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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, 2003
COMMISSION FILE NUMBERS 33-26322; 33-46827; 33-52254; 33-60290;
33-58303; 333-33863; 333-34192
MERRILL LYNCH LIFE INSURANCE COMPANY
(Exact name of Registrant as specified in its charter)
<Table>
ARKANSAS 91-1325756
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
</Table>
1300 Merrill Lynch Drive, 2nd Floor
Pennington, NJ 08534
(Address of Principal Executive Offices)
(609) 274-6900
(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 __
Indicate by check mark whether the Registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
Yes ___ No X
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 250,000
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.
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
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BALANCE SHEETS
(Dollars in thousands)
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September 30, December 31,
ASSETS 2003 2002
- ------ ------------- -------------
(Unaudited)
INVESTMENTS:
Fixed maturity securities, at estimated fair value
(amortized cost: 2003 - $2,072,330; 2002 - $1,844,077) $ 2,134,346 $ 1,856,732
Equity securities, at estimated fair value
(cost: 2003 - $98,550; 2002 - $112,903) 98,012 105,430
Trading account securities, at estimated fair value 24,178 21,949
Limited partnerships, at cost 12,280 12,150
Policy loans on insurance contracts 1,094,948 1,143,663
------------- -------------
Total Investments 3,363,764 3,139,924
CASH AND CASH EQUIVALENTS 130,922 312,217
ACCRUED INVESTMENT INCOME 63,925 63,603
DEFERRED POLICY ACQUISITION COSTS 392,105 404,220
FEDERAL INCOME TAXES - CURRENT - 39,905
REINSURANCE RECEIVABLES 4,052 8,197
AFFILIATED RECEIVABLES - NET - 3,040
RECEIVABLES FROM SECURITIES SOLD 2,929 10,072
OTHER ASSETS 36,377 37,399
SEPARATE ACCOUNTS ASSETS 9,931,951 9,079,285
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TOTAL ASSETS $ 13,926,025 $ 13,097,862
============= =============
See accompanying notes to financial statements. (Continued)
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
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BALANCE SHEETS
(Continued) (Dollars in thousands, except common stock par value and shares)
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September 30, December 31,
LIABILITIES AND STOCKHOLDER'S EQUITY 2003 2002
- ------------------------------------ -------------- --------------
(Unaudited)
LIABILITIES:
POLICYHOLDER LIABILITIES AND ACCRUALS:
Policyholders' account balances $ 2,927,823 $ 3,084,042
Claims and claims settlement expenses 96,856 98,526
-------------- --------------
Total policyholder liabilities and accruals 3,024,679 3,182,568
OTHER POLICYHOLDER FUNDS 16,695 11,815
LIABILITY FOR GUARANTY FUND ASSESSMENTS 6,611 7,221
FEDERAL INCOME TAXES - DEFERRED 54,327 67,304
FEDERAL INCOME TAXES - CURRENT 15,301 -
PAYABLES FOR SECURITIES PURCHASED 19,710 19,635
AFFILIATED PAYABLES - NET 4,141 -
UNEARNED POLICY CHARGE REVENUE 115,276 113,774
OTHER LIABILITIES 8,271 6,033
SEPARATE ACCOUNTS LIABILITIES 9,926,530 9,072,606
-------------- --------------
Total Liabilities 13,191,541 12,480,956
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STOCKHOLDER'S EQUITY:
Common stock ($10 par value; authorized: 1,000,000 shares; issued and
outstanding: 250,000 shares) 2,500 2,500
Additional paid-in capital 397,324 347,324
Retained earnings 320,437 290,092
Accumulated other comprehensive income (loss) 14,223 (23,010)
-------------- --------------
Total Stockholder's Equity 734,484 616,906
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 13,926,025 $ 13,097,862
============== ==============
See accompanying notes to financial statements.
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
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STATEMENTS OF EARNINGS
(Dollars in thousands) (Unaudited)
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Three Months Ended
September 30,
------------------------------
2003 2002
---------- ----------
REVENUES:
Policy charge revenue $ 56,845 $ 56,070
Net investment income 42,295 52,565
Net realized investment losses (6,199) (11,464)
---------- ----------
Total Revenues 92,941 97,171
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BENEFITS AND EXPENSES:
Interest credited to policyholders' account balances 32,286 34,788
Market value adjustment expense 1,694 1,172
Policy benefits (net of reinsurance recoveries: 2003 - $2,381;
2002 - $1,977) 13,259 15,954
Reinsurance premium ceded 5,667 6,192
Amortization of deferred policy acquisition costs 13,426 13,039
Insurance expenses and taxes 13,348 12,014
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Total Benefits and Expenses 79,680 83,159
---------- ----------
Earnings Before Federal Income Tax Provision 13,261 14,012
FEDERAL INCOME TAX PROVISION (BENEFIT):
Current 12,301 (53,686)
Deferred (7,660) 56,405
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Total Federal Income Tax Provision 4,641 2,719
---------- ----------
NET EARNINGS $ 8,620 $ 11,293
========== ==========
See accompanying notes to financial statements.
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
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STATEMENTS OF EARNINGS
(Dollars in thousands) (Unaudited)
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Nine Months Ended
September 30,
--------------------------------
2003 2002
----------- -----------
REVENUES:
Policy charge revenue $ 161,278 $ 177,540
Net investment income 132,112 158,365
Net realized investment losses (608) (17,595)
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Total Revenues 292,782 318,310
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BENEFITS AND EXPENSES:
Interest credited to policyholders' account balances 98,065 106,599
Market value adjustment expense 4,225 2,339
Policy benefits (net of reinsurance recoveries: 2003 - $12,930;
2002 - $10,741) 52,142 39,117
Reinsurance premium ceded 16,989 18,218
Amortization of deferred policy acquisition costs 37,463 45,170
Insurance expenses and taxes 37,213 36,117
----------- -----------
Total Benefits and Expenses 246,097 247,560
----------- -----------
Earnings Before Federal Income Tax Provision 46,685 70,750
FEDERAL INCOME TAX PROVISION (BENEFIT):
Current 49,366 (42,124)
Deferred (33,026) 64,701
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Total Federal Income Tax Provision 16,340 22,577
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NET EARNINGS $ 30,345 $ 48,173
=========== ===========
See accompanying notes to financial statements.
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
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STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands) (Unaudited)
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Three Months Ended
September 30,
------------------------------
2003 2002
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NET EARNINGS $ 8,620 $ 11,293
OTHER COMPREHENSIVE INCOME:
Net unrealized gains (losses) on available-for-sale securities:
Net unrealized holding gains (losses) arising during the period (20,823) 12,994
Reclassification adjustment for losses included in net earnings 6,347 10,423
---------- ----------
Net unrealized gains (losses) on investment securities (14,476) 23,417
Adjustments for:
Policyholder liabilities 15,082 (15,837)
Deferred policy acquisition costs 1,039 (4,260)
Deferred federal income taxes (576) (1,162)
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Total other comprehensive income, net of taxes 1,069 2,158
---------- ----------
COMPREHENSIVE INCOME $ 9,689 $ 13,451
========== ==========
See accompanying notes to financial statements.
