<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
COMMISSION FILE NUMBERS 33-34562; 33-60288; 333-48983
ML LIFE INSURANCE COMPANY OF NEW YORK
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
NEW YORK 16-1020455
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
</TABLE>
100 CHURCH STREET
NEW YORK, NEW YORK 10080-6511
(Address of Principal Executive Offices)
(800) 333-6524
(Registrant's telephone number including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No __
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
COMMON 220,000
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a)
AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
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PART I Financial Information
Item 1. Financial Statements.
ML LIFE INSURANCE COMPANY OF NEW YORK
(a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
BALANCE SHEETS
(Dollars in thousands) (Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 2000 1999
------- ------------- ------------
<S> <C> <C>
INVESTMENTS:
Fixed maturity securities, at estimated fair value
(amortized cost: 2000 - $151,118; 1999 - $166,016) $ 146,215 $ 160,437
Equity securities, at estimated fair value
(cost: 2000 - $19,512; 1999 - $19,782) 18,387 16,992
Policy loans on insurance contracts 90,774 88,165
------------- ------------
Total Investments 255,376 265,594
CASH AND CASH EQUIVALENTS 39,093 34,195
ACCRUED INVESTMENT INCOME 5,889 4,990
DEFERRED POLICY ACQUISITION COSTS 30,358 29,703
FEDERAL INCOME TAXES - DEFERRED 3,322 3,892
REINSURANCE RECEIVABLES 1,654 153
RECEIVABLES FROM SECURITIES SOLD 3,972 -
OTHER ASSETS 3,801 3,292
SEPARATE ACCOUNTS ASSETS 1,118,137 1,086,875
------------- ------------
TOTAL ASSETS $ 1,461,602 $ 1,428,694
============= ============
See accompanying notes to financial statements. (continued)
</TABLE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
BALANCE SHEETS
(Continued) (Dollars in thousands, except common stock par value and shares)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 30,
LIABILITIES AND STOCKHOLDER'S EQUITY 2000 1999
------------------------------------ ------------- ------------
<S> <C> <C>
LIABILITIES:
POLICYHOLDER LIABILITIES AND ACCRUALS:
Policyholders' account balances $ 242,999 $ 248,016
Claims and claims settlement expenses 4,733 3,762
------------- ------------
Total policyholder liabilities and accruals 247,732 251,778
OTHER POLICYHOLDER FUNDS 1,335 1,195
FEDERAL INCOME TAXES - CURRENT 1,301 1,420
AFFILIATED PAYABLES - NET 459 1,030
OTHER LIABILITIES 2,181 2,414
SEPARATE ACCOUNTS LIABILITIES 1,118,137 1,086,875
------------- ------------
Total Liabilities 1,371,145 1,344,712
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 28,571 21,051
Accumulated other comprehensive loss (6,573) (5,528)
------------- ------------
Total Stockholder's Equity 90,457 83,982
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,461,602 $ 1,428,694
============= ============
See accompanying notes to financial statements.
</TABLE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF EARNINGS
(Dollars in thousands) (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------------
2000 1999
------------ -----------
<S> <C> <C>
REVENUES:
Investment revenue:
Net investment income $ 14,083 $ 14,694
Net realized investment losses (74) (2,805)
Policy charge revenue 15,215 12,594
------------ -----------
Total Revenues 29,224 24,483
------------ -----------
BENEFITS AND EXPENSES:
Interest credited to policyholders' account balances 8,882 9,306
Policy benefits (net of reinsurance recoveries: 2000 - $1,976;
1999 - $458) 1,231 520
Reinsurance premium ceded 1,489 1,358
Amortization of deferred policy acquisition costs 2,746 3,383
Insurance expenses and taxes 3,307 3,036
------------ -----------
Total Benefits and Expenses 17,655 17,603
------------ -----------
Earnings Before Federal Income Tax Provision 11,569 6,880
FEDERAL INCOME TAX PROVISION (BENEFIT):
Current 2,917 3,386
Deferred 1,132 (978)
------------ -----------
Total Federal Income Tax Provision 4,049 2,408
------------ -----------
NET EARNINGS $ 7,520 $ 4,472
============ ===========
See accompanying notes to financial statements.
