during 1998 as
compared to net realized investment gains of $1.9 million during
1997. During 1998, we incurred $1.9 million in credit-related
losses due to the book value adjustment on one fixed maturity
security . During 1997, we realized a $2.0 million credit-related
gain on the disposition of a single equity security investment.

Policy charge revenue increased $2.4 million (or 19%) during the
current year as compared to 1997. The increase in policy charge
revenue is primarily attributable to the increase in
policyholders' variable account balances. During 1998, average
variable account balances increased $140 million (or 21%) as
compared to 1997.

The market value adjustment expense is attributable to our
modified guaranteed annuity product. This contract provision
results in a market value adjustment to the cash surrender value
of those contracts that are surrendered before the expiration of
their interest rate guarantee period. During 1998, the market
value adjustment expense increased $0.3 million (or 144%) as
compared to 1997 consistent with the increase in surrender
activity resulting from the lower interest rate environment in
1998.

Policy benefits increased $0.8 million (or 109%) during 1998 as
compared to 1997 due to increased mortality for variable life
insurance products.

Reinsurance premium ceded increased $0.1 million (or 8%) to $1.7
million during 1998. This increase is attributable to the combined
effect of the increasing age of policyholders and increased
insurance in-force.

Amortization of deferred policy acquisition costs increased $1.6
million to $5.8 million in 1998. Approximately $1.5 million of the
increase is attributable to the retrospective adjustment of
deferred policy acquisition costs as a result of revising
estimated future gross profits assumptions for certain life
insurance and annuity products.

Insurance expenses and taxes increased $0.3 million (or 7%) during
1998 as compared to 1997. During the third quarter 1998, we
incurred $0.3 million in expenses due to the writedown of various
leasehold improvements and other expenses associated with the
closure of our New York service center.

1997 compared to 1996

We recorded net earnings of $9.7 million and $9.2 million for 1997
and 1996, respectively.

Net investment income and interest credited to policyholders'
account balances for 1997 as compared to 1996 both declined by
approximately $2 million. The reduction in net investment income
is primarily attributable to the reduction in fixed rate contracts
in-force and stockholder dividend payments. The decrease in
interest credited to policyholders' account balances is primarily
attributable to the reduction in fixed rate contracts in-force.
Additionally, during 1997, certain policyholder reserves were
determined to be in excess of amounts required, resulting in a $1
million reduction to interest credited.

Net realized investment gains were $1.9 million and $2.2 million
during 1997 and 1996, respectively. The decrease is primarily due
to credit related losses on fixed maturity investments during
1997.

Policy charge revenue increased $1.1 million (or 9%) during the
current year as compared to 1996. The increase in policy charge
revenue is primarily attributable to the increase in
policyholders' variable account balances. Asset based charges
increased $1.3 million (or 23%) consistent with the growth in the
separate account assets. Non-asset based charges decreased $0.2
million during 1997 as compared to 1996 primarily due to an
increase in the number of in-force variable life policies reaching
the end of their deferred policy load collection period.
30

<PAGE> 32

The decrease in policy benefits of $0.5 million during 1997 as
compared to 1996 is attributable to favorable mortality
experienced during the current year.

Reinsurance premium ceded increased $0.3 million to $1.6 million
during 1997. This increase is attributable to the combined effect
of the increasing age of policyholders and increased insurance
in-force resulting from the strong equity markets.

Segment Information

Our operating results are categorized into two business segments:
Life Insurance and Annuities. Our Life Insurance segment consists
of variable life insurance products and interest-sensitive life
products. Our Annuity segment consists of variable annuities and
interest-sensitive annuities. All other earnings represent
earnings on assets that do not support contractholder liabilities.
Net earnings by segment were as follows:

<TABLE>
<CAPTION>
SEGMENT 1998 1997 1996
------- ---- ---- ----
<S> <C> <C> <C>
Life Insurance....... $0.5 $2.1 $2.1
Annuities............ $2.6 $5.3 $4.6
Other................ $1.7 $2.3 $2.5
</TABLE>

The products that comprise the Life Insurance and Annuity segments
generally possess similar economic characteristics. As such, the
financial condition and results of operations of each business
segment are generally consistent with our consolidated financial
condition and results of operations presented herein.

We are not dependent upon any single customer, and no single
customer accounted for more than 10% of our revenues during 1998.

Inflation

Our operations have not been materially impacted by inflation and
changing prices during the preceding three years.

REINSURANCE

We reinsure portions of our life insurance risks with other companies. In this
regard, we have reinsurance agreements with a number of other insurance
companies for individual life insurance. The maximum retention on any one life
is approximately $500,000.

CONTRACT OWNER ACCOUNT BALANCES

We record on our books liabilities for life insurance and annuity products equal
to the full accumulation value of such contracts plus a mortality provision for
certain of its products, which will be sufficient to meet our contract
obligations at their maturities or in the event of your death.

INVESTMENTS

Our assets must be invested in accordance with applicable state laws. These laws
govern the nature and quality of investments that may be made by life insurance
companies and the percentage of their assets that may be committed to any
particular type of investment. In general, these laws permit investments, within
specified limits and subject to certain qualifications, in federal, state, and
municipal obligations, corporate bonds, preferred or common stocks, real estate
mortgages, real estate and certain other investments. All of our assets, except
for separate account assets supporting variable products, are available to meet
our obligations under the Contracts.

We make investments in accordance with investment guidelines that take into
account investment quality, liquidity and diversification. Based on these
guidelines, we invest our assets supporting Contract guarantees primarily in
investment grade fixed income assets such as mortgage-backed securities,
collateralized mortgage obligations and corporate debentures. At December 31,
1998, invested assets supporting Contract
31

<PAGE> 33

guarantees consisted of $201 million of fixed maturity securities, $88 million
of policy loans, and $14 million of equity securities.

At December 31, 1998, our assets supporting Contract guarantees included $191
million of cash, short-term investments, investment grade publicly traded fixed
maturity securities, and investment grade publicly traded preferred stock.

At December 31, 1998, approximately $76 million (approximately 38% of our
general account portfolio of fixed maturity securities) was invested in
securities rated BBB by Standard and Poor's (or similar rating agency). Fixed
maturity securities rated BBB may have speculative characteristics and changes
in economic conditions or other circumstances are more likely to lead to a
weakened capacity of the issuer to make principal and interest payments than is
the case with higher rated fixed maturity securities.

At December 31, 1998, approximately $9 million (4.5%) of our fixed maturity
securities invested in securities considered non-investment grade. We define
non-investment grade as unsecured corporate debt obligations that do not have a
rating equivalent to Standard and Poor's (or similar rating agency) BBB or
higher 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. We carefully select, and closely monitor,
such investments.

COMPETITION

We are engaged in a business that is highly competitive because of the large
number of stock and mutual life insurance companies and other entities marketing
insurance products. There are approximately 1,800 stock, mutual and other types
of insurers in the life insurance business in the United States, a number of
which are substantially larger than us.

CERTAIN AGREEMENTS

INVESTMENT MANAGEMENT AGREEMENT

We have entered into an investment management agreement with MLAM, a
subsidiary of Merrill Lynch & Co., pursuant to which MLAM provides
investment management and related accounting services with respect to our
investments. We pay a fee to MLAM for these services. We paid
reimbursements of $157,000, $159,000, and $186,000, during the years
ended December 31, 1998, 1997, and 1996, respectively, to MLAM for such
services.

MORTGAGE LOAN SERVICING AND INVESTMENT ADVISORY AGREEMENTS

We have entered into a mortgage loan servicing agreement with Merrill
Lynch & Co. Under this agreement, Merrill Lynch & Co. provides mortgage
servicing and related accounting services with respect to our investments
in real estate, commercial mortgage loans, and mortgage loan
participations. Because we no longer have any real estate investments or
mortgage loans outstanding, we paid no fees to Merrill Lynch & Co. for
such services in 1998. During the years ended December 31, 1997 and 1996,
we paid fees of $2,000 and $7,000, respectively.

SERVICE AGREEMENT

We have entered into a service agreement with MLIG pursuant to which MLIG
has agreed to provide us with certain accounting, data processing, legal,
actuarial, management, advertising and other services. We reimburse MLIG
for expenses incurred in relation to this service agreement on an
allocated cost basis. Charges billed to us by MLIG pursuant to the
agreement were $4.8 million, $4.3 million, and $4.3 million during the
years ended December 31, 1998, 1997, and 1996, respectively.

GENERAL AGENCY AGREEMENT

We have entered into a general agency agreement with MLLA pursuant to
which registered representatives of MLPF&S who are also our licensed
insurance agents solicit applications for
32

<PAGE> 34

contracts we issue. We pay MLLA commissions for the contracts sold by
such agents. We paid MLLA commissions under the general agency agreement
of $3.8 million, $4.1 million, and $1.3 million during the years ended
December 31, 1998, 1997, and 1996, respectively. (See "Distribution of
the Contracts".)

EMPLOYEES

Under our Management Services Agreement with MLIG, however, various management
services are provided by MLIG, as described above under "Service Agreement". The
cost of these services is allocated to us.

Certain of our officers also perform services for our affiliates, and their
salaries are allocated among such affiliates and us. (See "Directors and
Executive Officers".)

PROPERTIES

Our home office is located at 100 Church Street, 11th Floor, New York. We lease
this office space from MLPF&S. In addition, personnel performing services for us
pursuant to our Management Services Agreement operate in MLIG office space.
Merrill Lynch Insurance Group Services, Inc. ("MLIGS"), an affiliate of MLIG
owns office space in Jacksonville, Florida. MLIGS also leases certain office
space in Springfield, Massachusetts from Picknelly Family Limited Partnership.
MLIG occupies certain office space in Plainsboro, New Jersey through Merrill
Lynch & Co. We pay an allocable share of the cost of each of these premises
through the service agreement with MLIG.

STATE REGULATION

We are subject to the laws of the State of New York governing insurance
companies and to the regulations of the New York State Insurance Department (the
"Insurance Department"). We file a detailed financial statement in the
prescribed form (the "Annual Statement") with the Insurance Department each year
covering our operations for the preceding year and our financial condition as of
the end of that year. Regulation by the Insurance Department includes periodic
examination to determine contract liabilities and reserves so that the Insurance
Department may certify that these items are correct. Our books and accounts are
subject to review by the Insurance Department at all times. A full examination
of our operations is conducted periodically by the Insurance Department and
under the auspices of the NAIC.