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
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STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands) (Unaudited)
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Nine Months Ended
September 30,
------------------------------
2003 2002
---------- ----------
NET EARNINGS $ 30,345 $ 48,173
OTHER COMPREHENSIVE INCOME (LOSS):
Net unrealized gains (losses) on available-for-sale securities:
Net unrealized holding gains arising during the period 54,334 1,499
Reclassification adjustment for losses included in net earnings 3,107 16,346
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Net unrealized gains on investment securities 57,441 17,845
Adjustments for:
Policyholder liabilities 5,484 (26,097)
Deferred policy acquisition costs (5,643) (2,060)
Deferred federal income taxes (20,049) 3,609
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Total other comprehensive income (loss), net of taxes 37,233 (6,703)
---------- ----------
COMPREHENSIVE INCOME $ 67,578 $ 41,470
========== ==========
See accompanying notes to financial statements.
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
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STATEMENTS OF STOCKHOLDER'S EQUITY
(Dollars in thousands) (Unaudited)
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Accumulated
Additional other Total
Common Paid-in Retained comprehensive stockholder's
stock Capital earnings income (loss) equity
----------- ----------- ----------- ------------- -------------
BALANCE, JANUARY 1, 2002 $ 2,500 $ 347,324 $ 273,046 $ (19,428) $ 603,442
Cash dividend paid to parent (30,899) (30,899)
Net earnings 47,945 47,945
Other comprehensive loss, net of tax (3,582) (3,582)
----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 2002 2,500 347,324 290,092 (23,010) 616,906
Capital contribution from parent 50,000 50,000
Net earnings 30,345 30,345
Other comprehensive income, net of tax 37,233 37,233
----------- ----------- ----------- ----------- -----------
BALANCE, September 30, 2003 $ 2,500 $ 397,324 $ 320,437 $ 14,223 $ 734,484
=========== =========== =========== =========== ===========
See accompanying notes to financial statements.
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
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STATEMENTS OF CASH FLOWS
(Dollars in thousands) (Unaudited)
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Nine Months Ended
September 30,
------------------------------
2003 2002
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Cash Flows From Operating Activities:
Net earnings $ 30,345 $ 48,173
Noncash items included in earnings:
Amortization of deferred policy acquisition costs 37,463 45,170
Capitalization of policy acquisition costs (30,991) (24,784)
Amortization of investments 6,762 1,222
Interest credited to policyholders' account balances 98,065 106,599
Provision (benefit) for deferred Federal income tax (33,026) 64,701
(Increase) decrease in operating assets:
Accrued investment income (322) 1,651
Federal income taxes - current 39,905 (51,786)
Reinsurance receivables 4,145 3,439
Affiliated receivables 3,040 -
Other 1,022 6,956
Increase (decrease) in operating liabilities:
Claims and claims settlement expenses (1,670) 1,643
Other policyholder funds 4,880 (7,103)
Liability for guaranty fund assessments (610) (1,212)
Federal income taxes - current 15,301 (5,522)
Affiliated payables 4,141 8,454
Unearned policy charge revenue 1,502 5,169
Other 2,238 (268)
Other operating activities:
Net realized investment losses 608 17,595
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Net cash and cash equivalents provided by operating activities 182,798 220,097
----------- -----------
Cash Flows From Investing Activities:
Proceeds from (payments for):
Sales of available-for-sale securities 239,127 298,974
Maturities of available-for-sale securities 470,167 255,794
Purchases of available-for-sale securities (925,382) (480,668)
Trading account securities (196) (408)
Purchases of limited partnerships (200) (880)
Sales of limited partnerships 70 -
Policy loans on insurance contracts 48,715 34,799
Recapture of investments in separate accounts 2,709 1,041
Investment in separate accounts (303) (3,548)
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Net cash and cash equivalents provided (used) by investing activities $ (165,293) $ 105,104
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See accompanying notes to financial statements. (Continued)
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
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STATEMENTS OF CASH FLOWS
(Continued) (Dollars in thousands) (Unaudited)
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Nine Months Ended
September 30,
------------------------------
2003 2002
----------- -----------
Cash Flows From Financing Activities:
Proceeds from (payments for):
Capital contribution received from (cash dividend paid to) parent $ 50,000 $ (30,899)
Policyholder deposits (excludes internal policy replacement deposits) 693,257 441,825
Policyholder withdrawals (including transfers from separate accounts) (942,057) (679,860)
----------- -----------
Net cash and cash equivalents used by financing activities (198,800) (268,934)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (181,295) 56,267
CASH AND CASH EQUIVALENTS:
Beginning of year 312,217 130,429
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End of period $ 130,922 $ 186,696
=========== ===========
Supplementary Disclosure of Cash Flow Information:
Cash paid to (received from) affiliates for:
Federal income taxes $ (5,840) $ 15,184
Intercompany interest 89 47
See accompanying notes to financial statements.
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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NOTE 1. BASIS OF PRESENTATION
Merrill Lynch Life Insurance Company (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 annuity products, including variable
annuities, modified guaranteed annuities, and immediate annuities. The Company
is domiciled in the State of Arkansas.
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 accounting principles generally accepted in the United States
of America. 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 ("2002 10K") for the year ended December 31, 2002. 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.
NOTE 2. STOCKHOLDER'S EQUITY AND STATUTORY ACCOUNTING PRACTICES
The Company's statutory financial statements are presented on the basis of
accounting practices prescribed or permitted by the Insurance Department of the
State of Arkansas. The State of Arkansas has adopted the National Association of
Insurance Commissioners' statutory accounting practices as the basis of its
statutory accounting practices.
Statutory capital and surplus at September 30, 2003 and December 31, 2002 were
$262,140 and $136,823, respectively. For the nine month periods ended September
30, 2003 and 2002, statutory net income (loss) was $62,547 and ($15,725),
respectively.
During 2002, the Company established $144,000 in statutory reserves to support
its cashflow testing analysis required by state insurance regulation. As a
result, statutory capital and surplus was significantly reduced from December
2001, but remained in excess of regulatory capital requirements. However, due to
the inherent volatility in statutory earnings, the Company received a $50,000
capital contribution from MLIG on March 3, 2003.
NOTE 3. INVESTMENTS
The Company's investments in fixed maturity and equity securities are classified
as either available-for-sale or trading and are carried at estimated fair value.
