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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 JUNE 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)
ARKANSAS 91-1325756
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
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) (Unaudited)
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ASSETS June 30, December 31,
- ------ 2003 2002
---------------- ----------------
INVESTMENTS:
Fixed maturity securities, at estimated fair value
(amortized cost: 2003 - $2,040,399; 2002 - $1,844,077) $ 2,116,326 $ 1,856,732
Equity securities, at estimated fair value
(cost: 2003 - $116,239; 2002 - $112,903) 116,651 105,430
Trading account securities, at estimated fair value 24,685 21,949
Limited partnerships, at cost 12,150 12,150
Policy loans on insurance contracts 1,104,545 1,143,663
---------------- ----------------
Total Investments 3,374,357 3,139,924
CASH AND CASH EQUIVALENTS 174,638 312,217
ACCRUED INVESTMENT INCOME 68,132 63,603
DEFERRED POLICY ACQUISITION COSTS 394,447 404,220
FEDERAL INCOME TAXES - CURRENT - 39,905
REINSURANCE RECEIVABLES 7,319 8,197
AFFILIATED RECEIVABLES - NET - 3,040
RECEIVABLES FROM SECURITIES SOLD 531 10,072
OTHER ASSETS 38,460 37,399
SEPARATE ACCOUNTS ASSETS 9,720,432 9,079,285
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TOTAL ASSETS $ 13,778,316 $ 13,097,862
================ ================
See accompanying notes to financial statements. (Continued)
1
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)
(Unaudited)
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LIABILITIES AND STOCKHOLDER'S EQUITY June 30, December 31,
- ------------------------------------ 2003 2002
----------------- -----------------
LIABILITIES:
POLICYHOLDER LIABILITIES AND ACCRUALS:
Policyholders' account balances $ 2,987,395 $ 3,084,042
Claims and claims settlement expenses 99,669 98,526
----------------- -----------------
Total policyholder liabilities and accruals 3,087,064 3,182,568
OTHER POLICYHOLDER FUNDS 16,930 11,815
LIABILITY FOR GUARANTY FUND ASSESSMENTS 6,811 7,221
FEDERAL INCOME TAXES - DEFERRED 61,411 67,304
FEDERAL INCOME TAXES - CURRENT 31,927 -
PAYABLES FOR SECURITIES PURCHASED 11,079 19,635
AFFILIATED PAYABLES - NET 2,698 -
UNEARNED POLICY CHARGE REVENUE 115,501 113,774
OTHER LIABILITIES 6,203 6,033
SEPARATE ACCOUNTS LIABILITIES 9,713,897 9,072,606
----------------- -----------------
Total Liabilities 13,053,521 12,480,956
----------------- -----------------
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 311,817 290,092
Accumulated other comprehensive income (loss) 13,154 (23,010)
----------------- -----------------
Total Stockholder's Equity 724,795 616,906
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 13,778,316 $ 13,097,862
================= =================
See accompanying notes to financial statements.
2
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
June 30,
-------------------------------------
2003 2002
----------------- ----------------
REVENUES:
Policy charge revenue $ 52,616 $ 60,762
Net investment income 45,362 52,425
Net realized investment gains (losses) 3,553 (9,052)
----------------- ----------------
Total Revenues 101,531 104,135
----------------- ----------------
BENEFITS AND EXPENSES:
Interest credited to policyholders' account balances 32,582 35,867
Market value adjustment expense 1,034 511
Policy benefits (net of reinsurance recoveries: 2003 - $5,196;
2002 - $4,055) 19,278 12,540
Reinsurance premium ceded 5,687 6,080
Amortization of deferred policy acquisition costs 11,540 16,539
Insurance expenses and taxes 12,900 12,557
----------------- ----------------
Total Benefits and Expenses 83,021 84,094
----------------- ----------------
Earnings Before Federal Income Tax Provision 18,510 20,041
FEDERAL INCOME TAX PROVISION (BENEFIT):
Current 28,927 (1,100)
Deferred (22,448) 8,114
----------------- ----------------
Total Federal Income Tax Provision 6,479 7,014
----------------- ----------------
NET EARNINGS $ 12,031 $ 13,027
================= ================
See accompanying notes to financial statements.