</TABLE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF EARNINGS
(Dollars in thousands) (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------------
2000 1999
------------ ------------
<S> <C> <C>
REVENUES:
Investment revenue:
Net investment income $ 4,708 $ 4,801
Net realized investment gains (losses) 3 (26)
Policy charge revenue 5,275 4,388
------------ ------------
Total Revenues 9,986 9,163
------------ ------------
BENEFITS AND EXPENSES:
Interest credited to policyholders' account balances 3,028 3,073
Policy benefits (net of reinsurance recoveries: 2000 - $1,600;
1999 - $98) 710 234
Reinsurance premium ceded 508 460
Amortization of deferred policy acquisition costs 267 1,081
Insurance expenses and taxes 1,021 1,129
------------ ------------
Total Benefits and Expenses 5,534 5,977
------------ ------------
Earnings Before Federal Income Tax Provision 4,452 3,186
FEDERAL INCOME TAX PROVISION (BENEFIT):
Current 900 1,125
Deferred 658 (10)
------------ ------------
Total Federal Income Tax Provision 1,558 1,115
------------ ------------
NET EARNINGS $ 2,894 $ 2,071
============ ============
See accompanying notes to financial statements.
</TABLE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands) (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------
2000 1999
------------ ------------
<S> <C> <C>
NET EARNINGS $ 7,520 $ 4,472
------------ ------------
OTHER COMPREHENSIVE LOSS:
Net unrealized gains (losses) on available-for-sale securities:
Net unrealized holding gains (losses) arising during the period 2,267 (10,219)
Reclassification adjustment for losses included in net earnings 87 3,413
------------ ------------
Net unrealized gains (losses) on investment securities 2,354 (6,806)
Adjustments for:
Policyholder liabilities (3,961) 2,565
Deferred federal income taxes 562 1,484
------------ ------------
Total other comprehensive loss, net of taxes (1,045) (2,757)
------------ ------------
COMPREHENSIVE INCOME $ 6,475 $ 1,715
============ ============
See accompanying notes to financial statements.
</TABLE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands) (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------------
2000 1999
------------ ------------
<S> <C> <C>
NET EARNINGS $ 2,894 $ 2,071
------------ ------------
OTHER COMPREHENSIVE LOSS:
Net unrealized gains (losses) on available-for-sale securities:
Net unrealized holding gains (losses) arising during the period 2,268 (2,473)
Reclassification adjustment for losses included in net earnings 10 290
------------ ------------
Net unrealized gains (losses) on investment securities 2,278 (2,183)
Adjustments for:
Policyholder liabilities (4,078) (84)
Deferred federal income taxes 630 793
------------ ------------
Total other comprehensive loss, net of taxes (1,170) (1,474)
------------ ------------
COMPREHENSIVE INCOME $ 1,724 $ 597
============ ============
See accompanying notes to financial statements.
</TABLE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF STOCKHOLDER'S EQUITY
(Dollars in thousands) (Unaudited)
<TABLE>
<CAPTION>
Accumulated
Additional other Total
Common paid-in Retained comprehensive stockholder's
stock capital earnings loss equity
----------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1999 $ 2,200 $ 66,259 $ 14,462 $ (967) $ 81,954
Net earnings 6,589 6,589
Other comprehensive loss, net of tax (4,561) (4,561)
----------- ----------- ----------- ------------- -------------
BALANCE, DECEMBER 31, 1999 2,200 66,259 21,051 (5,528) 83,982
Net earnings 7,520 7,520
Other comprehensive loss, net of tax (1,045) (1,045)
----------- ----------- ----------- ------------- -------------
BALANCE, SEPTEMBER 30, 2000 $ 2,200 $ 66,259 $ 28,571 $ (6,573) $ 90,457
=========== =========== =========== ============= =============
See accompanying notes to financial statements.