Unrealized gains and losses on available-for-sale securities are included in
stockholder's equity as a component of accumulated other comprehensive income
(loss), net of taxes. Unrealized gains and losses on trading account securities
are included in net realized investment gains (losses). 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 deferred policy acquisition
costs and policyholders' account balances in connection with unrealized holding
gains or losses on investments classified as available-for-sale. The Company
adjusts those assets and liabilities as if the unrealized holdings gains or
losses had actually been realized, with corresponding credits or charges
reported in accumulated other comprehensive income (loss), net of taxes. The
components of net unrealized gains (losses) included in accumulated other
comprehensive income (loss) were as follows:
September 30, December 31,
2003 2002
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Assets:
Fixed maturity securities $ 62,016 $ 12,655
Equity securities (538) (7,473)
Deferred policy acquisition costs (1,928) 3,715
Separate Accounts assets (2,099) (3,244)
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57,451 5,653
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Liabilities:
Policyholders' account balances 35,568 41,052
Federal income taxes - deferred 7,660 (12,389)
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43,228 28,663
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Stockholder's equity:
Accumulated other comprehensive income (loss) $ 14,223 $ (23,010)
=========== ===========
Net realized investment gains (losses), including other-than-temporary
writedowns in carrying value, for the three and nine months ended September 30
were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Available-for-sale securities $ (6,044) $ (9,251) $ (2,644) $ (14,506)
Trading account securities:
Net realized investment gains (losses) 636 (1,485) 1,187 (1,366)
Net unrealized holding gains (losses) (795) (728) 846 (1,760)
Investment in Separate Accounts 4 - 3 37
---------- ---------- ---------- ----------
Total net realized investment losses $ (6,199) $ (11,464) $ (608) $ (17,595)
========== ========== ========== ==========
NOTE 4. ACCOUNTING PRONOUNCEMENTS
On April 30, 2003, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and clarifies
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under SFAS No. 133. The
new guidance amends SFAS No. 133 for decisions made as part of the Derivatives
Implementation Group process that effectively required amendments to SFAS No.
133, and decisions made in connection with other FASB projects dealing with
financial instruments and in connection with implementation issues raised in
relation to the application of the definition of a derivative and
characteristics of a derivative that contains financing components. In addition,
it clarifies when a derivative contains a financing component that warrants
special reporting in the statements of cash flows. SFAS No. 149 is effective for
contracts entered into or modified after June 30, 2003 and for hedging
relationships designated after June 30, 2003. The Company does not have any
derivatives or hedging activities that qualify for hedge accounting. The
adoption of SFAS No. 149 did not have a material impact on the Financial
Statements.
On July 7, 2003, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 03-1, Accounting and Reporting by Insurance
Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate
Accounts. The SOP provides guidance on accounting and reporting by insurance
companies for certain nontraditional long-duration contracts and for separate
accounts. The SOP is effective for financial statements for the Company
beginning in 2004. The SOP requires the establishment of a liability for
contracts that contain death or other insurance benefits using a specified
reserve methodology that is different from the methodology that the Company
currently employs. Had the Company adopted SOP 03-1 at September 30, 2003, the
estimated pre-tax decrease to the Company's Statements of Earnings would be
between $86.0 million and $94.0; however, the ultimate impact of adoption in
2004 will depend on market conditions at that time.
NOTE 5. SEGMENT INFORMATION
In reporting to management, the Company's operating results are categorized into
two business segments: Annuities and Life Insurance. The Company's Annuity
segment consists of variable annuities and interest sensitive annuities. The
Company's Life Insurance segment consists of variable life insurance products
and interest-sensitive life insurance products. The Company currently does not
manufacture, market, or sell life insurance products. 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 net earnings on assets that do not
support annuity or life contract owner liabilities.
The following table summarizes each business segment's contribution to
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,
--------------------------- ---------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Net Revenues (a):
Annuities $ 40,096 $ 36,745 $ 117,650 $ 123,854
Life Insurance 18,822 27,749 72,595 90,053
Other 1,737 (2,111) 4,472 (2,196)
---------- ---------- ---------- ----------
Total Net Revenues $ 60,655 $ 62,383 $ 194,717 $ 211,711
========== ========== ========== ==========
Net Earnings:
Annuities $ 6,596 $ 5,667 $ 13,385 $ 25,333
Life Insurance 893 6,998 14,054 24,267
Other 1,131 (1,372) 2,906 (1,427)
---------- ---------- ---------- ----------
Total Net Earnings $ 8,620 $ 11,293 $ 30,345 $ 48,173
========== ========== ========== ==========
(a) Net revenues include investment income net of interest credited to
policyholders' account balances.
NOTE 6. SUBSEQUENT EVENTS
Management finalized the periodic review of the amortization of deferred policy
acquisition costs and accretion of unearned policy charge revenue during the
fourth quarter of 2003. This resulted in a reduction in the carrying values of
the related asset and liability of $21.9 million and $5.5 million, respectively.
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, 2003 and 2002. This discussion should be read in conjunction with
the accompanying unaudited financial statements and notes thereto, in addition
to the December 31, 2002 Audited Financial Statements and Notes to Financial
Statements and the Management's Discussion and Analysis of Financial Condition
and Results of Operations included in the 2002 10K.
Certain statements contained in this Report may be considered forward-looking,
including statements about management expectations, strategic objectives,
business prospects, anticipated financial performance, and other similar
matters. These forward-looking statements are not statements of historical fact
and represent only management's beliefs regarding future events, which are
inherently uncertain. There are a variety of factors, many of which are beyond
the Company's control, which affect its operations, performance, business
strategy, financial condition, and results and could cause its actual results
and experience to differ materially from the expectations and objectives
expressed in any forward-looking statements. These factors include, but are not
limited to, the factors listed in the Economic Environment section below, as
well as actions and initiatives taken by both current and potential competitors,
the effect of current, pending, and future legislation and regulation, and the
other risks and uncertainties detailed in the Company's Financial Statements and
Notes to Financial Statements. Accordingly, readers are cautioned not to place
undue reliance on forward-looking statements, which speak only as of the dates
on which they are made. The Company does not undertake to update or revise
forward-looking statements to reflect the impact of circumstances or events that
arise after the dates the forward-looking statements are made. The reader
should, however, consult any further disclosures the Company may make in its
Quarterly Reports on Form 10-Q.
DISCONTINUANCE OF VARIABLE LIFE INSURANCE
During the first quarter 2003, the Company discontinued manufacturing its single
premium variable life insurance product. As a result, the Company currently does
not manufacture, market, or sell life insurance products. However, the Company
remains committed to servicing all life insurance contracts inforce.
TAX LEGISLATION
During May 2003, Congress passed the Jobs and Growth Tax Relief Reconciliation
Act of 2003 (the "Act"). A key provision in the Act is reduced federal income
tax rates on dividends and capital gains paid to investors on stocks and mutual
funds held individually. Pending future Congressional action, these federal
income tax rate reductions are set to expire after 2008. These recently enacted
tax rate reductions may impact the relative attractiveness of life annuitization
and systematic withdrawals using non-qualified annuities.
BUSINESS OVERVIEW
The Company's gross earnings are principally derived from two sources:
- - the charges imposed on variable annuity and variable life insurance
contracts, and
- - 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
The costs associated with acquiring contract owner deposits (deferred policy
acquisition costs) are amortized over the period in which the Company
anticipates holding those funds. Deferred 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. Insurance expenses and taxes reported
in the statements of earnings are net of amounts deferred. 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: equity market performance,
fluctuations in medium term interest rates, and the corporate credit environment
via credit quality and fluctuations in credit spreads. The following discusses
the impact of each economic factor.