In addition, we are subject to regulation under the insurance laws of all
jurisdictions in which we operate. The laws of the various jurisdictions
establish supervisory agencies with broad administrative powers with respect to
various matters, including licensing to transact business, overseeing trade
practices, licensing agents, approving contract forms, establishing reserve
requirements, fixing maximum interest rates on life insurance contract loans and
minimum rates for accumulation of surrender values, prescribing the form and
content of required financial statements and regulating the type and amounts of
investments permitted. We are required to file the Annual Statement with
supervisory agencies in each of the jurisdictions in which we do business, and
our operations and accounts are subject to examination by these agencies at
regular intervals.

The NAIC has adopted several regulatory initiatives designed to improve the
surveillance and financial analysis regarding the solvency of insurance
companies in general. These initiatives include the development and
implementation of a risk-based capital formula for determining adequate levels
of capital and surplus. Insurance companies are required to calculate their
risk-based capital in accordance with this formula and to include the results in
their Annual Statement. It is anticipated that these standards will have no
significant effect upon us. For additional information about the Risk-Based
Capital adequacy monitoring system, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources".

In addition, many states regulate affiliated groups of insurers, such as our
affiliates and us, under insurance holding company legislation. Under such laws,
inter-company transfers of assets and dividend payments
33

<PAGE> 35

from insurance subsidiaries may be subject to prior notice or approval,
depending on the size of the transfers and payments in relation to the financial
positions of the companies involved.

Under insurance guaranty fund laws in most states, insurers doing business
therein can be assessed (up to prescribed limits) for contract owner losses
incurred by other insurance companies which have become insolvent. Most of these
laws provide that an assessment may be excused or deferred if it would threaten
an insurer's own financial strength. For information regarding our estimated
liability for future guaranty fund assessments, see Note 8 of Notes to Financial
Statements.

Although the federal government generally does not directly regulate the
business of insurance, federal initiatives often have an impact on the business
in a variety of ways. Certain of our insurance products are subject to various
federal securities laws and regulations. In addition, current and proposed
federal measures that may significantly affect the insurance business include
regulation of insurance company solvency, employee benefit regulation, removal
of barriers preventing banks from engaging in the insurance business, tax law
changes affecting the taxation of insurance companies and the tax treatment of
insurance products and its impact on the relative desirability of various
personal investment vehicles.

DIRECTORS AND EXECUTIVE OFFICERS

Our directors and executive officers and their positions with us are as follows:

<TABLE>
<CAPTION>
POSITION(S) WITH
NAME (AGE) ML LIFE INSURANCE COMPANY OF NEW YORK
---------- --------------------------------------------------------
<S> <C>
Anthony J. Vespa (57).............................. Chairman of the Board, President, and Chief Executive
Officer
Joseph E. Crowne, Jr. (52)......................... Director, Senior Vice President, Chief Financial
Officer, Chief Actuary, and Treasurer
Barry G. Skolnick (47)............................. Director, Senior Vice President, General Counsel, and
Secretary
David M. Dunford (50).............................. Director, Senior Vice President, and Chief Investment
Officer
Gail R. Farkas (47)................................ Director and Senior Vice President
Michael P. Cogswell (44)........................... Director, Vice President, and Senior Counsel
Frederick J.C. Butler (57)......................... Director
Robert L. Israeloff (60)........................... Director
Allen N. Jones (56)................................ Director
Cynthia L. Kahn (43)............................... Director
Robert A. King (60)................................ Director
Stanley C. Peterson (54)........................... Director
Irving M. Pollack (81)............................. Director
Robert J. Boucher (53)............................. Senior Vice President, Variable Life Administration
</TABLE>

Each director is elected to serve until the next annual meeting of shareholders
or until his or her successor is elected and shall have qualified. Some
directors have held various executive positions with insurance company
subsidiaries of our indirect parent, Merrill Lynch & Co. From time to time
during 1998, the law firm of Rogers & Wells for ML of New York performed legal
services for us. Cynthia L. Kahn is a partner of this law firm.

The principal positions of our directors and executive officers for the past
five years are listed below:

Mr. Vespa joined ML Life Insurance Company of New York in February 1994.
Since February 1994, he has held the position of Senior Vice President of
MLPF&S.

Mr. Crowne joined ML Life Insurance Company of New York in June 1991.
34

<PAGE> 36

Mr. Skolnick joined ML Life Insurance Company of New York in November
1989. Since May 1992, he has held the position of Assistant General
Counsel of Merrill Lynch and First Vice President of MLPF&S.

Mr. Dunford joined ML Life Insurance Company of New York in July 1990.

Ms. Farkas joined ML Life Insurance Company of New York in August 1995.
Prior to August 1995, she held the position of Director of Market
Planning of MLPF&S.

Mr. Cogswell has been with ML Life Insurance Company of New York since
November of 1990.

Mr. Butler joined ML Life Insurance Company of New York in April 1991.

Mr. Israeloff joined ML Life Insurance Company of New York in April 1991.
Since 1964, he has been Chairman and Executive Partner of Israeloff,
Trattner & Co., CPAs, P.C., a public accounting firm.

Mr. Jones joined ML Life Insurance Company of New York in June 1996.
Since May 1992, he has been Senior Vice President of MLPF&S. From June
1992 to May 1995, he served as a director of ML Life Insurance Company of
New York.

Ms. Kahn joined ML Life Insurance Company of New York in November 1993.
She is a partner at the law firm of Rogers & Wells. She has been
associated with Rogers & Wells since 1984.

Mr. King joined ML Life Insurance Company of New York in April 1991. In
May 1996, he retired from the position of Vice President for Finance at
Marymount College, Tarrytown, New York, which he had held since February
1991.

Mr. Peterson joined ML Life Insurance Company of New York in December
1997. Since November 1997, he has been National Sales Director for MLLA.
Prior to November 1997, he held various positions with MLLA.

Mr. Pollack joined ML Life Insurance Company of New York in April 1991.
In 1980, he retired from the Securities and Exchange Commission after
thirty years of service, and having served as an SEC Commissioner from
1974 to 1980. Since 1980, he has practiced law and been a private
consultant in the securities and capital markets fields.

Mr. Boucher joined ML Life Insurance Company of New York in May 1992.

None of our shares are owned by any of our directors or executive
officers, as we are a wholly owned subsidiary of MLIG. Our directors and
executive officers, both individually and as a group, own less than one
percent of the outstanding shares of common stock of Merrill Lynch & Co.

<PAGE> 37

EXECUTIVE COMPENSATION

Certain of our executive officers and directors also perform services for our
affiliates, and the salaries of all such individuals are allocated among us and
such affiliates.

COMPENSATION TABLES AND OTHER INFORMATION

The following tables set forth information with respect to our Chief Executive
Officer. Annual salary and bonus for the next four most highly compensated
executive officers did not exceed $100,000 for the fiscal year ended December
31, 1998.

SUMMARY COMPENSATION TABLE

<TABLE>
LONG-TERM
COMPENSATION
AWARDS (1)
-----------------------
RESTRICTED
ANNUAL COMPENSATION STOCK SECURITIES ALL OTHER
NAME AND -------------------------- AWARDS UNDERLYING COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS(1) (2)(3)(4) OPTIONS SATION(5)
- ----------------------------------- ---- ------ -------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Anthony J. Vespa 1998 $9,500 $47,250 $10,482 1,238 $1,035
Chairman of the Board, 1997 9,280 46,154 11,966 696 1,686
President and Chief 1996 7,235 29,988 8,263 404 1,019
Executive Officer
</TABLE>

- ---------------
(1) Awards were made in January or February of the succeeding fiscal year for
performance in the year indicated.

(2) All awards have been valued for this table using closing prices of Common
Stock of Merrill Lynch & Co. on the Consolidated Transaction Reporting
System on the grant dates of such awards. The closing price on February 1,
1999, the effective date of the grants for performance in 1998, was $73.75.
All Restricted Shares and Restricted Units vest three years following grant
and all Restricted Shares and those Restricted Units granted in 1999 may not
be transferred for an additional two years after vesting. Restricted Shares
are shares of Merrill Lynch & Co. Common Stock that convey to the holder all
the rights of a stockholder except that they are restricted from being sold,
transferred, or assigned for a period of time after they are granted.
Restricted Units are similar to Restricted Shares but do not convey voting
rights. Awards in 1999 consisted of Restricted Units, payable in cash or
shares of Common Stock at the end of five years. Prior to 1999, awards were
split equally between Restricted Shares and Restricted Units payable in cash
at the end of a three-year vesting period.

(3) During the applicable vesting and/or restricted periods, dividends are paid
on Restricted Shares and dividend equivalents are paid on Restricted Units.
Such dividends and dividend equivalents are equal in amount to the dividends
paid on shares of Merrill Lynch & Co. Common Stock.

(4) The number and value of Restricted Shares and Restricted Units held by the
Chief Executive Officer named in the table as of December 25, 1998 is as
follows: Mr. Vespa (282 shares and 282 units--$40,547). These amounts do not
include Restricted Shares and Restricted Units awarded in 1999 for
performance in fiscal year 1998.

(5) Amounts shown for 1998 consist of the following: (i) contributions we made
in 1998 to account of employee under the Merrill Lynch 401(k) Savings and
Investment Plan (including, where applicable, cash payments made because of
limitations imposed by the Internal Revenue Code)--Mr. Vespa ($75); and (ii)
allocations we made in 1998 to account of employee under the defined
contribution retirement program--Mr. Vespa ($960).

<PAGE> 38

STOCK OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANT
UNDERLYING GRANTED TO EXERCISE DATE
FISCAL OPTIONS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME YEAR(1) GRANTED FISCAL YEAR ($ PER SHARE) DATE(2) VALUE(3)
---- ------- ---------- ------------ ------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Anthony J. Vespa 1998 1,238 .004% $72.34375 1/25/2009 $31,124
</TABLE>

- ---------------
(1) Includes awards made in January 1999 for performance in 1998. Awards made in
January 1998 for performance in 1997 are excluded, which awards were
reflected in our prospectus for the Contracts dated May 1, 1998.

(2) Awards made in January 1999 included two different classes of Stock Option
grants that are the same in all respects with the exception of when the
Stock Options are exercisable. The first class of Stock Option grants are
exercisable as follows: 20% after one year, 40% after two years, 60% after
three years, 80% after four years, and 100% after five years. The number of
securities underlying options granted for this class of Stock Option grants
awarded to the Chief Executive Officer named in the table is as follows: Mr.
Vespa (569).

