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-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NgUlFO5z/zU3tMURv8/zQf4R/jOJO/9vJwSPVIfs15evZBhFrym26I4DNe/aAgx9 4ifKlBXr3xLWM9r73D7cyw== 0000950133-08-001277.txt : 20080327 0000950133-08-001277.hdr.sgml : 20080327 20080327151904 ACCESSION NUMBER: 0000950133-08-001277 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20071231 FILED AS OF DATE: 20080327 DATE AS OF CHANGE: 20080327 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERRILL LYNCH LIFE INSURANCE CO CENTRAL INDEX KEY: 0000845091 IRS NUMBER: 911325756 STATE OF INCORPORATION: AR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-26322 FILM NUMBER: 08714904 BUSINESS ADDRESS: STREET 1: 4333 EDGEWOOD ROAD, NE CITY: CEDAR RAPIDS STATE: IA ZIP: 52499-0001 BUSINESS PHONE: 800-346-3677 MAIL ADDRESS: STREET 1: 4333 EDGEWOOD ROAD, NE CITY: CEDAR RAPIDS STATE: IA ZIP: 52499-0001 10-K 1 w50994e10vk.htm FORM 10-K e10vk

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007

Commission File Nos. 33-26322; 33-46827; 33-52254; 33-60290; 33-58303; 333-33863; 333-133223; 333-133225

MERRILL LYNCH LIFE INSURANCE COMPANY
(Exact name of Registrant as specified in its charter)


Arkansas		91-1325756

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4333 Edgewood Road, NE
Cedar Rapids, Iowa 52499-0001

(Address of Principal Executive Offices)

(800) 346-3677

(Registrant’s telephone no. including area code)

Securities registered pursuant to Section 12(b) or 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [ ] Yes [X] No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. [ ] Yes [X] No

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. [X] Yes __ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

o large accelerated filer o accelerated filer þ non-accelerated filer o smaller reporting company

Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). [ ] Yes [X] No

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: Not applicable.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Common 250,000

REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a) AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.

Item 1. Business

On December 28, 2007 (the “Acquisition Date”), Merrill Lynch Life Insurance Company (“the Registrant” or “MLLIC”) and its affiliate, ML Life Insurance Company of New York (“MLLICNY”) were acquired by AEGON USA, Inc. (“AUSA”) for $1.12 billion and $0.13 billion, respectively for a total price for both entities of $1.25 billion. AUSA is an indirect wholly owned subsidiary of AEGON N.V., a limited liability share company organized under Dutch law. AEGON N.V. and its subsidiaries and joint ventures have life insurance and pension operations in over 10 countries in Europe, the Americas, and Asia and are also active in savings and investment operations, accident and health insurance, general insurance and limited banking operations in a number of these countries. Prior to the Acquisition Date, MLLIC was a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc. (“MLIG”), which is an indirect wholly owned subsidiary of Merrill Lynch & Co., Inc. (“ML&Co.”).

The Registrant is a life insurance company engaged in the sale of annuity products. The Registrant was incorporated under the laws of the State of Washington on January 27, 1986 and redomesticated to the State of Arkansas on August 31, 1991. The Registrant is currently subject to primary regulation by the Arkansas Insurance Department.

Information pertaining to contract owner deposits, contract owner account balances, and capital contributions can be found in the Registrant’s financial statements which are contained herein.

The Registrant is currently licensed in 49 states, the District of Columbia, the Virgin Islands, and Guam. During 2007, life insurance and/or annuity sales were made in all states the Registrant was licensed in, with the largest concentration in Florida, 11%, Texas, 10%, Illinois, 7%, New Jersey, 7%, California, 7%, and Pennsylvania, 6%, as measured by total contract owner deposits.

The Registrant’s annuity products are sold by licensed agents of Merrill Lynch Life Agency, Inc. (“MLLA”), a wholly owned subsidiary of Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), pursuant to a general agency agreement by and between the Registrant and MLLA. At December 31, 2007, approximately 14,389 agents of MLLA were authorized to act for the Registrant.

The Registrant makes available, free of charge, annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. This information is available through Our Insurance Companies section of the AUSA website at www.aegonins.com. These reports are available through the website as soon as reasonably practicable after the Registrant electronically files such material with, or furnishes it to, the Securities and Exchange Commission.

Item 1A. Risk Factors

Risk Factors that Could Affect Merrill Lynch Life Insurance Company

In the course of conducting its business operations, Merrill Lynch Life Insurance Company (herein referred to as “MLLIC”, “we”, “our”, or “us”) could be exposed to a variety of risks that are inherent to the insurance industry. A summary of some of the significant risks that could affect MLLIC’s financial condition and results of operations is included below. Some of these risks are managed in accordance with established risk management policies and procedures.

Competitive Environment

Industry trends could adversely affect our financial results

MLLIC is influenced by a variety of trends that affect the insurance industry. The product development and product life-cycles have shortened in many product segments, leading to more intense competition with respect to product features and benefits. In addition, several of the industry’s products can be quite homogeneous and subject to intense price competition, and sufficient scale, financial strength, and superior customer service are becoming prerequisites for sustainable growth in the life insurance industry.

Competitive factors may adversely affect our market share and financial results

MLLIC is subject to intense competition. We compete based on a number of factors including name recognition, service, product features, price, perceived financial strength, and claims-paying and credit ratings. MLLIC competes with a large number of other insurers for insurance products, as well as non-insurance financial services companies for investment products.

Competitors of MLLIC have applied for, and in some cases obtained, business method patents on such things as investment techniques, contract administration, and strategies to avoid or reduce taxes among others. Competition with such companies may materially increase MLLIC’s costs, reduce its revenues, or adversely affect MLLIC’s ability to manufacture or distribute its products.

Regulatory and Legislative Risks

The insurance industry is heavily regulated and changes in regulation may adversely affect our financial results

The life insurance industry is regulated at the state level, with some products also subject to federal regulation. Various federal and state securities regulators and self-regulatory organizations (including the Securities and Exchange Commission, New York Stock Exchange, and FINRA), as well as industry participants continued to review and, in many cases, adopt changes to their established rules and policies in areas such as corporate governance, variable annuity distribution practices, disclosure practices and auditor independence.

MLLIC is subject to a wide variety of insurance and other laws and regulations. As life insurers introduce new and often more complex products, regulators refine capital requirements and introduce new reserving standards for the life insurance industry. Regulations recently adopted or currently under review can potentially impact the reserving/capital requirements and marketing/sales practices for certain products, particularly variable annuities and the optional guaranteed benefits offered with these products.

Compliance with applicable laws and regulations is time consuming and personnel-intensive, and changes in these laws and regulations may materially increase MLLIC’s direct and indirect compliance and other expenses of doing business, thus having a material adverse effect on financial results.

Changes in tax legislation could make certain insurance products less attractive to consumers

Changes in tax laws could make variable annuities less attractive to consumers. For example, enacted reductions in the federal income tax that individual investors are required to pay on dividends and capital gains on stocks and mutual funds provide an incentive for some customers and potential customers to shift assets into mutual funds, and away from variable annuity products. These enacted tax rate reductions may impact the relative attractiveness of annuities as compared to stocks and mutual funds.

MLLIC cannot predict whether any other legislation will be enacted, what the specific terms of any such legislation will be or how, if at all, this legislation or any other legislation could have a material adverse effect on financial condition and results of operations.

Market Risk

Changes in equity markets and other factors may significantly affect our financial results

The fee revenue that is earned on equity-based separate accounts assets is based upon account values. As strong equity markets result in higher account value, strong equity markets positively affect our results of operations through increased policy charge revenue. Conversely, a weakening of the equity markets results in lower fee income and may have a material adverse effect on our results of operations and capital resources.

The increased fee revenue resulting from strong equity markets increases the expected gross profits (“EGPs”) from variable insurance products as do lower than expected lapses, mortality rates, and expenses. As a result, the higher EGPs may result in lower new amortized costs related to deferred acquisition costs (“DAC”), deferred sales inducements (“DSI”), and value of business acquired (“VOBA”). However, a decrease in the equity markets as well as increases in lapses, mortality rates, and expenses depending upon their significance, may result in higher net amortized costs associated with DAC, DSI, and VOBA and may have a material adverse effect on our results of operations and capital resources. For more information on DAC, DSI, and VOBA amortization, see “Item 7 – Management’s Narrative Analysis of Results of Operations – Critical Accounting Policies” below.

Changes in equity markets and interest rates affects the profitability of our products with guaranteed benefits, therefore, such changes may have a material adverse effect on our financial results

The amount of liabilities related to the guaranteed minimum death benefits (“GMDB”) and guaranteed minimum income benefits (“GMIB”) for variable annuities is tied to the difference between the value of the underlying accounts and the guaranteed death or income benefit, calculated using a benefit ratio approach. The GMDB and GMIB liabilities take into account the present value of total expected GMDB and GMIB payments and the present value of total expected assessments over the life of the contract and claims and assessments to date. Both the level of expected GMDB and GMIB payments and expected total assessments used in calculating the benefit ratio are affected by the equity markets. Accordingly, a decrease in the equity markets will increase the net amount at risk under the GMDB and the GMIB benefits we offer as part of our variable annuity products, which has the effect of increasing the amount of GMDB and GMIB liabilities we must record.

The amount of liabilities related to the guaranteed minimum withdrawal benefits (“GMWB”) for variable annuities are based on the fair value of the underlying benefit. The liabilities related to GMWB benefits valued at fair value are impacted by changes in equity markets and interest rates. Accordingly, strong equity markets and increases in interest rates will generally decrease the amount of GMWB liabilities. Conversely, a decrease in the equity markets, along with a decrease in interest rates, will result in an increase in the GMWB liabilities we must record.

The amount of liabilities related to the reinsurance of guaranteed minimum income benefits (“GMIB reinsurance”) for variable annuities is based on the fair value of the underlying benefit. The liabilities related to the GMIB reinsurance benefits valued at fair value are impacted by changes in equity markets and interest rates. Accordingly, strong equity markets and increases in interest rates will generally decrease the amount of the GMIB reinsurance liability. Conversely, a decrease in the equity markets, along with a decrease in interest rates, will generally result in an increase in the GMIB reinsurance liabilities we must record.

Changes in the guaranteed benefits would result in a charge to earnings in the quarter in which the liabilities are increased or decreased.

Credit Risk

Impairments in the value of the investment portfolio may adversely affect our financial results

MLLIC is subject to the risk that the issuers of the securities owned may default on principal and interest payments owed. The occurrence of a major economic downturn, acts of corporate malfeasance or other events that adversely affect the issuers of these securities could cause the value of the portfolio to decline and/or the default rate to increase. A ratings downgrade affecting particular issuers or securities could also have a similar effect. Any event reducing the value of these securities other than on a temporary basis could have a material adverse effect on our financial results.

Interest Rate Risk

Changes in market interest rates may adversely affect our financial results

The profitability of our fixed life and annuity products depends in part on interest rate spreads, therefore, interest rate fluctuations could negatively affect our financial results. Some of our fixed products have interest rate guarantees that expose us to the risk that changes in interest rates will reduce our “spread” or the difference between the amounts that we are required to pay under the contracts and the amounts we are able to earn on our general account investments intended to support our obligations under the contracts. Declines in our spread or instances where the returns on our general account investments are not enough to support the interest rate guarantees on these products could have a material adverse effect on our financial results.

In periods of increasing interest rates, we may not be able to replace the assets in our general account with higher yielding assets needed to fund the higher crediting rates necessary to keep our products competitive. We therefore may have to accept a lower spread and thus lower profitability or face a decline in sales and greater loss of existing contracts and related assets. In periods of declining interest rates, we have to reinvest the cash we receive as interest or return of principal on our investments in lower yielding instruments then available. Moreover, borrowers may prepay fixed-income securities in our general account in order to borrow at lower market rates, which exacerbates this risk. As we are entitled to reset the interest rates on our fixed rate annuities only at limited, pre-established intervals, and since many of our policies have guaranteed minimum interest or crediting rates, our spreads could decrease and potentially become negative.

Increases in interest rates may cause increased surrenders and withdrawals of insurance products. In periods of increasing interest rates, policy loans and surrenders and withdrawals of life insurance policies and annuity contracts may increase as policyholders seek products with perceived higher returns. This process may lead to cash outflows of our existing block of business. These outflows may require investment assets to be sold at a time when the prices of those assets are lower because of the increase in market interest rates, which may result in realized investment losses. A sudden demand among policyholders to change product types or withdraw funds could lead us to sell assets at a loss to meet funding demands.

Liquidity Risk

Business and financial results may be adversely impacted by an inability to sell assets to meet maturing obligations

MLLIC could be exposed to liquidity risk, which is the potential inability to sell assets that can be quickly converted into cash obligations. MLLIC’s liquidity may be impaired due to circumstances that it may be unable to control, such as general market disruptions or an operational problem. MLLIC’s ability to sell assets may also be impaired if other market participants are seeking to sell similar assets at the same time. The inability of MLLIC to sell assets to meet maturing obligations, a negative change in its credit ratings, or regulatory capital restrictions, may have a negative effect on financial results.

Underwriting Risk

Differences between actual claims experience and underwriting and reserving assumptions may require liabilities to be increased, which may have a material adverse effect on our financial results

Our earnings depend upon the extent to which actual claims experience is consistent with the assumptions used in setting the prices for products and establishing the technical provisions and liabilities for claims. To the extent that actual claims experience is less favorable than the underlying assumptions used in establishing such liabilities, earnings would be reduced. Furthermore, if these higher claims were part of a trend, we may be required to increase our liabilities, which may also reduce income. In addition, certain acquisition costs related to the sale of new policies and the purchase of policies already in force have been recorded as assets on the balance sheet and are being amortized into earnings over time. If the assumptions relating to the future profitability of these policies (such as future claims, investment income, and expenses) are not realized, the amortization of these costs may be accelerated and may require write-offs due to unrecoverability. This may have a material adverse effect on our financial results.

Concentration Risk

The use of a single distribution channel may adversely affect our financial results

Our insurance products are sold solely through the ML&Co. distribution channel. If an unfavorable development occurs with respect to this distribution source, it may adversely impact our financial results.

Other Risks

Inadequate or failed processes or systems, human factors or external events may adversely affect our profitability, reputation or operational effectiveness

Operational risk is inherent in our business and can manifest itself in many ways including business interruption, poor vendor performance, information systems malfunctions or failures, regulatory breaches, human errors, employee misconduct, and/or internal and external fraud. These events can potentially result in financial loss, harm to our reputation, and hinder our operational effectiveness.

We may have difficulty transitioning into AUSA’s business model and may incur unexpected costs in connection with the integration

We may experience material unanticipated difficulties or expenses in connection with the transition of our business subsequent to AUSA’s acquisition from MLIG. Integrating the business is a complex, time-consuming and expensive process. Before the acquisition by AUSA, we had our own systems, culture, customers and products. We may seek to transition certain operations and functions to common information and communication systems, operating procedures and financial controls. We may be unsuccessful or delayed in implementing the integration of these systems and processes, which may cause increased operating costs, worse than anticipated financial performance or the loss of clients and agents.

Litigation and regulatory investigations may adversely affect our business, results of operations, and financial condition

In recent years, the insurance industry has increasingly been the subject of litigation, investigation, and regulatory activity by various governmental and enforcement authorities concerning common industry practices such as the disclosure of contingent commissions. We cannot predict at this time the effect this current trend towards litigation and investigation will have on the insurance industry or to our business. Lawsuits, including class actions and regulatory actions, may be difficult to assess or quantify, may seek recovery of very large and/or indeterminate amounts, including punitive and treble damages, and their existence and magnitude may remain unknown for substantial periods of time. A substantial legal liability or significant regulatory action could have a material adverse effect on our business, results of operations, and financial condition.

Item 1B. Unresolved Staff Comments

Not Applicable.

Item 2. Properties

The Registrant’s home office is located in Little Rock, Arkansas. Personnel performing services for the Registrant operate in MLIG office space, which occupies certain office space in Pennington, New Jersey through ML&Co. In addition, personnel performing services for the Registrant also operate in office space in Jacksonville, Florida, which is owned by ML&Co.

Prior to the Acquisition Date, the services were pursuant to the Registrant’s Management Services agreement with MLIG. An allocable share of the cost of each of the above mentioned premises was paid by the Registrant through the service agreement with MLIG.

Subsequent to the Acquisition Date, ML&Co. and AUSA entered into a transition services agreement whereby ML&Co. is to provide certain outsourced services required for the normal operations of the business. An allocable share of the cost of each of the abovementioned premises is paid by the Registrant through the transition service agreement with ML&Co.

Item 3. Legal Proceedings

There is no material pending litigation to which the Registrant is a party or of which any of its property is the subject and there are no legal proceedings contemplated by any governmental authorities against the Registrant of which it has any knowledge.

Item 4. Submission of Matters to a Vote of Security Holders

Information called for by this item is omitted pursuant to General Instruction I. of Form 10-K.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

(a)

The Registrant is a wholly owned subsidiary of AUSA. There is no public trading market for the Registrant’s common stock.

During 2007, the Registrant paid a dividend of $193.7 million to MLIG, of which $41.6 million were ordinary dividends. During 2006, the Registrant paid a dividend of $180.0 million to MLIG, of which $39.8 million were ordinary dividends. During 2005, the Registrant did not pay a dividend. No other cash or stock dividends have been declared on Registrant’s common stock at any time during the two most recent fiscal years. Under laws applicable to insurance companies domiciled in the State of Arkansas, the Registrant’s ability to pay extraordinary dividends on its common stock is restricted. See Note 10 to the Registrant’s Financial Statements.

	(b)		Not applicable.

	(c)		Not applicable.

Item 6. Selected Financial Data

Information called for by this item is omitted pursuant to General Instruction I. of Form 10-K.

Item 7. Management’s Narrative Analysis of Results of Operations

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

Forward Looking Statements

The statements contained in this Report that are not historical facts are forward-looking statements as defined in the US Private Securities Litigation Reform Act of 1995. The following are words that identify such forward-looking statements: believe, estimate, target, intend, may, expect, anticipate, predict, project, counting on, plan, continue, want, forecast, should, would, is confident, will, and similar expressions as they relate to our company. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict.

Such risks and uncertainties include but are not limited to the following:

Changes in general economic conditions;

Changes in the performance of financial markets, including emerging markets, such as with regard to:

	a)		The frequency and severity of defaults by issuers in our fixed income investment portfolios; and

	b)		The effects of corporate bankruptcies and/or accounting restatements on the financial markets and the resulting decline in the value of equity and debt securities we hold;

The frequency and severity of insured loss events;

Changes affecting mortality and other factors that may impact the profitability of our insurance products;

Changes affecting interest rate levels and continuing low or rapidly changing interest rate levels;

Increasing levels of competition;

Changes in laws and regulations, particularly those affecting our operations, the products we sell, and the attractiveness of certain products to our customers;

8)		Regulatory changes relating to the insurance industry in the jurisdictions in which we operate;

9)		Acts of God, acts of terrorism, acts of war and pandemics;

10)		Changes in the policies of central banks and/or governments;

11)		Litigation or regulatory actions that could require us to pay significant damages or change the way we do business;

12)		Customer responsiveness to both new products and distribution channels;

13)

Competitive, legal, regulatory or tax changes that affect the distribution cost of or demand for our products; and

14)

Our failure to achieve anticipated levels of earnings or operational efficiencies as well as other cost saving initiatives

We undertake no obligation to publicly update or revise any forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which merely reflect company expectations at the time of the writing. Actual results may differ materially from expectations conveyed in forward-looking statements due to changes caused by various risks and uncertainties. The reader should, however, consult any further disclosures MLLIC may make in future filings of its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.

Business Overview

MLLIC conducts its business primarily in the annuity markets and to a lesser extent in the life insurance markets of the financial services industry. These markets are highly regulated with particular emphasis on company solvency and sales practice monitoring. Demographically, the population is aging and there are a growing number of individuals preparing for retirement, which favors life insurance and annuity products. MLLIC currently offers the following guaranteed benefits within its variable annuity product suite: guaranteed minimum death benefits (GMDB’s), guaranteed minimum income benefits (GMIB’s) and guaranteed minimum withdrawal benefits (GMWB’s). MLLIC believes that the demand for retirement products containing guarantee features will continue to increase in the future. MLLIC believes it is positioned to continue meeting these demands for guaranteed benefits.

Acquisition

On December 28, 2007, AUSA completed the acquisition of MLLIC and its affiliate MLLICNY. In accordance with Statement of Financial Accounting Standard (“SFAS”) No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangibles, the acquisition is being accounted for by AUSA using the purchase method of accounting, which requires the assets and liabilities of MLLIC to be identified and measured at their estimated fair values as of the Acquisition Date. The estimated fair values are subject to adjustment of the initial allocation for a one-year period as more information relative to the fair values as of the Acquisition Date becomes available.

As a result, MLLIC follows AUSA’s accounting policies subsequent to the Acquisition Date. This new basis of accounting is referred to as the “successor basis”, while the historical basis of accounting is referred to as the “predecessor basis’’. In general, Balance Sheet amounts at December 31, 2007 are representative of the successor basis of accounting while Statements of Earnings, Comprehensive Income, and Cash Flows amounts for 2007 are representative of the predecessor basis of accounting. Financial Statements included herein for periods prior and subsequent to the Acquisition Date are labeled “Predecessor” and “Successor”, respectively. Since the actual results between the period December 28, 2007 and December 31, 2007 were not material, MLLIC has utilized December 31, 2007 as the Acquisition Date herein.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses. Estimates, by their nature, are based on judgment and available information. Therefore, actual results could differ and could have a material impact on the Financial Statements, and it is possible that such changes could occur in the near term.

MLLIC’s critical accounting policies and estimates are discussed below. See Note 2 to the Financial Statements for additional information regarding accounting policies.

Valuation of Fixed Maturity and Equity Securities

MLLIC’s principal investments are available-for-sale fixed maturity and equity securities as defined by SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. The fair value of publicly traded fixed maturity and equity securities are based on independently quoted market prices. For non-publicly traded fixed maturity and equity securities, MLLIC utilizes pricing services and broker quotes to determine fair value. Since significant judgment is required for the valuation of non-publicly traded securities, the estimated fair value of these securities may differ from amounts realized upon an immediate sale. At December 31, 2007 and December 31, 2006, approximately, $144.5 million (or 10%) and $203.2 million (or 12%), respectively, of MLLIC’s fixed maturity and equity securities portfolio consisted of non-publicly traded securities.

Changes in the fair value of fixed maturity and equity securities are reported as a component of accumulated other comprehensive loss, net of taxes on the Balance Sheets and are not reflected in the Statements of Earnings until a sale transaction occurs or when declines in fair value are deemed other-than-temporary.

Other-Than-Temporary Impairment Losses on Investments

MLLIC regularly reviews each investment in its fixed maturity and equity securities portfolio to evaluate the necessity of recording impairment losses for other-than-temporary (“OTT”) declines in the fair value of investments. Management makes this determination through a series of discussions with MLLIC’s portfolio managers and credit analysts, information obtained from external sources (i.e. company announcements, ratings agency announcements, or news wire services) and MLLIC’s ability and intent to hold the investments for a period of time sufficient for a forecasted market price recovery up to or beyond the amortized cost of the investment. The factors that may give rise to a potential OTT impairment include, but are not limited to, i) certain credit-related events such as default of principal or interest payments by the issuer, ii) bankruptcy of issuer, iii) certain security restructurings, and iv) fair market value less than amortized cost for an extended period of time. In the absence of a readily ascertainable market value, the estimated fair value on these securities represents management’s best estimate and is based on comparable securities and other assumptions as appropriate. Management bases this determination on the most recent information available. OTT impairment losses result in a permanent reduction of the cost basis of the investment. MLLIC did not experience any realized investment losses due to OTT declines in fair value for the years ended December 31, 2007 and December 31, 2006. For the year ended December 31, 2005, MLLIC realized investment losses due to OTT declines in fair value of $1.9 million.

Deferred Policy Acquisition Costs (“DAC”) for Variable Annuities and Variable Life Insurance

The costs of acquiring business, principally commissions, certain expenses related to policy issuance, and certain variable sales expenses that relate to and vary with the production of new and renewal business, are deferred and amortized in accordance with SFAS No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments. DAC is subject to recoverability testing at the time of policy issuance and loss recognition testing at the end of each reporting period. As of December 31, 2007, the DAC balance was zero as a result of the push-down accounting at the Acquisition Date. See Note 3 to the Financial Statements for a further discussion of push-down accounting adjustments. At December 31, 2006, variable annuities and variable life insurance accounted for $191.9 million (or 67%) and $83.2 million (or 29%), respectively, of MLLIC’s DAC asset.