Equity Market Performance
Changes in the U.S. equity market directly affect the values of the underlying
U.S. equity-based mutual funds supporting separate accounts assets and, as such,
the values of variable contract owner account balances. Since asset-based policy
charge revenue
collected on inforce variable contracts represent a significant source of
revenue, the Company's earnings will be impacted by fluctuations in investment
performance of separate accounts assets. Fluctuations in the U.S. equity market
also directly impact the Company's exposure to guaranteed minimum death benefit
("GMDB") provisions contained in the variable annuities it manufactures.
Negative investment performance generally results in greater exposure to GMDB
provisions, as there is an increase in the number of variable contracts (and
amount per contract) in which the GMDB exceeds the variable account balance.
Prolonged periods of negative investment performance may result in greater GMDB
claims. GMDB claims are recorded as a component of policy benefits.
Additionally, the Company's financial condition is impacted by the U.S. equity
markets through its trading account investments. The Company's trading account
is invested in convertible debt and convertible preferred stocks. The valuations
of these types of securities are impacted by changes in value of the underlying
equity security. The trading account is carried at market value with changes in
market value included in earnings as a component of net realized investment
gains (losses).
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"). The
following table provides the increase in performance for each equity market
index for the current three and nine month periods ended September 30, 2003:
2003
-----------------------------------
Third Quarter Nine Months
2003 2003
------------- -------------
Dow 3.2% 11.2%
NASDAQ 10.1% 33.8%
S&P Index 2.2% 13.2%
Despite positive equity market performance during the current nine month period
ended September 30, 2003, average separate accounts assets, and in turn, average
variable contract owner account balances remained at lower levels as compared to
the same period in 2002. Conversely, during the current three month period,
average variable contract owner account balances were at higher levels as
compared to the same period in 2002. The following table provides the average
increase (decrease) in performance for each equity market index for the three
and nine month periods ended September 30, 2003 as compared to the same periods
in 2002:
2003
-----------------------------------
Third Quarter Nine Months
2003 2003
------------- -------------
Dow 11.7% -7.5%
NASDAQ 39.8% -0.6%
S&P Index 13.3% -8.4%
The investment performance of the underlying U.S. equity-based mutual funds
supporting the Company's variable products do not replicate the returns of any
specific U.S. equity market index. However, investment performance of the
underlying U.S. equity-based mutual funds will generally increase or decrease
with corresponding increases or decreases in the overall U.S. equity market.
Medium Term Interest Rates
Changes in interest rates 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 to
the value of investments and interest sensitive liabilities. Also, since the
Company has certain fixed products that contain guaranteed minimum crediting
rates, decreases in interest rates can decrease the amount of interest spread
earned by the Company.
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 three and nine
month periods ended September 30, 2003, average medium term interest rates
increased approximately 53 basis points and decreased approximately 83 basis
points, respectively, to yield, on average, 2.36% during the current nine month
period. During the three and nine month periods ended September 30, 2002,
average medium term interest rates decreased approximately 84 basis points and
48 basis points, respectively, to yield, on average, 3.39% during the nine month
period.
Corporate Credit and Credit Spreads
Changes in the corporate credit environment directly impact the value of the
Company's investments, primarily fixed maturity securities. The Company
primarily invests in investment-grade corporate debt to support its fixed rate
product liabilities.
Credit spreads represent the credit risk premiums required by market
participants for a given credit quality, e.g. the additional yield that a debt
instrument issued by a AA-rated entity must produce over a risk-free alternative
(for example, U.S. Treasury instruments). Changes in credit spreads have an
inverse relationship to the value of investments.
The Company defines credit spreads according to the Merrill Lynch U.S. Corporate
Bond Index for BBB-A Rated bonds with three to five year maturities. During the
three and nine month periods ended September 30, 2003, credit spreads contracted
approximately 11 basis points and 100 basis points, respectively, and ended the
current nine month period at 98 basis points. During the three and nine month
periods ended September 30, 2002, credit spreads widened approximately 59 basis
points and 73 basis points, respectively, and ended the nine month period at 251
basis points.
NEW BUSINESS
Annuity and life insurance premiums increased $141.5 million (or 120%) to $259.2
million and $246.7 million (or 52%) to $720.4 million during the current three
and nine month periods ended September 30, 2003, respectively, as compared to
the same periods in 2002. Annuity and life insurance premiums by type of product
were as follows:
($ In Millions) % Change
---------------------------- ------------------------------
Third Quarter Nine Months Third Quarter Nine Months
2003 2003 2003-2002 2003-2002
------------- ----------- ------------- -----------
Variable Annuities:
B-Share $ 223.1 $ 584.5 432% 227%
C-Share 16.6 72.9 -66 -52
L-Share 3.1 11.8 -70 -80
---------- ---------- ---------- ----------
242.8 669.2 140 72
---------- ---------- ---------- ----------
Variable Life Insurance 8.9 27.4 -26 -28
Modified Guaranteed Annuities 3.5 9.6 9 -76
Other 4.0 14.2 208 84
---------- ---------- ---------- ----------
Total Direct Premiums $ 259.2 $ 720.4 120% 52%
========== ========== ========== ==========
During the current three and nine month periods, variable annuity premiums
increased $141.6 million (or 140%) to $242.8 million and $280.4 million (or 72%)
to $669.2 million, respectively, as compared to the same periods in 2002.
Management attributes the increase in variable annuity premiums primarily to the
introduction of a new B-Share variable annuity product, which was introduced
during the fourth quarter of 2002. Sales of the new B-Share variable annuity
product were $138.5 million and $385.1 million during the current three and nine
month periods ended September 30, 2003, respectively. The new B-Share variable
annuity product is designed for the tax-qualified IRA market and includes a
living benefit provision. Prior to the fourth quarter of 2002 the Company did
not offer any variable annuity products that contained a living benefit
provision. Also, during the fourth quarter of 2002, the Company added a living
benefit provision to its existing B-Share variable annuity. Sales of this
product increased $42.9 million and $20.8 million during the current three and
nine month periods ended September 30, 2003, respectively. The C-Share and
L-Share variable annuities do not contain living benefits.
During the current nine month period, modified guaranteed annuity premiums
decreased $29.6 million (or 76%) to $9.6 million as compared to the same period
in 2002. The decrease is primarily due to the lower interest rate environment
during the first nine months of 2003 as compared to 2002. During the current
three month period ended September 30, 2003, modified guaranteed annuity
premiums were relatively unchanged as compared to the same period in 2002.
WITHDRAWALS
Policy and contract withdrawals decreased $37.7 million (or 12%) to $272.7
million and $71.5 million (or 8%) to $794.4 million during the current three and
nine month periods, respectively, as compared to the same periods in 2002.