</TABLE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF CASH FLOWS
(Dollars in thousands) (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 7,520 $ 4,472
Noncash items included in earnings:
Amortization of deferred policy acquisition costs 2,746 3,383
Capitalization of policy acquisition costs (3,401) (3,773)
Amortization of investments 289 294
Interest credited to policyholders' account balances 8,882 9,306
Provision (benefit) for deferred Federal income tax 1,132 (978)
(Increase) decrease in operating assets:
Accrued investment income (899) (1,353)
Other (1,997) 805
Increase (decrease) in operating liabilities:
Claims and claims settlement expenses 971 376
Other policyholder funds 140 737
Federal income taxes - current (119) (222)
Affiliated payables (571) (1,253)
Other (233) 200
Other operating activities:
Net realized investment losses 74 2,805
------------ ------------
Net cash and cash equivalents provided by operating activities 14,534 14,799
------------ ------------
Cash Flows From Investing Activities:
Proceeds from (payments for):
Sales of available-for-sale securities 3,199 164,623
Maturities of available-for-sale securities 20,492 29,744
Purchases of available-for-sale securities (12,858) (187,846)
Policy loans on insurance contracts (2,609) (1,259)
------------ ------------
Net cash and cash equivalents provided by investing activities $ 8,224 $ 5,262
------------ ------------
See accompanying notes to financial statements. (continued)
</TABLE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF CASH FLOWS
(Continued) (Dollars in thousands) (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash Flows From Financing Activities:
Proceeds from (payments for):
Policyholder deposits (excludes internal policy replacement $ 58,549 $ 59,172
deposits)
Policyholder withdrawals (including transfers to/from separate (76,409) (80,646)
accounts) ------------ ------------
Net cash and cash equivalents used by financing activities (17,860) (21,474)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,898 (1,413)
CASH AND CASH EQUIVALENTS:
Beginning of year 34,195 18,707
------------ ------------
End of period $ 39,093 $ 17,294
============ ============
Supplementary Disclosure of Cash Flow Information:
Cash paid for:
Federal income taxes $ 3,036 $ 3,607
Intercompany interest 71 59
See accompanying notes to financial statements.
</TABLE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1: BASIS OF PRESENTATION:
ML Life Insurance Company of New York (the "Company") is a
wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.
("MLIG"). The Company is an indirect wholly owned subsidiary of
Merrill Lynch & Co., Inc. ("Merrill Lynch & Co."). The Company
sells life insurance and annuity products, including variable
life insurance and variable annuities.
The interim financial statements for the three and nine month
periods are unaudited. In the opinion of management, these
unaudited financial statements include all adjustments
(consisting only of normal recurring accruals) necessary for a
fair presentation of the financial position and the results of
operations in accordance with generally accepted accounting
principles. These unaudited financial statements should be read
in conjunction with the audited financial statements included in
the Company's Annual Report on Form 10-K ("1999 10K") for the
year ended December 31, 1999. The nature of the Company's
business is such that the results of any interim period are not
necessarily indicative of results for a full year. Certain
reclassifications have also been made to prior period financial
statements, where appropriate, to conform to the current period
presentation.
NOTE 2. STATUTORY ACCOUNTING PRACTICES:
The Company maintains its statutory accounting records in
conformity with accounting practices prescribed or permitted by
the Insurance Department of the State of New York and the
National Association of Insurance Commissioners. Statutory
capital and surplus at September 30, 2000 and December 31, 1999,
was $67.8 million and $61.7 million, respectively. For the nine
month periods ended September 30, 2000 and 1999, statutory net
income was $4.4 million and $5.6 million, respectively.
In March 1998, the National Association of Insurance
Commissioners adopted the Codification of Statutory Accounting
Principles ("Codification"). The Codification, which is
intended to standardize regulatory accounting and reporting for
the insurance industry, becomes effective January 1, 2001.
However, statutory accounting principles will continue to be
established by individual state laws and permitted practices.
Codification is not expected to have a material impact on the
Company's capital requirements or statutory financial
statements.
NOTE 3. INVESTMENTS:
The Company's investments in debt and equity securities are
classified as available-for-sale and are recorded at fair value.