DAC for variable annuities is amortized with interest over the anticipated lives of the insurance contracts in relation to the present values of estimated future gross profits from asset-based fees, contract fees, and surrender charges, less provisions for guaranteed death and living benefit expenses, policy maintenance expenses, and non-capitalized commissions.

DAC for variable life insurance is amortized with interest over the anticipated lives of the insurance contacts in relation to the present values of estimated future gross profits from fees related to contract loans, asset-based fees, and cost of insurance charges, less claims (net of reinsurance), cost of mortality reinsurance, policy maintenance expenses, and non-capitalized commissions.

The most significant assumptions involved in the estimation of future gross profits are future net separate accounts performance, surrender rates, mortality rates and reinsurance costs. For variable annuities, MLLIC generally establishes a long-term rate of net separate accounts growth. If returns over a determined historical period differ from the long-term assumption, returns for future determined periods are calculated so that the long-term assumption is achieved. The result is that the long-term rate is assumed to be realized over a specified period. However, the long-term rate may be adjusted if expectations change. This method for projecting market returns is known as reversion to the mean, a standard industry practice. For variable life insurance, MLLIC generally assumes a level long-term rate of net variable life separate accounts growth for all future years and the long-term rate may be adjusted if expectations change. Additionally, MLLIC may modify the rate of net separate accounts growth over the short term to reflect near-term expectations of the economy and financial market performance in which separate accounts assets are invested. Surrender and mortality rates for all variable contracts are based on historical experience and a projection of future experience.

Future gross profit estimates are subject to periodic evaluation with necessary revisions applied against amortization to date. The impact of revisions and assumptions to estimates on cumulative amortization is recorded as a charge or benefit to current operations, commonly referred to as “unlocking”. Changes in assumptions can have a significant impact on the amount of DAC reported and their related amortization patterns. In general, increases in the estimated separate accounts return and decreases in surrender or mortality assumptions increase the expected future profitability of the underlying business and may lower the rate of DAC amortization. Conversely, decreases in the estimated separate accounts returns and increases in surrender or mortality assumptions reduce the expected future profitability of the underlying business and may increase the rate of DAC amortization. For the years ended December 31, 2007, 2006 and 2005 the favorable (unfavorable) impact on pre-tax earnings related to DAC unlocking was $26.5 million, $16.7 million, and ($81.9) million, respectively. See Note 5 to the Financial Statements for a further discussion of period-to-period differences in DAC unlocking.

Value of Business Acquired (“VOBA”)

VOBA represents the portion of the purchase price that is allocated to the value of the right to receive future cash flows from the insurance and annuity contracts inforce at the Acquisition Date. VOBA is based on actuarially determined projections, by each block of business, of future policy and contract charges, premiums, mortality, policyholder behavior, separate account performance, operating expenses, investment returns, and other factors. Actual experience on the purchased business may vary from these projections. Revisions in estimates result in changes to the amounts expensed in the reporting period in which the revisions are made and could result in the impairment of the asset and a charge to income if estimated future gross profits are less than the unamortized balance. In addition, MLLIC utilizes the reversion to the mean assumption, a common industry practice, in its determination of the amortization of VOBA.

This practice assumes that the expectations for long-term appreciation in equity markets is not changed by minor short-term market fluctuations, but that it does change when large interim deviations have occurred. Since there were no events or circumstances to indicate that there may be any significant change in the fair value of net assets acquired on December 28, 2007, management did not perform an impairment test for VOBA. At December 31, 2007, the VOBA asset was $575.0 million. There was no VOBA asset balance at December 31, 2006.

Other Intangibles

Other intangible assets that were acquired at the Acquisition Date include a distribution agreement, a tradename, and a non-compete agreement. The tradename and the non-compete are required to be amortized on a straight-line basis over their useful life of five years. The distribution intangible will be amortized over the expected economic benefit period and at a pace consistent with the expected future gross profit streams generated from the distribution agreement, which is 30 years. The carrying values of the intangibles will be reviewed periodically for indicators of impairment in value including unexpected or adverse changes in the following: (1) the economic or competitive environments in which MLLIC operates, (2) the profitability analyses, (3) cash flow analyses, and (4) the fair value of the relevant business operation. If there was an indication of impairment, then the cash flow method would be used to measure the impairment, and the carrying value would be adjusted as necessary. Since there were no events or circumstances to indicate that there may be any significant change in the fair value of net assets acquired on December 28, 2007, management did not perform an impairment test for the other intangibles. At December 31, 2007, other intangible assets were $74.9 million. There were no other intangible assets at December 31, 2006. The entire asset amount has been allocated to annuities.

Goodwill

Goodwill is the excess of the purchase price over the estimated fair value of net assets acquired. Under SFAS No. 142, Goodwill and Other Intangible Assets, goodwill and intangible assets with indefinite lives are not amortized, but are subject to impairment tests conducted at least annually. Impairment testing is to be performed using the fair value approach, which requires the use of estimates and judgment, at the “reporting unit” level. A reporting unit represents the operating segment which is the level at which the financial information is prepared and regularly reviewed by management. Goodwill is reviewed for indications of value impairment, with consideration given to financial performance and other relevant factors. In addition, certain events including a significant adverse change in legal factors or the business climate, an adverse action or assessment by a regulator, or unanticipated competition would cause MLLIC to review the carrying amounts of goodwill for impairment. When considered impaired, the carrying amounts are written down to fair value based primarily on discounted cash flows. Since there were no events or circumstances to indicate that there may be any significant change in the fair value of net assets acquired on December 28, 2007, management did not perform an impairment test for the acquired goodwill. At December 31, 2007, the goodwill asset was $156.9 million. There was no goodwill asset at December 31, 2006. The entire asset amount has been allocated to annuities.

Policyholder Liabilities

MLLIC establishes liabilities for amounts payable on its life and annuity contracts based on methods and underlying assumptions in accordance with SFAS No. 60, Accounting and Reporting by Insurance Enterprises, SFAS No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments, and Statement of Position (“SOP”) 03-1, Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts and applicable actuarial standards.

Policyholder Account Balances

MLLIC’s liability for policyholder account balances represents the contract value that has accrued to the benefit of the policyholder as of the balance sheet date. The liability is generally equal to the accumulated account deposits plus interest credited less policyholders’ withdrawals and other charges assessed against the account balance. Policyholder account balances at December 31, 2007 and December 31, 2006 were $1.9 billion and $2.0 billion, respectively.

Future Policy Benefits

Included within future policy benefits are liabilities for GMDB and GMIB provisions contained in the variable products MLLIC issues. At December 31, 2007 and December 31, 2006, GMDB and GMIB liabilities included within future policy benefits were $74.6 million and $101.0 million, respectively. MLLIC regularly evaluates the assumptions used to establish these liabilities, as well as actual experience and adjusts GMDB and/or GMIB liabilities with a related charge or credit to earnings (“unlocking”), if actual experience or evidence suggests that the assumptions should be revised. For the year ended December 31, 2007 and December 31, 2006, the favorable impact to pre-tax earnings related to GMDB and GMIB unlocking was $22.0 million and $10.7 million, respectively. See Note 6 to the Financial Statements for a further discussion of GMDB and GMIB liabilities.

Future policy benefits also include liabilities, which can be either positive or negative, for contracts containing GMWB provisions and for the reinsurance of GMIB provisions (“GMIB reinsurance”) for variable annuities based on the fair value of the underlying benefit. The GMWB provision is treated as an embedded derivative and is required to be reported separately from the host variable annuity contract. The fair value of the GMWB obligation is calculated based on actuarial and capital market assumptions related to the projected cash flows, including benefits and related contract charges, over the anticipated life of the related contracts. The cash flow estimates are produced using stochastic techniques under a variety of market return scenarios and other best estimate assumptions. In general, the GMIB reinsurance liability represents the present value of future reinsurance deposits net of reinsurance recoverables less a provision for required profit. At December 31, 2007 and December 31, 2006, GMDB and GMIB reinsurance liabilities included within future policy benefits were $14.6 million and $5.1 million, respectively. See Note 6 to the Financial Statements for a further discussion of GMWB and GMIB reinsurance liabilities.

Unearned Policy Charge Revenue (“UPCR”) Liability for Variable Life Insurance

MLLIC’s variable universal life insurance product includes a premium load that is higher in early policy years than in later years. The excess of the initial load over the ultimate load is accreted into revenue over time in the same manner that DAC is amortized. In addition, the unearned policy charge revenue liability is subject to the same periodic reassessment as DAC. For the year ended December 31, 2007, the unfavorable impact on pre-tax earnings related to UPCR unlocking was $4.8 million. For the years ended December 31, 2006 and 2005, the favorable impact on pre-tax earnings related to UPCR was $1.5 million, and $67.9 million, respectively. See Note 5 to the Financial Statements for a further discussion of period-to-period differences in UPCR unlocking. As of December 31, 2007, the UPCR liability was zero as a result of the push-down accounting at the Acquisition Date. See Note 3 to the Financial Statements for a further discussion of push-down accounting adjustments. At December 31, 2006 MLLIC’s UPCR liability was $35.5 million.

Federal Income Taxes

MLLIC uses the asset and liability method in providing income taxes on all transactions that have been recognized in the financial statements. The asset and liability method requires that deferred taxes be adjusted to reflect the tax rates at which future taxable amounts will be settled or realized. MLLIC provides for federal income taxes based on amounts it believes it will ultimately owe. Inherent in the provision for federal income taxes are estimates regarding the realization of certain tax deductions and credits.

Specific estimates include the realization of dividend-received deductions (“DRD”) and foreign tax credits (“FTC”). A portion of MLLIC’s investment income related to separate accounts business qualifies for the DRD and FTC. Information necessary to calculate these tax adjustments is typically not available until the following year. However, within the current year’s provision, management makes estimates regarding the future tax deductibility of these items. These estimates are primarily based on recent historic experience. See Note 7 to the Financial Statements for period-to-period differences in DRD and FTC adjustments. During 2007, 2006, and 2005, MLLIC reduced its provision for federal income taxes by $6.8 million, $4.4 million and $9.2 million, respectively, due to DRD and FTC adjustments.

MLLIC adopted the provisions of FASB Interpretation (“FIN”) No. 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007. MLLIC has analyzed all material tax positions under the provisions of FIN No. 48, and has determined that there are no tax benefits that should not be recognized as of December 31, 2007 or as of December 31, 2006.

There are no unrecognized tax benefits that would affect the effective tax rate. It is not anticipated that the total amounts of unrecognized tax benefits will significantly increase within twelve months of the reporting date.

MLLIC files a return in the U.S. Federal tax jurisdiction, and various state tax jurisdictions. As a result of the MLLIC’s election for Federal income tax purposes of Internal Revenue Code Section 338, the predecessor is responsible for any FIN No. 48 obligations that existed prior to the Acquisition Date.

Recent Developments

Accounting Pronouncements

In December 2007, Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised 2007), “Business Combinations” (“SFAS 141(R)”). This statement replaces SFAS No. 141, “Business Combinations” (“SFAS 141”) and establishes the principles and requirements for how the acquirer in a business combination: (a) measures and recognizes the identifiable assets acquired, liabilities assumed, and any noncontrolling interests in the acquired entity, (b) measures and recognizes positive goodwill acquired or a gain from bargain purchase (negative goodwill), and (c) determines the disclosure information that is decision-useful to users of financial statements in evaluating the nature and financial effects of the business combination. SFAS 141(R) is effective for and shall be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, with earlier adoption prohibited. Assets and liabilities that arose from business combinations with acquisition dates prior to the SFAS 141(R) effective date shall not be adjusted upon adoption of SFAS 141(R) with certain exceptions for acquired deferred tax assets and acquired income tax positions. MLLIC expects to adopt SFAS 141(R) on January 1, 2009, and has not yet determined the effect of SFAS 141(R) on its Financial Statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“SFAS 160”). This statement amends Accounting Research Bulletin No. 51, “Consolidated Financial Statements” (“ARB 51”). Noncontrolling interest refers to the minority interest portion of the equity of a subsidiary that is not attributable directly or indirectly to a parent. SFAS 160 establishes accounting and reporting standards that require for-profit entities that prepare consolidated financial statements to: (a) present noncontrolling interests as a component of equity, separate from the parent’s equity, (b) separately present the amount of consolidated net income attributable to noncontrolling interests in the income statement, (c) consistently account for changes in a parent’s ownership interests in a subsidiary in which the parent entity has a controlling financial interest as equity transactions, (d) require an entity to measure at fair value its remaining interest in a subsidiary that is deconsolidated, (e) require an entity to provide sufficient disclosures that identify and clearly distinguish between interests of the parent and interests of noncontrolling owners. SFAS 160 applies to all for-profit entities that prepare consolidated financial statements, and affects those for-profit entities that have outstanding noncontrolling interests in one or more subsidiaries or that deconsolidate a subsidiary. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 with earlier adoption prohibited. MLLIC expects to adopt SFAS 160 on January 1, 2009 and has not yet determined the effect of SFAS 160 on its Financial Statements.

Prior to the acquisition by AUSA, MLLIC early adopted SFAS No. 159 as of the first quarter 2007, but did not elect the fair value option for any of its existing assets or liabilities and therefore, the adoption did not have an impact on MLLIC’s Financial Statements. However, AUSA has not elected early adoption, and therefore as a result of the acquisition by AUSA and the resulting new basis of accounting, MLLIC will adopt SFAS No. 159 on January 1, 2008 and it is not expected to have a material impact on MLLIC’s Financial Statements.

On January 1, 2007, MLLIC adopted Statement of Position (“SOP”) 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection With Modifications or Exchanges of Insurance Contracts. SOP 05-1 provides guidance on accounting by insurance enterprises for deferred acquisition costs on internal replacements of insurance and investment contracts other than those specifically described in SFAS No. 97. SOP 05-1 defines an internal replacement as a modification in product benefits, features, rights, or coverages that occurs by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. Since MLLIC’s practice of accounting for deferred acquisition costs, in connection with modifications or exchanges, substantially meets the provisions prescribed within SOP 05-1, the adoption of SOP 05-1 did not have a material impact on MLLIC’s Financial Statements.

In September 2006, the FASB issued SFAS No. 157 Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 with early adoption permitted, provided the entity has not yet issued financial statements for the fiscal year, including any interim periods. The provisions of SFAS No. 157 are to be applied prospectively. Prior to the acquisition by AUSA, MLLIC had early adopted SFAS No. 157 as of the first quarter 2007, which did not have a material impact on MLLIC’s Financial Statements. However, AUSA has not elected early adoption, and therefore as a result of the acquisition by AUSA and the resulting new basis of accounting, MLLIC will adopt SFAS No. 157 on January 1, 2008 and it is not expected to have a material impact on MLLIC’s Financial Statements.

In June 2006, the FASB issued FIN No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109. FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in a company’s Financial Statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN No. 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. MLLIC adopted FIN No. 48 in the first quarter of 2007. The adoption of FIN No. 48 did not have an impact on MLLIC’s Financial Statements.

New Business

MLLIC offers products in the highly competitive retirement planning market by selling variable and interest-sensitive annuity products through the retail network of Merrill Lynch, Pierce, Fenner & Smith, Incorporated, a wholly owned broker-dealer subsidiary of ML&Co. MLLIC competes for ML&Co.’s clients’ retirement planning business with i) unaffiliated insurers whose products are also sold through ML&Co.’s retail network, ii) insurers who solicit this business directly, and iii) other investment products sold through ML&Co.’s retail network. MLLIC competes in this market segment by integrating its products into ML&Co.’s planning-based financial management program.

ML&Co. offers for sale numerous variable annuity products issued by unaffiliated insurers. MLLIC’s market share of variable annuity sales within the ML&Co. distribution system was 10%, 13%, and 14% for 2007, 2006 and 2005, respectively.

MLLIC has strategically placed its marketing emphasis on the sale of variable annuity products. These products are designed to address the retirement planning needs of ML&Co.’s clients. Each variable annuity product is designed to provide tax-deferred retirement savings with the opportunity for diversified investing in a wide selection of underlying mutual fund portfolios.

During the first quarter 2005, MLLIC introduced a new variable annuity product line called Merrill Lynch Investor Choice Annuity (“ICA”), which replaced all new sales of existing variable annuity products. ICA provides the ability to customize variable annuity products with specific contract features including guaranteed minimum death, income, and withdrawal benefits, charge structures, and investment options. MLLIC has also enhanced ICA income and withdrawal benefits and investment options in the succeeding two years. ICA is offered in B-Share, C-Share, and L-Share classes similar to previous variable annuity products. These classes are differentiated by the surrender charge period and the types of contract fees charged to the contract owner. Additionally, ICA offers a bonus class in which a specified amount is added to the contract value with each deposit.

Total direct deposits by product, including internal exchanges, for the three years ended December 31 were as follows:


	Predecessor
	(dollars in millions						% Change
							2007 vs.			2006 vs.
	2007		2006		2005		2006			2005
Variable Annuities:
L-Share	$	288.7	$	276.8	$	199.8		4	%		39	%
Bonus		266.0		242.4		161.1		10			50
B-Share		156.6		171.7		261.2		(9	)		(34	)
C-Share		40.7		62.7		55.3		(35	)		13

		752.0		753.6		677.4		—			11


All Other Deposits		21.0		33.2		34.0		(37	)		(2	)


Total Direct Deposits	$	773.0	$	786.8	$	711.4		(2)	%		11	%

Total direct deposits decreased $13.8 million (or 2%) to $773.0 million for the period ended December 31, 2007, as compared to the same period ended December, 31, 2006 primarily due to a decrease in other deposits. During 2007, variable annuity deposits which represent 97% to total direct deposits were relatively unchanged as compared to 2006.

All other deposits include deposits on modified guaranteed annuities and immediate annuities as well as renewal deposits on existing life insurance and fixed annuity contracts that are no longer manufactured.

Surrenders

Policy and contract surrenders increased $152.7 million (or 11%) to $1,519.0 million during 2007, as compared to the same period in 2006. The increase is primarily due to increased variable annuity surrenders resulting from the anticipated increase in lapse rates on variable annuity contracts reaching the end of their surrender charge period.

Financial Condition

At December 31, 2007, MLLIC’s assets were $14.7 billion or $87.3 million higher than the $14.6 billion in assets at December 31, 2006. Assets excluding separate accounts assets increased $184.7 million (or 6%) primarily due to the push-down accounting adjustments recorded at December 28, 2007. See Note 3 to the Financial Statements for a summary of these adjustments. Separate accounts assets, which represent 76% of total assets, decreased $97.4 million (or 1%) to $11.2 billion.

Changes in separate accounts assets were as follows:


	Predecessor
(dollars in millions)	2007
Investment performance	$	942.9
Deposits		766.7
Policy fees and charges		(225.1	)
Surrenders, benefits and withdrawals		(1,581.9	)


Net decrease	$	(97.4	)

During 2007, MLLIC experienced contract owner withdrawals that exceeded deposits on all products by $1,083.5 million. The components of contract owner transactions were as follows:


	Predecessor
(dollars in millions)	2007
Deposits collected	$	773.0
Internal tax-free exchanges		(140.2	)

Net contract owner deposits		632.8


Contract owner withdrawals		887.6
Net transfers from separate accounts		828.7

Net contract owner withdrawals		1,716.3


Net contract owner activity	$	(1,083.5	)

MLLIC maintains a conservative general account investment portfolio comprised primarily of investment grade fixed maturity securities, policy loans, and cash and cash equivalents. MLLIC has no mortgage or real estate holdings and its investment in below investment grade fixed maturity securities are below the industry average.

The following schedule identifies MLLIC’s general account invested assets by type for the years ended December 31:


	Successor			Predecessor
	2007			2006
Investment grade fixed maturity securities (rated A or higher)		41	%		38	%
Policy loans		37			34
Investment grade fixed maturity securities (rated BBB)		14			16
Cash and cash equivalents		6			8
Equity securities		1			3
Below investment grade fixed maturity securities		1			1

		100	%		100	%

At December 31, 2007 and 2006, approximately $1,399.3 million (or 99%) and $1,552.9 million (or 99%), respectively, of fixed maturity securities were considered investment grade. MLLIC defines investment grade securities as unsecured debt obligations that have a rating equivalent to Standard and Poor’s BBB- or higher (or similar rating agency). Also, at December 31, 2007, approximately $61.1 million (or 4%) of fixed maturity securities were rated BBB-, which is the lowest investment grade rating given by Standard and Poor’s. This compares to $58.7 million (or 4%) of BBB- rated fixed maturity securities at December 31, 2006.

At December 31, 2007 and 2006, approximately $12.4 million (or 1%) and $17.5 million (or 1%), respectively, of fixed maturity securities were considered below investment grade. Below 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. These investment grade holdings were the result of ratings downgrades on existing securities as MLLIC does not purchase below investment grade securities. MLLIC closely monitors such investments.

MLLIC’s investment in collateralized mortgage obligations (“CMO”) and mortgage backed securities (“MBS”) had a carrying value of $208.6 million and $91.8 million at December 31, 2007 and 2006, respectively. At December 31, 2007 and 2006, approximately $151.3 million (or 73%) and $68.4 million (or 74%), respectively, of CMO and MBS holdings were fully collateralized by the Government National Mortgage Association, the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation. CMO and MBS securities are structured to allow the investor to determine, within certain limits, the amount of interest rate risk, prepayment risk and default risk that the investor is willing to accept. It is this level of risk that determines the degree to which the yields on CMO and MBS securities will exceed the yields that can be obtained from corporate securities with similar credit ratings.

Subprime Mortgage Investments

Subprime mortgages are loans to homebuyers who have weak or impaired credit histories. In recent years, the market for these loans has expanded rapidly. During that time, however, lending practices and credit assessment standards grew steadily weaker. As a result, the market is now experiencing a sharp increase in the number of loan defaults. Investors in subprime assets include not only mortgage lenders, but also brokers, hedge funds, and insurance companies. MLLIC does not sell or buy subprime mortgages directly. As of December 31, 2007 and 2006, MLLIC had no material exposure to subprime mortgage investments.

Business Environment

MLLIC’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

The investment performance of the underlying U.S. equity-based mutual funds supporting MLLIC’s variable products does not replicate the returns of any specific U.S. equity market index. However, investment performance will generally increase or decrease with corresponding increases or decreases of the overall U.S. equity market. 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”), the NASDAQ Composite Index (“NASDAQ”) and the Standard & Poor’s 500 Composite Stock Price Index (“S&P”). The Dow, NASDAQ and S&P ended 2007 with increases of 6.4%, 9.8% and 3.5%, respectively. The Dow, NASDAQ and S&P ended 2006 with increases of 16.3%, 9.5%, and 13.6%, respectively.

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, accordingly, the values of variable contract owner account balances. Approximately 79% of separate accounts assets were invested in equity-based mutual funds at December 31, 2007. Since asset-based fees collected on inforce variable contracts represent a significant source of revenue, MLLIC’s financial condition will be impacted by fluctuations in investment performance of equity-based separate accounts assets.

Fluctuations in the U.S. equity market also directly impact MLLIC’s exposure to guaranteed benefit provisions contained in the variable contracts it manufactures. Minimal or negative investment performance generally results in greater exposure to guaranteed provisions, to the extent there is an increase in the number of variable contracts (and amount per contract) in which the guaranteed benefit exceeds the variable account balance. Prolonged periods of minimal or negative investment performance may result in greater guaranteed benefit costs as compared to assumptions. If MLLIC determines that it needs to increase its estimated long term cost of guaranteed benefits, it will result in establishing greater guaranteed benefit liabilities as compared to current practice.

During 2007, average variable account balances increased $445.4 million (or 4%) to $11.5 billion as compared to 2006. The increase in average variable account balances contributed to a $9.8 million (or 6%) increase in asset-based policy charge revenue during the period ended December 31, 2007 as compared to the same period in 2006.

Medium Term Interest Rates, Corporate Credit and Credit Spreads

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 MLLIC has certain fixed products that contain guaranteed minimum crediting rates, decreases in interest rates can decrease the amount of interest spread earned.

During 2007, medium term interest rates decreased 139 basis points to end the year at 3.38%. During 2006, medium term interest rates increased 41 basis points to end the year at 4.77%. MLLIC defines medium term interest rates as the average interest rate on U.S. Treasury securities with terms of 1 to 5 years.

Changes in the corporate credit environment directly impact the value of MLLIC’s investments, primarily fixed maturity securities. MLLIC 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.