The second class of Stock Option grants become 100% exercisable on January
25, 2008, but may become exerciseable earlier in whole or in part, as of any
anniversary date of the award at a rate of 1% for each full increment of $20
million of cumulative Economic Profit (net earnings available to common
stockholders ("Net Earnings") in excess of Net Earnings required to produce
a 15% return on equity) earned by Merrill Lynch & Co. in a fiscal year
beginning in 1999. The Stock Options expire on the tenth anniversary of the
award date. The number of securities underlying options granted for this
class of Stock Option grants awarded to the Chief Executive Officer named in
the table is as follows: Mr. Vespa (669).

(3) Valued using a modified Black-Scholes option pricing model. The exercise
price of each Stock Option ($72.34375) is equal to the average of the high
and low prices on the Consolidated Transaction Reporting System of a share
of Merrill Lynch & Co. Common Stock on January 25, 1999, the date of grant.
The assumptions used for the variables in the model were: 35.49% volatility
(which is the volatility of the Merrill Lynch & Co. Common Stock for the 120
months preceding grant); a 5.05% risk-free rate of return (which is the
yield as of the date of grant on a U.S. Treasury Strip (zero-coupon bond)
maturing in February 2009, as quoted in The Wall Street Journal); a 1.33%
dividend yield (which was the dividend yield on the date of grant); and a
10-year option term (which is the term of the option when granted). A
discount of 25% was applied to the option value yielded by the model to
reflect the non-marketability of employee stock options. The actual gain
that executives will realize on their Stock Options will depend on the
future price of the Merrill Lynch & Co. Common Stock and cannot be
accurately forecast by application of an option pricing model.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Anthony J. Vespa 0 $0 1,116 2,014 $53,879 $58,992
</TABLE>

- ---------------
(1) This valuation represents the difference between $71.81250, the closing
price on December 24, 1998 on the Consolidated Transaction Reporting System
of a share of Merrill Lynch & Co. Common Stock, and the exercise price of
these Stock Options.

(2) This valuation represents the difference between the average of the high and
low price on the Consolidated Transaction Reporting System on the date of
exercise of a share of Merrill Lynch & Co. Common Stock, and the exercise
prices of the Stock Options exercised.
37

<PAGE> 39

Directors who also serve as officers receive no compensation in addition to
their compensation as officers. We compensate each director who is not also an
officer with a fee of $4,000 annually plus $500 per meeting attended. In
addition, we reimburse reasonable travel expenses of directors related to their
service as directors. We paid fees of $7,000 to Mr. Butler, $7,000 to Mr.
Israeloff, $11,000 to Ms. Kahn, $11,000 to Mr. King, and $7,000 to Mr. Pollack,
each a director who was not an officer, for services rendered to us in 1998.

LEGAL PROCEEDINGS

We are not aware of any material pending litigation against us or involving our
property. We are also not aware of any legal proceedings contemplated by any
governmental authorities against us.

LEGAL MATTERS

Barry G. Skolnick, our Senior Vice President and General Counsel, has approved
our organization, our authority to issue the Contracts, and the validity of the
Contract form. Sutherland Asbill & Brennan LLP of Washington, D.C., provided
advice on certain matters relating to federal securities laws.

EXPERTS

Deloitte & Touche LLP, independent auditors, audited our financial statements as
of December 31, 1998 and 1997 and for each of the three years in the period
ended December 31, 1998 included in this prospectus, as stated in their report.
We have included our financial statements in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing. Deloitte
& Touche LLP's principal business address is Two World Financial Center, New
York, New York 10281-1433.

REGISTRATION STATEMENT

We have filed registration statements with the Securities and Exchange
Commission under the Securities Act of 1933 that relate to the Contract. This
prospectus does not contain all of the information in the registration
statements as permitted by Securities and Exchange Commission regulations. You
can obtain the omitted information from the Securities and Exchange Commission's
principal office in Washington, D.C., upon payment of a prescribed fee.

<PAGE> 40

INDEPENDENT AUDITORS' REPORT

The Board of Directors of
ML Life Insurance Company of New York:

We have audited the accompanying balance sheets of ML Life
Insurance Company of New York (the "Company"), a wholly-owned
subsidiary of Merrill Lynch Insurance Group, Inc., as of December
31, 1998 and 1997, and the related statements of earnings,
comprehensive income, stockholder's equity, and cash flows for
each of the three years in the period ended December 31, 1998.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all
material respects, the financial position of the Company at
December 31, 1998 and 1997, and the results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted
accounting principles.

February 22, 1999
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)

BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
(Dollars in Thousands)
<TABLE>
<CAPTION>

ASSETS 1998 1997
- -------- ------------- -------------
<S> <C> <C>
INVESTMENTS:
Fixed maturity securities, at estimated fair value
(amortized cost: 1998 - $197,588; 1997 - $250,695) $ 200,681 $ 255,958
Equity securities, at estimated fair value
(cost: 1998 - $14,684; 1997 - $5,830) 13,718 5,029
Policy loans on insurance contracts 88,083 88,163
------------- -------------
Total Investments 302,482 349,150

CASH AND CASH EQUIVALENTS 18,707 10,063
ACCRUED INVESTMENT INCOME 4,968 5,416
DEFERRED POLICY ACQUISITION COSTS 29,742 30,406
REINSURANCE RECEIVABLES 652 429
OTHER ASSETS 4,261 3,405
SEPARATE ACCOUNTS ASSETS 887,170 739,712
------------- -------------
TOTAL ASSETS $ 1,247,982 $ 1,138,581
============= =============

</TABLE>

See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
1998 1997
------------- -------------
<S> <C> <C>
LIABILITIES:
POLICY LIABILITIES AND ACCRUALS:
Policyholders' account balances $ 269,246 $ 307,333
Claims and claims settlement expenses 2,986 2,007
------------- -------------
Total policy liabilities and accruals 272,232 309,340

OTHER POLICYHOLDER FUNDS 1,783 1,941
FEDERAL INCOME TAXES - DEFERRED 119 1,905
FEDERAL INCOME TAXES - CURRENT 1,347 2,255
AFFILIATED PAYABLES - NET 1,253 3,492
OTHER LIABILITIES 2,124 2,155
SEPARATE ACCOUNTS LIABILITIES 887,170 739,712
------------- -------------
Total Liabilities 1,166,028 1,060,800
------------- -------------
STOCKHOLDER'S EQUITY:
Common stock, $10 par value - 220,000 shares
authorized, issued and outstanding 2,200 2,200
Additional paid-in capital 66,259 66,259
Retained earnings 14,462 9,692
Accumulated other comprehensive loss (967) (370)
------------- -------------
Total Stockholder's Equity 81,954 77,781
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,247,982 $ 1,138,581
============= =============

</TABLE>
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)

STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>

1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
REVENUES:
Investment revenue:
Net investment income $ 21,549 $ 25,465 $ 27,520
Net realized investment gains (losses) (1,998) 1,947 2,169
Policy charge revenue 15,484 13,064 11,959
------------- ------------- -------------
Total Revenues 35,035 40,476 41,648
------------- ------------- -------------
BENEFITS AND EXPENSES:
Interest credited to policyholders' account balances 13,832 14,532 16,586
Market value adjustment expense 567 232 301
Policy benefits (net of reinsurance recoveries: 1998 - $1,191
1997 - $690; 1996 - $1,584) 1,630 781 1,311
Reinsurance premium ceded 1,705 1,584 1,262
Amortization of deferred policy acquisition costs 5,759 4,119 3,784
Insurance expenses and taxes 4,900 4,563 4,595
------------- ------------- -------------
Total Benefits and Expenses 28,393 25,811 27,839
------------- ------------- -------------

Earnings Before Federal Income Tax Provision 6,642 14,665 13,809

FEDERAL INCOME TAX PROVISION (BENEFIT):
Current 3,337 2,905 102
Deferred (1,465) 2,068 4,488
------------- ------------- -------------
Total Federal Income Tax Provision 1,872 4,973 4,590
------------- ------------- -------------
NET EARNINGS $ 4,770 $ 9,692 $ 9,219
============= ============= =============

</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 COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>

1998 1997 1996
------------- ------------ -------------
<S> <C> <C> <C>
NET EARNINGS $ 4,770 $ 9,692 $ 9,219
------------- ------------ -------------
OTHER COMPREHENSIVE LOSS, NET OF TAX:

Net unrealized gains (losses) on investment securities:
Net unrealized holding losses arising during the period (4,329) (413) (4,206)
Reclassification adjustment for (gains) losses included
in net earnings 1,994 (1,771) (1,858)
------------- ------------ -------------
Net unrealized losses on investment securities (2,335) (2,184) (6,064)

Adjustments for:
Policyholder liabilities 1,417 (70) 5,380

Income tax benefit related to items of
other comprehensive loss 321 789 240
------------- ------------ -------------
Other comprehensive loss, net of tax (597) (1,465) (444)
------------- ------------ -------------
COMPREHENSIVE INCOME $ 4,173 $ 8,227 $ 8,775
============= ============ =============

</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
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>

Accumulated
Additional other Total
Common paid-in Retained comprehensive Stockholder's
stock Capital earnings income (loss) equity
----------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 $ 2,200 $ 83,006 $ 24,034 $ 1,539 $ 110,779

Dividend to Parent (10,966) (24,034) (35,000)
Net earnings 9,219 9,219
Other comprehensive loss, net of tax (444) (444)
----------- ----------- ------------ ------------ ------------
BALANCE, DECEMBER 31, 1996 2,200 72,040 9,219 1,095 84,554

Dividend to Parent (5,781) (9,219) (15,000)
Net earnings 9,692 9,692
Other comprehensive loss, net of tax (1,465) (1,465)
----------- ------------ ------------ ------------ ------------
BALANCE, DECEMBER 31, 1997 2,200 66,259 9,692 (370) 77,781

Net earnings 4,770 4,770
Other comprehensive loss, net of tax (597) (597)
----------- ------------ ------------ ------------ ------------
BALANCE, DECEMBER 31, 1998 $ 2,200 $ 66,259 $ 14,462 $ (967) $ 81,954
=========== ============ ============ ============ ============

</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
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>