3
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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Six Months Ended
June 30,
-------------------------------------
2003 2002
----------------- ----------------
REVENUES:
Policy charge revenue $ 104,433 $ 121,470
Net investment income 89,817 105,800
Net realized investment gains (losses) 5,591 (6,131)
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Total Revenues 199,841 221,139
----------------- ----------------
BENEFITS AND EXPENSES:
Interest credited to policyholders' account balances 65,779 71,811
Market value adjustment expense 2,531 1,167
Policy benefits (net of reinsurance recoveries: 2003 - $10,549;
2002 - $8,764) 38,883 23,163
Reinsurance premium ceded 11,322 12,026
Amortization of deferred policy acquisition costs 24,037 32,131
Insurance expenses and taxes 23,865 24,103
----------------- ----------------
Total Benefits and Expenses 166,417 164,401
----------------- ----------------
Earnings Before Federal Income Tax Provision 33,424 56,738
FEDERAL INCOME TAX PROVISION (BENEFIT):
Current 37,065 11,562
Deferred (25,366) 8,296
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Total Federal Income Tax Provision 11,699 19,858
----------------- ----------------
NET EARNINGS $ 21,725 $ 36,880
================= ================
See accompanying notes to financial statements.
4
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
June 30,
-------------------------------------
2003 2002
----------------- ----------------
NET EARNINGS $ 12,031 $ 13,027
OTHER COMPREHENSIVE INCOME (LOSS):
Net unrealized gains on available-for-sale securities:
Net unrealized holding gains arising during the period 57,928 14,687
Reclassification adjustment for (gains) losses included in net earnings (1,088) 6,629
----------------- ----------------
Net unrealized gains on investment securities 56,840 21,316
Adjustments for:
Policyholder liabilities (18,527) (18,815)
Deferred policy acquisition costs (4,471) (5,296)
Deferred federal income taxes (11,845) 978
----------------- ----------------
Total other comprehensive income (loss), net of taxes 21,997 (1,817)
----------------- ----------------
COMPREHENSIVE INCOME $ 34,028 $ 11,210
================= ================
See accompanying notes to financial statements.
5
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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Six Months Ended
June 30,
-------------------------------------
2003 2002
----------------- ----------------
NET EARNINGS $ 21,725 $ 36,880
OTHER COMPREHENSIVE INCOME (LOSS):
Net unrealized gains (losses) on available-for-sale securities:
Net unrealized holding gains (losses) arising during the period 75,157 (9,239)
Reclassification adjustment for (gains) losses included in net earnings (3,240) 3,667
----------------- ----------------
Net unrealized gains (losses) on investment securities 71,917 (5,572)
Adjustments for:
Policyholder liabilities (9,598) (10,260)
Deferred policy acquisition costs (6,682) 2,200
Deferred federal income taxes (19,473) 4,771
----------------- ----------------
Total other comprehensive income (loss), net of taxes 36,164 (8,861)
----------------- ----------------
COMPREHENSIVE INCOME $ 57,889 $ 28,019
================= ================
See accompanying notes to financial statements.
6
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 21,725 21,725
Other comprehensive income, net of
tax 36,164 36,164
---------- ------------- ------------ --------------- --------------
BALANCE, June 30, 2003 $ 2,500 $ 397,324 $ 311,817 $ 13,154 $ 724,795
========== ============= ============ =============== ==============
See accompanying notes to financial statements.