During 2007, credit spreads expanded approximately 153 basis points and ended the period at 230 basis points. During 2006, credit spreads contracted approximately 29 basis points and ended the period at 77 basis points. MLLIC defines credit spreads according to the Merrill Lynch U.S. Corporate Bond Index for BBB-A Rated bonds with three to five year maturities.

At December 31, 2007, MLLIC had 19,388 life insurance and annuity contracts inforce with interest rate guarantees. The estimated average rate of interest credited on behalf of contract owners was 4.17% and 4.26% during 2007 and 2006, respectively. Total invested assets supporting these liabilities with interest rate guarantees had an estimated average effective yield of 5.20% and 4.88% during 2007 and 2006, respectively. The number of life insurance and annuity contracts inforce with interest rate guarantees decreased 2,162 (or 10%) as compared to 2006.

Liquidity and Capital Resources

Liquidity

MLLIC’s liquidity requirements include the payment of sales commissions and other underwriting expenses and the funding of its contractual obligations for the life insurance and annuity contracts it has in force. MLLIC has developed and utilizes a cash flow projection system and regularly performs asset / liability duration matching in the management of its asset and liability portfolios. MLLIC anticipates funding its cash requirements utilizing cash from operations, normal investment maturities and anticipated calls and repayments, consistent with prior years. As of December 31, 2007 and 2006, MLLIC’s assets included $1.5 billion and $1.8 billion, respectively, of cash, cash equivalents, and investment grade publicly traded available-for-sale securities that could be liquidated if funds were required.

MLLIC receives claims paying ability ratings from various rating agencies. The following table summarizes MLLIC’s ratings prior to (Predecessor) and subsequent to (Successor) the Acquisition Date:


	Predecessor	Successor
Standard and Poor’s	AA-	AA-
A.M. Best	A	A+
Moody’s	Not Rated	Aa3
Fitch	Not Rated	AA+

Capital Resources

MLLIC believes that it will be able to fund the capital and surplus requirements of projected new business from current statutory earnings and existing statutory capital and surplus. If sales of new business significantly exceed projections, MLLIC may have to look to its parent and other affiliated companies to provide the capital or borrowings necessary to support its current marketing efforts. MLLIC’s future marketing efforts could be hampered should its parent and/or affiliates be unwilling to commit additional funding.

Prior to the Acquisition Date, MLLIC and ML&Co. were parties to a “keepwell” agreement which obligated ML&Co. to maintain a level of capital in MLLIC in excess of minimum regulatory requirements. Subsequent to the Acquisition Date, MLLIC and AUSA are parties to a “keepwell” agreement which commits AUSA to maintain MLLIC at a minimum net worth.

MLLIC paid a cash dividend during 2007 of $193.7 million to MLIG, of which $41.6 million was considered an ordinary dividend and $152.1 million was extraordinary. MLLIC paid a cash dividend during 2006 of $180.0 million to MLIG, of which $39.8 million was considered an ordinary dividend and $140.2 million was extraordinary. MLLIC did not pay a dividend during 2005.

Statutory Practices and Risk-Based Capital (“RBC”)

In order to continue to issue annuity products, MLLIC must meet or exceed the statutory capital and surplus requirements of the insurance departments of the states in which it conducts business. Statutory accounting practices differ from generally accepted accounting principles (“GAAP”) in two major respects. First, under statutory accounting practices, the acquisition costs of new business are charged to expense, while under GAAP they are amortized over a period of time. Second, under statutory accounting practices, the required additions to statutory reserves are calculated under different rules than under GAAP.

The National Association of Insurance Commissioners utilizes the RBC adequacy monitoring system. The RBC calculates the amount of adjusted capital that a life insurance company should have based upon that company’s risk profile. As of December 31, 2007 and 2006, based on the RBC formula, MLLIC’s total adjusted capital level was well in excess of the minimum amount of capital required to avoid regulatory action.

Commitments and Contingencies

The following table summarizes MLLIC’s policyholder obligations as of December 31, 2007:


	Successor
	Less Than		One to		Four to		More Than
(dollars in millions)	One Year		Three Years		Five Years		Five Years		Total
Policyholder liabilities (1)	$	204.7	$	639.1	$	427.2	$	1,094.5	$	2,365.5


(1)		The policyholder liabilities include benefit and claim liabilities of which a significant portion represents policies and contracts that do not have a stated contractual maturity. The projected cash benefit payments in the table above are based on managements’ best estimates of the expected gross benefits and expenses, partially offset by the expected gross premiums, fees and charges relating to the existing business inforce. Estimated cash benefit payments are based on mortality and lapse assumptions comparable with MLLIC’s historical experience, modified for recently observed trends.

Actual payment obligations may differ if experience varies from these assumptions. The cash benefit payments are presented on an undiscounted basis and are before deduction of tax and before reinsurance. The liability amounts in our Financial Statements reflect the discounting for interest as well as adjustments for the timing of other factors as described above. As a result, the sum of the cash benefit payments shown for all years in the table above exceeds the corresponding policyholder liability amounts.

MLLIC has utilized public information to estimate the future assessments it will incur as a result of life insurance company insolvencies. At December 31, 2007 and 2006, MLLIC’s estimated net liability for future guaranty fund assessments was $5.7 million and $6.0 million, respectively. MLLIC regularly monitors public information regarding insurer insolvencies and adjusts its estimated liability as appropriate.

Results of Operations

MLLIC’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 (DAC) are amortized over the period in which MLLIC anticipates holding those funds, as noted in the Critical Accounting Policies section above. Insurance expenses and taxes reported in the Statements of Earnings are net of amounts deferred. In addition, MLLIC incurs expenses associated with the maintenance of inforce contracts.

2007 compared to 2006

MLLIC recorded net earnings of $110.5 million and $94.7 million for 2007 and 2006, respectively.

Policy charge revenue increased $2.9 million (or 1%) to $267.6 million during 2007 as compared to $264.7 million in 2006. The following table provides the changes in policy charge revenue by type for each respective period:


	Predecessor			Predecessor
Policy Charge Revenue	2007			2006		Change
				(In Millions)
Asset-based policy charge revenue	$	174.5		$	164.7	$	9.8	(1)
Guaranteed benefit based policy charge revenue		20.0			13.7		6.3	(2)
UPCR unlocking		(4.8	)		1.5		(6.3	)(3)
Non-asset based policy charge revenue		77.9			84.8		(6.9	)(4)

	$	267.6		$	264.7	$	2.9


(1)		Asset-based policy charge revenue was favorably impacted by the increase in average variable account balances during 2007 as compared to 2006.

(2)		The increase in guaranteed benefit based policy charge revenue is due to the increase in inforce variable annuity contracts containing guaranteed benefit riders.

(3)		See the Critical Accounting Policies section above for a further discussion of UPCR unlocking.

(4)		The decrease in non-asset based policy charge revenue is primarily due to a decrease in UPCR accretion resulting from higher mortality during 2007 as compared to 2006.

Net realized investment gains increased $0.9 million (or 75%) to $2.1 million during 2007 as compared to $1.2 million in 2006. The following table provides the changes in realized investment gains by type:


	Predecessor		Predecessor
Net Realized Gains	2007		2006		Change
			(In Millions)
Credit related gains	$	2.0	$	0.5	$	1.5	(1)
Interest related gains		0.1		—		0.1
Trading account gains		—		0.7		(0.7	)(2)

	$	2.1	$	1.2	$	0.9


(1)		The increase in credit related gains is primarily due to one large credit related gain earned in the second quarter 2007.

(2)		During the first quarter 2006 MLLIC liquidated its trading portfolio.

Policy benefits increased $3.1 million (or 8%) to $42.3 million during 2007 as compared to $39.2 million in 2006. The following table provides the changes in policy benefits by type:


	Predecessor			Predecessor
Policy Benefits	2007			2006			Change
				(In Millions)
Life insurance benefit expense	$	27.0		$	18.0		$	9.0	(1)
Variable annuity benefit expense		37.3			31.9			5.4	(2)
Variable annuity guaranteed benefit reserve unlocking		(22.0	)		(10.7	)		(11.3	)(3)

	$	42.3		$	39.2		$	3.1


(1)		The increase in life insurance benefit expense is primarily due to period-to-period differences in variable life reinsurance activity.

(2)		The increase in variable annuity benefit expense is primarily due to net unfavorable market valuation adjustments to GMWB and GMIB liabilities. See the Critical Accounting Policies section above for a further discussion of variable annuity guaranteed benefit liabilities.

(3)		See the Critical Accounting Policies section above for a further discussion of variable annuity benefit reserve unlocking.

Reinsurance premium ceded increased $1.4 million (or 5%) during 2007 as compared to 2006. The increase is attributable to an increase in net amount at risk for certain variable life insurance policies containing reinsurance provisions.

Amortization of DAC decreased $20.2 million to $22.1 million during 2007 as compared to $42.3 million in 2006. Excluding the impact of DAC unlocking as noted in the Critical Accounting Policies section above, DAC amortization decreased $10.4 million during 2007 as compared to 2006. The decrease in amortization is primarily due to higher life insurance mortality as compared to 2006.

MLLIC’s effective federal income tax rate decreased to 31% for 2007 from 32% for 2006 primarily due to period-to-period differences in DRD and FTC adjustments as noted in the Critical Accounting Policies section above.

2006 compared to 2005

MLLIC recorded net earnings of $94.7 million and $67.4 million for 2006 and 2005, respectively.

Policy charge revenue decreased $40.1 million (or 13%) to $264.7 million during 2006 as compared to $304.8 million in 2005. The following table provides the changes in policy charge revenue by type for each respective period:


	Predecessor		Predecessor
Policy Charge Revenue	2006		2005		Change
			(In Millions)
UPCR unlocking	$	1.5	$	67.9	$	(66.4	)(1)
Guaranteed benefit based policy charge revenue		13.7		7.5		6.2	(2)
Asset-based policy charge revenue		164.7		158.3		6.4	(3)
Non-asset based policy charge revenue		84.8		71.1		13.7	(4)

	$	264.7	$	304.8	$	(40.1	)


(1)		See the Critical Accounting Policies section above for a further discussion of UPCR unlocking.

(2)		The increase in guaranteed benefit based policy charge revenue is due to the increase in inforce variable annuity contracts containing guaranteed benefit riders.

(3)		Asset-based policy charge revenue was favorably impacted by the increase in average variable account balances during 2006 as compared to 2005.

(4)		The increase in non-asset based policy charge revenue is primarily due an increase in UPCR accretion resulting from lower mortality during 2006 as compared to 2005.

Net realized investment gains decreased $1.4 million to $1.2 million during 2006 as compared to $2.6 million in 2005 primarily due to period-to-period differences in credit related gains. Prior year credit related gains were favorably impacted by a large gain on one security.

Policy benefits decreased $8.1 million (or 17%) to $39.2 million during 2006 as compared to $47.3 million in 2005. The following table provides the changes in policy benefits by type:


	Predecessor			Predecessor
Policy Benefits	2006			2005			Change
				(In Millions)
Variable annuity guaranteed benefit reserve unlocking	$	(10.7	)	$	(4.3	)	$	(6.4	)(1)
Life insurance benefit expense		18.0			20.8			(2.8	)(2)
Amortization of deferred sales inducements		1.0			0.4			0.6	(3)
Variable annuity guaranteed benefit expense		30.9			30.4			0.5	(4)

	$	39.2		$	47.3		$	(8.1	)


(1)		See the Critical Accounting Policies section above for further discussion of variable annuity benefit reserve unlocking.

(2)		The decrease in life insurance benefit expense is primarily due to period-to-period differences in variable life reinsurance activity.

(3)		The increase in amortization of deferred sales inducements coincide with the March 2005 introduction of the bonus feature contained in the variable annuity product line.

(4)		The increase in variable annuity benefit expense is due to increased accruals for variable annuity liabilities resulting from the higher asset-based policy charge revenue.

Amortization of DAC decreased $84.0 million to $42.3 million during 2006 as compared to $126.3 million in 2005 primarily as a result of period-to-period differences in DAC unlocking as noted in the Critical Accounting Policies section above. Offsetting the impact of DAC unlocking is an increase in normal amortization due to higher policy charge revenue.

MLLIC’s effective federal income tax rate increased to 32% for 2006 from 25% for 2005 primarily due to period-to-period differences in DRD and FTC adjustments as noted in the Critical Accounting Policies section above.

Segment Information

MLLIC’s operating results are categorized into two business segments: Annuities and Life Insurance. MLLIC’s Annuity segment consists of variable annuity and interest-sensitive annuity contracts. MLLIC’s Life Insurance segment consists of variable life insurance and interest-sensitive life insurance contracts. MLLIC currently does not manufacture, market, or issue life insurance contracts. The accounting policies of the business segments are the same as those described in the summary of significant accounting policies. All revenue and expense transactions are recorded at the contract level and accumulated at the business segment level for review by management. The “Other” category, presented in the following segment financial information, represents net revenues and earnings on invested assets that do not support life or annuity policyholder liabilities. Subsequent to the Acquisition Date, management no longer considers “Other” a category for segment reporting purposes. It is impracticable to restate the prior period segment information as well as disclosing the information under both the old basis and the new basis of reporting. Therefore, the predecessor information is shown under the old basis, three segments — Annuities, Life Insurance and Other, while the successor information is shown under the new basis, two segments — Annuities and Life Insurance.

Select financial information by segment for the years ended December 31 is as follows:


	Predecessor
2007	Annuities			Life			Other			Total
				(Dollars In Millions)
Net revenues (1)	$	200.3		$	97.4		$	14.4		$	312.1
Net revenues — % of all segments		64	%		31	%		5	%		100	%

Net earnings	$	72.2		$	28.9		$	9.4		$	110.5
Net earnings — % of all segments		65	%		26	%		9	%		100	%


	Predecessor
2006	Annuities			Life			Other			Total
				(Dollars In Millions)
Net revenues (1)	$	186.7		$	109.4		$	10.6		$	306.7
Net revenues — % of all segments		61	%		36	%		3	%		100	%

Net earnings	$	60.0		$	27.8		$	6.9		$	94.7
Net earnings — % of all segments		64	%		29	%		7	%		100	%


	Predecessor
2005	Annuities			Life			Other			Total
	(Dollars In Millions)
Net revenues (1)	$	174.7		$	166.5		$	7.6		$	348.8
Net revenues — % of all segments		50	%		48	%		2	%		100	%

Net earnings	$	28.3		$	34.2		$	4.9		$	67.4
Net earnings — % of all segments		42	%		51	%		7	%		100	%


(1)		Management considers interest credited to policyholder liabilities in evaluating net revenues.

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 MLLIC’s consolidated financial condition and results of operations presented herein.

OTT impairment losses on investments by segment were as follows:


	Predecessor		Predecessor		Predecessor
Segment	2007		2006		2005
			(In Millions)
Annuities	$	—	$	—	$	1.6
Life insurance		—		—		—
Other		—		—		0.3

MLLIC is not dependent upon any single customer, and no single customer accounted for more than 10% of its revenues during 2007, 2006, or 2005.

Inflation

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

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Market Risk

Market risk is the potential change in a financial instrument’s value caused by fluctuations in certain underlying risk factors. MLLIC is primarily subject to market risk resulting from fluctuations in interest rates, credit spreads, credit risk, and equity prices. MLLIC utilizes an integrated approach to manage financial market risks including a comprehensive asset / liability management process, product design, and reinsurance programs.

A number of assumptions must be made to obtain the expected fair value changes illustrated below. MLLIC has no reason to believe that historically simulated interest rate and credit spread movements have any predictive power for future fair value changes.

Interest Rate Risk

Interest rate risk arises from the possibility that changes in interest rates will affect the value of investments, primarily fixed maturity securities and preferred equity securities. Changes in interest rates have an inverse relationship to the value of investments. MLLIC manages interest rate risk as part of its asset / liability management strategy. For each portfolio, management monitors the expected changes in assets and liabilities, as produced by MLLIC’s model, resulting from various interest rate scenarios. Based on these results, management closely matches the duration of insurance liabilities to the duration of assets supporting those liabilities.

The following table presents the estimated net impact on the fair value of investments resulting from various hypothetical interest rate scenarios, based on assumptions contained in MLLIC’s model:


	Change in Fair Value
	Successor			Predecessor
Change in Interest Rates	2007			2006
	(In Millions)
+ 100 Basis Points	$	(38.8	)	$	(46.7	)
- 100 Basis Points	$	38.7		$	47.0

MLLIC’s model is based on existing business inforce as of the years ended December 31 without considering the impact of new annuity sales on assets. The model incorporates MLLIC’s fixed maturity securities and preferred equity investments excluding variable rate securities with rate resettings in less than ninety days, securities with a maturity of less than ninety days, and securities that are in or near default. The changes in interest rate scenarios, noted above, assume parallel shifts in the yield curve occurring uniformly throughout the year.

Additionally, certain products have features that mitigate the impact of interest rate risk. Examples include surrender charges, market value adjustments, and resetting of interest credited rates (subject to certain guaranteed minimum crediting rates). For interest sensitive life products the guaranteed minimum interest rate is 4.0%. However, for some products, the minimum rate may be reduced by a charge for mortality that varies by the attained age of the insured. For interest sensitive annuity products, excluding modified guaranteed annuities, the guaranteed minimum rates range from 4.0% to 4.5%, with the greatest concentration at 4.0%. Modified guaranteed annuity products do not have minimum rate guarantees.

Credit Spread Risk

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

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


	Change in Fair Value
	Successor			Predecessor
Change in Credit Spreads	2007			2006
	(In Millions)
+ 50 Basis Points	$	(22.1	)	$	(18.1	)
- 50 Basis Points	$	22.1		$	18.1

MLLIC’s model is based on existing business inforce as of the years ended December 31 without considering the impact of new annuity sales on assets. The model incorporates MLLIC’s fixed maturity securities and preferred equity investments excluding securities with a maturity of less than ninety days and securities that are in or near default. The changes in credit spreads, noted above, assume a uniform occurrence throughout the year.

Liability valuations for modified guaranteed annuities mitigate MLLIC’s exposure to credit spread risk on these products. Contract owner surrender values reflect changes in spread between corporate bonds and U.S. Treasury securities since the market value adjusted account value is based on current crediting rates for new and renewal contracts. These crediting rates are adjusted weekly and reflect current market conditions.

Credit Risk

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

Equity Price Risk

Equity price risk arises from the possibility that general reductions in equity prices will negatively affect the value of assets and liabilities, primarily separate accounts assets and separate accounts liabilities. MLLIC manages its exposure to equity risk via certain product design features (e.g., waiting periods, age caps, subsequent premium restrictions, and adjusted withdrawals) and reinsurance programs to the extent reinsurance capacity is available in the marketplace. General reductions in equity prices impact MLLIC in the following ways:

•		Reductions in separate accounts assets. Asset-based policy fees collected on separate accounts assets are a primary source of earnings, thus lower asset balances will result in lower policy charge revenue and lower gross profits.

•		Increased exposure to death and living benefits. Decreasing variable contract owner account values increase the number of contracts, as well as amounts per contract, in which GMDB and GMIB provisions exceed those variable contract owner account balances. This may result in greater future policy benefit expense. Additionally, declines in the U.S. equity markets may also increase MLLIC’s exposure to benefits under GMWB provisions. This provision can generate volatility in earnings as the underlying embedded derivative liability is recorded at fair value in response to changes in equity market conditions and policyholder behavior. This may result in greater policy benefit expense.

•		Potential hindrance of sales and marketing efforts for variable annuity products.

•		One or any combination of the above items may lead to the revision of future assumptions which may result in unfavorable DAC, VOBA, UPCR or variable annuity guaranteed benefit liability unlocking.

Item 8. Financial Statements and Supplementary Data

The financials statements of Registrant are set forth in Part IV hereof and are incorporated herein by reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

a) As a result of the acquisition on December 28, 2007 of MLLIC by AUSA, MLLIC dismissed Deloitte & Touche LLP (“D&T”) effective December 28, 2007 as its independent auditors for all periods subsequent to December 28, 2007. This dismissal was approved by MLLIC’s Board of Directors.

D&T’s audit report on MLLIC’s financial statements for the fiscal years ended December 31, 2006 and 2005 did not contain an adverse opinion or disclaimer of opinion, nor were such reports qualified or modified as to uncertainty, audit scope, or accounting principles.

During the two most recent fiscal years and any subsequent interim period preceding December 28, 2007, there were no (i) disagreements with D&T on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement(s), if not resolved to the satisfaction of D&T, would have caused it to make reference to the subject matter of the disagreement(s) in connection with its reports, and (ii) “reportable events,” as defined in Item 304(a)(i)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended.

b) On December 28, 2007, MLLIC engaged Ernst & Young, LLP (“E&Y”) to serve as its independent auditors for the year ended December 31, 2007. During the two most recent fiscal years and any subsequent interim period preceding December 28, 2007, neither MLLIC nor anyone on its behalf consulted E&Y regarding either the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on MLLIC’s financial statements, nor has E&Y provided MLLIC a written report or oral advice regarding such principles or audit opinion.

Item 9A(T). Controls and Procedures

a) Evaluation of disclosure controls and procedures

The term “disclosure controls and procedures” (defined in the Securities Exchange Act of 1934 Rule 13a-15(e)) generally refers to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within required time periods. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by MLLIC in the reports that it files or submits under the Exchange Act is accumulated and communicated to MLLIC’s management, including MLLIC’s principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure. MLLIC’s management, with the participation of the President and Chief Financial Officer, have evaluated the effectiveness of the MLLIC’s disclosure controls and procedures as of the end of the period covered by this annual report (the “Evaluation Date”). Based on that evaluation, MLLIC’s President and Chief Financial Officer have concluded that, as of the Evaluation Date, such disclosure controls and procedures were effective.

b) Changes in internal control over financial reporting

The term “internal control over financial reporting” (defined in Exchange Act Rule 13a-15(f)) generally refers to the process of a company that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Immediately following the Acquisition Date, AUSA installed a new management team at MLLIC, which included a new principal executive officer, a new principal financial officer and several other key members of management with responsibility over the internal control over financial reporting. In addition, as noted in Item 9 above, the independent accountants (auditors) were changed at the Acquisition Date.

Due to these significant changes, we did not perform an assessment of our internal control over financial reporting as of December 31, 2007, and thus we are not filing a report on management’s assessment of internal control over financial reporting as of December 31, 2007.

Item 9B. Other Information

No information is required to be disclosed under this item.

PART III

Information called for by items 10 through 13 of this part is omitted pursuant to General instruction I. of form 10-K.

Item 14. Principal Account Fees and Services

Fees Paid to the Registrant’s Independent Auditor

As of December 28, 2007, Ernst & Young, LLP (“E&Y”) is MLLIC’s independent registered public accountant. Services provided to MLLIC by E&Y were the audit of MLLIC’s Financial Statements for the 2007 fiscal year period. Prior to E&Y becoming the independent registered public accounting firm, Deloitte & Touche, LLP (“D&T”) was the independent registered public accounting firm of record, a change that was precipitated by the acquisition of MLLIC by AUSA, effective December 28, 2007. These changes were disclosed to the SEC on Form 8-K dated January 3, 2008.

The aggregate fees for professional services by D&T in 2006 and 2007 for these accounting services were:


	Predecessor		Predecessor
	2007		2006
Audit (a)	$	869,771	$	1,306,765
Audit-Related (b)		—		76,903

Total	$	869,771	$	1,383,668


(a)		Audit fees consist of fees for the annual financial statement audit (including required quarterly reviews) and other procedures required to be performed by the independent auditor to be able to form an opinion on MLLIC’s financial statements. These other procedures include information systems and procedural reviews and testing performed in order to understand and place reliance on the systems of internal control, and consultations relating the audit or quarterly review. They also include fees billed for other audit services, which are those services that only the external auditor reasonably can provide, and include statutory audits, comfort letters, services associated with SEC registration statements, periodic reports and other documents filed with the SEC.

(b)		Audit-related fees consist of fees for audit-related services including assurance and related services that are reasonably related to the performance of the audit or review of MLLIC’s financial statements or that are traditionally performed by the independent auditor. Audit-related services include, among others, due diligence services pertaining to potential business acquisitions/dispositions; accounting consultations related to accounting, financial reporting or disclosure matters not classified as “Audit services”; assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities; agreed-upon or expanded audit procedures related to accounting and/or billing records required to respond to or comply with financial, accounting or regulatory reporting matters; and assistance with internal control reporting requirements.

MLLIC’s current independent registered public accountants, E&Y, did not submit any bills for services during fiscal year 2007. However, the estimated audit fees related to the audit of the 2007 Financial Statements to be billed in 2008 are $1,230,445.