During the current three and nine month periods ended September 30, 2003,
variable annuity withdrawals decreased $35.7 million (or 18%) and $82.7 million
(or 15%) as compared to the same periods in 2002. Management attributes the
decrease in variable annuity withdrawals to the general decline in the equity
markets occurring over the past three years whereby variable annuity contract
owners are less inclined to give up contracts in which GMDB provisions are in
excess of the variable account balance. In addition, modified guaranteed annuity
withdrawals decreased $9.1 million (or 24%) and $18.4 million (or 17%) during
the current three and nine month periods, respectively, as compared to the same
periods in 2002. Management attributes the decrease in modified guaranteed
annuity withdrawals to the general decline in the equity markets occurring over
the past three years, whereby modified guaranteed annuity contract owners have
less incentive to give up guaranteed income. Partially offsetting the decreases
in variable annuity and modified guaranteed annuity withdrawals was an increase
in variable life withdrawals, which increased $7.1 million (or 12%) and $35.5
million (or 22%) during the current three and nine month periods as compared to
the same periods in 2002. The increases in variable life withdrawals primarily
represent movement by contract owners to other non-proprietary insurance
products. As previously noted, the Company does not manufacture variable life
insurance products.
FINANCIAL CONDITION
At September 30, 2003, the Company's assets were $13.9 billion, or $828.2
million higher than the $13.1 billion in assets at December 31, 2002 primarily
due to an increase in separate accounts assets. Separate accounts assets
increased $852.7 million (or 9%) to $9.9 billion. Changes in separate accounts
assets for the first three quarters of 2003 were as follows:
1Q03 2Q03 3Q03 Total
---------- ---------- ---------- ----------
(In Millions)
Investment performance - variable products $ (171.0) $ 948.2 $ 272.0 $ 1,049.2
Net cash outflow - variable products (99.7) (36.3) (59.2) (195.2)
Net change in seed money (0.3) 0.2 (1.2) (1.3)
---------- ---------- ---------- ----------
$ (271.0) $ 912.1 $ 211.6 $ 852.7
========== ========== ========== ==========
At September 30, 2003 and December 31, 2002, approximately $106.7 million (or
5%) and $114.7 million (or 6%), respectively, 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. Current non-investment grade holdings are the
result of ratings downgrades on the Company's portfolio as the Company does not
purchase non-investment grade securities. Also, at September 30, 2003,
approximately $166.6 million (or 8%) of the Company's fixed maturity securities
were rated BBB-, which is the lowest investment grade rating given by Standard
and Poor's, compared to $233.6 million (or 13%) of the Company's fixed maturity
securities at December 31, 2002. The reduction in securities rated BBB- is due
to management's intention to increase the overall credit quality of the fixed
maturity security portfolio. Management closely monitors such securities.
During the first nine months of 2003, the Company experienced contract owner
withdrawals that exceeded deposits by $323.6 million. The components of contract
owner transactions were as follows:
September 30,
2003
--------------
(In Millions)
Premiums collected $720.4
Internal tax-free exchanges (27.1)
----------
Net contract owner deposits 693.3
Contract owner withdrawals 942.1
Net transfers from separate accounts 74.8
----------
Net contract owner withdrawals 1,016.9
----------
Net contract owner activity $(323.6)
==========
LIQUIDITY AND CAPITAL RESOURCES
To fund all business activities, the Company maintains a high quality and liquid
investment portfolio. As of September 30, 2003, the Company's assets included
$2.2 billion of cash, short-term investments and investment grade publicly
traded available-for-sale securities that could be liquidated if funds were
required.
During June 2003, the Company and Merrill Lynch & Co. executed a "keepwell"
agreement. The agreement obligates Merrill Lynch & Co. to maintain a level of
capital in the Company in excess of minimum regulatory capital requirements.
MANAGEMENT ESTIMATES
The Company amortizes deferred policy acquisition costs based on the expected
future gross profits for each group of contracts. In estimating future gross
profits, management makes assumptions regarding such factors as policy charge
revenue, investment performance, policy lapse rates, mortality, and expenses for
the expected life of each group of contracts. Actual gross profits can vary from
management's estimates resulting in increases or decreases in the rate of
amortization. Management periodically updates these estimates and evaluates the
recoverability of deferred policy acquisition costs. The impact of revisions to
estimates on cumulative amortization is recorded as a charge or credit to
current operations.
RESULTS OF OPERATIONS
For the three month periods ended September 30, 2003 and 2002, the Company
reported net earnings of $8.6 million and $11.3 million, respectively. For the
nine month periods ended September 30, 2003 and 2002, the Company reported net
earnings of $30.3 million and $48.2 million, respectively.
Policy charge revenue increased $0.8 million (or 1%) and decreased $16.3 million
(or 9%) during the current three and nine month periods ended September 30,
2003, respectively, as compared to the same periods in 2002. The current three
and nine month period fluctuations in policy charge revenue are primarily due to
period-to-period changes in average variable account balances. During the
current three month period, average variable account balances increased $0.5
million (or 6%) as compared to the same period in 2002. Conversely, during the
nine month period, average variable account balances decreased 985.7 million (or
9%) as compared to the same period in 2002. During the current three and nine
month periods, asset-based policy charge revenue increased $1.6 million (or 5%)
and decreased $10.3 million (or 9%), respectively, as compared to the same
periods in 2002. In addition, during the current three and nine month periods,
non-asset based policy charge revenue decreased $0.8 million (or 4%) and $6.0
million (or 9%), respectively, as compared to the same periods in 2002. The
decreases in non-asset based policy charge revenue are primarily due to
decreases in cost of insurance and withdrawal charges.
Net earnings derived from interest spread decreased $7.8 million (or 44%) and
$17.7 million (or 34%) during the current three and nine month periods ended
September 30, 2003, respectively, as compared to the same periods in 2002. The
decreases in interest spread are primarily due to the reduction in fixed rate
contracts inforce, as well as reductions in invested asset yields resulting from
(i) the generally lower interest rate environment during the current three and
nine month periods of 2003 as compared to 2002 and (ii) the increase in credit
quality of the portfolio. Additionally, during the current three and nine month
periods ended September 30, 2003, interest spread was negatively impacted by a
decrease of $1.4 million and $2.7 million in real estate income, respectively,
as compared to the same periods in 2002. The Company sold its remaining real
estate holding during the fourth quarter 2002.
Net realized investment gains increased $5.3 million and $17.0 million during
the current three and nine month periods ended September 30, 2003, respectively,
as compared to the same periods in 2002. The following table provides the
changes in net realized investment gains by type for each respective period:
Three Months Nine Months
Net Realized Gains 2003 - 2002 2003 - 2002
- ----------------------- ------------ -----------
($ in Millions)
Credit related $ 2.5 $ 7.3 (1)
Trading account 2.1 5.2 (2)
Interest related 0.7 4.5 (3)
-------- --------
$ 5.3 $ 17.0
======== ========
(1) Primarily due to decreases in other-than-temporary ("OTT")
declines in the carrying value of fixed maturity securities. OTT
declines on investments in fixed maturity securities were $6.7
million and $11.9 million during the first nine months of 2003
and 2002, respectively.