7
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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Six Months Ended
June 30,
----------------------------------
2003 2002
--------------- ---------------
Cash Flows From Operating Activities:
Net earnings $ 21,725 $ 36,880
Noncash items included in earnings:
Amortization of deferred policy acquisition costs 24,037 32,131
Capitalization of policy acquisition costs (20,946) (18,023)
Amortization of investments 3,998 834
Interest credited to policyholders' account balances 65,779 71,811
Provision (benefit) for deferred Federal income tax (25,366) 8,296
(Increase) decrease in operating assets:
Accrued investment income (4,529) (2,691)
Federal income taxes - current 39,905 -
Reinsurance receivables 878 2,128
Affiliated receivables 3,040 -
Other (1,061) 6,161
Increase (decrease) in operating liabilities:
Claims and claims settlement expenses 1,143 (766)
Other policyholder funds 5,115 (6,157)
Liability for guaranty fund assessments (410) (1,212)
Federal income taxes - current 31,927 (3,622)
Affiliated payables 2,698 3,695
Unearned policy charge revenue 1,727 3,628
Other 170 (2,224)
Other operating activities:
Net realized investment (gains) losses (5,591) 6,131
--------------- ---------------
Net cash and cash equivalents provided by operating activities 144,239 137,000
--------------- ---------------
Cash Flows From Investing Activities:
Proceeds from (payments for):
Sales of available-for-sale securities 171,038 178,336
Maturities of available-for-sale securities 346,104 175,968
Purchases of available-for-sale securities (716,413) (387,438)
Trading account securities (544) 96
Purchases of limited partnerships - (200)
Policy loans on insurance contracts 39,118 25,320
Recapture of investments in separate accounts 1,204 1,042
Investment in separate accounts (301) 2
--------------- ---------------
Net cash and cash equivalents used by investing activities $ (159,794) $ (6,874)
--------------- ---------------
See accompanying notes to financial statements. (Continued)
8
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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Six Months Ended
June 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) 448,633 332,054
Policyholder withdrawals (including transfers from separate accounts) (620,657) (478,539)
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Net cash and cash equivalents used by financing activities (122,024) (177,384)
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NET DECREASE IN CASH AND CASH EQUIVALENTS (137,579) (47,258)
CASH AND CASH EQUIVALENTS:
Beginning of year 312,217 130,429
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End of period $ 174,638 $ 83,171
=============== ==============
Supplementary Disclosure of Cash Flow Information:
Cash paid to (received from) affiliates for:
Federal income taxes $ (34,767) $ 15,184
Intercompany interest (23) 56
See accompanying notes to financial statements.
9
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 six 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 June 30, 2003 and December 31, 2002 were
$222,689 and $136,823, respectively. For the six month periods ended June 30,
2003 and 2002, statutory net income was $43,049 and $13,830, 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:
10
June 30, December 31,
2003 2002
---------------- -----------------
Assets:
Fixed maturity securities $ 75,927 $ 12,655
Equity securities 412 (7,473)
Deferred policy acquisition costs (2,967) 3,715
Separate Accounts assets (2,484) (3,244)
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70,888 5,653
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Liabilities:
Policyholders' account balances 50,650 41,052
Federal income taxes - deferred 7,084 (12,389)
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57,734 28,663
---------------- -----------------
Stockholder's equity:
Accumulated other comprehensive income (loss) $ 13,154 $ (23,010)
================ =================
Net realized investment gains (losses), including other-than-temporary
writedowns in carrying value, for the three and six months ended June 30 were as
follows:
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- ------------------------------
2003 2002 2003 2002
-------------- -------------- -------------- --------------
Available-for-sale securities $ 1,247 $ (8,258) $ 3,400 $ (5,255)
Trading account securities:
Net realized investment gains (losses) 645 (11) 551 119
Net unrealized holding gains (losses) 1,651 (783) 1,641 (1,032)
Investment in Separate Accounts 10 - (1) 37
-------------- -------------- -------------- --------------
Total net realized investment gains
(losses) $ 3,553 $ (9,052) $ 5,591 $ (6,131)
============== ============== ============== ==============
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 Company
is currently assessing the impact of SFAS No. 149 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. Depending on market conditions at the time of adoption, the
impact of implementing this reserve methodology may have a material impact on
the Company's Statements of Earnings.