Audit Committee Pre-approval Policies and Procedures

MLLIC’s Audit Committee is responsible, among other matters, for the oversight of the external auditor. Consistent with SEC rules regarding auditor independence, the Audit Committee has adopted a policy regarding pre-approval of audit and permissible non-audit services provided by our independent auditors (the “Pre-approval Policy”).

Under the Pre-approval Policy, proposed services either:

(i) may be pre-approved by the Audit Committee without consideration of specific case-by-case services (“general pre-approval”); or

(ii) require the specific pre-approval of the Audit Committee (“specific pre-approval”). Appendices to the Pre-approval Policy (that are adopted each year) set out the audit, audit-related, tax, and other services that have received the general pre-approval of the Audit Committee. All other audit, audit-related, tax and other services must receive specific pre-approval from the Audit Committee.

During 2007, all services provided to MLLIC by D&T and E&Y were pre-approved by the Audit Committee in accordance with the Pre-approval policy.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a) Financial Statements and Exhibits.


(1)		The following financial statements of the Registrant are filed as part of this report:
a.		Independent Auditors’ Report dated March 14, 2008 (Ernst & Young LLP).

b.		Independent Auditors’ Report dated March 2, 2007 (Deloitte & Touche LLP).
c.		Balance Sheets at December 31, 2007 and 2006.
d.		Statements of Earnings for the Years Ended December 31, 2007, 2006 and 2005.
e.		Statements of Comprehensive Income for the Years Ended December 31, 2007, 2006 and 2005.
f.		Statements of Stockholder’s Equity for the Years Ended December 31, 2007, 2006 and 2005.
g.		Statements of Cash Flows for the Years Ended December 31, 2007, 2006 and 2005.
h.		Notes to Financial Statements for the Years Ended December 31, 2007, 2006 and 2005.
(2)		Not applicable.
(3)		The following exhibits are filed as part of this report as indicated below:
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.)

10.10		Insurance Administrative Services Agreement between Merrill Lynch Life Insurance Company and Liberty Insurance Services Corporation. (Incorporated by reference to Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K, File Nos. 33-26322, 33-46827, 33-52254, 33-60290, 33-58303, 333-33863, filed March 30, 2005.)

10.11		Master Distribution Agreement between Merrill Lynch Insurance Group, Inc., Merrill Lynch & Co., Inc., and AEGON USA, Inc. (Incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K, File No. 33-26322, filed January 4, 2008.)

10.12		Wholesaling Agreement between Merrill Lynch Life Insurance Company, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Transamerica Capital is filed herewith.

10.13		Selling Agreement between Merrill Lynch Life Insurance Company, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Merrill Lynch Life Agency, Inc. is filed herewith.

10.14		Keep Well Agreement between AEGON USA, Inc. and Merrill Lynch Life Insurance Company is filed herewith.

10.15		Purchase Agreement between Merrill Lynch Insurance Group, Inc., Merrill Lynch & Co., Inc., and AEGON USA, Inc. (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, File No. 33-26322, filed August 17, 2007.)

10.16		First Amendment to Purchase Agreement between Merrill Lynch Insurance Group, Inc., Merrill Lynch & Co., Inc., and AEGON USA, Inc. (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, File No. 33-26322, filed January 4, 2008.)

23.1		Written consent of Deloitte & Touche LLP, independent registered public accounting firm, is filed herewith.
23.2		Written consent of Ernst & Young LLP, independent registered public accounting firm, is filed herewith.
24.1		Powers of attorney are filed herewith.
31.1		Certification by the Chief Executive Officer of the Registrant pursuant to Rule 15d-14(a), is filed herewith.
31.2		Certification by the Chief Financial Officer of the Registrant pursuant to Rule 15d-14(a), is filed herewith.
32.1		Certification by the Chief Executive Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is filed herewith.
32.2		Certification by the Chief Financial Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is filed herewith.

INDEX TO FINANCIAL STATEMENTS

Independent Auditors’ Reports

Balance Sheets at December 31, 2007 and 2006

Statements of Earnings for the Years Ended December 31, 2007, 2006 and 2005

Statements of Comprehensive Income for the Years Ended December 31, 2007, 2006 and 2005

Statements of Stockholder’s Equity for the Years Ended December 31, 2007, 2006 and 2005

Statements of Cash Flows for the Years Ended December 31, 2007, 2006 and 2005

Notes to Financial Statements for the Years Ended December 31, 2007, 2006 and 2005

[Ernst & Young LLP]

Report of Independent Registered Public Accounting Firm

The Board of Directors
Merrill Lynch Life Insurance Company

We have audited the accompanying balance sheet of Merrill Lynch Life Insurance Company (the Company) as of December 31, 2007, and the related statements of earnings, comprehensive income, stockholder’s equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financials statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Merrill Lynch Life Insurance Company at December 31, 2007, and the results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

Des Moines, Iowa
March 14, 2008

[Deloitte & Touche LLP]

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
Merrill Lynch Life Insurance Company

We have audited the accompanying balance sheets of Merrill Lynch Life Insurance Company (the “Company”) as of December 31, 2006, and the related statements of earnings, comprehensive income, stockholder’s equity, and cash flows for each of the two years in the period ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits include consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the financial position of Merrill Lynch Life Insurance Company as of December 31, 2006, and the results of its operations and it cash flows for each of the two years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

New York, New York
March 2, 2007

Merrill Lynch Life Insurance Company
(a wholly owned subsidiary of AEGON USA, Inc.)
Balance Sheets


	Successor		Predecessor
	December 31,		December 31,
(dollars in thousands)	2007		2006
ASSETS

Investments
Fixed maturity available-for-sale securities, at estimated fair value	$	1,411,730	$	1,570,383
Equity available-for-sale securities, at estimated fair value		37,182		72,728
Limited partnerships		18,785		11,417
Policy loans on insurance contracts		948,625		968,874

		2,416,322		2,623,402


Cash and Cash Equivalents		158,633		230,586

Accrued Investment Income		39,626		47,548

Deferred Policy Acquisition Costs		—		285,648

Deferred Sales Inducements		—		20,606

Value of Business Acquired		574,950		—

Other Intangibles		74,930		—

Goodwill		156,880		—

Federal Income Taxes — Current		6,641		—

Federal Income Taxes — Deferred		2,031		—

Reinsurance Receivables		5,440		10,522

Receivables from Securities Sold		—		23,921

Other Assets		40,741		49,241

Separate Accounts Assets		11,232,996		11,330,397


Total Assets	$	14,709,190	$	14,621,871


See Notes to Financial Statements.		(Continued)

Merrill Lynch Life Insurance Company
(a wholly owned subsidiary of AEGON USA, Inc.)
Balance Sheets


	Successor		Predecessor
	December 31,		December 31,
(dollars in thousands, except common stock par value and shares)	2007		2006
LIABILITIES
Policyholder Liabilities and Accruals
Policyholder account balances	$	1,900,837	$	2,047,973
Future policy benefits		396,760		408,681
Claims and claims settlement expenses		42,405		42,426

		2,340,002		2,499,080


Other Policyholder Funds		4,703		6,973

Federal Income Taxes — Current		—		16,295

Federal Income Taxes — Deferred		—		2,846

Payables for Securities Purchased		1,399		40,319

Affiliated Payables — Net		—		9,982

Unearned Policy Charge Revenue		—		35,545

Other Liabilities		10,954		11,398

Separate Accounts Liabilities		11,232,996		11,330,397


Total Liabilities		13,590,054		13,952,835


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		1,116,636		397,324
Accumulated other comprehensive loss, net of taxes		—		(10,233	)
Retained earnings		—		279,445

Total Stockholder’s Equity		1,119,136		669,036


Total Liabilities and Stockholder’s Equity	$	14,709,190	$	14,621,871

See Notes to Financial Statements.

Merrill Lynch Life Insurance Company
(a wholly owned subsidiary of AEGON USA, Inc.)
Statements of Earnings


	Predecessor		Predecessor		Predecessor
	For the Years Ended December 31,
(dollars in thousands)	2007		2006		2005
Net Revenues
Policy charge revenue	$	267,586	$	264,669	$	304,848
Net investment income		136,416		142,617		147,730
Net realized investment gains		2,055		1,236		2,622


Total Net Revenues		406,057		408,522		455,200


Benefits and Expenses
Interest credited to policyholder liabilities		93,978		101,837		106,444
Policy benefits (net of reinsurance recoveries: 2007 - $15,311; 2006 - $14,536; 2005 - $17,706)		42,286		39,158		47,270
Reinsurance premium ceded		28,292		26,919		26,322
Amortization of deferred policy acquisition costs		22,064		42,337		126,281
Insurance expenses and taxes		59,846		59,248		59,396


Total Benefits and Expenses		246,466		269,499		365,713


Earnings Before Federal Income Taxes		159,591		139,023		89,487


Federal Income Tax Expense (Benefit)
Current		37,982		40,293		32,083
Deferred		11,090		3,993		(9,960	)


Total Federal Income Tax Expense		49,072		44,286		22,123


Net Earnings	$	110,519	$	94,737	$	67,364

See Notes to Financial Statements.

Merrill Lynch Life Insurance Company
(a wholly owned subsidiary of AEGON USA, Inc.)
Statements of Comprehensive Income


	Predecessor			Predecessor			Predecessor
	For the Years Ended December 31,
(dollars in thousands)	2007			2006			2005
Net Earnings	$	110,519		$	94,737		$	67,364


Other Comprehensive Income (Loss)
Net unrealized gains (losses) on available-for-sale securities:
Net unrealized holding gains (losses) arising during the period		4,072			1,403			(48,849	)
Reclassification adjustment for (gains) losses included in net earnings		56			(524	)		(2,851	)

		4,128			879			(51,700	)


Adjustments for policyholder liabilities		(4,795	)		1,377			11,704
Adjustments for deferred federal income taxes		233			(790	)		13,999

		(4,562	)		587			25,703


Total other comprehensive income (loss), net of taxes		(434	)		1,466			(25,997	)


Comprehensive Income	$	110,085		$	96,203		$	41,367

See Notes to Financial Statements.

Merrill Lynch Life Insurance Company
(a wholly owned subsidiary of AEGON USA, Inc.)
Statements of Stockholder’s Equity


					Accumulated
			Additonal		other						Total
	Common		paid-in		comprehensive			Retained			stockholder’s
(dollars in thousands)	stock		capital		income (loss)			earnings			equity
Balance, January 1, 2005 (Predecessor)	$	2,500		397,324		14,298			297,344			711,466

Net earnings									67,364			67,364

Other comprehensive loss, net of taxes						(25,997	)					(25,997	)


Balance, December 31, 2005 (Predecessor)		2,500		397,324		(11,699	)		364,708			752,833

Net earnings									94,737			94,737

Cash dividend paid to Merrill Lynch Insurance Group, Inc.									(180,000	)		(180,000	)

Other comprehensive income, net of taxes						1,466						1,466


Balance, December 31, 2006 (Predecessor)		2,500		397,324		(10,233	)		279,445			669,036

Net earnings									110,519			110,519

Cash dividend paid to Merrill Lynch Insurance Group, Inc.									(193,731	)		(193,731	)

Other comprehensive loss, net of taxes						(434	)					(434	)


Balance, at date of acquisition (Predecesor)		2,500		397,324		(10,667	)		196,233			585,390

Effect of pushdown accounting of AEGON USA, Inc.’s purchase price on Merrill Lynch Life Insurance Company’s net assets acquired (see Note 3)				719,312		10,667			(196,233	)		533,746


Balance, December 31, 2007 (Successor)	$	2,500	$	1,116,636	$	—		$	—		$	1,119,136

See Notes to Financial Statements.

Merrill Lynch Life Insurance Company
(a wholly owned subsidiary of AEGON USA, Inc.)
Statements of Cash Flows


	Predecessor			Predecessor			Predecessor
	For the Years Ended December 31,
(dollars in thousands)	2007			2006			2005
Cash Flows From Operating Activities:
Net earnings	$	110,519		$	94,737		$	67,364
Noncash items included in earnings:
Amortization of deferred policy acquisition costs		22,064			42,337			126,281
Capitalization of policy acquisition costs		(31,206	)		(31,796	)		(29,954	)
Amortization of deferred sales inducements		2,294			944			352
Capitalization of sales inducements		(14,294	)		(13,252	)		(8,650	)
Accretion (amortization) of unearned policy charge revenue		1,941			(10,357	)		(68,309	)
Capitalization of unearned policy charge revenue		291			298			1,692
Amortization of investments		3,008			7,350			9,476
Limited partnership asset distributions		(610	)		—			—
Interest credited to policyholder liabilities		93,978			101,837			106,444
Change in guaranteed benefit liabilities		(4,034	)		(2,218	)		1,797
Deferred federal income tax expense (benefit)		11,090			3,993			(9,960	)
(Increase) decrease in operating assets:
Trading account securities		—			28,148			642
Accrued investment income		7,922			4,918			5,180
All other assets — net		2,603			(11,675	)		(2,459	)
Increase (decrease) in operating liabilities:
Claims and claims settlement expenses		(21	)		11,279			(3,998	)
Other policyholder funds		(2,270	)		5,025			(5,276	)
All other liabilities — net		(26,874	)		10,907			(4,170	)
Other operating activities:
Net realized investment gains		(2,055	)		(1,236	)		(2,622	)


Net cash and cash equivalents provided by operating activities		174,346			241,239			183,830


Cash Flows From Investing Activities:
Proceeds from (payments for):
Sales of available-for-sale securities		262,046			390,637			369,222
Maturities of available-for-sale securities		295,271			160,863			191,749
Purchases of available-for-sale securities		(376,215	)		(236,551	)		(503,621	)
Sales of limited partnerships		860			1,028			3,466
Purchases of limited partnerships		—			(250	)		(2,349	)
Policy loans on insurance contracts – net		20,249			23,269			37,893


Net cash and cash equivalents provided by investing activities		202,211			338,996			96,360



See Notes to Financial Statements.		(Continued)

Merrill Lynch Life Insurance Company
(a wholly owned subsidiary of AEGON USA, Inc.)
Statements of Cash Flows


	Predecessor			Predecessor			Predecessor
	For the Years Ended December 31,
(dollars in thousands)	2007			2006			2005
Cash Flows From Financing Activities:
Cash dividend paid to Merrill Lynch Insurance Group, Inc.	$	(193,731	)	$	(180,000	)	$	—
Policyholder deposits (excludes internal policy replacement deposits)		632,846			685,069			623,148
Policyholder withdrawals (including transfers from separate accounts		(887,625	)		(911,037	)		(911,222	)


Net cash and cash equivalents used in financing activities		(448,510	)		(405,968	)		(288,074	)


Net increase (decrease) in cash and cash equivalents		(71,953	)		174,267			(7,884	)

Cash and cash equivalents, beginning of year		230,586			56,319			64,203


Cash and cash equivalents, end of year	$	158,633		$	230,586		$	56,319


Supplementary Disclosure of Cash Flow Information:
Cash paid for:
Federal income taxes	$	60,918		$	41,570		$	38,127
Interest		501			494			332

See Notes to Financial Statements.

Merrill Lynch Life Insurance Company
(a wholly owned subsidiary of AEGON USA, Inc.)
Notes to Financial Statements
(Dollars in Thousands)

Note 1. Acquisition of Merrill Lynch Insurance Company by AEGON USA, Inc.

On December 28, 2007 (the “Acquisition Date”), Merrill Lynch Life Insurance Company (“MLLIC” or the “Company”) and its affiliate, ML Life Insurance Company of New York (“MLLICNY”) were acquired by AEGON USA, Inc. (“AUSA”) for $1.12 billion and $0.13 billion, respectively for a total price for both entities of $1.25 billion. AUSA is an indirect wholly owned subsidiary of AEGON N.V., a limited liability share company organized under Dutch law. AEGON N.V. and its subsidiaries and joint ventures have life insurance and pension operations in over 10 countries in Europe, the Americas, and Asia and are also active in savings and investment operations, accident and health insurance, general insurance and limited banking operations in a number of these countries. Prior to the Acquisition Date, MLLIC was a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc. (“MLIG”), which is an indirect wholly owned subsidiary of Merrill Lynch & Co., Inc. (“ML&Co.”). See Note 3 for additional information on the purchase price and goodwill related to this transaction.

Note 2. Summary of Significant Accounting Policies

Description of Business

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 and is currently licensed to sell insurance and annuities in forty-nine states, the District of Columbia, the U.S. Virgin Islands and Guam. The Company markets its products solely through the retail network of Merrill Lynch, Pierce, Fenner & Smith, Incorporated (“MLPF&S”), a wholly owned broker-dealer subsidiary of ML&Co.

Basis of Reporting

The accompanying financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). The Company also submits financial statements to insurance industry regulatory authorities, which are prepared on the basis of statutory accounting practices (“SAP”). The significant accounting policies and related judgments underlying the Company’s Financial Statements are summarized below.

On December 28, 2007, AUSA completed the acquisition of MLLIC and its affiliate MLLICNY. In accordance with Statement of Financial Accounting Standard (“SFAS”) No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangibles, the acquisition is being accounted for by AUSA using the purchase method of accounting, which requires the assets and liabilities of the Company to be identified and measured at their estimated fair values as of the Acquisition Date. The estimated fair values are subject to adjustment of the initial allocation for a one-year period as more information relative to the fair values as of the Acquisition Date becomes available.

In addition, as required by the U.S. Securities and Exchange Commission Staff Accounting Bulletin 54, Push Down Basis of Accounting in Financial Statements of a Subsidiary, the purchase method of accounting applied by AUSA to the acquired assets and liabilities associated with the Company has been “pushed down” to the financial statements of the Company, thereby establishing a new basis of accounting. As a result, the Company follows AUSA’s accounting policies subsequent to the Acquisition Date. This new basis of accounting is referred to as the “successor basis”, while the historical basis of accounting is referred to as the “predecessor basis’’. In general, Balance Sheet amounts at December 31, 2007 are representative of the successor basis of accounting while Statements of Earnings, Comprehensive Income, and Cash Flows amounts for 2007 are representative of the predecessor basis of accounting. Financial Statements included herein for periods prior and subsequent to the Acquisition Date are labeled “Predecessor” and “Successor”, respectively. Since the actual results between the period December 28, 2007 and December 31, 2007 were not material, the Company has utilized December 31, 2007 as the Acquisition Date herein.

Certain amounts in the predecessor financial statements have been reclassified to conform to the presentation of the successor and the current year presentation.

Accounting Estimates and Assumptions

The preparation of financial statements requires management to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenues and expenses and the disclosures of contingent assets and liabilities. Those estimates are inherently subject to change and actual results could differ from those estimates. Included among the material (or potentially material) reported amounts

and disclosures that require extensive use of estimates are: fair value of certain invested assets, asset valuation allowances, deferred policy acquisition costs, goodwill, value of business acquired, other intangible assets, insurance and investment contract liabilities, income taxes and potential effects of resolved litigated matters.

Revenue Recognition

Revenues for variable annuity contracts consist of policy charges for i) mortality and expense risks, ii) certain guaranteed benefits selected by the contract owner, iii) administration fees, iv) annual contract maintenance charges, and v) withdrawal charges assessed on contracts surrendered during the withdrawal charge period. Revenues for variable annuity contracts are recognized when policy charges are assessed or earned.

Revenues for variable life insurance contracts consist of policy charges for i) mortality and expense risks, ii) cost of insurance fees, iii) amortization of front-end and deferred sales charges, and iv) withdrawal charges assessed on contracts surrendered during the withdrawal charge period. Revenues for variable life insurance contracts are recognized when policy charges are assessed or earned. The Company does not currently manufacture variable life insurance contracts.

Revenues for interest-sensitive annuity contracts (market value adjusted annuities, immediate annuities, and single premium deferred annuities) and interest-sensitive life insurance contracts (single premium whole life insurance) consist of i) investment income, ii) gains (losses) on the sale of invested assets, and iii) withdrawal charges assessed on contracts surrendered during the withdrawal charge period. Revenues for interest-sensitive annuity and life insurance contracts are recognized when investment income and investment sales are earned while revenues for contract charges are recognized when assessed or earned. The Company does not currently manufacture single premium deferred annuities or single premium whole life contracts.

Investments

The Company’s investments in fixed maturity and equity securities are classified as either available-for-sale or trading and are reported 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 loss, net of taxes. These changes in estimated fair value are not reflected in the Statements of Earnings until a sale transaction occurs or when declines in fair value are deemed other-than-temporary. Unrealized gains and losses on trading account securities are included in net realized investment gains. During the first quarter 2006 the Company liquidated its trading portfolio.

If management determines that a decline in the value of an available-for-sale 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. Management makes this determination through a series of discussions with the Company’s portfolio managers and credit analysts, information obtained from external sources (i.e. company announcements, rating agency announcements, or news wire services) and the Company’s ability and intent to hold the investments for a period of time sufficient for a forecasted market price recovery up to or beyond the amortized cost of the investment. The factors that may give rise to a potential other-than-temporary impairment include, but are not limited to, i) certain credit-related events such as default of principal or interest payments by the issuer, ii) bankruptcy of issuer, iii) certain security restructurings, and iv) fair market value less than amortized cost for an extended period of time. In the absence of a readily ascertainable market value, the estimated fair value on these securities represents management’s best estimate and is based on comparable securities and other assumptions as appropriate. Management bases this determination on the most recent information available.

For fixed maturity securities, premiums are amortized to the earlier of the call or maturity date, discounts are accreted to the maturity date, and interest income is accrued daily. For equity securities, dividends are recognized on the ex-dividend date. Prior to December 28, 2007, realized gains and losses on the sale or maturity of investments were determined on the basis of specific identification. Subsequent to December 28, 2007, realized gains and losses on the sale or maturity of investments are determined on the FIFO basis. Investment transactions are recorded on the trade date.

Certain fixed maturity and equity securities are considered below investment grade. The Company defines below investment grade securities as unsecured debt obligations that have a Standard and Poor’s (or similar rating agency) rating lower than BBB-.

For publicly traded securities, the estimated fair value is determined using quoted market prices. For securities without a readily ascertainable market value, the Company utilizes pricing services and broker quotes. Such estimated fair values do not necessarily represent the values for which these securities could have been sold at the dates of the balance sheets.

Investments in limited partnerships are carried at cost. In accordance with push-down accounting, the original cost basis has been adjusted to reflect the estimated fair value. The Company has investments in three limited partnerships that are not publicly traded. Based on the review of the underlying investments of the partnerships, management has estimated the fair value of two of the

partnerships as equal to its underlying equity share and the third partnership equal to zero. Prior to December 28, 2007, management had estimated the fair value of two of the partnerships as equal to cost and the third partnership equal to zero.

Policy loans on insurance contracts are stated at unpaid principal balances. The Company estimates the fair value of policy loans as equal to the book value of the loans. Policy loans are fully collateralized by the account value of the associated insurance contracts, and the spread between the policy loan interest rate and the interest rate credited to the account value held as collateral is fixed.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and on deposit and short-term investments with original maturities of three months or less. The estimated fair value of cash and cash equivalents approximates the carrying value.

Deferred Policy Acquisition Costs (“DAC”)

Policy acquisition costs for variable annuities and variable life insurance contracts are deferred and amortized based on the estimated future gross profits for each group of contracts. These future gross profit estimates are subject to periodic evaluation by the Company, with necessary revisions applied against amortization to date. The impact of these revisions on cumulative amortization is recorded as a charge or credit to current operations, commonly referred to as “unlocking”. It is reasonably possible that estimates of future gross profits could be reduced in the future, resulting in a material reduction in the carrying amount of DAC.

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. Policy acquisition costs can also arise from the acquisition or reinsurance of existing inforce policies from other insurers. These costs include ceding commissions and professional fees related to the reinsurance assumed. The deferred costs are amortized in proportion to the estimated future gross profits over the anticipated life of the acquired insurance contracts utilizing an interest methodology.

During 1990, the Company entered into an assumption reinsurance agreement with an unaffiliated insurer. The acquisition costs relating to this agreement are being amortized over a twenty-five year period using an effective interest rate of 7.5%. This reinsurance agreement provided for payment of contingent ceding commissions, for a ten year period, based upon the persistency and mortality experience of the insurance contracts assumed. Payments made for contingent ceding commissions were capitalized and amortized using an identical methodology as that used for the initial acquisition costs.

As of December 31, 2007, the DAC balance was zero as a result of push-down accounting at the Acquisition Date.