(2) The trading account is comprised of convertible debt and
convertible preferred equity securities. The valuations of these
securities generally fluctuate in a direct relationship to
changes in the valuations of the underlying common equity.
(3) Attributable to increases in invested asset market valuations
resulting from generally lower interest rates and contracting
credit spreads during the current three and nine month periods
of 2003 as compared to 2002.
The market value adjustment expense is attributable to the Company's modified
guaranteed annuity products. 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 the
current three and nine month periods ended September 30, 2003, the market value
adjustment expense increased $0.5 million (or 45%) and $1.9 million (or 81%) as
compared to the same periods in 2002. The increases are primarily due to the
generally lower interest rate environment during the current three and nine
month periods of 2003 as compared to 2002. The market value adjustment expense
has an inverse relationship to changes in interest rates.
Policy benefits decreased $2.7 million (or 17%) and increased $13.0 million (or
33%) during the current three and nine month periods ended September 30, 2003,
respectively, as compared to the same periods in 2002. The decrease during the
current three month period is attributable to a decrease in variable annuity
death benefit payments incurred under GMDB provisions for that same period. The
increase during the current nine month period is attributable to an increase in
variable annuity death benefit payments incurred under GMDB provisions for that
same period. As noted above, average variable account balances increased during
the current three month period and decreased during the current nine month
period as compared to the same periods in 2002.
Reinsurance premium ceded decreased $0.5 million (or 8%) and $1.2 million (or
7%) during the current three and nine month periods ended September 30, 2003,
respectively, as compared to the same periods in 2002. The decreases are
attributable to a decrease in life insurance inforce.
Amortization of deferred policy acquisition costs increased $0.4 million (or 3%)
and decreased $7.7 million (or 17%) during the current three and nine month
periods ended September 30, 2003, respectively, as compared to the same periods
in 2002. The current three and nine month period fluctuations in amortization of
deferred policy acquisition costs are primarily due to period-to-period changes
in policy charge revenue. As noted above, policy charge revenue increased during
the current three month period and decreased during the current nine month
period as compared to the same periods in 2002.
Insurance expenses and taxes increased $1.3 million (or 11%) and $1.1 million
(or 3%) during the current three and nine month periods ended September 30,
2003, as compared to the same periods in 2002. The following table provides the
changes in insurance expenses and taxes by type for each respective period:
Three Months Nine Months
Insurance expenses and taxes - net of capitalization 2003 - 2002 2003 - 2002
- --------------------------------------------------------- ------------ -----------
($ in Millions)
Asset-based commissions $ 1.4 $ 1.3 (1)
General insurance expenses 0.3 (1.3) (2)
Taxes, licenses, and fees (0.4) 1.1 (3)
------- -------
$ 1.3 $ 1.1
======= =======
(1) Reflects the increase in average variable account balances
during the current three month period ended September 30, 2003.
(2) The decrease in general expenses during the current nine month
period is primarily due to reductions in employee compensation
expense, as well as a decrease in system and technology expenses
related to new product development.
(3) The increase in taxes, licenses, and fees during the current
nine month period is primarily due to guaranty fund association
refunds received during the first quarter 2002. Guaranty fund
association refunds received during the first quarter of 2002
were $1.1 million.
The Company's effective federal income tax rate was 35% during the current three
and nine month periods ended September 30, 2003 as compared to 19% and 32%,
respectively, during the equivalent periods in 2002. The changes in the
effective federal income tax rate during the respective periods are primarily
due to certain permanent adjustments recorded in the third quarter 2002. During
the three and nine month periods ended September 30, 2002, the Company's current
and deferred tax components were significantly impacted by adjustments in tax
reserves for guaranteed minimum death benefits. The reserve adjustments resulted
in an increased current tax benefit and an increased deferred tax expense during
the three and nine month periods ended September 30, 2002.
SEGMENT INFORMATION
The products that comprise the Annuity and Life Insurance 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 increase in other net revenues and other net earnings during the current
three and nine month periods ended September 30, 2003 are primarily due to
trading account gains incurred during the first three and nine months of 2003.
ITEM 4. Controls and Procedures
The Company's Chief Executive Officer and Chief Financial Officer have
concluded, based on their evaluation as of the end of the period covered by this
quarterly report on Form 10-Q, that the Company's disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934) are effective. There have been no changes in the Company's
internal control over financial reporting that occurred during the period
covered by this quarterly report on Form 10-Q that have materially affected, or
are reasonably likely to materially affect, the Company's internal control over
financial reporting.
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.
2.1 Merrill Lynch Life Insurance Company Board of Directors
Resolution in Connection with the Merger between Merrill Lynch
Life Insurance Company and Tandem Insurance Group, Inc.
(Incorporated by reference to Exhibit 2.1, filed September 5,
1991, as part of Post-Effective Amendment No. 4 to the
Registrant's registration statement on Form S-1, File No.
33-26322.)
2.2 Plan and Agreement of Merger between Merrill Lynch Life
Insurance Company and Tandem Insurance Group, Inc. (Incorporated
by reference to Exhibit 2.1a, filed September 5, 1991, as part
of Post-Effective Amendment No. 4 to the Registrant's
registration statement on Form S-1, File No. 33-26322.)
3.1 Articles of Amendment, Restatement and Redomestication of the
Articles of Incorporation of Merrill Lynch Life Insurance
Company. (Incorporated by reference to Exhibit 6(a) to
Post-Effective Amendment No. 10 to Merrill Lynch Life Variable
Annuity Separate Account A's registration statement on Form N-4,
File No. 33-43773, filed December 10, 1996.)
3.2 Amended and Restated By-Laws of Merrill Lynch Life Insurance
Company. (Incorporated by reference to Exhibit 6(b) to
Post-Effective Amendment No. 10 to Merrill Lynch Life Variable
Annuity Separate Account A's registration statement on Form N-4,
File No. 33-43773, filed December 10, 1996.)
4.1 Group Modified Guaranteed Annuity Contract, ML-AY-361.
(Incorporated by reference to Exhibit 4.1, filed February 23,
1989, as part of Pre-Effective Amendment No. 1 to the
Registrant's registration statement on Form S-1, File No.
33-26322.)
4.2 Individual Certificate, ML-AY-362. (Incorporated by reference to
Exhibit 4.2, filed February 23, 1989, as part of Pre-Effective
Amendment No. 1 to the Registrant's registration statement on
Form S-1, File No. 33-26322.)
4.2a Individual Certificate, ML-AY-362 KS. (Incorporated by reference
to Exhibit 4.2a, filed March 9, 1990, as part of Post-Effective
Amendment No. 1 to the Registrant's registration statement on
Form S-1, File No. 33-26322.)
4.2b Individual Certificate, ML-AY-378. (Incorporated by reference to
Exhibit 4.2b, filed March 9, 1990, as part of Post-Effective
Amendment No. 1 to the Registrant's registration statement on
Form S-1, File No. 33-26322.)