11
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 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 six month periods
ended June 30:
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------- -------------------------------
2003 2002 2003 2002
--------------- --------------- --------------- ---------------
Net Revenues (a):
Annuities $ 40,402 $ 39,722 $ 77,554 $ 87,109
Life Insurance 25,194 30,453 53,773 62,304
Other 3,353 (1,907) 2,735 (85)
--------------- --------------- --------------- ---------------
Total Net Revenues $ 68,949 $ 68,268 $ 134,062 $ 149,328
=============== =============== =============== ===============
Net Earnings:
Annuities $ 3,949 $ 6,651 $ 6,789 $ 19,666
Life Insurance 5,909 7,615 13,161 17,269
Other 2,173 (1,239) 1,775 (55)
--------------- --------------- --------------- ---------------
Total Net Earnings $ 12,031 $ 13,027 $ 21,725 $ 36,880
=============== =============== =============== ===============
(a) Net revenues include investment income net of interest credited to policyholders' account balances.
12
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 six month periods ended June
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. Dividends and capital gains paid by the mutual funds
held by non-qualified annuities do not qualify for such federal income tax
reductions. Pending future Congressional action, these federal income tax rate
reductions are set to expire after 2008. These recently enacted tax rate
reductions may adversely impact tax incentives to save for retirement through
the use of non-qualified annuities versus other investment vehicles. As such,
future sales of non-qualified annuities may be negatively impacted.
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.
13
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 six month periods ended June 30, 2003:
2003
--------------------------------
Second Quarter Six Months
2003 2003
---------------- ------------
Dow 12.4 % 7.7 %
NASDAQ 21.0 % 21.5 %
S&P Index 14.9 % 10.8 %
Despite positive equity market performance during the current three and six
month periods ended June 30, 2003, separate accounts assets and, in turn,
variable contract owner account balances remain at lower levels as compared to
the same periods in 2002. The following table provides the average decrease in
performance for each equity market index for the three and six month periods
ended June 30, 2003 as compared to the same periods in 2002:
2003
--------------------------------
Second Quarter Six Months
2003 2003
---------------- ------------
Dow -9.6 % -15.6 %
NASDAQ -1.8 % -15.5 %
S&P Index -8.9 % -17.2 %
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 six
month periods ended June 30, 2003, medium term interest rates decreased
approximately 63 basis points and 73 basis points, respectively, to yield, on
average, 1.80% during the current six month period. During the three and six
month periods
14
ended June 30, 2002, medium term interest rates decreased approximately 80 basis
points and 36 basis points, respectively, to yield, on average, 3.30% during the
six 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 six month periods ended June 30, 2003, credit spreads contracted
approximately 41 basis points and 89 basis points, respectively, and ended the
current six month period at 109 basis points. During the three and six month
periods ended June 30, 2002, credit spreads widened approximately 13 basis
points and 14 basis points, respectively, and ended the six month period at 192
basis points.
NEW BUSINESS
Annuity and life insurance premiums increased $108.2 million (or 68%) to $266.8
million and $105.2 million (or 30%) to $461.2 million during the current three
and six month periods ended June 30, 2003, respectively, as compared to the same
periods in 2002. Annuity and life insurance premiums by type of product were as
follows:
($ In Millions) % Change
--------------------------------- --------------------------------
Second Quarter Six Months Second Quarter Six Months
2003 2003 2003-2002 2003-2002
-------------- --------------- --------------- --------------
Variable Annuities:
B-Share $ 220.7 $ 361.4 250 % 164 %
C-Share 22.6 56.3 -45 -45
L-Share 4.9 8.7 -70 -82
-------------- --------------- --------------- --------------
248.2 426.4 106 48
-------------- --------------- --------------- --------------
Variable Life Insurance 8.0 18.5 -30 -29
Modified Guaranteed Annuities 3.7 6.1 -85 -83
Other 6.9 10.2 165 59
-------------- --------------- --------------- --------------
Total Direct Premiums $ 266.8 $ 461.2 68 % 30 %
============== =============== =============== ==============
During the current three and six month periods, variable annuity premiums
increased $127.7 million (or 106%) to $248.2 million and $138.8 million (or 48%)
to $426.4 million, respectively, as compared to the same periods in 2002.