Deferred Sales Inducements (“DSI”)

The Company offers a sales inducement whereby the contract owner receives a bonus which increases the initial account balance by an amount equal to a specified percentage of the contract owner’s deposit. This amount may be subject to recapture under certain circumstances. Consistent with DAC, sales inducements for variable annuity contracts are deferred and amortized based on the estimated future gross profits for each group of contracts. These future gross profit estimates are subject to periodic evaluation by the Company, with necessary revisions applied against amortization to date. The impact of these revisions on cumulative amortization is recorded as a charge or credit to current operations, commonly referred to as “unlocking”. It is reasonably possible that estimates of future gross profits could be reduced in the future, resulting in a material reduction in the carrying amount of the deferred sales inducement asset.

The expense and the subsequent capitalization and amortization are recorded as a component of policy benefits in the Statements of Earnings.

As of December 31, 2007, the DSI balance was zero as a result of push-down accounting at the Acquisition Date.

Value of Business Acquired (“VOBA”)

VOBA represents the portion of the purchase price that is allocated to the value of the right to receive future cash flows from the insurance and annuity contracts inforce at the Acquisition Date. VOBA is based on actuarially determined projections, by each block of business, of future policy and contract charges, premiums, mortality, policyholder behavior, separate account performance, operating expenses, investment returns and other factors. Actual experience on the purchased business may vary from these projections. Revisions in estimates result in changes to the amounts expensed in the reporting period in which the revisions are made and could result in the impairment of the asset and a charge to income if estimated future gross profits are less than the unamortized balance. In addition, the Company utilizes the reversion to the mean assumption, a common industry practice, in its determination of the amortization of VOBA. This practice assumes that the expectations for long-term appreciation in equity markets is not changed by

minor short-term market fluctuations, but that it does change when large interim deviations have occurred. Since there were no events or circumstances to indicate that there may be any significant change in the fair value of net assets acquired on December 28, 2007, management did not perform an impairment test for VOBA.

Other Intangibles

Other intangible assets that were acquired at the Acquisition Date are a distribution agreement, a tradename and a non-compete agreement. The tradename and the non-compete are required to be amortized on a straight-line basis over their useful life of five years. The distribution intangible will be amortized over the expected economic benefit period and at a pace consistent with the expected future gross profit streams generated from the distribution agreement, which is 30 years. The entire asset amount has been allocated to annuities. The carrying values of the intangibles will be reviewed periodically for indicators of impairment in value including unexpected or adverse changes in the following: (1) the economic or competitive environments in which the Company operates, (2) the profitability analyses, (3) cash flow analyses, and (4) the fair value of the relevant business operation. If there was an indication of impairment, then the cash flow method would be used to measure the impairment, and the carrying value would be adjusted as necessary. Since there were no events or circumstances to indicate that there may be any significant change in the fair value of net assets acquired on December 28, 2007, management did not perform an impairment test for the other intangibles.

Goodwill

Goodwill is the excess of the purchase price over the estimated fair value of net assets acquired. Under SFAS No. 142, “Goodwill and Other Intangible Assets”, goodwill and intangible assets with indefinite lives are not amortized, but are subject to impairment tests conducted at least annually. Impairment testing is to be performed using the fair value approach, which requires the use of estimates and judgment, at the “reporting unit” level. A reporting unit represents the operating segment which is the level at which the financial information is prepared and regularly reviewed by management. The entire asset amount has been allocated to annuities. Goodwill is reviewed for indications of value impairment, with consideration given to financial performance and other relevant factors. In addition, certain events including a significant adverse change in legal factors or the business climate, an adverse action or assessment by a regulator, or unanticipated competition would cause the Company to review the carrying amounts of goodwill for impairment. When considered impaired, the carrying amounts are written down to fair value based primarily on discounted cash flows. Since there were no events or circumstances to indicate that there may be any significant change in the fair value of net assets acquired on December 28, 2007, management did not perform an impairment test for the acquired goodwill.

Separate Accounts

The Company’s Separate Accounts consist of variable annuities and variable life insurance contracts, of which the assets and liabilities are legally segregated and reported as separate captions in the Balance Sheets. Separate Accounts are established in conformity with Arkansas State Insurance Law and are generally not chargeable with liabilities that arise from any other business of the Company. Separate Accounts assets may be subject to claims of the Company only to the extent the value of such assets exceeds Separate Accounts liabilities. The assets of the Separate Accounts are carried at the daily net asset value of the mutual funds in which they invest.

Absent any contract provision wherein the Company guarantees either a minimum return or account value upon death or annuitization, the net investment income and net realized and unrealized gains and losses attributable to Separate Accounts assets supporting variable annuities and variable life contracts accrue directly to the contract owner and are not reported as revenue in the Statements of Earnings. Mortality, guaranteed benefit fees, policy administration, maintenance, and withdrawal charges associated with Separate Accounts products are included in policy charge revenue in the Statements of Earnings.

Policyholder Account Balances


Interest-sensitive life products	4.00% - 4.85	%
Interest-sensitive deferred annuities	1.60% - 6.80	%

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

Future Policy Benefits

The Company’s liability for future policy benefits consists of liabilities for immediate annuities and liabilities for certain guaranteed benefits contained in the variable insurance products the Company manufactures. Liabilities for immediate annuities are equal to the

present value of estimated future payments to or on behalf of policyholders, where the timing and amount of payment generally depends on policyholder mortality. Liabilities for guaranteed benefits for variable annuity and life insurance contracts are discussed in more detail in Note 6 of the Financial Statements. Interest rates used in establishing such liabilities are as follows:


	Successor			Predecessor
Interest rates used for liabilities		2.55% - 5.50	%		3.00% - 11.00	%

Claims and Claims Settlement Expenses

Liabilities for claims and claims settlement expenses equal the death benefit (plus accrued interest) for claims that have been reported to the Company but have not settled and an estimate, based upon prior experience, for unreported claims.

Unearned Policy Charge Revenue (“UPCR”)

Certain variable life insurance products contain policy charges that are assessed at policy issuance. These policy charges are deferred and accreted into policy charge revenue based on the estimated future gross profits for each group of contracts, consistent with the amortization of DAC. The impact of any revisions on cumulative accretion is recorded as a charge or credit to current operations, commonly referred to as “unlocking”. The Company records a liability equal to the unaccreted balance of these policy charges on the Balance Sheets. The accretion of the UPCR is recorded as a component of policy charge revenue in the Statements of Earnings.

As of December 31, 2007, the UPCR balance was zero as a result of push-down accounting at the Acquisition Date.

Federal Income Taxes

The results of operations of the Company through December 28, 2007 were included in the consolidated Federal income tax return of ML&Co. The Company had entered into a tax-sharing agreement with ML&Co. whereby the Company calculated its current tax provision based on its operations and periodically remitted its current federal income tax liability to ML&Co. The tax-sharing agreement with ML&Co. was terminated on December 28, 2007. The Company has not entered into a new tax sharing agreement.

The Company provides for income taxes on all transactions that have been recognized in the financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. Accordingly, deferred taxes are adjusted to reflect the tax rates at which future taxable amounts will likely be settled or realized. The effects of tax rate changes on future deferred tax liabilities and deferred tax assets, as well as other changes in income tax laws, are recognized in net earnings in the period during which such changes are enacted.

For federal income tax purposes, an election under Internal Revenue Code Section 338 was made by AUSA in connection with the purchase of the Company. As a result of this election, the income tax bases in the acquired assets and liabilities were adjusted as of the Acquisition Date resulting in a change to the related deferred income taxes. See Notes 3 and 7.

The Company is subject to taxes on premiums and is exempt from state income taxes in most states.

Recent Accounting Pronouncements

In December 2007, Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised 2007), “Business Combinations” (“SFAS 141(R)”). This statement replaces SFAS No. 141, “Business Combinations” (“SFAS 141”) and establishes the principles and requirements for how the acquirer in a business combination: (a) measures and recognizes the identifiable assets acquired, liabilities assumed, and any noncontrolling interests in the acquired entity, (b) measures and recognizes positive goodwill acquired or a gain from bargain purchase (negative goodwill), and (c) determines the disclosure information that is decision-useful to users of financial statements in evaluating the nature and financial effects of the business combination. SFAS 141(R) is effective for and shall be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, with earlier adoption prohibited. Assets and liabilities that arose from business combinations with acquisition dates prior to the SFAS 141(R) effective date shall not be adjusted upon adoption of SFAS 141(R) with certain exceptions for acquired deferred tax assets and acquired income tax positions. The Company expects to adopt SFAS 141(R) on January 1, 2009, and has not yet determined the effect of SFAS 141(R) on its Financial Statements.

parent’s ownership interests in a subsidiary in which the parent entity has a controlling financial interest as equity transactions, (d) require an entity to measure at fair value its remaining interest in a subsidiary that is deconsolidated, (e) require an entity to provide sufficient disclosures that identify and clearly distinguish between interests of the parent and interests of noncontrolling owners. SFAS 160 applies to all for-profit entities that prepare consolidated financial statements, and affects those for-profit entities that have outstanding noncontrolling interests in one or more subsidiaries or that deconsolidate a subsidiary. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 with earlier adoption prohibited. The Company expects to adopt SFAS 160 on January 1, 2009 and has not yet determined the effect of SFAS 160 on its Financial Statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 provides a fair value option election that allows companies to irrevocably elect fair value as the initial and subsequent measurement attribute for certain financial assets and liabilities, with changes in fair value recognized in earnings as they occur. SFAS No. 159 permits the fair value option election on an instrument by instrument basis at initial recognition of an asset or liability or upon an event that gives rise to a new basis of accounting for that instrument. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007 provided that the entity makes that choice in the first 120 days of that fiscal year, has not yet issued financial statements for any interim period of the fiscal year of adoption, and also elects to apply the provisions of SFAS No. 157, Fair Value Measurements. Prior to the acquisition by AUSA, the Company early adopted SFAS No. 159 as of the first quarter 2007, but did not elect the fair value option for any of its existing assets or liabilities and therefore, the adoption did not have an impact on the Company’s Financial Statements. However, AUSA has not elected early adoption, and therefore as a result of the acquisition by AUSA and the resulting new basis of accounting, the Company will adopt SFAS No. 159 on January 1, 2008 and it is not expected to have a material impact on the Company’s Financial Statements.

On January 1, 2007, the Company adopted Statement of Position (“SOP”) 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection With Modifications or Exchanges of Insurance Contracts. SOP 05-1 provides guidance on accounting by insurance enterprises for deferred acquisition costs on internal replacements of insurance and investment contracts other than those specifically described in SFAS No. 97. SOP 05-1 defines an internal replacement as a modification in product benefits, features, rights, or coverages that occurs by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. Since the Company’s practice of accounting for deferred acquisition costs, in connection with modifications or exchanges, substantially meets the provisions prescribed within SOP 05-1, the adoption of SOP 05-1 did not have a material impact on the Company’s Financial Statements.

In September 2006, the FASB issued SFAS No. 157 Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 with early adoption permitted, provided the entity has not yet issued financial statements for the fiscal year, including any interim periods. The provisions of SFAS No. 157 are to be applied prospectively. Prior to the acquisition by AUSA, the Company had early adopted SFAS No. 157 as of the first quarter 2007, which did not have a material impact on the Company’s Financial Statements. However, AUSA has not elected early adoption, and therefore as a result of the acquisition by AUSA and the resulting new basis of accounting, the Company will adopt SFAS No. 157 on January 1, 2008 and it is not expected to have a material impact on the Company’s Financial Statements.

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a company’s Financial Statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company adopted FIN 48 in the first quarter of 2007. The adoption of FIN 48 did not have an impact on the Company’s Financial Statements. As a result of the Company’s election for federal income tax purposes of Internal Revenue Code Section 338, the predecessor is responsible for any FIN 48 obligation that existed prior to the Acquisition Date.

Note 3. Purchase Price Allocation and Goodwill — Preliminary

On December 28, 2007, the Company and its affiliate, MLLICNY, were acquired by AUSA for $1.12 billion and $0.13 billion, respectively, for a total price for both entities of $1.25 billion. The allocation of the purchase price to the entities is based on their relative fair value. Since the actual results between the period December 28, 2007 and December 31, 2007 were not material, the Company has utilized December 31, 2007 as the Acquisition Date.

In addition, on December 28, 2007, ML&Co. and AUSA entered into a transition services agreement whereby ML&Co. is to provide certain outsourced third-party services required for the normal operations of the business and other services necessary for the migration to AUSA’s infrastructure. These services may be provided for a period of up to two years.

The purchase price has been allocated to the assets acquired and liabilities assumed using management’s best estimate of their fair value as of the Acquisition Date. The Company anticipates further refinement of the estimated fair values during the year as additional information relative to the fair values as of the Acquisition Date become available. Based upon AUSA’s method of attributing the purchase price to the entities acquired, refinements to the estimated fair values may result in changes to the purchase price of each of the entities. In no case will the adjustments extend beyond one year from the Acquisition Date.

In connection with the purchase of the Company discussed in Note 1, ML&Co. has agreed to make an additional payment to AUSA for the cost, if any, of making an election to determine policy acquisition costs to be capitalized for tax purposes without regard to the Company’s general expenses for its tax year ended December 31, 2008. If such a payment is made, it is not expected to have a material impact on any of the push-down accounting adjustments.

The computation of the purchase price and the allocation of the purchase price to the net assets acquired based upon their respective fair values at December 28, 2007, and the resulting goodwill, are presented below.


	Successor
Total Purchase Price				$	1,249,974
Purchase price allocated to MLNY					130,838

Purchase price allocated to the Company					1,119,136

Net Assets acquired prior to purchase accounting adjustments	$	585,390

Adjustments to reflect assets acquired at fair value:
Fixed maturity available-for-sale securities		(2,020	)
Equity available-for-sale securities		(236	)
Limited partnerships		8,601
Elimination of historical DAC		(294,790	)
Elimination of historical DSI		(32,606	)
VOBA		574,950
Value of distribution agreements acquired		53,280
Value of non-compete intangible acquired		12,420
Value of tradename intangible acquired		9,230
Reinsurance receivables		(3,828	)
Other assets		(510	)

Adjustments to reflect liabilities assumed at fair value:
Policyholder account balances		601
Future policy benefits		(1,584	)
Federal income taxes — deferred		15,734
Elimination of historical UPCR		37,777
Other liabilities		(153	)


Net Fair Value of Assets Acquired and Liabilities Assumed					962,256


Goodwill Resulting from the Acquisition				$	156,880

The entire amount of goodwill is expected to be deductible for income tax purposes.

Other Intangible Assets

VOBA reflects the estimated fair value of inforce contracts acquired and represents the portion of the purchase price that is allocated to the value of the right to receive future cash flows from the life insurance and annuity contracts inforce at the Acquisition Date. VOBA is based on actuarially determined projections, by each block of business, of future policy and contract charges, premiums, mortality, separate account performance, surrenders, operating expenses, investment returns and other factors. Actual experience on

the purchased business may vary from these projections. If estimated gross profits or premiums differ from expectations, the amortization of VOBA is adjusted to reflect actual experience.

The value of the distribution agreement reflects the estimated fair value of the Company’s distribution agreement acquired at the Acquisition Date. The value of the distribution agreement is based on actuarially determined projections of future sales during the term of the agreement. The distribution intangible will be amortized over the expected economic benefit period and at a pace consistent with the expected future gross profit streams generated from the distribution agreement, which is 30 years.

The value of the tradename and the non-compete agreement reflects the estimated fair value of the tradename and the non-compete agreement at the Acquisition Date and will be amortized over the five year contractual agreement on a straight-line basis.

If actual experience under the distribution agreement, the tradename and the non-compete agreements differ from expectations, the amortization of these intangibles will be adjusted to reflect actual experience.

For purposes of calculating the VOBA and other intangible assets relating to the Acquisition, management considered the Company’s weighted average cost of capital, as well as the weighted average cost of capital required by market participants. A discount rate of 9% and 11% were used for VOBA for the life and annuity segments, respectively. A discount rate of 12% was used to value the distribution agreement, the tradename and the non-compete agreement intangible assets.

The fair values of VOBA and the distribution agreement, tradename, and the non-compete intangibles acquired at the Acquisition Date are as follows:


	Successor
VOBA	$	574,950
Value of distribution agreement acquired		53,280
Value of non-compete intangible acquired		12,420
Value of tradename intangible acquired		9,230

Total value of amortizable intangible assets acquired, excluding goodwill	$	649,880

The estimated future amortization of VOBA and the distribution agreement, tradename, and the non-compete intangibles from 2008 to 2012 are as follows:


	Successor
2008	$	50,304
2009	$	47,908
2010	$	47,712
2011	$	45,764
2012	$	42,742

Note 4. Estimated Fair Value of Financial Instruments

Estimated Fair Value

As a result of the acquisition, all assets and liabilities acquired have been valued based on management’s best estimate of their fair value as of the Acquisition Date. See Note 2 for additional information regarding the determination of fair value.

Financial instruments are carried at fair value or amounts that approximate fair value. The carrying values of financial instruments at December 31, 2006 were:


	Predecessor
	2006
Assets:
Fixed maturity securities	$	1,570,383
Equity securities		72,728
Limited partnerships		11,417
Policy loans on insurance contracts		968,874
Cash and cash equivalents		230,586
Separate accounts assets		11,330,397


Total assets	$	14,184,385


Liabilities:
Policyholder account balances (1)	$	2,047,973
Separate accounts liabilities		11,330,397


Total liabilities	$	13,378,370


(1)		The Company records certain adjustments to policyholder account balances in conjunction with the unrealized holding gains or losses on investments classified as available-for-sale. The Company adjusts a portion of these liabilities as if the unrealized holding gains or losses had actually been realized, with corresponding credits or charges reported in accumulated other comprehensive loss, net of taxes.

The amortized cost and estimated fair value of investments in fixed maturity securities and equity securities at December 31 were:


	Successor
	2007
	Estimated
	Fair
	Value (1)
Fixed maturity securities:
Corporate debt securities	$	1,080,552
Mortgage-backed securities and other asset backed securities		208,582
U.S. Government and agencies		102,097
Foreign governments		18,790
Municipals		1,709


Total fixed maturity securities	$	1,411,730


Equity securities:
Preferred stocks	$	37,182


(1)		In accordance with push-down accounting, cost /amortized cost were equal to estimated fair value at December 31, 2007.


	Predecessor
	2006
	Cost/		Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Fixed maturity securities:
Corporate debt securities	$	1,424,640	$	7,509	$	22,568	$	1,409,581
Mortgage-backed securities and other asset backed securities		91,956		226		376		91,806
U.S. Government and agencies		44,363		200		419		44,144
Foreign governments		21,281		321		648		20,954
Municipals		3,956		38		96		3,898


Total fixed maturity securities	$	1,586,196	$	8,294	$	24,107	$	1,570,383


Equity securities:
Preferred stocks	$	70,021	$	2,869	$	162	$	72,728

In accordance with push-down accounting implemented at December 28, 2007, there were no unrealized losses incurred at December 31, 2007. Estimated fair value and gross unrealized losses by length of time that certain fixed maturity and equity securities have been in a continuous unrealized loss position at December 31, 2006 were:


	Predecessor
	2006
	Less than 12 months				More than 12 Months				Total
	Estimated				Estimated				Estimated
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Fixed maturity securities:
Corporate debt securities	$	116,759	$	1,074	$	961,147		21,494	$	1,077,906	$	22,568
Foreign governments		62		—		17,844		648		17,906		648
U.S. Government and agencies		15,057		143		21,862		276		36,919		419
Mortgage-backed securities and other asset backed securities		5,555		15		14,886		361		20,441		376
Municipals		2,104		96		—		—		2,104		96

Equity securities:
Preferred stocks		17,408		134		483		28		17,891		162


Total temporarily impaired securities	$	156,945	$	1,462	$	1,016,222	$	22,807	$	1,173,167	$	24,269

Unrealized losses incurred during 2006 were primarily due to price fluctuations resulting from changes in interest rates and credit spreads. The Company had the ability and intent to hold the investments for a period of time sufficient for a forecasted market price recovery up to or beyond the amortized cost of the investment.

There were no recorded realized investment losses due to other-than-temporary declines in fair value of securities during 2007 and 2006. During 2005, the Company recorded realized investment losses due to other-than-temporary declines in fair value of $1,937.

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


	Successor
	2007
	Estimated
	Fair
	Value (1)
Fixed maturity securities:
Due in one year or less	$	342,031
Due after one year through five years		538,779
Due after five years through ten years		215,646
Due after ten years		106,692

		1,203,148

Mortgage-backed securities and other asset backed securities		208,582


Total fixed maturity securities	$	1,411,730


(1)		In accordance with push-down accounting, cost /amortized cost were equal to estimated fair value at December 31, 2007.


	Predecessor
	2006
			Estimated
	Amortized		Fair
	Cost		Value
Fixed maturity securities:
Due in one year or less	$	288,695	$	286,606
Due after one year through five years		827,644		813,813
Due after five years through ten years		284,352		283,360
Due after ten years		93,549		94,798

		1,494,240		1,478,577

Mortgage-backed securities and other asset backed securities		91,956		91,806


Total fixed maturity securities	$	1,586,196	$	1,570,383

In the preceding tables fixed maturity securities not due at a single maturity date have been included in the year of final maturity. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

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


	Successor
	2007
	Estimated
	Fair
	Value (1)
AAA	$	348,432
AA		222,623
A		468,078
BBB		360,156
Below investment grade		12,441


Total fixed maturity securities	$	1,411,730


Investment grade		99	%
Below investment grade		1	%


(1)		In accordance with push-down accounting, cost /amortized cost were equal to estimated fair value at December 31, 2007.


	Predecessor
	2006
				Estimated
	Amortized			Fair
	Cost			Value
AAA	$	260,478		$	258,082
AA		307,490			303,167
A		533,715			527,398
BBB		467,182			464,259
Below investment grade		17,331			17,477
Total fixed maturity securities	$	1,586,196		$	1,570,383
Investment grade		99	%		99	%
Below investment grade		1	%		1	%

At December 31, 2007 and 2006, the carrying value of fixed maturity securities rated BBB- were $61,063 and $58,695, respectively, which is the lowest investment grade rating given by Standard and Poor’s.

The Company’s liability for policyholder account balances represents the contract value that has accrued to the benefit of the policyholder as of the balance sheet date. The liability is generally equal to the accumulated account deposits plus interest credited less policyholders’ withdrawals and other charges assessed against the account balance. The Company records certain adjustments to policyholder account balances in conjunction with the unrealized holding gains or losses on investments classified as available-for-sale. The Company adjusts a portion of these liabilities as if the unrealized holding gains or losses had actually been realized, with corresponding credits or charges reported in accumulated other comprehensive loss, net of taxes.

The components of net unrealized gains (losses) included in accumulated other comprehensive loss, net of taxes, at December 31, 2006 were as follows:


	Predecessor
	2006
Assets:
Fixed maturity securities	$	(15,813	)
Equity securities		2,707

		(13,106	)


Liabilities:
Policyholder account balances		2,636
Federal income taxes — deferred		(5,509	)

		(2,873	)


Stockholder equity:
Accumulated other comprehensive loss, net of taxes	$	(10,233	)

As of December 31, 2007, accumulated other comprehensive loss, net of taxes was zero as a result of push-down accounting at the Acquisition Date.

Proceeds and gross realized investment gains and losses from the sale of available-for-sale securities for the years ended December 31 were as follows:


	Predecessor		Predecessor		Predecessor
	2007		2006		2005
Proceeds	$	262,046	$	390,637	$	369,222
Gross realized investment gains		4,119		4,533		7,026
Gross realized investment losses		2,064		4,009		4,175

The Company considers fair value at the date of sale to be equal to proceeds received. Proceeds on the sale of available-for-sale securities sold at a realized loss were $152,277, $201,738 and $191,302 for the years ended December 31, 2007, 2006 and 2005, respectively.

During 2007, 2006 and 2005 the Company incurred realized investment losses in order to further diversify and match the duration of its invested assets to corresponding policyholder liabilities.

The Company had investment securities with a carrying value of $23,136 and $22,355 that were deposited with insurance regulatory authorities at December 31, 2007 and 2006, respectively.

Excluding investments in U.S. Government and agencies, the Company is not exposed to any significant concentration of credit risk in its fixed maturity securities portfolio.