4.2c Modified Guaranteed Annuity Contract. (Incorporated by reference
to Exhibit 4(a), filed August 18, 1997, as part of the
Registrant's registration statement on Form S-3, File No.
333-33863.)
4.3 Individual Tax-Sheltered Annuity Certificate, ML-AY-372. (Incorporated
by reference to Exhibit 4.3, filed February 23, 1989, as part of
Pre-Effective Amendment No. 1 to the Registrant's registration statement
on Form S-1, File No. 33-26322.)
4.3a Individual Tax-Sheltered Annuity Certificate, ML-AY-372 KS.
(Incorporated by reference to Exhibit 4.3a, filed March 9, 1990, as part
of Post-Effective Amendment No. 1 to the Registrant's registration
statement on Form S-1, File No. 33-26322.)
4.4 Qualified Retirement Plan Certificate, ML-AY-373. (Incorporated by
reference to Exhibit 4.4 to the Registrant's registration statement on
Form S-1, File No. 33-26322, filed January 3, 1989.)
4.4a Qualified Retirement Plan Certificate, ML-AY-373 KS. (Incorporated by
reference to Exhibit 4.4a, filed March 9, 1990, as part of
Post-Effective Amendment No. 1 to the Registrant's registration
statement on Form S-1, File No. 33-26322.)
4.5 Individual Retirement Annuity Certificate, ML-AY-374. (Incorporated by
reference to Exhibit 4.5 to the Registrant's registration statement on
Form S-1, File No. 33-26322, filed January 3, 1989.)
4.5a Individual Retirement Annuity Certificate, ML-AY-374 KS. (Incorporated
by reference to Exhibit 4.5a, filed March 9, 1990, as part of
Post-Effective Amendment No. 1 to the Registrant's registration
statement on Form S-1, File No. 33-26322.)
4.5b Individual Retirement Annuity Certificate, ML-AY-375 KS. (Incorporated
by reference to Exhibit 4.5b, filed March 9, 1990, as part of
Post-Effective Amendment No. 1 to the Registrant's registration
statement on Form S-1, File No. 33-26322.)
4.5c Individual Retirement Annuity Certificate, ML-AY-379. (Incorporated by
reference to Exhibit 4.5c, filed March 9, 1990, as part of
Post-Effective Amendment No. 1 to the Registrant's registration
statement on Form S-1, File No. 33-26322.)
4.6 Individual Retirement Account Certificate, ML-AY-375. (Incorporated by
reference to Exhibit 4.6, filed February 23, 1989, as part of
Pre-Effective Amendment No. 1 to the Registrant's registration statement
on Form S-1, File No. 33-26322.)
4.6a Individual Retirement Account Certificate, ML-AY-380. (Incorporated by
reference to Exhibit 4.6a, filed March 9, 1990, as part of
Post-Effective
Amendment No. 1 to the Registrant's registration statement on Form S-1,
File No. 33-26322.)
4.7 Section 457 Deferred Compensation Plan Certificate, ML-AY-376.
(Incorporated by reference to Exhibit 4.7 to the Registrant's
registration statement on Form S-1, File No. 33-26322, filed January 3,
1989.)
4.7a Section 457 Deferred Compensation Plan Certificate, ML-AY-376 KS.
(Incorporated by reference to Exhibit 4.7a, filed March 9, 1990, as part
of Post-Effective Amendment No. 1 to the Registrant's registration
statement on Form S-1, File No. 33-26322.)
4.8 Tax-Sheltered Annuity Endorsement, ML-AY-366. (Incorporated by reference
to Exhibit 4.8 to the Registrant's registration statement on Form S-1,
File No. 33- 26322, filed January 3, 1989.)
4.8a Tax-Sheltered Annuity Endorsement, ML-AY-366 190. (Incorporated by
reference to Exhibit 4.8a, filed March 9, 1990, as part of
Post-Effective Amendment No. 1 to the Registrant's registration
statement on Form S-1, File No. 33-26322.)
4.8b Tax-Sheltered Annuity Endorsement, ML-AY-366 1096. (Incorporated by
reference to Exhibit 4(h)(3), filed March 27, 1997, as part of
Post-Effective Amendment No. 2 to the Registrant's registration
statement on Form S-1, File No. 33-58303.)
4.9 Qualified Retirement Plan Endorsement, ML-AY-364. (Incorporated by
reference to Exhibit 4.9 to the Registrant's registration statement on
Form S-1, File No. 33-26322, filed January 3, 1989.)
4.10 Individual Retirement Annuity Endorsement, ML-AY-368. (Incorporated by
reference to Exhibit 4.10 to the Registrant's registration statement on
Form S-1, File No. 33-26322, filed January 3, 1989.)
4.10a Individual Retirement Annuity Endorsement, ML-AY-368 190. (Incorporated
by reference to Exhibit 4.10a, filed March 9, 1990, as part of
Post-Effective Amendment No. 1 to the Registrant's registration
statement on Form S-1, File No. 33-26322.)
4.10b Individual Retirement Annuity Endorsement, ML009. (Incorporated by
reference to Exhibit 4(j)(3) to Post-Effective Amendment No. 1 to the
Registrant's registration statement on Form S-1, File No. 33-60290,
filed March 31, 1994.)
4.10c Individual Retirement Annuity Endorsement. (Incorporated by reference to
Exhibit 4(b) to Pre-Effective Amendment No. 1 to the Registrant's
registration statement on Form S-3, File No. 333-33863, filed October
31, 1997.)
4.11 Individual Retirement Account Endorsement, ML-AY-365. (Incorporated by
reference to Exhibit 4.11 to the Registrant's registration statement on
Form S-1, File No. 33-26322, filed January 3, 1989.)
4.11a Individual Retirement Account Endorsement, ML- AY-365 190. (Incorporated
by reference to Exhibit 4.11a, filed March 9, 1990, as part of
Post-Effective Amendment No. 1 to the Registrant's registration
statement on Form S-1, File No. 33-26322.)
4.12 Section 457 Deferred Compensation Plan Endorsement, ML-AY-367.
(Incorporated by reference to Exhibit 4.12 to the Registrant's
registration statement on Form S-1, File No. 33-26322, filed January 3,
1989.)
4.12a Section 457 Deferred Compensation Plan Endorsement, ML-AY-367 190.
(Incorporated by reference to Exhibit 4.12a, filed March 9, 1990, as
part of Post-Effective Amendment No. 1 to the Registrant's registration
statement on Form S-1, File No. 33-26322.)
4.13 Qualified Plan Endorsement, ML-AY-369. (Incorporated by reference to
Exhibit 4.13 to the Registrant's registration statement on Form S-1,
File No. 33-26322, filed January 3, 1989.)
4.13a Qualified Plan Endorsement, ML-AY-448. (Incorporated by reference to
Exhibit 4.13a, filed March 9, 1990, as part of Post-Effective Amendment
No. 1 to the Registrant's registration statement on Form S-1, File No.
33-26322.)