1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 4,770 $ 9,692 $ 9,219
Adjustments to reconcile net earnings to net cash and
cash equivalents provided (used) by operating activities:
Amortization of deferred policy acquisition costs 5,759 4,119 3,784
Capitalization of policy acquisition costs (5,095) (5,253) (2,134)
Amortization (accretion) of investments (262) (239) 1
Net realized investment (gains) losses 1,998 (1,947) (2,169)
Interest credited to policyholders' account balances 13,832 14,532 16,586
Provision (benefit) for deferred Federal income tax (1,465) 2,068 4,488
Changes in operating assets and liabilities:
Accrued investment income 448 536 651
Claims and claims settlement expenses 979 (565) (329)
Federal income taxes - current (908) 156 1,914
Other policyholder funds (158) 781 421
Affiliated payables - net (2,239) (1,534) 964
Policy loans on insurance contracts 80 (2,615) (3,475)
Other, net (1,110) 2,306 (3,951)
------------ ------------ ------------
Net cash and cash equivalents provided by operating activites 16,629 22,037 25,970
------------ ------------ ------------
INVESTING ACTIVITIES:
Sales of available-for-sale securities 102,967 88,882 155,645
Maturities of available-for-sale securities 59,161 51,060 34,455
Purchases of available-for-sale securities (119,611) (120,965) (162,828)
Mortgage loans principal payments received - 2,057 1,975
------------ ------------ ------------
Net cash and cash equivalents provided by investing activities 42,517 21,034 29,247
------------ ------------ ------------

</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
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(Continued) (Dollars In Thousands)
<TABLE>
<CAPTION>

1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
FINANCING ACTIVITIES:
Dividends paid to parent $ - $ (15,000) $ (35,000)
Policyholders' account balances:
Deposits 94,226 106,983 32,158
Withdrawals (including transfers to/from Separate Accounts) (144,728) (132,819) (61,934)
------------- ------------- -------------
Net cash and cash equivalents used by financing activites (50,502) (40,836) (64,776)
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 8,644 2,235 (9,559)

CASH AND CASH EQUIVALENTS:
Beginning of year 10,063 7,828 17,387
------------- ------------- -------------
End of year $ 18,707 $ 10,063 $ 7,828
============= ============= =============
Supplementary Disclosure of Cash Flow Information:
Cash paid to (received from) affiliates for:
Federal income taxes $ 4,245 $ 2,749 $ (1,812)
Interest 148 494 440

</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
(DOLLARS IN THOUSANDS)

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business: 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 non-participating life insurance and annuity
products primarily variable life insurance, variable annuities,
market value adjusted annuities and immediate annuities. The
Company is licensed to sell insurance in nine states; however,
it currently limits its marketing activities to the State of
New York. The Company markets its products solely through the
retail network of Merrill Lynch, Pierce, Fenner & Smith,
Incorporated ("MLPF&S"), a wholly-owned broker-dealer
subsidiary of Merrill Lynch & Co.

Basis of Reporting: The accompanying financial statements have
been prepared in conformity with generally accepted accounting
principles and prevailing industry practices, both of which
require management to make estimates that affect the reported
amounts and disclosure of contingencies in the financial
statements. Actual results could differ from those estimates.

For the purpose of reporting cash flows, cash and cash
equivalents include cash on hand and on deposit and short-term
investments with original maturities of three months or less.

Revenue Recognition: Revenues for the Company's interest-
sensitive life, interest-sensitive annuity, variable life and
variable annuity products consist of policy charges for the
mortality risk and cost of insurance, deferred sales charges,
policy administration charges and/or withdrawal charges assessed
against policyholders' account balances during the period.

Investments: The Company's investments in fixed maturity and
equity securities are classified as available-for-sale and are
carried at estimated fair value with unrealized gains and
losses included in stockholder's equity as a component of
accumulated other comprehensive loss, net of tax. If a decline
in value of a security is determined by management to be other-
than-temporary, the carrying value is adjusted to the estimated
fair value at the date of this determination and recorded as
net realized investment gains (losses).

For fixed maturity securities, premiums are amortized to the
earlier of the call or maturity date, discounts are accreted to
the maturity date, and interest income is accrued daily. For
equity securities, dividends are recognized on the ex-dividend
date. Realized gains and losses on the sale or maturity of the
investments are determined on the basis of specific identification.

Certain fixed maturity securities are considered non-investment
grade. The Company defines non-investment grade fixed maturity
securities as unsecured debt obligations that do not have a rating
equivalent to Standard and Poor's (or similar rating agency)
BBB- or higher.
<PAGE>

All outstanding mortgage loans were repaid during 1997. The
Company recognized income from mortgage loans based on the cash
payment interest rate of the loan, which may have been
different from the accrual interest rate of the loan for
certain mortgage loans. The Company recognized a realized gain
at the date of the satisfaction of the loan at contractual
terms for loans where there was a difference between the cash
payment interest rate and the accrual interest rate. For all
loans, the Company stopped accruing income when an interest
payment default either occurred or was probable. Impairments
of mortgage loans were established as valuation allowances and
recorded to net realized investment gains or losses.

Policy loans on insurance contracts are stated at unpaid
principal balances.

Deferred Policy Acquisition Costs: Policy acquisition costs for
life and annuity contracts are deferred and amortized based on
the estimated future gross profits for each group of contracts.
These future gross profit estimates are subject to periodic
evaluation by the Company, with necessary revisions applied
against amortization to date. It is reasonably possible that
estimates of future gross profits could be reduced in the
future, resulting in a material reduction in the carrying
amount of deferred policy acquisition costs.

Policy acquisition costs are principally commissions and a
portion of certain other expenses relating to policy
acquisition, underwriting and issuance that are primarily
related to and vary with the production of new business.
Certain costs and expenses reported in the statements of
earnings are net of amounts deferred. Policy acquisition costs
can also arise from the acquisition or reinsurance of existing
in-force policies from other insurers. These costs include
ceding commissions and professional fees related to the
reinsurance assumed. The deferred costs are amortized in
proportion to the estimated future gross profits over the
anticipated life of the acquired insurance contracts utilizing
an interest methodology.

The Company has entered into an assumption reinsurance
agreement with an unaffiliated insurer. The acquisition costs
relating to this agreement are being amortized over a twenty-
year period using an effective interest rate of 7.5%. This
reinsurance agreement provides for payment of contingent ceding
commissions based upon the persistency and mortality experience
of the insurance contracts assumed. Any payments made for the
contingent ceding commissions will be capitalized and amortized
using an identical methodology as that used for the initial
acquisition costs. The following is a reconciliation of the
acquisition costs related to the reinsurance agreement for the
years ended December 31:

1998 1997 1996
------------ ------------ ------------
Beginning balance $ 16,550 $ 17,151 $ 17,654
Capitalized amounts 691 577 577
Interest accrued 1,241 1,651 1,566
Amortization (5,698) (2,829) (2,646)
------------ ------------ ------------
Ending balance $ 12,784 $ 16,550 $ 17,151
============ ============ ============
<PAGE>
The following table presents the expected amortization, net of
interest accrued, of these deferred acquisition costs over the
next five years. The amortization may be adjusted based on
periodic evaluation of the expected gross profits on the
reinsured policies.

1999 $905
2000 $785
2001 $747
2002 $712
2003 $700

Separate Accounts: Separate Accounts are established in
conformity with New York State Insurance Law, the Company's
domiciliary state, and are generally not chargeable with
liabilities that arise from any other business of the Company.
Separate Accounts assets may be subject to general claims of
the Company only to the extent the value of such assets exceeds
Separate Accounts liabilities.

Net investment income and net realized and unrealized gains
(losses) attributable to Separate Accounts assets accrue
directly to the policyholder and are not reported as revenue in
the Company's Statement of Earnings.

Assets and liabilities of Separate Accounts, representing net
deposits and accumulated net investment earnings less fees,
held primarily for the benefit of policyholders, are shown as
separate captions in the balance sheets.

Policyholders' Account Balances: Liabilities for the Company's
universal life type contracts, including its life insurance and
annuity products, are equal to the full accumulation value of
such contracts as of the valuation date plus deficiency
reserves for certain products. Interest-crediting rates for the
Company's fixed-rate products are as follows:

Interest-sensitive life products 4.00% - 5.00%
Interest-sensitive deferred annuities 3.70% - 8.23%
Immediate annuities 3.00% - 10.00%

These rates may be changed at the option of the Company,
subject to minimum guarantees, after initial guaranteed rates
expire.

Claims and Claims Settlement Expenses: For life insurance
products, the liability equals the death benefit for claims
that have been reported to the Company and an estimate based
upon prior experience for unreported claims. For annuity
products, the liability equals the guaranteed minimum death
benefit reserve.

Income Taxes: The results of operations of the Company are
included in the consolidated Federal income tax return of
Merrill Lynch & Co. The Company has entered into a tax-sharing
agreement with Merrill Lynch & Co. whereby the Company will
calculate its current tax provision based on its operations.
Under the agreement, the Company periodically remits to Merrill
Lynch & Co. its current federal tax liability.
<PAGE>
The Company uses the asset and liability method in providing
income taxes on all transactions that have been recognized in
the financial statements. The asset and liability method
requires that deferred taxes be adjusted to reflect the tax
rates at which future taxable amounts will be settled or
realized. The effects of tax rate changes on future deferred
tax liabilities and deferred tax assets, as well as other
changes in income tax laws, are recognized in net earnings in
the period such changes are enacted. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amounts expected to be realized.

Insurance companies are generally subject to taxes on premiums
and in substantially all states are exempt from state income
taxes.

Accounting Pronouncements: During 1998, the Company adopted
SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information". This pronouncement requires a Company to
present disaggregated information based on the internal
segments used in managing its business. Adoption did not impact
the Company's financial position or results of operations, but
it did affect the presentation of the Company's disclosures
(See note 9).

In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and for Hedging Activities". This
pronouncement will be effective for annual periods beginning
after June 15, 1999. Adoption of this pronouncement is not
expected to have a material impact on the Company's financial
position or results of operations.

NOTE 2. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments are carried at fair value or amounts that
approximate fair value. The carrying value of financial
instruments as of December 31 were:

1998 1997
------------ ------------
Assets:
Fixed maturity securities (1) $ 200,681 $ 255,958
Equity securities (1) 13,718 5,029
Policy loans on insurance contracts (2) 88,083 88,163
Cash and cash equivalents (3) 18,707 10,063
Separate Accounts assets (4) 887,170 739,712
------------ ------------
Total financial instruments $ 1,208,359 $ 1,098,925
============ ============

(1) For publicly traded securities, the estimated fair value
is determined using quoted market prices. For securities
without a readily ascertainable market value, the Company
has determined an estimated fair value using a discounted
cash flow model, including provision for credit risk,
based upon the assumption that such securities will be
held to maturity. Such estimated fair values do not
necessarily represent the values for which these
securities could have been sold at the dates of the
balance sheets. At December 31, 1998 and 1997, securities
without a readily ascertainable market value, having an
amortized cost of $33,427 and $47,064, had an estimated
fair value of $33,879 and $48,188, respectively.
<PAGE>
(2) The Company estimates the fair value of policy loans as
equal to the book value of the loans. Policy loans are
fully collateralized by the account value of the
associated insurance contracts, and the spread between the
policy loan interest rate and the interest rate credited
to the account value held as collateral is fixed.