Net investment income (loss) by source for the years ended December 31 was as follows:


	Predecessor			Predecessor			Predecessor
	2007			2006			2005
Fixed maturity securities	$	72,597		$	84,176		$	91,754
Policy loans on insurance contracts		49,497			50,755			51,346
Cash and cash equivalents		9,976			6,030			2,673
Equity securities		3,593			4,739			4,313
Limited partnerships		3,223			15			483
Other		113			(149	)		38


Gross investment income		138,999			145,566			150,607
Less investment expenses		(2,583	)		(2,949	)		(2,877	)


Net investment income	$	136,416		$	142,617		$	147,730

Net realized investment gains (losses) for the years ended December 31 were as follows:


	Predecessor		Predecessor		Predecessor
	2007		2006		2005
Fixed maturity securities	$	1,727	$	447	$	2,854
Equity securities		328		77		(3	)
Limited partnerships		—		—		(311	)
Trading account securities		—		712		82

Net realized investment gains	$	2,055	$	1,236	$	2,622

The Company maintained a trading portfolio comprised of convertible debt and equity securities that was liquidated in the first quarter 2006. The net unrealized holdings losses on trading account securities included in net realized investment gains were $1,012 at December 31, 2005.

Note 5. DAC, DSI and UPCR

DAC

The components of amortization of DAC for the years ended December 31 were as follows:


	Predecessor			Predecessor			Predecessor
	2007			2006			2005
Normal amortization — variable life and annuity insurance products	$	48,575		$	58,994		$	44,415
Unlocking — variable life insurance products		(16,795	)		1,055			55,492
Unlocking — variable annuity insurance products		(9,716	)		(17,712	)		26,374


Total amortization of DAC	$	22,064		$	42,337		$	126,281

During 2007, the Company revised its mortality assumptions and historical claims relating to its variable life insurance products which were favorable as compared to expectations. In addition, the Company updated its DAC model to reflect actual market returns for its variable annuity products, which were favorable as compared to expectations, consistent with the application of the reversion to the mean approach. However, this amount was partially offset by unfavorable unlocking resulting from revised lapse assumptions relating to certain variable annuity products.

During 2006, the Company revised its reinsurance and mortality assumptions and historical claims relating to its variable universal life insurance product. In addition, the Company updated its DAC model to reflect actual market returns, which were favorable as compared to expectations, for its variable annuity products resulting in favorable unlocking, consistent with the application of the reversion to the mean approach.

During 2005, the Company lowered its future gross profit assumptions on certain variable life insurance and annuity products resulting from historical surrender experience and reinsurance assumptions. This adjustment resulted in a corresponding and partially offsetting increase in UPCR accretion.

DSI

During 2005, the Company introduced a variable annuity product in which certain contracts contain sales inducements. The components of amortization of DSI for the years ended December 31 were as follows:


	Predecessor			Predecessor			Predecessor
	2007			2006			2005
Amortization	$	(2,355	)	$	(1,884	)	$	(352	)
Unlocking		61			940			—


Total amortization of DSI	$	(2,294	)	$	(944	)	$	(352	)

UPCR

The components of accretion (amortization) of UPCR for the years ended December 31 were as follows:


	Predecessor			Predecessor		Predecessor
	2007			2006		2005
Normal accretion — variable life insurance products	$	2,874		$	8,825	$	400
Unlocking — variable life insurance products		(4,815	)		1,532		67,909


Total accretion (amortization) of UPCR	$	(1,941	)	$	10,357	$	68,309

During 2007, the Company revised its mortality assumptions and historical claims relating to its variable universal life insurance product resulting in unfavorable unlocking. The decrease in normal UPCR accretion during 2007 is attributable to higher mortality as compared to 2006.

During 2006, the Company revised its reinsurance and mortality assumptions and historical claims for the current year on its variable universal life insurance product. The increase in normal UPCR accretion during 2006 is attributable to lower mortality as compared to 2005.

During 2005, the Company lowered its future gross profit assumptions on its variable life insurance product in connection to historical surrender experience and reinsurance assumptions. This adjustment resulted in a corresponding and partially offsetting increase in DAC amortization.

As previously discussed in Note 2, as of December 31, 2007, the DAC, DSI and UPCR balances were zero as a result of push-down accounting at the Acquisition Date.

Note 6. Variable Contracts Containing Guaranteed Benefits

Variable Annuity Contracts Containing Guaranteed Benefits

The Company issues variable annuity contracts in which the Company may contractually guarantee to the contract owner a guaranteed minimum death benefit (“GMDB”) and/or an optional guaranteed living benefit provision. The living benefit provisions offered by the Company include a guaranteed minimum income benefit (“GMIB”) and a guaranteed minimum withdrawal benefit (“GMWB”). Information regarding the general characteristics of each guaranteed benefit type is provided below:

	•		In general, contracts containing GMDB provisions provide a death benefit equal to the greater of the GMDB or the contract value. Depending on the type of contract, the GMDB may equal: i) contract deposits accumulated at a specified interest rate, ii) the contract value on specified contract anniversaries, iii) return of contract deposits, or iv) some combination of these benefits. Each benefit type is reduced for contract withdrawals.

	•		In general, contracts containing GMIB provisions provide the option to receive a guaranteed future income stream upon annuitization. There is a waiting period of ten years that must elapse before the GMIB provision can be exercised.

•

Contracts containing GMWB provisions provide the contract owner the ability to withdraw minimum annual payments regardless of the impact of market performance on the contract owner’s account value. In general, withdrawal percentages are based on the contract owner’s age at the time of the first withdrawal. The Company began offering the GMWB benefit provision in the first quarter 2006.

The Company had the following variable annuity contracts containing guaranteed benefits at December 31:


	Successor							Predecessor
	2007							2006
	GMDB		GMIB			GMWB		GMDB		GMIB			GMWB
Net amount at risk (1)	$	612,749	$	14,149		$	1,866	$	693,011	$	1,906		$	91

Average attained age of contract owners		68		60			71		68		59			71

Weighted average period remaining until expected annuitization		n/a	6.8		yrs		n/a		n/a	7.6		yrs		n/a


(1)		Net amount at risk for GMDB is defined as the current GMDB in excess of the contract owners’ account balance at the balance sheet date.

		Net amount at risk for GMIB is defined as the present value of the minimum guaranteed annuity payments available to the contract owner in excess of the contract owners’ account balance at the balance sheet date.

		Net amount at risk for GMWB is defined as the present value of the minimum guaranteed withdrawals available to the contract owner in excess of the contract owners’ account balance at the balance sheet date.

The Company records liabilities for contracts containing GMDB and GMIB provisions as a component of future policy benefits in the Balance Sheets. Changes in these guaranteed benefit liabilities are included as a component of policy benefits in the Statement of Earnings. The GMDB and GMIB liabilities are calculated in accordance with SOP 03-1 and are determined by projecting future expected guaranteed benefits under multiple scenarios for returns on Separate Accounts assets. The Company uses estimates for mortality and surrender assumptions based on actual and projected experience for each contract type. These estimates are consistent with the estimates used in the calculation of DAC. The Company regularly evaluates the estimates used and adjusts the GMDB and/or GMIB liability balances with a related charge or credit to earnings (“unlocking”), if actual experience or evidence suggests that earlier assumptions should be revised.

The variable annuity GMDB and GMIB liabilities for the years ended December 31 were as follows:


	GMDB			GMIB
Balance at January 1, 2006 (Predecessor)	$	106,209		$	2,245

Guaranteed benefits incurred		28,405			(2,547	)
Guaranteed benefits paid		(22,622	)		—
Unlocking		(11,691	)		1,007


Balance at December 31, 2006 (Predecessor)		100,301			705

Guaranteed benefits incurred		24,699			478
Guaranteed benefits paid		(16,902	)		—
Unlocking		(22,390	)		393
Push-down accounting adjustment (see Note 3)		(11,067	)		(1,576	)


Balance at December 31, 2007 (Successor)	$	74,641		$	—

During 2007 and 2006, the Company updated its market return assumptions resulting in favorable unlocking for GMDB liabilities.

The Company also records liabilities, which can be either positive or negative, for contracts containing GMWB provisions and for the reinsurance of GMIB provisions (“GMIB reinsurance”) for variable annuities based on the fair value of the underlying benefit. These liabilities are recorded as a component of future policy benefits in the Balance Sheets, with changes in the fair value recognized as a component of policy benefits in the Statement of Earnings. In accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (“FAS 133”), the GMWB provision is treated as an embedded derivative and is required to be reported separately from the host variable annuity contract. The fair value of the GMWB obligation is calculated based on actuarial and capital market assumptions related to the projected cash flows, including benefits and related contract charges, over the anticipated life of the related contracts. The cash flow estimates are produced by using stochastic techniques under a variety of market return scenarios and other best estimate assumptions. The GMIB reinsurance liability is considered a fair value item and is also valued in accordance with FAS 133. In general, the GMIB reinsurance liability represents the present value of future reinsurance deposits net of reinsurance recoverables less a provision for required profit.

The variable annuity GMWB and GMIB reinsurance liabilities for the years ended December 31 were as follows:


			GMIB
	GMWB		Reinsurance
Balance at December 31, 2006 (Predecessor)	$	—	$	5,077

Changes in fair value		13,865		(4,333	)


Balance at December 31, 2007 (Successor)	$	13,865	$	744

At December 31, contract owners’ account balances by mutual fund class by guaranteed benefit provisions were comprised as follows:


	Successor
	2007
							Money
	Equity		Bond		Balanced		Market		Other		Total
GMDB only	$	3,404,287		984,755		717,798		215,326		8,142	$	5,330,308
GMDB and GMIB		1,624,427		383,453		403,003		44,436		21,175		2,476,494
GMDB and GMWB		327,786		72,025		90,578		8,759		8,866		508,014
GMWB only		129,217		28,392		37,188		989		3,552		199,338
GMIB only		99,073		14,326		24,623		2,055		3,146		143,223
No guaranteed benefit		25,430		6,151		9,754		1,479		937		43,751


Total	$	5,610,220		1,489,102		1,282,944		273,044		45,818	$	8,701,128


	Predecessor
	2006
							Money
	Equity		Bond		Balanced		Market		Other		Total
GMDB only	$	3,911,104		1,151,001		710,581		220,210		5,767	$	5,998,663
GMDB and GMIB		1,564,167		392,969		302,442		55,578		17,947		2,333,103
GMDB and GMWB		120,914		28,925		32,371		3,527		4,759		190,496
GMWB only		58,397		15,615		17,273		1,916		2,292		95,493
GMIB only		64,012		11,195		13,824		848		2,679		92,558
No guaranteed benefit		15,838		4,464		5,429		2,010		687		28,428


Total	$	5,734,432		1,604,169		1,081,920		284,089		34,131	$	8,738,741

Variable Life Contracts Containing Guaranteed Benefits

The Company has issued variable life contracts in which the Company contractually guarantees to the contract owner a GMDB. In general, contracts containing GMDB provisions provide a death benefit equal to the amount specified in the contract regardless of the level of the contract’s account value.

The Company records liabilities for contracts containing GMDB provisions as a component of future policy benefits. Changes in the GMDB liabilities are included as a component of policy benefits in the Statements of Earnings. The variable life GMDB liability is set as a percentage of asset-based fees and cost of insurance charges deducted from contracts that include a GMDB provision. The percentage is established based on the Company’s estimate of the likelihood of future GMDB claims.

The variable life GMDB liabilities for the years ended December 31 were as follows:


	GMDB
Balance at January 1, 2006 (Predecessor)	$	2,132

Guaranteed benefits incurred		154
Guaranteed benefits paid		—


Balance at December 31, 2006 (Predecessor)		2,286

Guaranteed benefits incurred		155
Guaranteed benefits paid		—
Push-down accounting adjustment (see Note 3)		(2,441	)


Balance at December 31, 2007 (Successor)	$	—

At December 31, contract owners’ account balances by mutual fund class for contracts containing GMDB provisions were distributed as follows:


	Successor		Predecessor
	2007		2006
Balanced	$	999,501	$	1,013,969
Equity		966,850		983,622
Bond		313,625		342,893
Money Market		251,892		251,172


Total	$	2,531,868	$	2,591,656

Note 7. Federal Income Taxes

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


	Predecessor			Predecessor			Predecessor
	2007			2006			2005
Provisions for income taxes computed at Federal statutory rate	$	55,857		$	48,658		$	31,320
Decrease in income taxes resulting from:
Dividend received deduction		(4,783	)		(3,657	)		(8,615	)
Foreign tax credit		(2,002	)		(715	)		(582	)


Federal income tax provision	$	49,072		$	44,286		$	22,123

Effective tax rate		31	%		32	%		25	%

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

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


	Predecessor			Predecessor			Predecessor
	2007			2006			2005
DAC	$	5,141		$	(288	)	$	(29,060	)
Deferred sales inducements		4,200			4,308			2,904
Policyholder account balances		3,149			(6,168	)		(9,361	)
Liability for guaranty fund assessments		100			275			93
Other		97			(387	)		(3,497	)
Investment adjustment		19			557			5,645
UPCR		(781	)		3,521			23,316
Reinsurance adjustments		(835	)		2,175			0


Deferred Federal income tax provision (benefit)	$	11,090		$	3,993		$	(9,960	)

Deferred tax assets and liabilities at December 31 were as follows:


	Successor		Predecessor
	2007		2006 (1)
Deferred tax assets:
DAC	$	137,200	$	—
Tax VOBA		10,358		—
Liability for guaranty fund assessments		2,031		2,102
Policyholder account balances		56,549		64,914
UPCR		—		12,440
Net unrealized investment loss on investment securities		—		5,510

Total deferred tax assets		206,138		84,966


Deferred tax liabilities:
Book VOBA		204,107		—
DAC		—		77,469
DSI		—		7,212
Reinsurance adjustments		—		2,175
Investment adjustments		—		791
Other		—		165

Total deferred tax liabilities		204,107		87,812


Net deferred tax asset (liability)	$	2,031	$	(2,846	)


(1)		At December 28, 2007, all deferred tax assets and liabilities associated with the predecessor were adjusted to zero due to the Section 338 tax election made by AUSA. The Section 338 election caused the predecessor to treat the acquisition as a sale of its assets for Federal tax purposes which reversed all of the predecessor’s temporary differences.

The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007. The Company has analyzed all material tax positions under the provisions of FASB Interpretation No. 48, and has determined that there are no tax benefits that should not be recognized as of December 31, 2006 or as of December 31, 2007. There are no unrecognized tax benefits that would affect the effective tax rate. It is not anticipated that the total amounts of unrecognized tax benefits will significantly increase within twelve months of the reporting date.

The Company classifies interest and penalties related to income taxes as interest expense and penalty expense, respectively. The Company has recognized no such interest and penalties in its financial statements for the years ended December 31, 2007 and 2006.

The Company files a return in the U.S. Federal tax jurisdiction, and various state tax jurisdictions. As a result of the Company’s election for Federal income tax purposes of Internal Revenue Code Section 338, the predecessor is responsible for any FIN 48 obligations that existed prior to the Acquisition Date.

The Company will file a separate federal income tax return for the years 2008 through 2012. Beginning in 2013 and assuming no changes in ownership, the Company will join the affiliated consolidated tax group. The Company has no valuation allowance related to its deferred tax assets as of December 31, 2007, and no change in valuation allowance since December 31, 2006. Management believes it is more likely than not that the Company or the affiliated consolidated group will generate sufficient taxable income in the appropriate carryforward periods to realize the benefit of its deferred tax assets.

Note 8. Reinsurance

In the normal course of business, the Company seeks to limit its exposure to loss on any single insured life and to recover a portion of benefits paid by ceding mortality risk to other insurance enterprises or reinsurers under indemnity reinsurance agreements, primarily excess coverage and coinsurance agreements. The maximum amount of mortality risk retained by the Company is approximately $500 on single life policies and $750 on joint life policies.

Indemnity reinsurance agreements do not relieve the Company from its obligations to contract owners. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company regularly evaluates the financial condition of its reinsurers so as to minimize its exposure to significant losses from reinsurer insolvencies. As of December 31, 2007, the Company held collateral under reinsurance agreements in the form of letters of credit and funds withheld totaling $602 that can be drawn upon for delinquent reinsurance recoverables.

At December 31, 2007 the Company had the following life insurance inforce:


									Percentage
			Ceded to		Assumed				of amount
	Gross		other		from other		Net		assumed to
	amount		companies		companies		amount		net
Life insurance inforce	$	9,381,082	$	2,449,837	$	954	$	6,932,199		0.01	%

The Company is party to an indemnity reinsurance agreement with an unaffiliated insurer whereby the Company coinsures, on a modified coinsurance basis, 50% of the unaffiliated insurer’s variable annuity contracts sold through the ML&Co. distribution system from January 1, 1997 to June 30, 2001.

In addition, the Company seeks to limit its exposure to guaranteed benefit features contained in certain variable annuity contracts. Specifically, the Company reinsures certain GMIB and GMDB provisions to the extent reinsurance capacity is available in the marketplace. As of December 31, 2007, 52% and 6% of the account value for variable annuity contracts containing GMIB and GMDB provisions, respectively, were reinsured.

Note 9. Related Party Transactions

Prior to December 28, 2007, the Company had the following affiliated agreements in effect:

The Company and MLIG were parties to a service agreement whereby MLIG agreed to provide certain accounting, data processing, legal, actuarial, management, advertising and other services to the Company. Expenses incurred by MLIG in relation to this service agreement were reimbursed by the Company on an allocated cost basis. Charges allocated to the Company by MLIG pursuant to the agreement were $27,017, $29,692 and $33,127 for 2007, 2006 and 2005, respectively. Charges attributable to this agreement were included in insurance expenses and taxes, except for investment related expenses, which were included in net investment income. The Company was allocated interest expense on its accounts payable to MLIG that approximates the daily Federal funds rate. Total intercompany interest incurred was $501, $494 and $332 for 2007, 2006 and 2005, respectively. Intercompany interest was included in net investment income.

The Company had a general agency agreement with Merrill Lynch Life Agency Inc. (“MLLA”) whereby registered representatives of MLPF&S, who are the Company’s licensed insurance agents, solicit applications for contracts to be issued by the Company. MLLA was paid commissions for the contracts sold by such agents. Commissions paid to MLLA were $61,916, $57,298 and $54,058 for

2007, 2006 and 2005, respectively. Certain commissions were capitalized as DAC and were being amortized in accordance with the accounting policy discussed in Note 2. Charges attributable to this agreement were included in insurance expenses and taxes, net of amounts capitalized.

Effective September 30, 2006, ML&Co. transferred the Merrill Lynch Investment Managers, L.P. (“MLIM”) investment management business to BlackRock, Inc. (“BlackRock”) in exchange for approximately half of the economic interest in the combined firm, including a 45% voting interest. Under this agreement, all previous investment management services performed by MLIM were merged into BlackRock. Prior to September 30, 2006, the Company and MLIM were parties to a service agreement whereby MLIM agreed to provide certain invested asset management services to the Company. The Company paid a fee to MLIM, for these services through the MLIG service agreement. Charges paid to MLIM through the first three quarters of 2006 and allocated to the Company by MLIG were $1,172. Charges for 2005 were $1,681.

MLIG had entered into agreements with i) Roszel Advisors, LLC (“Roszel”), a subsidiary of MLIG, with respect to administrative services for the MLIG Variable Insurance Trust (“the Trust”) and ii) the former MLIM, now BlackRock, with respect to administrative services for the Merrill Lynch Series Fund, Inc., Merrill Lynch Variable Series Funds, Inc. and Mercury Variable Trust, (collectively, “the Funds”). Certain Separate Accounts of the Company may invest in the various mutual fund portfolios of the Trust and the Funds in connection with the variable life insurance and annuity contracts the Company has inforce. Under these agreements, Roszel and MLIM pay MLIG an amount equal to a percentage of the assets invested in the Trust and the Funds through the Separate Accounts. Revenue attributable to these agreements are included in policy charge revenue. The Company received from MLIG its allocable share of such compensation from Roszel in the amount of $2,560, $2,492 and $2,528 during 2007, 2006 and 2005, respectively. The Company received from MLIG its allocable share of such compensation from MLIM in the amount of $12,700 through the first three quarters of 2006. Compensation from MLIM for 2005 was $16,588.

Subsequent to December 28, 2007, the Company had the following affiliated agreements in effect:

The Company is party to a common cost allocation service agreement between AUSA companies in which various affiliated companies may perform specified administrative functions in connection with the operation of the Company, in consideration of reimbursement of actual costs of services rendered. During the three day period from December 29, 2007 to December 31, 2007, no expenses were incurred under this agreement.

AEGON USA Investment Management, LLC acts as a discretionary investment manager under an investment management agreement with the Company. During the three day period from December 29, 2007 to December 31, 2007, no expenses were incurred under this agreement.

Transamerica Capital, Inc. provides wholesaling distribution services for the Company under a distribution agreement. During the three day period from December 29, 2007 to December 31, 2007, no expenses were incurred under this agreement.

While management believes that the service agreements referenced above are calculated on a reasonable basis, they may not necessarily be indicative of the costs that would have been incurred with an unrelated third party. Affiliated agreements generally contain reciprocal indemnity provisions pertaining to each party’s representations and contractual obligations thereunder.

Note 10. Stockholder’s Equity and Statutory Regulations

During 2007, the Company paid cash dividends of $193,731 to its former parent, MLIG, of which $41,560 were ordinary dividends. During 2006, the Company paid cash dividends of $180,000 to MLIG, of which $39,845 were ordinary dividends. During 2005, the Company did not pay a dividend.

Applicable insurance department regulations require that the Company report its accounts in accordance with statutory accounting practices. Statutory accounting practices differ from principles utilized in these financial statements as follows: policy acquisition costs are expensed as incurred, policyholder liabilities are established using different actuarial assumptions, provisions for deferred income taxes are limited to temporary differences that will be recognized within one year, and securities are valued on a different basis. In addition, purchase accounting adjustments such as VOBA, goodwill, and other intangibles are not recognized on a statutory basis.

The Company’s statutory financial statements are presented on the basis of accounting practices prescribed or permitted by the Arkansas Insurance Department. The State of Arkansas has adopted the National Association of Insurance Commissioners (“NAIC”) statutory accounting practices as a component of prescribed or permitted practices by the State of Arkansas.

Statutory capital and surplus at December 31, 2007 and 2006 were $366,011 and $418,100, respectively. At December 31, 2007 and 2006, approximately $36,351 and $41,560, respectively, of stockholder’s equity was available for dividend distribution that does not require approval by the Arkansas Insurance Department.

The Company’s statutory net income for 2007, 2006, and 2005 was $108,791, $193,731 and $117,262, respectively.

The NAIC utilizes the Risk Based Capital (“RBC”) adequacy monitoring system. The RBC calculates the amount of adjusted capital that a life insurance company should hold based upon that company’s risk profile. As of December 31, 2007 and 2006, based on the RBC formula, the Company’s total adjusted capital level was well in excess of the minimum amount of capital required to avoid regulatory action.

Note 11. Commitments and Contingencies

State insurance laws generally require that all life insurers who are licensed to transact business within a state become members of the state’s life insurance guaranty association. These associations have been established for the protection of contract owners from loss (within specified limits) as a result of the insolvency of an insurer. At the time an insolvency occurs, the guaranty association assesses the remaining members of the association an amount sufficient to satisfy the insolvent insurer’s contract owner obligations (within specified limits). The Company has utilized public information to estimate what future assessments it will incur as a result of insolvencies. At December 31, 2007 and 2006, the Company’s estimated liability for future guaranty fund assessments was $5,720 and $6,005, respectively. If future insolvencies occur, the Company’s estimated liability may not be sufficient to fund these insolvencies and the estimated liability may need to be adjusted. The Company regularly monitors public information regarding insurer insolvencies and adjusts its estimated liability appropriately.

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

Note 12. 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 annuity and interest-sensitive annuity contracts. The Company’s Life Insurance segment consists of variable life insurance and interest-sensitive life insurance contracts. The Company currently does not manufacture, market, or issue life insurance contracts. The accounting policies of the business segments are the same as those described in the summary of significant accounting policies. All revenue and expense transactions are recorded at the contract level and accumulated at the business segment level for review by management. The “Other” category, presented in the following segment financial information, represents net revenues and earnings on invested assets that do not support life or annuity policyholder liabilities. Subsequent to the Acquisition Date, management no longer considers “Other” a category for segment reporting purposes. It is impracticable to restate the prior period segment information as well as disclosing the information under both the old basis and the new basis of reporting. Therefore, the predecessor information is shown under the old basis, three segments – Annuities, Life Insurance and Other, while the successor information is shown under the new basis, two segments – Annuities and Life Insurance.

The following tables summarize each business segment’s contribution to consolidated earnings for the years ended December 31.