Unrealized gains and losses on available-for-sale securities are
included in stockholder's equity as a component of accumulated
other comprehensive loss, net of tax. If management determines
that a decline in the value of a security is other-than-
temporary, the carrying value is adjusted to estimated fair
value and the decline in value is recorded as a net realized
investment loss.
The Company has recorded certain adjustments to policyholders'
account balances in connection with unrealized holding gains or
losses on investments. The Company adjusts those liabilities as
if the unrealized holdings gains or losses had actually been
realized, with corresponding credits or charges reported in
accumulated other comprehensive loss, net of taxes. The
components of net unrealized gains (losses) included in
accumulated other comprehensive loss are as follows:
September 30, December 31,
2000 1999
------------- ------------
Assets:
Fixed maturity securities $ (4,903) $ (5,579)
Equity securities (1,125) (2,790)
Other assets (4) (17)
Federal income taxes - deferred 3,539 2,977
------------- ------------
(2,493) (5,409)
------------- ------------
Liabilities:
Policyholders' account balances 4,080 119
------------- -----------
Stockholder's equity:
Accumulated other comprehensive loss $ (6,573) $ (5,528)
============= ===========
NOTE 4. ACCOUNTING PRONOUNCEMENTS:
In June 1999, the Financial Accounting Standards Board deferred
for one year the effective date of the accounting and reporting
requirements of SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS No. 133"). SFAS No.133
requires the Company to recognize all derivatives as either
assets or liabilities in the balance sheet and measure those
instruments at fair value. Changes in fair value for derivatives
that do not qualify for hedge accounting are reported in
earnings. The Company does not have any derivatives that qualify
for hedge accounting.
The Company will adopt the provisions of SFAS No. 133 on January
1, 2001, and has undertaken initiatives to implement this
standard. The Company does not expect SFAS No. 133 to have a
material impact on its financial position or results of
operations.
NOTE 5. 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
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, 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 for the Company's financial statements included herein.
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 net revenues and earnings on
assets that do not support policyholder liabilities.
The following table summarizes each business segment's
contribution to the consolidated net revenues and net earnings
for the three and nine month periods ended September 30:
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ------------------------
2000 1999 2000 1999
---------- ---------- ----------- -----------
Net Revenues (a):
Life Insurance $ 2,769 $ 2,505 $ 8,183 $ 7,412
Annuities 3,357 2,704 9,782 5,738
Other 832 881 2,377 2,027
---------- ---------- ----------- -----------
Total Net Revenues $ 6,958 $ 6,090 $ 20,342 $ 15,177
========== ========== =========== ===========
Net Earnings:
Life Insurance $ 1,024 $ 565 $ 2,278 $ 1,818
Annuities 1,330 934 3,698 1,337
Other 540 572 1,544 1,317
---------- ---------- ----------- -----------
Total Net Earnings $ 2,894 $ 2,071 $ 7,520 $ 4,472
========== ========== =========== ===========
(a) Management considers investment income net of interest credited
to policyholders' account balances in evaluating results.
Item 2 Management's Narrative Analysis of the Results of Operations
This Management's Narrative Analysis of the Results of
Operations addresses changes in revenues and expenses for the
three and nine month periods ended September 30, 2000 and 1999.
This discussion should be read in conjunction with the
accompanying unaudited financial statements and notes thereto,
in addition to the 1999 Financial Statements and Notes to
Financial Statements and the Management's Discussion and
Analysis of Financial Condition and Results of Operations
included in the 1999 10K.
In addition to providing historical information, the Company may
make or publish forward-looking statements about management
expectations, strategic objectives, business prospects,
anticipated financial performance, and other similar matters. A
variety of factors, many of which are beyond the Company's
control, affect the operations, performance, business strategy,
and results of the Company and could cause actual results and
experience to differ materially from the expectations expressed
in these statements. These factors include, but are not limited
to, the factors listed in the Economic Environment section
listed below, as well as actions and initiatives taken by both
current and potential competitors and the effect of current,
pending, and future legislation and regulation. The Company
undertakes no responsibility to update or revise any forward-
looking statements.
Business Overview
The Company's 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 interest 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 the Company anticipates
holding those funds. In addition, the Company incurs expenses
associated with the maintenance of inforce contracts.