Management attributes the increase in variable annuity premiums to the
introduction of a new B-Share variable annuity product. Sales of the new B-Share
variable annuity product were $157.6 million and $246.6 million during the
current three and six month periods ended June 30, 2003, respectively. The new
B-Share variable annuity product, which was introduced during the fourth quarter
of 2002, is designed for the tax-qualified IRA market and includes a guaranteed
minimum income benefit provision. Prior to the fourth quarter of 2002 the
Company did not offer any variable annuity products that contained a guaranteed
minimum income benefit provision. Also, during the fourth quarter of 2002, the
Company added a guaranteed minimum income benefit provision to its existing
B-Share variable annuity. The C-Share and L-Share variable annuities do not
contain such a feature. There is increasing customer demand for annuity products
that offer various types of guarantee provisions, such as fixed rate products,
variable products with fixed account options, variable products with guaranteed
minimum income benefits, or variable products with guaranteed minimum account
values.
During the current three and six month periods, modified guaranteed annuity
premiums decreased $20.4 million (or 85%) to $3.7 million and $29.9 million (or
83%) to $6.1 million, respectively, as compared to the same periods in 2002. The
decreases are primarily due to the lower interest rate environment during the
current three and six month periods of 2003 as compared to 2002.
15
WITHDRAWALS
Policy and contract withdrawals decreased $31.5 million (or 11%) to $256.8
million and $33.9 million (or 6%) to $521.7 million during the current three and
six month periods, respectively, as compared to the same periods in 2002. During
the current three and six month periods ended June 30, 2003, variable annuity
withdrawals decreased $37.6 million (or 19%) and $47.0 million (or 13%) 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, which has resulted in decreased asset
balances, and thus lower withdrawal activity. In addition, modified guaranteed
annuity withdrawals decreased $8.8 million (or 23%) and $9.3 million (or 14%)
during the current three and six 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 $14.4 million (or 30%) and $28.4
million (or 29%) during the current three and six month periods as compared to
the same periods in 2002.
FINANCIAL CONDITION
At June 30, 2003, the Company's assets were $13.8 billion, or $680.5 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 $641.1
million (or 7%) to $9.7 billion. Changes in separate account assets for the
first two quarters of 2003 were as follows:
1Q03 2Q03 Total
------------ ------------ --------------
(In Millions)
Investment performance - variable
products $ (171.0) $ 948.2 $ 777.2
Net cash outflow - variable products (99.7) (36.3) (136.0)
Net change in seed money (0.3) 0.2 (0.1)
------------ ------------ --------------
$ (271.0) $ 912.1 $ 641.1
============ ============ ==============
At June 30, 2003 and December 31, 2002, approximately $110.2 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 June 30, 2003, approximately $203.2
million (or 10%) 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 Company closely monitors such investments.
During the first six months of 2003, the Company experienced contract owner
withdrawals that exceeded deposits by $234.7 million. The components of contract
owner transactions were as follows:
June 30,
2003
--------------
(In Millions)
Premiums collected $ 461.2
Internal tax-free exchanges (12.6)
--------------
Net contract owner deposits 448.6
Contract owner withdrawals 620.7
Net transfers from separate accounts 62.6
--------------
Net contract owner withdrawals 683.3
--------------
Net contract owner activity $ (234.7)
==============
16
LIQUIDITY AND CAPITAL RESOURCES
To fund all business activities, the Company maintains a high quality and liquid
investment portfolio. As of June 30, 2003, the Company's assets included $2.3
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 June 30, 2003 and 2002, the Company reported
net earnings of $12.0 million and $13.0 million, respectively. For the six month
periods ended June 30, 2003 and 2002, the Company reported net earnings of $21.7
million and $36.9 million, respectively.