(3) The estimated fair value of cash and cash equivalents
approximates the carrying value.

(4) Assets held in Separate Accounts are carried at quoted
market values.

NOTE 3: INVESTMENTS

The amortized cost and estimated fair value of investments in
fixed maturity and equity securities as of December 31 were:
<TABLE>
<CAPTION>

1998
------------------------------------------------------------------
Cost / Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Fixed maturity securities:
Corporate debt securities $ 159,421 $ 3,404 $ 1,224 $ 161,601
Mortgage-backed securities 13,258 443 54 13,646
U.S. government and agencies 22,912 869 48 23,734
Foreign governments 1,997 - 297 1,700
------------ ------------ ------------ ------------
Total fixed maturity securities $ 197,588 $ 4,716 $ 1,623 $ 200,681
============ ============ ============ ============
Equity securities:
Non-redeemable preferred stocks $ 13,361 $ 58 $ 257 $ 13,162
Common stocks 1,323 - 767 556
------------ ------------ ------------ ------------
Total equity securities $ 14,684 $ 58 $ 1,024 $ 13,718
============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1997
------------------------------------------------------------------
Cost / Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Fixed maturity securities:
Corporate debt securities $ 198,266 $ 4,595 $ 777 $ 202,084
Mortgage-backed securities 34,726 1,135 5 35,856
U.S. government and agencies 13,593 268 11 13,850
Municipals 2,090 90 - 2,180
Foreign governments 2,020 - 32 1,988
------------ ------------ ------------ ------------
Total fixed maturity securities $ 250,695 $ 6,088 $ 825 $ 255,958
============ ============ ============ ============
Equity securities:
Non-redeemable preferred stocks $ 4,507 $ - $ 34 $ 4,473
Common stocks 1,323 - 767 556
------------ ------------ ------------ ------------
Total equity securities $ 5,830 $ - $ 801 $ 5,029
============ ============ ============ ============
</TABLE>

The amortized cost and estimated fair value of fixed maturity
securities at December 31, 1998 by contractual maturity were:

Estimated
Amortized Fair
Cost Value
----------- -----------
Fixed maturity securities:
Due in one year or less $ 30,410 $ 29,997
Due after one year through five years 79,961 81,584
Due after five years through ten years 47,930 48,689
Due after ten years 26,029 26,765
----------- -----------
184,330 187,035
Mortgage-backed securities 13,258 13,646
----------- -----------
Total fixed maturity securities $ 197,588 $ 200,681
=========== ===========

Fixed maturity securities not due at a single maturity date
have been included in the preceding table in the year of final
maturity. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penelties.
<PAGE>

The amortized cost and estimated fair value of fixed maturity
securities at December 31, 1998 by rating agency equivalent were:

Estimated
Amortized Fair
Cost Value
----------- -----------

AAA $ 53,959 $ 55,431
AA 5,484 5,515
A 53,720 54,593
BBB 74,577 76,069
Non-investment grade 9,848 9,073
----------- -----------
Total fixed maturity securities $ 197,588 $ 200,681
=========== ===========

The Company has recorded certain adjustments to deferred policy
acquisition costs and policyholders' account balances in
conjunction with investments classified as available-for-sale.
The Company adjusts those assets and liabilities as if the
unrealized investment gains or losses from available-for-sale
investments had actually been realized, with corresponding
credits or charges reported in stockholder's equity as a
component of accumulated other comprehensive loss, net of
taxes. The following reconciles net unrealized investment gains
(losses) on available-for-sale investments as of December 31:

1998 1997
----------- -----------
Assets:
Fixed maturity securities $ 3,093 $ 5,263
Equity securities (966) (801)
----------- -----------
2,127 4,462
----------- -----------
Liabilities:
Policyholders' account balances 3,615 5,032
Federal income taxes - deferred (521) (200)
----------- -----------
3,094 4,832
----------- -----------
Stockholder's equity:
Accumulated other comprehensive loss $ (967) $ (370)
=========== ===========
<PAGE>
Proceeds and gross realized investment gains and losses from
the sale of available-for-sale securities for the years ended
December 31 were:

1998 1997 1996
----------- ----------- -----------
Proceeds $ 102,967 $ 88,882 $ 155,645
Gross realized investment gains 2,096 4,077 2,677
Gross realized investment losses 4,094 2,130 508

The company owned investment securities of $1,104 and $1,076
that were deposited with insurance regulatory authorities at
December 31, 1998 and 1997, respectively.

Net investment income arose from the following sources for the
years ended December 31:

1998 1997 1996
----------- ----------- -----------

Fixed maturity securities $ 16,244 $ 19,815 $ 22,153
Equity securities 734 761 183
Mortgage loans - 81 388
Policy loans on insurance contracts 4,316 4,333 4,133
Cash and cash equivalents 761 1,293 1,559
Other 29 65 -
----------- ----------- -----------
Gross investment income 22,084 26,348 28,416
Less investment expenses (535) (883) (896)
----------- ----------- -----------
Net investment income $ 21,549 $ 25,465 $ 27,520
=========== =========== ===========

Net realized investment gains (losses), including changes in
valuation allowances, for the years ended December 31:

1998 1997 1996
----------- ----------- -----------
Fixed maturity securities $ (1,944) $ (1,268) $ 657
Equity securities (54) 3,215 1,512
----------- ----------- -----------
Net realized investment gains (losses) $ (1,998) $ 1,947 $ 2,169
=========== =========== ===========

<PAGE>
NOTE 4: FEDERAL INCOME TAXES

The following is a reconciliation of the provision for income
taxes based on earnings before federal income taxes, computed
using the Federal statutory tax rate, with the provision for
income taxes for the years ended December 31:

1998 1997 1996
----------- ----------- -----------
Provision for income taxes computed at
Federal statutory rate $ 2,325 $ 5,133 $ 4,833
State corporate income taxes - - (10)
Decrease in income taxes resulting from:
Dividend received deduction (300) (160) (235)
Foreign tax credit (153) - -
Other - - 2
----------- ----------- -----------
Federal income tax provision $ 1,872 $ 4,973 $ 4,590
=========== =========== ===========

The Federal statutory rate for each of the three years in the
period ended December 31, 1998 was 35%.

The Company provides for deferred income taxes resulting from
temporary differences that arise from recording certain
transactions in different years for income tax reporting
purposes than for financial reporting purposes. The sources of
these differences and the tax effect of each are as follows:
<TABLE>
<CAPTION>

1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Deferred policy acquisition costs $ (158) $ 315 $ (259)
Policyholders' account balances (659) (140) 4,053
Liability for guaranty fund assessments - (50) 50
Investment adjustments (629) 1,943 642
Other (19) - 2
----------- ----------- -----------
Deferred Federal income tax provision (benefit) $ (1,465) $ 2,068 $ 4,488
=========== =========== ===========
</TABLE>
<PAGE>

Deferred tax assets and liabilities as of December 31 are
determined as follows:

1998 1997
----------- -----------
Deferred tax assets:
Policyholders' account balances $ 5,023 $ 4,364
Investment adjustments 625 (4)
Net unrealized investment loss 521 200
Other 19 -
----------- -----------
Total deferred tax assets 6,188 4,560
----------- -----------

Deferred tax liabilities:
Deferred policy acquisition costs 6,307 6,465
----------- -----------
Net deferred tax liability $ 119 $ 1,905
=========== ===========

The Company anticipates that all deferred tax assets will be
realized, therefore no valuation allowance has been provided.

NOTE 5: REINSURANCE

In the normal course of business, the Company seeks to limit
its exposure to loss on any single insured life and to recover
a portion of benefits paid by ceding reinsurance to other
insurance enterprises or reinsurers under indemnity reinsurance
agreements, primarily excess coverage and coinsurance
agreements. The maximum amount of mortality risk retained by
the Company is approximately $500 on a single life.

Indemnity reinsurance agreements do not relieve the Company
from its obligations to policyholders. Failure of reinsurers to
honor their obligations could result in losses to the Company.
The Company regularly evaluates the financial condition of its
reinsurers so as to minimize its exposure to significant losses
from reinsurer insolvencies. The Company holds collateral under
reinsurance agreements in the form of letters of credit and
funds withheld totaling $154 that can be drawn upon for
delinquent reinsurance recoverables.
<PAGE>

As of December 31, 1998, the Company had the following life
insurance in-force:
<TABLE>
<CAPTION>

Percentage
Ceded to Assumed of amount
Gross other from other Net assumed to
amount companies companies amount net
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Life insurance
in force $ 900,964 $ 159,582 $ 1,116,951 $ 1,858,333 60%
</TABLE>

NOTE 6: RELATED PARTY TRANSACTIONS

The Company and MLIG are parties to a service agreement whereby
MLIG has agreed to provide certain accounting, data processing,
legal, actuarial, management, advertising and other services to
the Company. Expenses incurred by MLIG, in relation to this
service agreement, are reimbursed by the Company on an
allocated cost basis. Charges billed to the Company by MLIG
pursuant to the agreement were $4,767, $4,305 and $4,258 for
1998, 1997 and 1996 respectively. The Company is allocated
interest expense on its accounts payable to MLIG that
approximates the daily Federal funds rate. Total intercompany
interest paid was $69, $64 and $74 for 1998, 1997 and 1996,
respectively.

The Company and Merrill Lynch Asset Management, LP ("MLAM") are
parties to a service agreement whereby MLAM has agreed to
provide certain invested asset management services to the
Company. The Company pays a fee to MLAM for these services
through the MLIG service agreement. Charges attributable to
this agreement and allocated to the Company by MLIG were $157,
$159 and $186 for 1998, 1997 and 1996, respectively.

The Company has a general agency agreement with Merrill Lynch
Life Agency Inc. ("MLLA") whereby registered representatives of
MLPF&S, who are the Company's licensed insurance agents,
solicit applications for contracts to be issued by the Company.
MLLA is paid commissions for the contracts sold by such agents.
Commissions paid to MLLA were $3,798, $4,130 and $1,334 for
1998, 1997 and 1996, respectively. Substantially all of these
commissions were capitalized as deferred policy acquisitions
costs and are being amortized in accordance with the policy
discussed in Note 1.
<PAGE>

In connection with the acquisition of a block of variable life
insurance business from Monarch Life Insurance Company
("Monarch Life"), the Company borrowed funds from Merrill Lynch
& Co. to partially finance the transaction. As of December 31,
1998 and 1997, the outstanding loan balance was $434 and
$1,156, respectively. Repayments made on this loan during 1998
and 1997 were $722 and $1,919, respectively. There were no
repayments made during 1996. Loan interest was calculated at
LIBOR plus 150 basis points. Intercompany interest paid during
1998, 1997 and 1996 was $79, $359 and $366, respectively.