Economic Environment
The Company's financial position and/or results of operations
are primarily impacted by the following economic factors:
fluctuations in medium term interest rates
fluctuations in credit spreads
equity market performance
The Company defines medium term interest rates as the average
interest rate on U.S. Treasury securities with terms of 1 to 10
years. During the current nine month period, medium term
interest rates decreased approximately 32 basis points as
compared to December 1999, but increased 32 basis points as
compared to September 1999.
The Company defines credit spreads as the interest rate spread
between the 5-year U.S. Treasury Bond Index and the 5-year
Corporate Industrial Bond Index. During the first nine months of
2000, credit spreads widened approximately 39 basis points to
end the period at 150 basis points. During the first nine
months of 1999, credit spreads contracted approximately 3 basis
points to end the period at 128 basis points.
There are several standard indices published on a daily basis
that measure performance of selected components of the U.S.
equity market. Examples include the Dow Jones Industrial Average
("Dow"), NASDAQ Composite Index ("NASDAQ") and the Standard &
Poor's 500 Composite Stock Price Index ("S&P Index"). During
the first nine months of 2000, the U.S. equity market
experienced increased volatility. Although all three indices
reached historical highs at various points during the current
nine month period, each index closed generally lower, on a daily
basis, as compared to their respective levels at December 31,
1999. During the first nine months of 2000, the Dow, NASDAQ and
S&P Index decreased 7.4%, 9.8% and 2.2%, respectively. The
investment performance in the underlying mutual funds supporting
the Company's variable products do not replicate the returns on
any specific U.S. equity market index. However, investment
performance will generally increase or decrease with
corresponding increases or decreases in the overall U.S. equity
market.
Life insurance premiums and annuity deposits recorded decreased
$2.5 million (or 9%) to $23.9 million and $1.9 million (or 3%)
to $63.6 million during the three and nine month periods ended
September 30, 2000, respectively, as compared to the same
periods in 1999. Life insurance premiums and annuity deposits
collected, which exclude premiums recorded from internal tax-
free exchanges, decreased $1.1 million and $0.7 million during
the current three and nine month periods, respectively, as
compared to the equivalent periods in 1999. Variable annuity
deposits continue to dominate the Company's sales by comprising
94% and 92% of total premiums recorded for the three and nine
month periods ended September 30, 2000, respectively. Life
insurance premiums and annuity deposits by type of product were
as follows:
<TABLE>
<CAPTION>
Premiums Collected Change
------------------------------ ------------------------------
Third Quarter Nine Months Third Quarter Nine Months
2000 2000 2000-1999 2000-1999
------------- ------------ -------------- -----------
<S> <C> <C> <C> <C>
($ In Millions) ($ In Millions)
Variable Annuities $ 22.5 $ 58.5 $ (1.3) $ (0.1)
Modified Guaranteed Annuites 0.4 1.6 0.1 0.5
Variable Life Insurance 1.0 3.4 (1.2) (2.3)
Other - 0.1 (0.1) -
------------- ------------ -------------- -----------
Total Premiums Recorded 23.9 63.6 (2.5) (1.9)
Internal tax-free exchanges (0.3) (5.1) 1.4 1.2
------------- ------------ -------------- -----------
Total Premiums Collected $ 23.6 $ 58.5 $ (1.1) $ (0.7)
============= ============ ============== ===========
</TABLE>
Policy and contract surrenders increased $3.3 million (or 20%)
and $5.3 million (or 12%) during the current three and nine
month periods, respectively, as compared to the equivalent
periods in 1999. During the three and nine month periods ended
September 30, 2000, variable annuity surrenders increased $2.1
million (or 34%) and $9.2 million (or 51%), respectively, as
compared to the same periods in 1999. These increases are
primarily a result of the anticipated increase in lapse rates on
contracts reaching the end of their surrender charge period.
Partially offsetting the increase in variable annuity surrenders
during the current nine month period was a decrease of $3.2
million (or 31%) in variable life surrenders.