Policy charge revenue decreased $8.1 million (or 13%) and $17.0 million (or 14%)
during the current three and six month periods ended June 30, 2003,
respectively, as compared to the same periods in 2002. The decreases in policy
charge revenue are primarily attributable to the decrease in average variable
account balances. Average variable account balances decreased $1.3 billion (or
12%) and $1.7 billion (or 16%) during the current three and six month periods as
compared to the same periods in 2002. During the same comparative periods,
asset-based policy charge revenue decreased $5.5 million (or 14%) and $11.8
million (or 15%). In addition, non-asset based policy charge revenue decreased
$2.6 million (or 12%) and $5.2 million (or 12%) during the current three and six
month periods ended June 30, 2003, 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 $3.8 million (or 23%) and
$10.0 million (or 29%) during the current three and six month periods ended June
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 the lower
interest rate environment during the current three and six month periods of 2003
as compared to 2002. In addition, during the first six months of 2003, interest
spread was negatively impacted by a decrease of $1.3 million in real estate
income. The Company sold its remaining real estate holding during the fourth
quarter 2002.
Net realized investment gains increased $12.6 million and $11.7 million during
the current three and six month periods ended June 30, 2003, respectively, as
compared to the same periods in 2002. The following table provides the changes
in net realized investment gains by type for each respective period:
Three Months Six Months
Net Realized Gains 2003 - 2002 2003 - 2002
------------------------------------- --------------- ---------------
($ in Millions)
Credit related $ 7.4 $ 5.0 (1)
Interest related 2.1 3.6 (2)
Trading account 3.1 3.1 (3)
--------------- ---------------
$ 12.6 $ 11.7
=============== ===============
(1) Increases are primarily due to a decrease in other-than-temporary
("OTT") declines in the carrying value of fixed maturity securities.
During the second quarter of 2002, OTT declines on investments in
fixed maturity securities issued by WorldCom Inc. were $9.2 million.
During the second quarter of 2003, OTT declines on investments in
fixed maturity securities were $1.8 million.
17
(2) Increases are primarily attributable to increases in invested asset
market valuations resulting from lower interest rates and contracting
credit spreads during the current three and six month periods of 2003
as compared to 2002.
(3) The trading account is comprised of convertible debt and convertible
preferred equity securities. The valuations of these securities will
generally fluctuate in a direct relationship to changes in the
valuations of the underlying common equity.
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 six month periods ended June 30, 2003, the market value
adjustment expense increased $0.5 million (or 102%) and $1.4 million (or 117%)
as compared to the same periods in 2002. The increases are primarily due to the
lower interest rate environment during the current three and six month periods
of 2003 as compared to 2002. The market value adjustment expense has an inverse
relationship to changes in interest rates.
Policy benefits increased $6.7 million (or 54%) and $15.7 million (or 68%)
during the current three and six month periods ended June 30, 2003,
respectively, as compared to the same periods in 2002. The increases in policy
benefits are primarily due to increased variable annuity death benefit payments
incurred under guaranteed minimum death benefit provisions.
Reinsurance premium ceded decreased $0.4 million (or 6%) and $0.7 million (or
6%) during the current three and six month periods ended June 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 decreased $5.0 million (or
30%) and $8.1 million (or 25%) during the current three and six month periods
ended June 30, 2003, as compared to the same periods in 2002. The decreases in
amortization of deferred policy acquisition costs are primarily due to the
decrease in policy charge revenue during 2003.
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 six month periods ended June 30, 2003 are primarily due to trading
account gains incurred during the second quarter 2003.
18
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.
19
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: August 13, 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.