Affiliated agreements generally contain reciprocal indemnity
provisions pertaining to each party's representations and
contractual obligations thereunder.

NOTE 7: STOCKHOLDER'S EQUITY AND STATUTORY REGULATIONS

Notice of intention to declare a dividend must be filed with
the New York Superintendent of Insurance who may disallow the
payment. During 1998, no dividend request was filed. During
1997 and 1996, the Company paid dividends of $15,000 and
$35,000, respectively, to MLIG. Statutory capital and surplus
at December 31, 1998 and 1997, was $55,851 and $51,080,
respectively.

Applicable insurance department regulations require that the
Company report its accounts in accordance with statutory
accounting practices. Statutory accounting practices primarily
differ from the principals utilized in these financial
statements by charging policy acquisition costs to expense as
incurred, establishing future policy benefit reserves using
different actuarial assumptions, not providing for deferred
income taxes and valuing securities on a different basis. The
Company's statutory net income for 1998, 1997 and 1996 was
$5,405, $9,888 and $12,884, respectively.

The National Association of Insurance Commissioners ("NAIC")
utilizes the Risk Based Capital ("RBC") adequacy monitoring
system. The RBC calculates the amount of adjusted capital that
a life insurance company should have based upon that company's
risk profile. As of December 31, 1998, and 1997, based on the
RBC formula, the Company's total adjusted capital level was
761% and 649%, respectively, of the minimum amount of capital
required to avoid regulatory action.

In March 1998, the NAIC adopted the Codification of Statutory
Accounting Principles ("Codification"). The Codification,
which is intended to standardize regulatory accounting and
reporting for the insurance industry, is proposed to be
effective January 1, 2001. However, statutory accounting
principles will continue to be established by individual state
laws and permitted practices and it is uncertain when, or if,
the state of New York will require adoption of Codification for
the preparation of statutory financial statements.
Codification is not expected to have a material impact on the
Company's capital requirements or statutory financial
statements.
<PAGE>
NOTE 8: COMMITMENTS AND CONTINGENCIES

State insurance laws generally require that all life insurers
who are licensed to transact business within a state become
members of the state's life insurance guaranty association.
These associations have been established for the protection of
policyholders from loss (within specified limits) as a result
of the insolvency of an insurer. At the time an insolvency
occurs, the guaranty association assesses the remaining members
of the association an amount sufficient to satisfy the
insolvent insurer's policyholder obligations (within specified
limits). Based upon the public information available at this
time, management believes the Company has no material financial
obligations to state guaranty associations.

In the normal course of business, the Company is subject to
various claims and assessments. Management believes the
settlement of these matters would not have a material effect on
the financial position or results of operations of the Company.

NOTE 9. SEGMENT INFORMATION

In reporting to management, the Company's operating results are
categorized into two business segments: Life Insurance and
Annuities. The Company's Life Insurance segment consists of
variable life insurance products and interest-sensitive life
insurance products. The Company's Annuity segment consists of
variable annuities and interest-sensitive annuities.

The Company's organization is structured in accordance with its
two business segments. Each segment has its own administrative
service center that provides product support to the Company and
customer service support to the Company's policyholders.
Additionally, the marketing and sales management functions,
within MLIG, are organized according to these two business
segments.

The accounting policies of the business segments are the same
as those described in the summary of significant accounting
policies. All revenue and expense transactions are recorded at
the product level and accumulated at the business segment level
for review by management.

The "Other" category, presented in the following segment
financial information, represents assets and related earnings
that do not support policyholder liabilities.
<PAGE>
The following table summarizes each business segment's
contribution to the consolidated amounts:
<TABLE>
<CAPTION>

Life
1998 Insurance Annuities Other Total
- -------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net interest spread (a) $ 789 $ 3,876 $ 3,052 $ 7,717
Other revenues 8,472 5,377 (363) 13,486
----------- ----------- ----------- -----------
Net revenues 9,261 9,253 2,689 21,203
----------- ----------- ----------- -----------

Policy benefits 1,570 60 - 1,630
Reinsurance premium ceded 1,705 - - 1,705
DAC amortization 3,571 2,188 - 5,759
Other non-interest expenses 1,973 3,494 - 5,467
----------- ----------- ----------- -----------
Total non-interest expenses 8,819 5,742 - 14,561
----------- ----------- ----------- -----------
Net earnings before Federal income
tax provision (benefit) 442 3,511 2,689 6,642
Income tax expense (benefit) (7) 938 941 1,872
----------- ----------- ----------- -----------
Net earnings $ 449 $ 2,573 $ 1,748 $ 4,770
=========== =========== =========== ===========
Balance Sheet Information:

Total assets $ 481,305 $ 720,478 $ 46,182 $1,247,965
Deferred policy acquisition costs $ 15,325 $ 14,417 $ - $ 29,742
Policy liabilities and accruals $ 103,926 $ 168,306 $ - $ 272,232
Other policyholder funds $ 1,319 $ - $ 464 $ 1,783
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

Life
1997 Insurance Annuities Other Total
- -------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net interest spread (a) $ 1,399 $ 6,060 $ 3,474 $ 10,933
Other revenues 7,759 7,172 80 15,011
----------- ----------- ----------- -----------
Net revenues 9,158 13,232 3,554 25,944
----------- ----------- ----------- -----------

Policy benefits 781 - - 781
Reinsurance premium ceded 1,584 - - 1,584
DAC amortization 1,992 2,127 - 4,119
Other non-interest expenses 1,747 3,048 - 4,795
----------- ----------- ----------- -----------
Total non-interest expenses 6,104 5,175 - 11,279
----------- ----------- ----------- -----------
Net earnings before Federal income
tax provision 3,054 8,057 3,554 14,665
Income tax expense 987 2,742 1,244 4,973
----------- ----------- ----------- -----------
Net earnings $ 2,067 $ 5,315 $ 2,310 $ 9,692
=========== =========== =========== ===========
Balance Sheet Information:

Total assets $ 456,240 $ 635,673 $ 46,668 $1,138,581
Deferred policy acquisition costs $ 17,506 $ 12,900 $ - $ 30,406
Policy liabilities and accruals $ 103,677 $ 205,663 $ - $ 309,340
Other policyholder funds $ 974 $ - $ 967 $ 1,941
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

Life
1996 Insurance Annuities Other Total
- -------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net interest spread (a) $ 1,400 $ 5,721 $ 3,813 $ 10,934
Other revenues 7,680 6,431 17 14,128
----------- ----------- ----------- ------------
Net revenues 9,080 12,152 3,830 25,062
----------- ----------- ----------- ------------

Policy benefits 1,311 - - 1,311
Reinsurance premium ceded 1,262 - - 1,262
DAC amortization 1,736 2,048 - 3,784
Other non-interest expenses 1,755 3,141 - 4,896
----------- ----------- ----------- ------------
Total non-interest expenses 6,064 5,189 - 11,253
----------- ----------- ----------- ------------
Net earnings before Federal income
tax provision 3,016 6,963 3,830 13,809
Income tax expense 923 2,335 1,332 4,590
----------- ----------- ----------- ------------
Net earnings $ 2,093 $ 4,628 $ 2,498 $ 9,219
=========== =========== =========== ============
Balance Sheet Information:

Total assets $ 429,330 $ 534,376 $ 44,361 $ 1,008,067
Deferred policy acquisition costs $ 18,213 $ 11,059 $ - $ 29,272
Policy liabilities and accruals $ 101,689 $ 219,450 $ - $ 321,139
Other policyholder funds $ 994 $ - $ 166 $ 1,160
</TABLE>

(a) Management considers investment income net of interest
credited to policyholders' account balances in evaluating
results.

The table below summarizes the Company's net revenues by
product for 1998, 1997, and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- ----------
<S> <C> <C> <C>
Life Insurance
Variable Life $ 9,045 $ 8,828 $ 8,790
Interest-sensitive whole life 216 330 290
----------- ----------- ----------
Total Life Insurance 9,261 9,158 9,080
----------- ----------- ----------
Annuities
Variable annuities 6,240 4,673 3,602
Interest-sensitive annuities 3,013 8,559 8,550
----------- ----------- ----------
Total Annuities 9,253 13,232 12,152
----------- ----------- ----------
Other 2,689 3,554 3,830
----------- ----------- ----------
Total $ 21,203 $ 25,944 $ 25,062
=========== =========== ==========
</TABLE>

<PAGE> 41

APPENDIX

The tables below are designed to show the impact of the Market Value Adjustment
and withdrawal charge on a single premium of $10,000. Table 1 assumes the
premium is allocated to a subaccount with a 10 year Guarantee Period with a
guaranteed rate of interest of 5.3%. Table 2 assumes the premium is allocated to
a subaccount with a 5 year Guarantee Period with a guaranteed rate of 4.8%. The
Market Value Adjustments are based on interpolated current interest rates
(defined in the Contract as "B") of 3.3%, 5.3% and 7.3% in the 10 year guarantee
table (see Table 1 below) and 3.0%, 4.8% and 6.8% in the 5 year guarantee table
(see Table 2 below). The net subaccount values shown in the tables are the
maximum amount available as cash withdrawals. Although the withdrawal charge is
in each case a fixed percentage of the amount withdrawn, the amount of the
charge for withdrawals made at the end of each year varies as a result of the
Market Value Adjustment. Values shown in the tables have been rounded to the
nearest dollar, and therefore the figures under the net subaccount value columns
may not precisely equal amounts set forth in the subaccount value, plus the
Market Value Adjustment, less the withdrawal charge columns.