During the first nine months of 2000, separate accounts assets
increased $31 million (or 2.9%) to $1.1 billion. Despite
increased market volatility, positive investment performance in
the variable products' underlying mutual funds contributed $25
million to the increase in separate accounts assets.
To fund all business activities, the Company maintains a high
quality and liquid investment portfolio. As of September 30,
2000, the Company's assets included $176 million of cash, short-
term investments and investment grade publicly traded available-
for-sale securities that could be liquidated if funds were
required.
As of September 30, 2000, approximately $3.9 million (or 2.7%)
of the Company's fixed maturity securities were considered non-
investment grade. The Company defines non-investment grade as
unsecured debt obligations that do not have a rating equivalent
to Standard and Poor's BBB- or higher (or similar rating
agency). Non-investment grade securities are speculative and
are subject to significantly greater risks related to the
creditworthiness of the issuers and the liquidity of the market
for such securities. The Company carefully selects, and closely
monitors, such investments.
Results of Operations
For the nine month periods ended September 30, 2000 and 1999,
the Company reported net earnings of $7.5 million and $4.5
million, respectively. For the three month periods ended
September 30, 2000 and 1999, the Company reported net earnings
of $2.9 million and $2.1 million, respectively.
Net earnings derived from interest spread decreased $0.2 million
for the nine month period ended September 30, 2000, as compared
to the same period in 1999. The decrease in interest spread is
primarily due to the reduction in invested assets resulting from
the decline in fixed rate contracts inforce. During the current
three month period, net earnings derived from interest spread
were flat as compared to 1999.
Net realized investment losses decreased $2.7 million during the
nine month period ended September 30, 2000, as compared to the
equivalent period in 1999. The decrease in net realized
investment losses is primarily due to a $2.6 million decrease in
credit related losses. Prior period credit related losses were
impacted by book value writedowns and asset sales of several
large security holdings. The Company did not incur any credit
related losses during the current nine month period. During the
current three month period, net realized investment gains
(losses) were flat as compared to 1999.
Policy charge revenue increased $0.9 million (or 20%) and $2.6
million (or 21%) during the three and nine month periods ended
September 30, 2000, respectively, compared to the same periods
during 1999. The increases in policy charge revenue are
attributable to the increase in contract owners' variable
account balances. Average variable account balances increased
$175 million (or 19%) during the current nine month period as
compared to the same period in 1999.
Policy benefits increased $0.5 million (or 203%) and $0.7
million (or 137%) during the current three and nine month
periods, respectively, compared to equivalent periods in 1999.
The increases are primarily due to one large death claim with a
net amount at risk of $0.5 million.
Amortization of deferred policy acquisition costs decreased $0.8
million (or 75%) and $0.6 million (or 19%) during the three and
nine month periods ended September 30, 2000, respectively,
compared to the equivalent periods in 1999. During the current
three month period, the Company revised its future gross profit
assumptions on certain life insurance business. The
retrospective adjustment of the Company's deferred policy
acquisition costs resulted in a $0.7 million decrease in
amortization of deferred policy acquisition costs.
Insurance expenses and taxes decreased $0.1 million (or 10%) and
increased $0.3 million (or 9%) during the current three and nine
month periods, respectively, compared to the same periods in
1999. The increase in the current nine month period is due to
increases in certain employee compensation related expense
allocations from Merrill Lynch & Co. and expenditures
related to financial systems enhancements.
Segment Information
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 the Company's
consolidated financial condition and results of operations
presented herein.
The current period increase in net earnings for the life
insurance segment is primarily due to the retrospective
adjustment of deferred policy acquisition costs, noted above.
<PAGE> 3
PART II Other Information
Item 1. Legal Proceedings.
Nothing to report.
Item 5. Other Information.
Nothing to report.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Financial Data Schedule.
(b) Reports on Form 8-K.
None.
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ML LIFE INSURANCE COMPANY OF NEW YORK
/s/ MATTHEW J. RIDER
-----------------------------------------
Matthew J. Rider
Senior Vice President and
Chief Financial Officer
Date: November 14, 2000
<PAGE> 5
EXHIBIT INDEX
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Exhibit
No. Description
------- -----------
27 Financial Data Schedule