	Predecessor
	2007
			Life
	Annuities		Insurance			Other		Total
Policy charge revenue	$	184,910	$	82,676		$	—	$	267,586
Net interest spread (1)		14,121		13,991			14,326		42,438
Net realized investment gains		1,264		684			107		2,055

Net Revenues		200,295		97,351			14,433		312,079


Policy benefits		15,291		26,995			—		42,286
Reinsurance premiums ceded		6,127		22,165			—		28,292
Amortization of DAC		24,829		(2,765	)		—		22,064
Insurance expenses and taxes		51,424		8,422			—		59,846

Net Benefits and Expenses		97,671		54,817			—		152,488


Earnings Before federal income taxes		102,624		42,534			14,433		159,591


Federal income tax expense		30,380		13,640			5,052		49,072

Net Earnings	$	72,244	$	28,894		$	9,381	$	110,519


(1)		Management considers investment income net of interest credited to policyholder liabilities in evaluating results.


	Predecessor
	2006
			Life
	Annuities		Insurance			Other		Total
Policy charge revenue	$	169,395	$	95,274		$	—	$	264,669
Net interest spread (1)		16,208		14,759			9,813		40,780
Net realized investment gains (losses)		1,065		(633	)		804		1,236

Net Revenues		186,668		109,400			10,617		306,685


Policy benefits		21,129		18,029			—		39,158
Reinsurance premiums ceded		5,988		20,931			—		26,919
Amortization of DAC		22,185		20,152			—		42,337
Insurance expenses and taxes		49,710		9,538			—		59,248

Net Benefits and Expenses		99,012		68,650			—		167,662


Earnings before federal income taxes		87,656		40,750			10,617		139,023


Federal income tax expense		27,639		12,931			3,716		44,286

Net Earnings	$	60,017	$	27,819		$	6,901	$	94,737


(1)		Management considers investment income net of interest credited to policyholder liabilities in evaluating results.


	Predecessor
	2005
			Life
	Annuities		Insurance			Other			Total
Policy charge revenue	$	152,818	$	152,030		$	—		$	304,848
Net interest spread (1)		18,542		15,025			7,719			41,286
Net realized investment gains (losses)		3,371		(521	)		(228	)		2,622

Net Revenues		174,731		166,534			7,491			348,756


Policy benefits		26,463		20,807			—			47,270
Reinsurance premiums ceded		5,680		20,642			—			26,322
Amortization of DAC		58,263		68,018			—			126,281
Insurance expenses and taxes		50,669		8,727			—			59,396

Net Benefits and Expenses		141,075		118,194			—			259,269


Earnings before federal income taxes		33,656		48,340			7,491			89,487


Federal income tax expense		5,363		14,138			2,622			22,123

Net Earnings	$	28,293	$	34,202		$	4,869		$	67,364


(1)		Management considers investment income net of interest credited to policyholder liabilities in evaluating results.

The following tables represent select balance sheet information for the years ended December 31.


	Successor
	2007
			Life
	Annuities		Insurance		Total
Total assets	$	10,120,795	$	4,588,395	$	14,709,190
Total policyholder liabilities and accruals		716,959		1,623,043		2,340,002


	Predecessor
	2006
			Life
	Annuities		Insurance		Other		Total
Total assets	$	9,873,167	$	4,479,664	$	269,040	$	14,621,871
Total policyholder liabilities and accruals		810,770		1,688,310		—		2,499,080

The following table summarizes the Company’s net revenues by contract type for the years ended December 31:


	Predecessor		Predecessor		Predecessor
	2007		2006		2005
Annuities:
Variable annuities	$	190,879	$	176,988	$	161,370
Interest-sensitive annuities		9,416		9,680		13,361


Total Annuities		200,295		186,668		174,731


Life Insurance:
Variable life		87,949		101,434		157,312
Interest-sensitive whole life		9,402		7,966		9,222


Total Life Insurance		97,351		109,400		166,534


Other		14,433		10,617		7,491


Net Revenues (1)	$	312,079	$	306,685	$	348,756


(1)		Management considers investment income net of interest credited to policyholder liabilities in evaluating Net Revenues.

******

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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

	(Registrant)


Date: March 26, 2008	By:	*

		John T. Mallett
		Treasurer and Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Signatures	Title	Date

*	Director and President	March 26, 2008
Lon J. Olejniczak

*	Director and Senior Vice President	March 26, 2008
Robert R. Frederick

*	Director, Treasurer and Chief Financial Officer	March 26, 2008
John T. Mallett

*	Director and Senior Vice President Operations	March 26, 2008
Brian C. Scott

*	Director and Senior Vice President	March 26, 2008
Ronald L. Ziegler

*	Vice President and Corporate Controller	March 26, 2008
Eric J. Martin

/s/ Darin D. Smith	Vice President and Assistant Secretary	March 26, 2008
Darin D. Smith

*By: Darin D. Smith - Attorney-in-Fact pursuant to Powers of Attorney filed herewith.

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT.

No annual report covering the Registrant’s last fiscal year or proxy material has been or will be sent to Registrant’s security holder.

EXHIBIT INDEX


Exhibit No.	Description	Location

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.

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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.

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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.

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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.

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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, ML-009	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	Incorporated by reference to Exhibit
	Endorsement, ML-AY-365 190	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	Incorporated by reference to Exhibit
	Endorsement, ML-AY-367 190	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.

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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 Guarantee Annuity Contract	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 Contract	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.

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4.19	Individual Tax-Sheltered Annuity Certificate	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	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	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	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	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	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.

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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, 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, 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.

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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.
10.10	Insurance Administrative Services Agreement between Merrill Lynch Life Insurance Company and Liberty Insurance Services Corporation.	Incorporated by reference to Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K, File Nos. 33-26322, 33-46827, 33-52254, 33-60290, 33-58303, 333-33863, filed March 30, 2005.

10.11	Master Distribution Agreement between Merrill Lynch Insurance Group, Inc., Merrill Lynch & Co., Inc., and AEGON USA, Inc.	Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, File No. 33-26322, filed January 4, 2008.

10.12	Wholesaling Agreement between Merrill Lynch Life Insurance Company, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Transamerica Capital	Exhibit 10.12

10.13	Selling Agreement between Merrill Lynch Life Insurance Company, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Merrill Lynch Life Agency, Inc.	Exhibit 10.13

10.14	Keep Well Agreement between AEGON USA, Inc. and Merrill Lynch Life Insurance Company	Exhibit 10.14

10.15	Purchase Agreement between Merrill Lynch Insurance Group, Inc., Merrill Lynch & Co., Inc., and AEGON USA, Inc.	Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, File No. 33-26322, filed August 17, 2007.

10.16	First Amendment to Purchase Agreement between Merrill Lynch Insurance Group, Inc., Merrill Lynch & Co., Inc., and AEGON USA, Inc.	Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K, File No. 33-26322, filed January 4, 2008.

23.1	Written Consent of Deloitte & Touche LLP, independent registered public accounting firm	Exhibit 23.1

23.2	Written Consent of Ernst & Young LLP, independent registered public accounting firm.	Exhibit 23.2

24.1	Powers of attorney	Exhibit 24.1

E-9


31.1	Certification by the Chief Executive Officer of the Registrant pursuant to Rule 15d-14(a).	Exhibit 31.1
31.2	Certification by the Chief Financial Officer of the Registrant pursuant to Rule 15d-14(a).	Exhibit 31.2
32.1	Certification by the Chief Executive Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Exhibit 32.1
32.2	Certification by the Chief Financial Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Exhibit 32.2

E-10 EX-10.12 2 w50994exv10w12.htm EXHIBIT 10.12 exv10w12

Exhibit 10.12

MERRILL LYNCH LIFE INSURANCE COMPANY
NONAFFILIATED BROKER-DEALER
WHOLESALING AGREEMENT

This WHOLESALING AGREEMENT (“Agreement”) is made this 28th day of December, 2007. The parties to this Agreement are Merrill Lynch Life Insurance Company, an Arkansas Company corporation (“Company”), issuer of annuity policies (“Contracts”), Merrill Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation (“Distributor”), and Transamerica Capital, a California corporation (“Wholesaler”).

RECITALS

WHEREAS, Company issues the Contracts that are described in the attached Wholesaling Allowance Compensation Schedules, as may be amended from time to time, which are registered as securities with the United States Securities and Exchange Commission (“SEC”) under the Securities Act of 1933 (“1933 Act”); and

WHEREAS, Distributor is duly registered as a broker-dealer with the SEC, is a member of the Financial Industry Regulatory Authority (“FINRA,” formerly known in part as the National Association of Securities Dealers, Inc.), and has been appointed by Company as the principal underwriter of the Contracts, as applicable; and

WHEREAS, Wholesaler is duly registered as a broker-dealer with the SEC and is a member of FINRA; and

WHEREAS, Company and Distributor desire to authorize Wholesaler to perform wholesaling services as set forth in Exhibit A (“Wholesale Services”) in regard to the Contracts.

NOW, THEREFORE, in consideration of the premises and mutual promises contained herein, the parties agree as follows:

APPOINTMENT

Company and Distributor hereby authorizes Wholesaler, on an exclusive basis, to enter into arrangements with broker-dealers for the purpose of promoting the Contracts to such broker-dealers and performing Wholesale Services to such broker-dealers’ registered representatives. Wholesaler shall provide Wholesaling services only to broker-dealers that have been pre-approved by Company or Distributor to receive such services. Company and Distributor agree that Wholesaling Services shall not include determining the suitability of any Contract for any prospective purchaser, recommending any Contract to any prospective purchaser, either directly or indirectly through broker-dealers, supervising the sales activities of broker-dealers and their registered representatives or ensuring their compliance with any applicable insurance and securities laws, regulations and rules. However, if Wholesaler undertakes to provide any of the aforementioned services to any broker-dealer or registered representative, Wholesaler agrees to perform such service in accordance with the requirements set forth in FINRA’s conduct rules regarding determinations of suitability, sales supervision and compliance supervision.

For purposes of this Agreement, Wholesaler shall only promote the Contracts to Merrill Lynch, Pierce, Fenner and Smith Incorporated and its registered representatives for the term of this Agreement.

REPRESENTATIONS

Company, Distributor and Wholesaler represent to each other that each of them, and each of their undersigned officers, has full power and authority to enter into this Agreement.

	a.		Company represents to Distributor and Wholesaler that the Contracts and the related Separate Accounts have been duly registered with the SEC in accordance with the requirements of the 1933 Act and the Investment Company Act of 1940 (“1940 Act”), respectively, and the SEC rules promulgated thereunder, and comply with these and all other applicable federal securities laws and regulations.

	b.		Company represents to Distributor and Wholesaler that the Contracts have been duly filed with and approved for sale by the insurance departments of each state and other jurisdiction in which the Contracts are offered for sale.

	c.		Company represents to Distributor and Wholesaler that the Contracts’ prospectuses included in the Company’s registration statements and post-effective amendments thereto, as have been filed or will be filed with the SEC, contain or will contain, as of their respective effective dates, all statements and information required to be stated therein by the 1933 Act, and in all other respects conform or will conform with the requirements of the 1933 Act.

	d.		Distributor represents to Company and Wholesaler that it is duly registered with the SEC as a broker-dealer under the provisions of the Securities Exchange Act of 1934 (“1934 Act”) and is a member of FINRA.

	e.		Wholesaler represents to Company and Distributor that it is duly registered with the SEC as a broker-dealer under the provisions of the 1934 Act and is a member of FINRA. Wholesaler also represents to Company and Distributor that it is, or will be, a licensed broker-dealer in any state or other jurisdiction in which it will perform Wholesaling Services if that state or jurisdiction regulates the Contracts as securities and requires Wholesaler to be a licensed broker-dealer to perform Wholesaling Services and/or to sell the Contracts.

	f.		Wholesaler represents to Company and Distributor that it is duly licensed as an insurance agent in each state and other jurisdiction in which it will perform Wholesaling Services.

	g.		Wholesaler represents to Company and Distributor that each individual that Wholesaler designates and authorizes to perform Wholesaling Services (“Wholesaling Agents”) will be registered representatives of Wholesaler, will be duly contracted or appointed by Company as an insurance producer, will be pre-approved

by Distributor to perform Wholesaling Services, will be registered with FINRA in the category of registration that is required to sell the Contracts, and will have all other necessary securities and insurance licenses that are required to perform Wholesaling Services and sell the Contracts in the states and other jurisdictions in which Wholesaling Agents perform Wholesaling Services.

	h.		Company, Distributor and Wholesaler each represents and warrants that, to the extent applicable to their operations, they have adopted and will enforce policies and procedures that are reasonably designed to comply with (i) all anti-money laundering requirements of the USA Patriot Act (“Act”) and the regulations promulgated thereunder, and (ii) all suspicious activity reporting and other reporting requirements of the Act and the rules of FINRA and any other applicable administrative agency (“Rules”). Company, Distributor and Wholesaler agree that their separate obligations to comply with the applicable requirements of the Act and Rules, including the filing of any reports, will not be diminished by any other party complying with its applicable requirements under the Act and Rules.

	j.		Company represents and warrants that all materials, including but not limited to prospectus and any supplements for Contracts, training materials, illustration software, brochures, marketing materials and policy forms (collectively “Wholesaling Materials”), provided to Wholesaler in order for Wholesaler to perform Wholesaling Services, comply with applicable insurance and state and federal securities laws, and filing requirements if any, and will be true and accurate in all material respects and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Company acknowledges and agrees that Wholesaler will be using and relying on Wholesaling Materials without independent investigation or verification thereof.

COMPLIANCE AND SUPERVISION

	a.		Wholesaler agrees that in providing Wholesaling Services, Wholesaler and its Wholesaling Agents will fully comply with all applicable rules and regulations of the SEC and FINRA, including without limitation FINRA’s Conduct Rules, and will comply with all applicable rules and regulations of the states and other jurisdictions in which Wholesaling Services are performed. Wholesaler further agrees that it and its Wholesaling Agents will conform to all applicable policies and procedures of Company, as such policies and procedures may be amended from time to time, to the extent that they do not conflict with the terms of this Agreement.

	b.		Wholesaler agrees that it will establish and maintain compliance and supervisory rules and procedures for the supervision of Wholesaling Agents, and that it will diligently supervise its Wholesaling Agents in regard to their performance of Wholesaling Services. Wholesaler’s supervisory responsibilities shall include, but shall not be limited to, ensuring that (1) all Wholesaling Agents are registered representatives of Wholesaler, (2) all Wholesaling Agents have all necessary

securities and insurance licenses to perform the Wholesaling Services, (3) all Wholesaling Agents are trained and qualified to perform the Wholesaling Services, (4) all Wholesaling Agents use only advertising materials and sales literature that have been approved by Company, as applicable under the circumstances, (5) all Wholesaling Agents use only current prospectuses in performing Wholesaling Services, (6) Wholesaling Services are provided to only those broker-dealers (and their registered representatives) that have been pre-approved by Company or Distributor to receive such services, and (7) Wholesaling Services are conducted only in states and other jurisdictions in which Company has authorized the solicitation of the Contracts.

	c.		If Wholesaler discovers that any Wholesaling Agent has failed to comply with Company’s and/or Distributor’s standards or rules with regard to Wholesaling Services, or if Wholesaler shall discover that any Wholesaling Agent has failed to comply with the terms of this Agreement that relate to Wholesaling Services, and if such failure constitutes a material breach of the aforementioned standards or rules or of this Agreement, Wholesaler shall immediately notify Company and Distributor. Also, Wholesaler shall immediately terminate the Wholesaling Agent’s authority to perform Wholesaling Services.

	d.		Upon the request of Company or Distributor, Wholesaler shall furnish to Company or Distributor certification that Wholesaler has policies and procedures reasonably designed to achieve compliance with applicable securities laws and FINRA rules.

	e.		Company will be solely responsible for conducting all due diligence reviews of all broker-dealers and their registered representatives that are recommended by Wholesaler under Section 4 of this Agreement.

	f.		Wholesaler agrees that it will not divulge any of Company’s or Distributor’s Confidential Information to any third party and will train and supervise the Wholesaling Agents to ensure that they maintain the confidentiality of such information. Notwithstanding the foregoing, Wholesaler shall not be restricted from disclosing any of Company’s or Distributor’s Confidential Information if it is required to do so by any applicable state or federal laws, or by order of any court or government agency that has jurisdiction over the parties upon prior written notice. Furthermore, this restriction shall not apply to Confidential Information which, without any breach by Wholesaler of any obligation of confidentiality: (1) is independently developed by Wholesaler; (2) is or becomes publicly known; (3) is already known by Wholesaler, evidenced by the written records of Wholesaler; or (4) is obtained from an independent source. “Confidential Information” shall be defined as all information communicated to Wholesaler by Company or Distributor relating to the Company, Distributor, or their affiliates, during the term of this Agreement, including but not limited to: 1) financial, business or technical information of the Company, Distributor, or their affiliates, and 2) information regarding consumers, customers or policy holders.

Wholesaler also agrees to comply with the provisions of the Gramm-Leach-Bliley Act (“GLBA”), the rules and regulations promulgated thereunder, SEC Regulation S-P and all relevant state laws and regulations that may apply to Wholesaler’s and the Wholesaling Agents’ receipt of any non-public personal information (as defined in GLBA, the regulations thereunder, SEC Regulation S-P or relevant state laws and regulations) of Company’s customers, including without limitation purchasers and prospective purchasers of the Contracts.

LICENSING AND/OR APPOINTMENT OF RETAIL BROKER-DEALERS AND THEIR REGISTERED REPRESENTATIVES

Wholesaler shall recommend to broker-dealers and to their registered representatives who are not contracted or appointed with Company, but desire to sell the Contracts, that they become contracted with or appointed by Company. Furthermore, Wholesaler shall recommend to such broker-dealers that they sign selling agreements with Company and Distributor to become authorized to sell the Contracts. Company and/or Distributor reserve the right to reject any such recommendation.

ADVERTISING, SALES LITERATURE AND OTHER SALES PROMOTION MATERIALS

Wholesaler and its Wholesaling Agents shall use only advertising, sales literature and other sales promotion materials that have been pre-approved in writing by Company when performing Wholesaling Services.

COMPENSATION

	a.		All commissions and other compensation payable for Wholesaling Services shall be payable to Wholesaler in accordance with the Wholesaling Allowance Compensation Schedules attached to this Agreement, as such Schedules may be amended from time to time. Commissions and other compensation for Wholesaling Services related to any particular Contract shall be determined in accordance with the Wholesaling Allowance Compensation Schedule for that Contract that is in effect at the time that premium payments for the Contract are received by Company. Company reserves the right to amend any Wholesaling Allowance Compensation Schedule at any time upon prior written notice to Wholesaler. The amendment of any Wholesaling Allowance Compensation Schedule shall be effective as of the effective date set forth in the written notice, and shall apply to all premiums for Contracts that are received by Company on and after that date. The compensation to the Wholesaling Agent will be governed by the agreement between Wholesaler and the Wholesaling Agent.

	b.		If Company is required to refund premiums or return Contract values and waive surrender charges on any Contract for any reason, then no commission or other compensation for Wholesaling Services will be payable with respect to such premiums and any commissions or other compensation for Wholesaling Services previously paid on account of such premiums must be refunded to Company.

For purposes of this section, Company is solely responsible for any Compensation payable hereunder.

HOLD HARMLESS AND INDEMNIFICATION PROVISIONS

If any director, officer, employee, associated person or other agent of any party to this Agreement (“Employer Party”) materially breaches any of the provisions of this Agreement, or otherwise fails to materially comply with any of its provisions, the Employer Party agrees to indemnify and hold harmless each of the other parties hereto for any and all liability, loss, damage or expense, including without limitation reasonable attorney’s fees and costs, that any of the other parties may incur or suffer as a result of such material breach or failure to materially comply. For purposes hereof, the term “associated person” shall have the same definition as in Article I of FINRA By-Laws. No party to this Agreement shall be responsible to perform any act or other obligation of any other party.

NON-ASSIGNABILITY OF AGREEMENT

No party may assign any of its rights or obligations under this Agreement without the express prior written consent of each of the other parties hereto.

NON-WAIVER OF BREACH

The failure of any party to terminate this Agreement for any act or omission by any other party that constitutes a breach of this Agreement shall not constitute a waiver by such party of the right to terminate this Agreement at a later time for another such breach.

10.

AMENDMENTS

No amendment to this Agreement will be effective unless it is in writing and signed by all of the parties hereto.

11.

INDEPENDENT CONTRACTOR

Wholesaler is an independent contractor of Company and Distributor.

12.

NOTIFICATION OF DISCIPLINARY PROCEEDINGS AND AGREEMENT TO COOPERATE IN INVESTIGATIONS

Wholesaler agrees to promptly notify Company and Distributor if Wholesaler receives notice that any of the following actions have been taken, or are threatened to be taken, against Wholesaler or any of its Wholesaling Agents in connection with the Wholesaling Services: (1) any disciplinary proceeding by the SEC, FINRA, any securities or insurance regulatory authority of any state or other jurisdiction, or any other governmental agency or self-regulatory organization; (2) any civil lawsuit or criminal indictment; or (3) any arbitration proceeding. In the event that any of the aforementioned actions are taken or threatened, Wholesaler agrees to fully cooperate with Company and Distributor in connection with any investigation that they may

make of the claims against Wholesaler or its Wholesaling Agents in such regulatory proceeding, civil lawsuit, criminal indictment or arbitration proceeding.

Company, Distributor and Wholesaler jointly agree to fully cooperate with each other, subject to the advice of their respective counsel, with regard to any securities, insurance or other regulatory investigation or proceeding that may arise in connection with or as a result of any Wholesaling Services.

13.

BOOKS AND RECORDS

	a.		Company, Distributor and Wholesaler agree to maintain such books, accounts, records and other documentation pertaining to Wholesaling Services and related sales of Contracts (“Books and Records”) that are required to be maintained by applicable laws and regulations, and shall preserve all such Books and Records for the periods prescribed by such laws and regulations. Each party hereto shall maintain its Books and Records so as to clearly and accurately disclose the nature and details of the transactions covered thereby, including such accounting records that may be necessary to correctly determine the compensation to be paid for Wholesaling Services.

	b.		If any party hereto shall request from any other party any report or other information pertaining to Wholesaling Services and related sales of Contracts for the purpose of enabling the requesting party to comply with its record keeping and reporting requirements under applicable laws and regulations, the party upon whom the request is made shall, to the best of its ability, promptly furnish a copy of such report and/or provide such information to the requesting party.

14.

LIMITATIONS

Company and Distributor shall have the sole and exclusive authority to make, alter or discharge any selling agreement between Company and Distributor. Company shall have the sole and exclusive authority to make, alter or discharge any of its Contracts, waive any forfeiture, grant or permit an extension of time for making any premium payment, alter any form used in connection with any of its Contracts, or enter into any proceeding in a court of law or before any regulatory agency in the name of or on behalf of Company.

15.

TERMINATION

This Agreement shall continue until April 30, 2008, subject to termination by any party hereto with or without cause upon sixty (60) days prior written notice to the other parties; except however, that in the event Distributor or Wholesaler ceases to be a registered broker-dealer with the SEC or a member of F1NRA, this Agreement shall terminate immediately. Upon termination of this Agreement, the authorizations, rights and obligations of the parties shall cease, except for the survival of (1) the provisions contained in Sections 7, 12 and 13 hereof.

16.

NOTICES

All notices to Company, Distributor and Wholesaler relating to this Agreement, or to any other matter that may otherwise arise in connection with Wholesaling Services, shall be sent to:

Company:

Merrill Lynch Life Insurance Company
4333 Edgewood Road NE
Cedar Rapids, IA 52499
Attn: President and Division General Counsel

Distributor:

Merrill Lynch, Pierce, Fenner & Smith Incorporated
1700 Merrill Lynch Drive, 3^rd Floor
Pennington, New Jersey 08534
Attn: Barry Skolnick, First Vice President & Assistant General Counsel

Wholesaler:

Transamerica Capital, Inc.
4600 South Syracuse Street, Suite 1100
Denver, CO 80237
Attn: President and Legal Department

All notices shall be in writing, shall be addressed as indicated above, and shall be sent by United States mail, telegram, facsimile or personal delivery. Notices sent by United States mail shall be deemed delivered by the third business day after such notice is deposited in the mail properly addressed and with correct first class postage pre-paid. Notices sent by telegram or facsimile shall be deemed delivered when sent if properly addressed. Notices sent by personal delivery shall be deemed delivered when received by the person to whom the notice is addressed, or by that person’s duly authorized representative.

17.