TABLE 1

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
MARKET VALUE ADJUSTMENTS, WITHDRAWAL CHARGES AND NET SUBACCOUNT VALUE BASED ON
INTERPOLATED CURRENT INTEREST RATES OF:
---------------------------------------------------------------------------------------------
3.30% 5.30% 7.30%
- -----------------------------------------------------------------------------------------------------------------------------------
MARKET NET MARKET NET MARKET NET
END OF SUB- VALUE WITH- SUB- VALUE WITH- SUB- VALUE WITH- SUB-
CONTRACT ACCOUNT ADJUST- DRAWAL ACCOUNT ADJUST- DRAWAL ACCOUNT ADJUST- DRAWAL ACCOUNT
YEAR VALUE MENT CHARGE VALUE MENT CHARGE VALUE MENT CHARGE VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,530 1,923 321 12,132 -0- 272 10,258 (1,604) 230 8,695
2 11,088 1,783 332 12,539 -0- 286 10,802 (1,515) 247 9,326
3 11,676 1,628 343 12,960 -0- 301 11,374 (1,408) 265 10,003
4 12,295 1,456 355 13,395 -0- 317 11,977 (1,282) 284 10,728
5 12,946 1,266 367 13,845 -0- 334 12,612 (1,135) 305 11,506
6 13,632 1,057 379 14,310 -0- 352 13,280 (965) 327 12,341
7 14,355 827 392 14,790 -0- 371 13,984 (769) 351 13,236
8 15,116 575 405 15,286 -0- 390 14,725 (544) 376 14,195
9 15,917 302 318 15,901 -0- 312 15,605 (291) 306 15,319
10 16,760 -0- -0- 16,760 -0- -0- 16,760 -0- -0- 16,760
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

TABLE 2

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
MARKET VALUE ADJUSTMENTS, WITHDRAWAL CHARGES AND NET SUBACCOUNT VALUE BASED ON
INTERPOLATED CURRENT INTEREST RATES OF:
---------------------------------------------------------------------------------------------
3.00% 4.80% 6.80%
- -----------------------------------------------------------------------------------------------------------------------------------
MARKET NET MARKET NET MARKET NET
END OF SUB- VALUE WITH- SUB- VALUE WITH- SUB- VALUE WITH- SUB-
CONTRACT ACCOUNT ADJUST- DRAWAL ACCOUNT ADJUST- DRAWAL ACCOUNT ADJUST- DRAWAL ACCOUNT
YEAR VALUE MENT CHARGE VALUE MENT CHARGE VALUE MENT CHARGE VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,480 733 263 10,950 -0- 246 10,234 (747) 228 9,505
2 10,983 571 271 11,284 -0- 257 10,726 (592) 244 10,147
3 11,510 396 279 11,627 -0- 270 11,240 (417) 260 10,833
4 12,063 206 288 11,981 -0- 283 11,780 (221) 278 11,564
5 12,642 -0- -0- 12,642 -0- -0- 12,642 -0- -0- 12,642
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

A-1

<PAGE> 42

The formulas used in determining the amounts shown in the above tables are as
follows:

<TABLE>
<S> <C>
Subaccount Value
-----------------------------------------------------------------------
n/365
1 + Current Interest Rate
(1) Net Subaccount Value = Withdrawal Factor + ( ------------------------------ )
1 + Guaranteed Interest Rate
</TABLE>

Where "n" is the number of days remaining in the Guaranteed Period of the
subaccount, but not less than 365.

(2) Withdrawal Charge = Net Subaccount Value X Withdrawal Factor

<TABLE>
<S> <C>
n/365
1 + Current Interest Rate
(3) Market Value Adjustment = Net Subaccount Value X [ 1 - ( ----------------------------- ) ]
1 + Guaranteed Interest Rate
</TABLE>

Where "n" is the number of days remaining in the Guarantee Period of the
subaccount, but not less than 365.

(4) Withdrawal Factor is the Lessor of:

(a) Guaranteed Interest Rate
------------------------
2
or

(b) 10% in Contract Year 1,
9% in Contract Year 2,
8% in Contract Year 3,
7% in Contract Year 4,
6% in Contract Year 5,
5% in Contract Year 6,
4% in Contract Year 7,
3% in Contract Year 8,
2% in Contract Year 9,
1% in Contract Year 10,
0% in Contract Year 11 and later

A-2

<PAGE> 43

REPORTS TO CONTRACT OWNERS. At least once each year prior to the annuity
date, we send you a report outlining your Contract Value, Subaccount
Values, Guarantee Periods, Withdrawal Charges and MVAs, if any, applied
during the year. The report will not include financial statements.

PUBLIC INFORMATION. We are required to file certain reports pursuant to
Section 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). We file our Exchange Act documents and reports,
including our annual and quarterly reports on Form 10-K and Form 10-Q,
electronically pursuant to EDGAR under CIK No. 0000862923.

The Securities and Exchange Commission ("SEC") maintains a web site that
contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC. The
address of the site is http://www.sec.gov.

You can also review and copy any materials filed with the SEC at its
Public Reference Room at 450 Fifth Street, N.W., Washington D.C., 20549.
You may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330.

A-3

<PAGE> 44

PART II

INFORMATION NOT REQUIRED IN A PROSPECTUS
<PAGE> 45

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Not applicable.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The following provisions regarding the Indemnification of Directors and Officers
of the Registrant are applicable:

AMENDED AND RESTATED BY-LAWS OF ML LIFE INSURANCE COMPANY OF NEW YORK, ARTICLE
VII

Section 7.1--Indemnification of Directors, Officers, Employees and Incorporators

To the extent permitted by New York law, directors, officers, employees and
incorporators (i) shall be indemnified by the Company for liabilities and
expenses incurred by such person by reason of the fact that he, his testator, or
intestate serves or served in such capacity and (ii) may be indemnified by the
Company for liabilities and expenses incurred by such person, by reason of the
fact that he, his testator, or intestate serves or served as a director,
officer, employee or incorporator of another corporation at the request of the
Company.

BY-LAWS OF MERRILL LYNCH & CO., INC.,

Section 2--Indemnification by Corporation

Any persons serving as an officer, director or trustee of a corporation, trust
or other enterprise, including the Registrant, at the request of Merrill Lynch
are entitled to indemnification from Merrill Lynch, to the fullest extent
authorized or permitted by law, for liabilities with respect to actions taken or
omitted by such persons in any capacity in which such persons serve Merrill
Lynch or such other corporation, trust or other enterprise. Any action initiated
by any such person for which indemnification is provided shall be approved by
the Board of Directors of Merrill Lynch prior to such initiation.

DIRECTORS' AND OFFICERS' INSURANCE

Merrill Lynch has purchased from Corporate Officers' and Directors' Assurance
Company directors' and officers' liability insurance policies which cover, in
addition to the indemnification described above, liabilities for which
indemnification is not provided under the By-Laws. The Company will pay an
allocable portion of the insurance premium paid by Merrill Lynch with respect to
such insurance policy.

NEW YORK BUSINESS CORPORATION LAW

In addition, Sections 722, 723 and 724 of the New York Business Corporation Law
generally provide that a corporation has the power (and in some instances the
obligation) to indemnify a director or officer of the corporation, or a person
serving at the request of the corporation as a director or officer of another
corporation or other enterprise against any judgments, amounts paid in
settlement, and reasonably incurred expenses in a civil or criminal action or
proceeding if the director or officer acted in good faith in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation (or, in the case of a criminal action or proceeding, if he or she in
addition had no reasonable cause to believe that his or her conduct was
unlawful).

SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION

Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled

II-1
<PAGE> 46

by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Not Applicable.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits.

<TABLE>
<S> <C>
1 Underwriting Agreement Between ML Life Insurance Company of
New York and Merrill Lynch Pierce, Fenner & Smith
Incorporated (Incorporated by Reference to Registrant's Form
S-1 Registration No. 33-34562, Filed April 26, 1990.)
3(a) Amended Charter of ML Life Insurance Company of New York
(Incorporated by Reference to ML of New York Variable
Annuity Separate Account A's Post-Effective Amendment No. 10
to Form N-4 Registration No. 33-43654, Filed December 9,
1996.)
3(b) By-Laws of ML Life Insurance Company of New York
(Incorporated by Reference to ML of New York Variable
Annuity Separate Account A's Post-Effective Amendment No. 10
to Form N-4 Registration No. 33-43654, Filed December 9,
1996.)
4(a)(1) Modified Guaranteed Annuity Contract (Incorporated by
Reference to Registrant's Pre-Effective Amendment No. 1 to
Form S-1 Registration No. 33-34562, Filed October 16, 1990.)
4(a)(2) Modified Guaranteed Annuity Contract MLNY-AY-991/94.
(Incorporated by Reference to Registrant's Post-Effective
Amendment No. 3 to Form S-1 Registration No. 33-60288, Filed
December 7, 1994.)
4(b) Modified Guaranteed Annuity Contract Application MLNY-AY-950
(Incorporated by Reference to Registrant's Pre-Effective
Amendment No. 1 to Form S-1 Registration No. 33-34562, Filed
October 16, 1990.)
4(c)(1) Qualified Retirement Plan Endorsement (Incorporated by
Reference to Registrant's Pre-Effective Amendment No. 1 to
Form S-1 Registration No. 33-34562, Filed October 16, 1990.)
4(c)(2) Qualified Retirement Plan Endorsement MLNY-AYQ-991/94.
(Incorporated by Reference to Registrant's Post-Effective
Amendment No. 3 to Form S-1 Registration No. 33-60288, Filed
December 7, 1994.)
4(d)(1) IRA Endorsement MLNY-AYIRA-991 (Incorporated by Reference to
Registrant's Pre-Effective Amendment No. 1 to Form S-1
Registration No. 33-34562, Filed October 16, 1990.)
4(d)(2) IRA Endorsement, MLNY009 (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 1 to Form S-1
Registration No. 33-60288, Filed March 31, 1994.)
4(e) Company Name Change Endorsement (Incorporated by Reference
to Registrant's Post-Effective Amendment No. 3 to Form S-1
Registration No. 33-34562, Filed March 30, 1992.)
5 Opinion of Barry G. Skolnick, Esq. and Consent to its use as
to the legality of the securities being registered
10(a) General Agency Agreement Between Royal Tandem Life Insurance
Company and Merrill Lynch Life Agency Inc. (Incorporated by
Reference to Registrant's Pre-Effective Amendment No. 1 to
Form S-1 Registration No. 33-34562, Filed October 16, 1990.)
10(b) Investment Management Agreement By and Between Royal Tandem
Life Insurance Company and Equitable Capital Management
Corporation (Incorporated by Reference to Registrant's
Pre-Effective Amendment No. 1 to Form S-1 Registration No.
33-34562, Filed October 16, 1990.)
10(c) Shareholders' Agreement By and Among The Equitable Life
Assurance Society of the United States and Merrill Lynch &
Co., Inc. and Tandem Financial Group, Inc. (Incorporated by
Reference to Registrant's Pre-Effective Amendment No. 1 to
Form S-1 Registration No. 33-34562, Filed October 16, 1990.)
</TABLE>