4.13b Qualified Plan Endorsement. (Incorporated by reference to Exhibit 4(c),
filed October 31, 1997, as part of Pre-Effective Amendment No. 1 to the
Registrant's registration statement on Form S-3, File No. 333-33863.)
4.14 Application for Group Modified Guaranteed Annuity Contract.
(Incorporated by reference to Exhibit 4.14 to the Registrant's
registration statement on Form S-1, File No. 33-26322, filed January 3,
1989.)
4.15 Annuity Application for Individual Certificate Under Modified Guaranteed
Annuity Contract. (Incorporated by reference to Exhibit 4.15 to the
Registrant's registration statement on Form S-1, File No. 33-26322,
filed January 3, 1989.)
4.15a Application for Modified Guaranteed Annuity Contract. (Incorporated by
reference to Exhibit 4(d), filed August 18, 1997, as part of the
Registrant's registration statement on Form S-3, File No. 333-33863.)
4.16 Form of Company Name Change Endorsement. (Incorporated by reference to
Exhibit 4.16, filed September 5, 1991, as part of Post-Effective
Amendment No. 4 to the Registrant's registration statement on Form S-1,
File No. 33-26322.)
4.17 Group Modified Guaranteed Annuity Contract, ML-AY-361/94. (Incorporated
by reference to Exhibit 4(a)(2), filed December 7, 1994, as part of
Post-Effective Amendment No. 3 to the Registrant's registration
statement on Form S-1, File No. 33-60290.)
4.18 Individual Certificate, ML-AY-362/94. (Incorporated by reference to
Exhibit 4(b)(4), filed December 7, 1994, as part of Post-Effective
Amendment No. 3 to the Registrant's registration statement on Form S-1,
File No. 33-60290.)
4.19 Individual Tax-Sheltered Annuity Certificate, ML-AY-372/94.
(Incorporated by reference to Exhibit 4(c)(3), filed December 7, 1994,
as part of Post-Effective Amendment No. 3 to the Registrant's
registration statement on Form S-1, File No. 33-60290.)
4.20 Qualified Retirement Plan Certificate, ML-AY-373/94. (Incorporated by
reference to Exhibit 4(d)(3), filed December 7, 1994, as part of
Post-Effective Amendment No. 3 to the Registrant's registration
statement on Form S-1, File No. 33-60290.)
4.21 Individual Retirement Annuity Certificate, ML-AY-374/94. (Incorporated
by reference to Exhibit 4(e)(5), filed December 7, 1994, as part of
Post-Effective Amendment No. 3 to the Registrant's registration
statement on Form S-1, File No. 33-60290.)
4.22 Individual Retirement Account Certificate, ML-AY-375/94. (Incorporated
by reference to Exhibit 4(f)(3), filed December 7, 1994, as part of
Post-Effective Amendment No. 3 to the Registrant's registration
statement on Form S-1, File No. 33-60290.)
4.23 Section 457 Deferred Compensation Plan Certificate, ML-AY-376/94.
(Incorporated by reference to Exhibit 4(g)(3), filed December 7, 1994,
as part of Post-Effective Amendment No. 3 to the Registrant's
registration statement on Form S-1, File No. 33-60290.)
4.24 Qualified Plan Endorsement, ML-AY-448/94. (Incorporated by reference to
Exhibit 4(m)(3), filed December 7, 1994, as part of Post-Effective
Amendment No. 3 to the Registrant's registration statement on Form S-1,
File No. 33-60290.)
10.1 Management Services Agreement between Family Life Insurance Company and
Merrill Lynch Life Insurance Company. (Incorporated by reference to
Exhibit 10.1 to the Registrant's registration statement on Form S-1,
File No. 33-26322, filed January 3, 1989.)
10.2 General Agency Agreement between Merrill Lynch Life Insurance Company
and Merrill Lynch Life Agency, Inc. (Incorporated by reference to
Exhibit 10.2, filed
February 23, 1989, as part of Pre-Effective Amendment No. 1 to the
Registrant's registration statement on Form S-1, File No. 33-26322.)
10.3 Service Agreement among Merrill Lynch Insurance Group, Inc., Family Life
Insurance Company and Merrill Lynch Life Insurance Company.
(Incorporated by reference to Exhibit 10.3, filed March 13, 1991, as
part of Post-Effective Amendment No. 2 to the Registrant's registration
statement on Form S-1, File No. 33-26322.)
10.3a Amendment to Service Agreement among Merrill Lynch Insurance Group,
Inc., Family Life Insurance Company and Merrill Lynch Life Insurance
Company. (Incorporated by reference to Exhibit 10(c)(2) to
Post-Effective Amendment No. 1 to the Registrant's registration
statement on Form S-1, File No. 33-60290, filed March 31, 1994.)
10.4 Indemnity Reinsurance Agreement between Merrill Lynch Life Insurance
Company and Family Life Insurance Company. (Incorporated by reference to
Exhibit 10.4, filed March 13, 1991, as part of Post-Effective Amendment
No. 2 to the Registrant's registration statement on Form S-1, File No.
33-26322.)
10.5 Assumption Reinsurance Agreement between Merrill Lynch Life Insurance
Company, Tandem Insurance Group, Inc. and Royal Tandem Life Insurance
Company and Family Life Insurance Company. (Incorporated by reference to
Exhibit 10.6, filed April 24, 1991, as part of Post-Effective Amendment
No. 3 to the Registrant's registration statement on Form S-1, File No.
33-26322.)
10.6 Amended General Agency Agreement between Merrill Lynch Life Insurance
Company and Merrill Lynch Life Agency, Inc. (Incorporated by reference
to Exhibit 10(g) to the Registrant's registration statement on Form S-1,
File No. 33-46827, filed March 30, 1992.)
10.7 Indemnity Agreement between Merrill Lynch Life Insurance Company and
Merrill Lynch Life Agency, Inc. (Incorporated by reference to Exhibit
10(h) to the Registrant's registration statement on Form S-1, File No.
33-46827, filed March 30, 1992.)
10.8 Management Agreement between Merrill Lynch Life Insurance Company and
Merrill Lynch Asset Management, Inc. (Incorporated by reference to
Exhibit 10(i) to the Registrant's registration statement on Form S-1,
File No. 33-46827, filed March 30, 1992.)
10.9 Amendment No. 1 to Indemnity Reinsurance Agreement between Family Life
Insurance Company and Merrill Lynch Life Insurance Company.
(Incorporated by reference to Exhibit 10.5, filed April 24, 1991, as
part of Post-Effective Amendment No. 3 to the Registrant's registration
statement on Form S-1, File No. 33-26322.)
31.1 Certification by the Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification by the Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification by the Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
32.2 Certification by the Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the last quarter.
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.
MERRILL LYNCH LIFE INSURANCE COMPANY
/s/ Joseph E. Justice
-----------------------------------------
Joseph E. Justice
Senior Vice President, Treasurer and
Chief Financial Officer
Date: November 12, 2003
EXHIBIT INDEX
31.1 Certification by the Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification by the Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification by the Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
32.2 Certification by the Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.