II-2
<PAGE> 47

<TABLE>
<S> <C>
10(d) Service Agreement By and Between Royal Tandem Life Insurance
Company and Tandem Financial Group, Inc. (Incorporated by
Reference to Registrant's Pre-Effective Amendment No. 1 to
Form S-1 Registration No. 33-34562, Filed October 16, 1990.)
10(e) Service Agreement By and Between Tandem Financial Group,
Inc. and Merrill Lynch & Co., Inc. (Incorporated by
Reference to Registrant's Pre-Effective Amendment No. 1 to
Form S-1 Registration No. 33-34562, Filed October 16, 1990.)
10(f) Form of Investment Management Agreement By and Between Royal
Tandem Life Insurance Company and Merrill Lynch Asset
Management, Inc. (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 1 to Form S-1 Registration No.
33-34562, Filed March 7, 1991.)
10(g) Assumption Reinsurance Agreement By and Among Merrill Lynch
Life Insurance Company and Tandem Insurance Group, Inc. and
Royal Tandem Life Insurance Company and Family Life
Insurance Company (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 3 to Form S-1 Registration No.
33-34562, Filed March 30, 1992.)
10(h) Indemnity Agreement Between ML Life Insurance Company of New
York and Merrill Lynch Life Agency Inc. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 3 to
Form S-1 Registration No. 33-34562, Filed March 30, 1992.)
10(i) Amended General Agency Agreement Between ML Life Insurance
Company of New York and Merrill Lynch Life Agency Inc.
(Incorporated by Reference to Registrant's Post-Effective
Amendment No. 3 to Form S-1 Registration No. 33-34562, Filed
March 30, 1992.)
10(j) Amended Management Agreement Between ML Life Insurance
Company of New York and Merrill Lynch Asset Management, Inc.
(Incorporated by Reference to Registrant's Form S-1, Filed
March 30, 1993.)
10(k) Mortgage Loan Servicing Agreement Between ML Life Insurance
Company of New York and Merrill Lynch & Co., Inc.
(Incorporated by Reference to Registrant's Post-Effective
Amendment No. 4 to Form S-1 Registration No. 33-60288, Filed
March 29, 1995.)
23(a) Written Consent of Sutherland Asbill & Brennan LLP
23(b) Written Consent of Deloitte & Touche LLP, independent
auditors
24(a) Power of attorney from Frederick J.C. Butler (Incorporated
by Reference to Registrant's Post-Effective Amendment No. 1
to Form S-1 Registration No. 33-60288, Filed March 31,
1994.)
24(b) Power of attorney from Michael P. Cogswell (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 1 to
Form S-1 Registration No. 33-60288, Filed March 31, 1994.)
24(c) Power of attorney from Sandra K. Cox (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 1 to
Form S-1 Registration No. 33-60288, Filed March 31, 1994.)
24(d) Power of attorney from Joseph E. Crowne (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 1 to
Form S-1 Registration No. 33-60288, Filed March 31, 1994.)
24(e) Power of attorney from David M. Dunford (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 1 to
Form S-1 Registration No. 33-60288, Filed March 31, 1994.)
24(f) Power of attorney from Francis X. Ervin, Jr. (Incorporated
by Reference to Registrant's Post-Effective Amendment No. 5
to Form S-1 Registration No. 33-60288, Filed March 26,
1996.)
24(g) Power of attorney from Gail R. Farkas (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 5 to
Form S-1 Registration No. 33-60288, Filed March 26, 1996.)
24(h) Power of attorney from John C.R. Hele (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 1 to
Form S-1 Registration No. 33-60288, Filed March 31, 1994.)
24(i) Power of attorney from Robert L. Israeloff (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 1 to
Form S-1 Registration No. 33-60288, Filed March 31, 1994.)
24(j) Power of attorney from Allen N. Jones (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 6 to
Form S-1 Registration No. 33-60288, Filed March 27, 1997.)
24(k) Power of attorney from Cynthia L. Kahn (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 1 to
Form S-1 Registration No. 33-60288, Filed March 31, 1994.)
24(l) Power of attorney from Robert A. King (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 1 to
Form S-1 Registration No. 33-60288, Filed March 31, 1994.)
</TABLE>

II-3
<PAGE> 48

<TABLE>
<S> <C>
24(m) Power of attorney from Irving M. Pollack (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 1 to
Form S-1 Registration No. 33-60288, Filed March 31, 1994.)
24(n) Power of attorney from Barry G. Skolnick (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 1 to
Form S-1 Registration No. 33-60288, Filed March 31, 1994.)
24(o) Power of attorney from William A. Wilde (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 1 to
Form S-1 Registration No. 33-60288, Filed March 31, 1994.)
24(p) Power of attorney from Anthony J. Vespa (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 1 to
Form S-1 Registration No. 33-60288, Filed March 31, 1994.)
24(q) Power of attorney from Stanley C. Peterson (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 1 to
Form S-1 Registration No. 33-60288, Filed March 31, 1998.)
27 Financial Data Schedule
</TABLE>

(b) Financial Statement Schedules

None.

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;

(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.

(4) That, for purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant
to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

II-4
<PAGE> 49

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Plainsboro, State of New
Jersey, on this 25th day of March, 1999.

<TABLE>
<S> <C>
ATTEST: ML LIFE INSURANCE COMPANY OF NEW YORK
(Registrant)

/s/ EDWARD W. DIFFIN, JR. By: /s/ BARRY G. SKOLNICK
- ----------------------------------------------------- -------------------------------------------------
Edward W. Diffin, Jr. Barry G. Skolnick
Vice President Senior Vice President
</TABLE>

Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities
indicated on this 25th day of March, 1999.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* Chairman of the Board, President, and Chief Executive
- ----------------------------------------------------- Officer
Anthony J. Vespa
* Director, Senior Vice President, Chief Financial
- ----------------------------------------------------- Officer, Chief Actuary, and Treasurer
Joseph E. Crowne, Jr.
* Director, Senior Vice President, and Chief Investment
- ----------------------------------------------------- Officer
David M. Dunford
* Director and Senior Vice President
- -----------------------------------------------------
Gail R. Farkas
* Director, Vice President, and Senior Counsel
- -----------------------------------------------------
Michael P. Cogswell
* Director
- -----------------------------------------------------
Frederick J.C. Butler
* Director
- -----------------------------------------------------
Robert L. Israeloff
* Director
- -----------------------------------------------------
Allen N. Jones
* Director
- -----------------------------------------------------
Cynthia L. Kahn
* Director
- -----------------------------------------------------
Robert A. King
* Director
- -----------------------------------------------------
Stanley C. Peterson
* Director
- -----------------------------------------------------
Irving M. Pollack
In his own capacity as Director, Senior Vice
*By: /s/ BARRY G. SKOLNICK President, and General Counsel and as
------------------------------------------------ Attorney-in-Fact
Barry G. Skolnick
</TABLE>

II-5
<PAGE> 50

EXHIBIT INDEX

(a) Exhibits.

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
------- ----------- ----
<S> <C> <C>
5 Opinion of Barry G. Skolnick, Esq. and Consent to its use as
to the legality of the securities being registered..........
23(a) Written Consent of Sutherland Asbill & Brennan LLP..........
23(b) Written Consent of Deloitte & Touche LLP, independent
auditors....................................................
27 Financial Data Schedule.....................................
</TABLE>

<PAGE> 1

EXHIBIT 5

March 25, 1999

[ML LIFE INSURANCE COMPANY OF NEW YORK LETTERHEAD]

Board of Directors
ML Life Insurance Company
of New York
100 Church Street, 11th Floor
New York, New York 10080-6511

Ladies and Gentlemen:

In my capacity as General Counsel of ML Life Insurance Company of New York
("Company"), I have supervised the preparation of Post-Effective Amendment No. 1
to the registration statement on Form S-1 (File No. 333-48983) for the ASSET I
modified guaranteed annuity contract ("Contract") to be filed by the Company
with the Securities and Exchange Commission under the Securities Act of 1933.

I am of the following opinion:

(1) The Company was organized in accordance with the laws of the State
of New York and is a duly authorized stock life insurance company
under the laws of New York and the laws of those states in which the
Company is admitted to do business;

(2) The Company is authorized to issue the Contracts in those states in
which it is admitted and upon compliance with applicable local law;
and

(3) The Contracts, when issued in accordance with the prospectus
contained in the aforesaid registration statement and upon
compliance with applicable local law, will be legal and binding
obligations of the Company in accordance with their terms.

In arriving at the foregoing opinion, I have made such examination of law and
examined such records and other documents as in my judgment are necessary or
appropriate.

I hereby consent to the filing of this opinion as an exhibit to the aforesaid
registration statement and to the reference to me under the caption "Legal
Matters" in the prospectus contained in said registration statement.

Sincerely,

/s/ Barry G. Skolnick

Barry G. Skolnick
Senior Vice President and
General Counsel

<PAGE> 1

EXHIBIT 23(a)

[SUTHERLAND ASBILL & BRENNAN LLP LETTERHEAD]

CONSENT OF SUTHERLAND ASBILL & BRENNAN LLP

We consent to the reference to our firm under the heading "Legal Matters" in the
prospectus included in Post-Effective Amendment No. 1 to the Registration
Statement on Form S-1 (File No. 333-48983) for certain modified guaranteed
annuity contracts issued by ML Life Insurance Company of New York. In giving
this consent, we do not admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933.

/s/ Sutherland Asbill & Brennan LLP

SUTHERLAND ASBILL & BRENNAN LLP

Washington, D.C.
March 25, 1999

<PAGE> 1

EXHIBIT 23(b)

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Post-Effective Amendment No. 1 to Registration
Statement No. 333-48983 of ML Life Insurance Company of New York on Form S-1 of
our report dated February 22, 1999 appearing in the Prospectus, which is a part
of such Registration Statement, and to the reference to us under the heading
"Experts" in such Prospectus.

/s/ Deloitte & Touche LLP

New York, New York
March 29, 1999

<ARTICLE> 7
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<DEBT-HELD-FOR-SALE> 0
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 200,681
<EQUITIES> 13,718
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 302,482
<CASH> 18,707
<RECOVER-REINSURE> 652
<DEFERRED-ACQUISITION> 29,742
<TOTAL-ASSETS> 1,247,982
<POLICY-LOSSES> 2,986
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 1,783
<POLICY-HOLDER-FUNDS> 269,246
<NOTES-PAYABLE> 0
0
0
<COMMON> 2,200
<OTHER-SE> 79,754
<TOTAL-LIABILITY-AND-EQUITY> 1,247,982
0
<INVESTMENT-INCOME> 21,549
<INVESTMENT-GAINS> (1,998)
<OTHER-INCOME> 15,484
<BENEFITS> 1,630
<UNDERWRITING-AMORTIZATION> 5,759
<UNDERWRITING-OTHER> 4,900
<INCOME-PRETAX> 6,642
<INCOME-TAX> 1,872
<INCOME-CONTINUING> 4,770
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,770
<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>