BINDING EFFECT AND SEVERABILITY

This Agreement shall be binding on and shall inure to the benefit of the parties hereto and to their respective successors in interest. If any provision of this Agreement would require any party to take any action that is, at that time, prohibited by applicable federal law or regulation, by FINRA rule, or by the applicable laws or regulations of any state or other jurisdiction, or if any provision of this Agreement is held to be invalid or unenforceable by a court of competent jurisdiction, then such provision shall be enforced only to the extent permitted by such law, regulation, rule or court decision, and all of the other provisions of this Agreement shall remain in full force and effect to the greatest extent possible.

18.

ENTIRE AGREEMENT

This Agreement and the attached Exhibits and Wholesaling Allowance Compensation Schedules constitute the entire agreement between Company, Distributor and Wholesaler with respect to the subject matter hereof, and supersedes any and all prior oral or written understandings, agreements or negotiations between the parties with respect to the subject matter. No prior writings by or between the parties hereto with respect to the subject matter hereof shall be used by any party to interpret any provision of this Agreement.

19.

GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York without giving any effect to any principles of conflict of laws.

20.

DISPUTE RESOLUTION

Any dispute, claim, or controversy arising out of or relating to this Agreement, or any breach thereof, will be submitted to binding arbitration under FINRA Code of Arbitration Procedure and settled in accordance with the then existing rules thereof. Any such arbitration shall be conducted in New York, New York, and each arbitrator shall be from the securities industry. Any award rendered by the arbitrators shall be binding and judgment thereon may be entered in any court having jurisdiction thereof.

21.

EXECUTION IN COUNTERPARTS

This Agreement may be executed in two or more counterparts, each of which when taken together shall constitute one and the same instrument.

22.

CAPTIONS

The captions of this Agreement are for convenience and reference only, and the words contained therein shall not be held to explain, modify, amplify or aid in the interpretation, construction or meaning of any provision of this Agreement.

23.

TIME IS OF THE ESSENCE

Time is of the essence in the performance of the provisions of this Agreement.

24.

EFFECTIVE DATE

This Agreement shall be effective as of the date first shown on page 1 hereof.

IN WITNESS WHEREOF, the parties have executed this Agreement as indicated by the signatures set forth below.


Merrill Lynch Life Insurance Company
By:	/s/ Brain C. Scott
	Title:	Brain C. Scott

Merrill Lynch, Pierce, Fenner & Smith Incorporated
By:	/s/ Barry G. Skolnick
	Barry G. Skolnick
	Title:	First Vice President

Transamerica Capital, Inc.
By:	/s/ Rob Frederick
	Title: President

WHOLESALING ALLOWANCE COMPENSATION SCHEDULE

Annuity Contracts

Merrill Lynch Investor Choice
Merrill Lynch Consults Annuity
Merrill Lynch Asset I Annuity
RateMax Annuity

EXHIBIT A
WHOLESALE SERVICES

Wholesaler, through its Wholesaling Agents, may provide Wholesaling Services listed below, or other activities related to this Agreement as agreed to in advance in writing among Wholesaler, Company, Distributor and/or broker-dealers (“BD”):

	•		At the request of BD, Company or Distributor, provide training on Contract features to BD and its registered representatives (“RRs”) utilizing materials created and approved by Wholesaler, Company, Distributor and BD.

	•		Answer questions from BD and RRs regarding Contract features as represented in Wholesale Materials.

	•		Complete insurance illustrations at the request of RRs for RRs to deliver to prospective Contract purchasers utilizing software provided by Company based on customer information provided by RRs.

	•		Assist BD with the review of Contract applications for completeness prior to forwarding Contract applications to Company.

	•		Assist BD with processing commissions received by BD under selling group agreements executed among BD, Company and Distributor.

EX-10.13 3 w50994exv10w13.htm EXHIBIT 10.13 exv10w13

Exhibit 10.13

SELLING AGREEMENT

This Agreement, effective as of the 28th day of December, 2007, is made by and among Merrill Lynch Life Insurance Company (“Insurer”), and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Distributor”), selling products listed on the attached Appendix A (hereinafter referred to collectively as “The Company”) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Broker/Dealer”) and its duly licensed insurance affiliate(s), Merrill Lynch Life Agency Inc., a Washington corporation, and the corporations listed together with their respective states of incorporation on the signature pages hereof (hereinafter referred to collectively as “General Agent”).

Where applicable, any reference in this Agreement to General Agent or the Company, while defined collectively, will be deemed to refer to the individual entity liable for the stated act.

The Company represents that it is the issuer of those products listed on Appendix A. The Company further represents that the products and approved contracts, applications, riders, endorsement etc. (“Forms”) listed on Appendix A are, (i) properly filed and/or approved for use by each state insurance department where the product is available for sale and that the Forms comply in all material respects with applicable insurance and securities state laws, regulation notices or bulletins; and (ii) where applicable, registered under the Securities Act of 1933 and the Investment Company Act of 1940, that the registration statements and prospectuses comply in all material respects with the applicable provisions of such acts, and do not contain any untrue statement of material fact nor omit to state a material fact required to be stated therein, or necessary to make the statements therein not misleading.

Broker/Dealer and Distributor each represent that it is registered as a broker and dealer under the Securities Exchange Act of 1934, as amended, and is a member in good standing of the Financial Industry Regulatory Authroity (“FINRA”).

General Agent represents that with respect to Securities and Exchange Commission-registered contracts sold under this Agreement, its producers shall be registered representatives of Broker/Dealer acting in accordance with SEC No Action letter date May 21, 1975, is duly licensed and lawfully authorized to distribute any unregistered products, if available for sale under this agreement.

I. Appointment

Subject to all the terms of this Agreement, and to the applicable state insurance and securities laws regarding licensing insurance agents, General Agent is hereby appointed by the Company to represent it and any subsidiary, agency or company designated by it in writing, only in accordance with the terms of this Agreement, in the sale of annuity products set forth in Appendix A, attached to and made a part of this Agreement and in any written amendment thereto, (hereinafter referred to as “Products” or “the Products”), in any jurisdiction in which General Agent is validly licensed and in good standing and in which the Products may be legally sold and while any applicable registration under the Securities Act of 1933, as amended, is in effect. General Agent hereby accepts such appointment. The Company and General Agent agree that this Agreement is not an exclusive Agreement and no rights of exclusivity arise here from in favor of either party. Distributor has been appointed as the principal underwriter of the registered products of Company.

II. Authorization and Responsibilities

General Agent and Broker/Dealer is authorized to:

A. promote, market, solicit, sell and deliver the Products, receive, and forward initial premiums thereon, and perform any other act specifically authorized by this Agreement or in writing by the Company; and

B. designate its producers, subject to the approval of the Company, as General Agent deems necessary to conduct the General Agency business under this Agreement. Any such producers that General Agent allows to sell the Products or to whom General Agent pays commissions under this Agreement shall also be licensed and appointed as required by law and securities registered as required by law.

C. General Agent shall notify the Company promptly upon notice of termination of any Broker. General Agent shall provide, or shall forward to Producers such document request by Company to provide, the Company with appropriate authorization to allow the Company to conduct such background and credit investigations of Producers as may reasonably be necessary or appropriate under applicable law.

III. Relationship

General Agent shall freely exercise its own judgment as to the time, place and means of exercising authority under this Agreement. General Agent is an independent contractor and nothing in this Agreement shall create the relationship of employer and employee between the Company and General Agent and its producers and employees. Nothing contained in this Agreement shall restrict General Agent from acting as an agent or producer for other insurance companies.

IV. General

The Company shall maintain an administrative office to which all policy applications, premiums and policy service requests shall be referred by General Agent. The Company shall designate dedicated service personnel to support General Agent’s business. The Company will accept business only from General Agent’s producers properly licensed and appointed to sell the Products for which applications are submitted by such producers. In the event that any of the Products are not approved products of General Agent prior to General Agent’s execution of this Agreement, they must be so approved prior to this Agreement’s effective date.

General Agent will obtain and transmit promptly to the Company all applications and premiums for the Products. All premiums shall be submitted to the Company by check payable to the Company or by wire transfer directly to the Company’s designated account.

General Agent shall provide the Company with any necessary paperwork and license information required by state insurance departments in order to appoint General Agent or designated producers with the Company and the Company shall use best efforts to forward all appointment paperwork to state insurance departments within two (2) business days of receipt of all necessary information from General Agent.

Upon issuance of a contract, unless otherwise delivered to General Agent’s producer at General Agent’s request, the Company shall promptly deliver such contract to its purchaser by first class mail to the purchaser’s last known address of record. For purposes of this provision, “promptly” shall be deemed to mean not later than five (5) business days.

V. Unauthorized Acts

General Agent and Producers have no authority to, and General Agent shall ensure that it and any Producer shall not: (a) make any promise or incur any debt on behalf of the Company; (b) hold themselves out as employees or affiliates of the Company unless true; (c) misrepresent, add, alter, waive, discharge, or omit any provision of the Products, the then-current prospectus for the registered Products or the underlying funds, Company produced confirmations and statements or any other Company materials; (d) give or offer to give, on the Company’s behalf, any advice or opinion regarding the taxation of any purchaser’s or prospective purchaser’s income or estate in connection with the sale or solicitation for sale of any Products,

VI. Expenses

General Agent shall pay all expenses whatsoever connected with operating its insurance business except that the Company shall pay those expenses which it expressly assumes under this Agreement or otherwise in writing.

VII. Compliance

A. The Company agrees that during the continuance of this Agreement it will take all action which is required for it to comply and for all Products marketed hereunder to comply, and to continue to comply with all applicable federal and state laws and regulations, and the rules and regulations of all appropriate self-regulatory organizations. The Company represents that all Products marketed hereunder as well as any prospectus for any Products marketed hereunder and all advertising or sales promotional material provided by the Company hereunder have been

reviewed and approved, as applicable, by the Company’s legal and/or compliance personnel, including the Distributor’s FINRA Registered Principal.

All parties to this Agreement each represent that during the continuation of the Agreement they will take all action which is required for them to comply with state and federal laws and regulation, and the rules and regulations of all self-regulatory organizations with respect to the sale of annuities, including variable annuities.

B. The Company shall appoint, prior to any solicitation of the Products, all producers mutually agreed to by the parties. Such appointments shall be in any and all states where General Agent indicates a designated producer will be doing insurance business under this Agreement and shall be at the expense of the Company. Throughout the term of this Agreement, each of General Agent’s District Annuity Specialists and any other of General Agent’s insurance specialists shall be appointed at the Company’s expense in all states where such District Annuity Specialist or insurance specialist holds an insurance license and in all states included in their respective territories as designated by General Agent. The Company shall use its best efforts to appoint producers based upon electronic transmissions of licensing information from General Agent. The Company shall provide General Agent with an electronic file to the designated General Agent data center, updating the appointment status of General Agent’s designated producers on a weekly basis or as otherwise requested by General Agent. Except as otherwise specified herein, regardless of individual production, Company shall renew at the Company’s expense all appointments of General Agent’s life insurance specialists (currently District Annuity Specialists and their assistants). Further, regardless of individual production, the Company shall also renew at the Company’s expense for not less than twenty-four (24) months from their original appointment date all appointments of General Agent’s other producers.

Thereafter, the Company shall continue to renew at its expense all appointments of General Agent’s other producers who have made a sale under this Agreement within the year prior to any renewal date. Company shall not terminate or fail to renew any designated producer’s appointment for non-production without thirty (30) days prior written notice to General Agent. If Company does not renew any designated producer’s appointment for non-production, Company shall notify said producer directly and indicate said non-renewal on its daily electronic appointment file provided to General Agent.

C. The parties understand and agree that General Agent is party to an agreement with the National Insurance Producer Registry (“NIPR”). As a result of this agreement between General Agent and NIPR, General Agent does not retain actual hard license copies for its individual producers.

VIII. Notice and Required Regulatory Reports

A. The Company will give General Agent notice in advance of any changes made with regard to the Products marketed under this Agreement. If the decision to make changes with regard to such Products is not in response to legal or regulatory mandate, thirty (30) days prior written notice to General Agent is required.

B. Each party shall notify the others within ten (10) days of its obtaining knowledge of any actual or impending material adverse change in its Company’s financial condition, the financial condition of any subsidiary, parent company or reinsurer, or if any published rating of the party, any subsidiary, parent or reinsurer has been or is to be lowered. Each party shall also notify the others within ten (10) days of its obtaining knowledge of any actual or impending

material adverse change in the financial condition of any reinsurer if such change has or could have a material effect on the financial condition of the party or its affiliates.

C. (1) Within twenty (20) days after the Company has sent or delivered the following reports to the pertinent regulatory agency, the Company agrees to send or furnish General Agent a copy of each such report actually filed. If the Company fails to provide such copies, the General Agent shall give notice thereof and allow twenty (20) days from date of notice to provide the requested documents.

The reports are:

	(a)		The Annual Statement of the Company filed with the Company’s state of domicile.

	(b)		The Quarterly Convention Statement of the Company filed with the Company’s state of domicile.

(2) If the Company is part of an insurance holding company system under the laws of its state of domicile and subject to said laws, the Company agrees to send within twenty (20) days of delivery to the pertinent regulatory agency, copies of the following:

	(a)		Any amendments to the Company’s Registration Statement.

	(b)		The Company’s Annual Report describing transactions during the prior year with entities within the holding company system.

	(c)		Any requests for approval filed by the Company with said regulatory agency with respect to any proposed transaction(s) between the Company and any entity within the holding company system.

	(d)		If applicable, the 10K report of the Company’s parent filed with the United States Securities and Exchange Commission (“SEC”).

	(e)		If applicable, the 10-Q report of the Company’s parent filed with the SEC.

D. Each party will notify the other of any regulatory or administrative investigation or inquiry, claim, judicial proceeding or customer complaint which may affect Products marketed or services rendered under this Agreement within ten (10) days of knowledge of such, excluding, however, claims for benefits under a policy or application or contests regarding the validity, enforceability, or construction of any policy or application issued by the Company.

(1) Within ten (10) days after receipt by either party of notice of any such customer complaint, investigation or proceeding involving General Agent or any of its Producers, the party in receipt thereof will notify the other party by forwarding a copy of all documents received in connection with the matter and will communicate to the other party additional information it deems necessary to furnish the other party a complete understanding of the same.

(2) In the case of a customer complaint with respect to General Agent, any designated producer or any company or person affiliated with General Agent or any designated producer, the parties shall not take any final action with respect to such complaint without prior consultation with the other party involved. This Subparagraph D (2) shall survive termination of this Agreement.

(3) For the purposes of this Agreement, the term “customer complaint” shall mean a written communication either directly from a purchaser or a purchaser’s representative or indirectly from a regulatory agency to which a purchaser or a purchaser’s representative has

written expressing a grievance. Further, for purpose of this Agreement, any oral complaints alleging misrepresentation of information or improper sales practices shall be treated as a written complaint.

Each party agrees to cooperate fully with the other in any regulatory investigation, administrative or judicial proceeding or customer complaint regarding products marketed or services rendered under this Agreement. This Subparagraph D(4) shall survive termination of this Agreement.

Each party shall bear its own cost and expenses in complying with any regulatory investigation, administrative or judicial proceeding, customer complaint, or regulatory or self-regulatory requests, subject to any right of indemnification that may be available pursuant to Section XXIII of this Agreement.

E. Distributor agrees that it shall act as Broker/Dealer’s agent in providing customer confirmations pursuant to Rule 10b-10 under the Securities Exchange Act of 1934, as amended the (“1934 Act”) and shall confirm or cause to be confirmed to customers of Broker/Dealer all contract transactions, as and to the extent legally required. Distributor either directly or through the services of the Company shall maintain as agent for Broker/Dealer in compliance with Rules 17a-3 and 17a-4 under the 1934 Act all books and records concerning such customer confirmations.

F. If applicable, Company shall confirm to General Agent either electronically or in writing any change in interest rates for new contracts, additional premiums or renewals as soon as Company becomes aware or receives notice of any such change. At all times Company shall

provide General Agent with access to current interest rates for Products marketed under this Agreement.

G. All communications under this Agreement shall be in writing and shall be mailed by certified mail, postage prepaid, sent by recognized overnight courier service, or transmitted by facsimile, with receipt confirmed by the transmitter via telephone within twenty-four (24) hours of transmission, provided a duplicate copy thereof is mailed by certified mail or sent by courier service, as indicated above;

(1)

if to General Agent, to:

Merrill Lynch Life Agency Inc.
1700 Merrill Lynch Drive, 3^rd Floor
Pennington, New Jersey 08534
Attention: Lori Caracappa

with a copy to:

Merrill Lynch Insurance Group, Inc.
1700 Merrill Lynch Drive, 3^rd Floor
Pennington, New Jersey 08534
Attention: Barry Skolnick, Senior V.P. & General Counsel

(2)

if to the Company, to:

Merrill Lynch Life Insurance Company
4333 Edgewood Road NE
Cedar Rapids, IA 52499
Attention: President and Division General Counsel

Notice will be deemed to have been effected once the certified mail or courier package has been delivered or once receipt of the facsimile has been confirmed in accordance with instructions, above.

Either party may change the address indicated herein by written notice to the other.

H. For the purposes of this Agreement, the term “days” shall refer to calendar days unless otherwise specifically indicated.

IX. Litigation

Each party shall use its best efforts to give reasonable notice of any legal proceedings against a third party regarding or affecting Products marketed or services rendered under this Agreement except in the case of any legal proceeding instituted against a customer of General Agent, Company agrees to provide ten (10) days prior notice.

X. Limitation

A. To the extent permitted by law, the Company has the right to reject any applications or premiums received by it and to return or refund to an applicant such applicant’s premium. In the event that the Company rejects an application, it will return any premium paid by the applicant to such applicant and will promptly notify General Agent and producer of such action. In the event that a purchaser exercises his or her “free look” right under a Product, any amount to be refunded will be so refunded to the purchaser by the Company.

B. Subject to Section VII(A) hereof, the Company may limit the amount and type of contract it shall distribute or issue and the amount of premium or deposit it shall accept.

XI. Territory, Withdrawal of Business and Policy Forms

The Company, upon thirty (30) days prior written notice to General Agent, may stop doing business in any state or territory or withdraw any Products from sale by General Agent. The foregoing notwithstanding and in the sole discretion of the Company, the Company may

immediately suspend the sale of any Products and may immediately cease doing business in any state upon notice to General Agent when such suspension or such cessation of business is in response to regulatory authority. The Company may additionally resume the use of Products at any time upon thirty (30) days prior written notice to General Agent, or such lesser period of time as agreed to by General Agent. In such event, the Company shall specifically advise General Agent of any modifications or changes to the resumed Products and provide General Agent with complete copies of any changed forms at the time notice is given to resume sales of the Products.

XII. Compensation

A. The Company will pay General Agent compensation hereunder as provided in the Commission Schedule attached to and made a part of this Agreement for sale during the term of this Agreement. Compensation will be paid on premiums received by the Company for issued Products which are produced in accordance with this Agreement and are accepted by the proposed owners, and are not refunded during any “free look” period required by law or permitted under a Product. The Insurer is solely responsible for the payment of all commissions under this Agreement. Distributor’s liability, if any, for commissions is limited solely to proceeds of commissions received from Insurer.

The Company may alter or amend the Commission Schedule for all Products upon thirty (30) days prior written notice to General Agent and the issuance of a new Commission Schedule. Changes or amendments to the rate of compensation payable on premiums or on asset-based compensation become effective for Products issued on or after the effective date of such changes unless otherwise agreed to in writing by General Agent and the Company. Changes or

amendments to the rate of compensation payable on premiums or asset-based compensation will not apply to Products issued prior to the effective date of such change, unless otherwise agreed in writing by General Agent and the Company. Changes or amendments to the Commission Schedule that do not relate to rate of compensation may be applied to Products issued prior to the effective date of the change.

Initial and trail commissions are payable to General Agent when earned under the applicable Commission Schedule. The terms of said Commission Schedule notwithstanding, all commissions or other compensation payable based on the production of designated producers hereunder shall be paid and reported only to General Agent.

B. The Company will send electronically a Statement of Account referencing all compensation payable hereunder for the preceding week to General Agent on a daily basis. Any and all compensation payable hereunder will be paid only to General Agent, on an automated basis, each day.

C. With respect to commissions or compensation owed by the Company or any affiliate to the General Agent, the Company shall have the right to set off against such amounts any chargebacks payable by the General Agent under this Agreement, to the extent permitted by applicable law.

D. Producers shall have no interest in this Agreement or right to any commissions to be paid by the Company to General Agent. General Agent shall be solely responsible for the payment of any commission or consideration of any kind to producers.

E. General Agent shall be solely responsible under applicable tax laws for reporting of compensation paid to producers and for any withholding of taxes from compensation paid to producers, including, without limitation, FICA, FUTA, and federal, state and local income taxes.

F. This Section XII shall survive termination of this Agreement.

XIII. Books, Records

A. Each party hereto shall have the right, during normal business hours and upon ten (10) days prior written notice, to audit and inspect the books and records of the other party relating solely to the business contemplated by this Agreement. Such books and records will be complete and available for review at each party’s business offices in a good and legible condition for a period of three (3) full calendar years after the year of termination of this Agreement, or longer if required by applicable federal or state law or regulation, during which time this audit right shall continue.

B. The Company shall furnish General Agent with all necessary forms required by applicable SEC and state insurance regulations, such as replacement analysis forms, disclosure material etc. required for use in connection with the sale of the Products.

C. The Company shall furnish General Agent with in-force current customer data and contract information through electronic means in a manner and format as specified in Appendix B.

D. Any unused contracts, forms, applications and other supplies furnished by the Company to General Agent shall always remain the property of the Company and shall be accounted for and returned to the Company or destroyed by General Agent on demand.

E. The Company will provide General Agent, on at least a quarterly basis, with the following statistical information: dollar amount of business generated; number and accumulated value of contracts in force and number and dollar amount of surrenders to date.

XIV. Product Names

A. The Company hereby represents and warrants that the Company, together with its affiliates, has exclusive right, title and interest in all Products’ names.

B. The Company shall indemnify and defend General Agent from and against any and all claims (including the costs of reasonable attorneys’ fees, investigation and defense of such claims) relating to General Agent’s use hereunder of any Products’ names.

C. Each party shall notify the other promptly in writing of any and all allegations or claims by others of which it may become aware that the use of any Products’ names infringes any trademark or service mark, violates any property right of a third party, or violates or is contrary to any law, regulation, order, consent, or the like. The Company shall notify General Agent of the settlement or outcome of any such claim or suit.

XV. Customer and Producer Confidentiality

The Company agrees that the names and addresses of all customers and prospective customers of General Agent, of General Agent’s parent company and of any affiliated company as well as the names, address and any information of all Producers of General Agent which may come to the attention of the Company or any company or person affiliated with the Company as a result of this Agreement are confidential. Such customer or producer information shall not be used, without the prior written consent of General Agent, by the Company or any company or person affiliated with the Company for any purpose whatsoever except as may be necessary in connection with the administration and servicing of products sold by or through General Agent.

In no event shall the names and addresses of such customers and prospective customers and Producer information that constitute confidential information under this Agreement be

furnished by the Company to any other company or person including, but not limited to: (1) any of such company’s managers, agents or producers which are not designated producers of General Agent; (2) any company affiliated with the Company or any manager, agent or producer of such company; or (3) any securities broker-dealer or any insurance agent affiliated with such broker-dealer other than Merrill Lynch, Pierce, Fenner & Smith.

The Company agrees that neither the Company nor any company or person affiliated with the Company shall solicit directly any customers whose names constitute confidential information pursuant to this Section. Notwithstanding the foregoing, Company reserves the right to contact customers or Producers for purpose of conversation of existing annuity or life insurance policies. Further, the parties understand that the Company or its affiliates may, from time to time, conduct general and untargeted solicitations of investments, insurance or annuity products using its own information or other publicly available information, but not the customers’ information. Such general untargeted solicitations may incidentally include General Agent’s customer and shall not be considered a breach of this Section provide that the Company or its affiliates received Customer Information from a third party or independently and not in any way as a result of the its relationship hereunder. The Company shall keep Customer Information separate and secure under this Agreement.

The intent of this paragraph is that the Company shall not utilize, or permit to be utilized, its knowledge of General Agent, of its parent company or of any affiliated companies or of the customers of any of the foregoing for the solicitation of sales of any products or services.

This Section XV shall survive termination of this Agreement.

XVI. Gramm-Leach-Bliley Compliance

The parties hereby acknowledge that they are subject to the privacy regulations under Title V of the Gramm-Leach-Bliley Act, 15 U.S.C. § 6801 et seq., (“GLBA”), to which regulations the parties are required to obtain certain undertakings from each other with regard to the privacy, use and protection of nonpublic personal financial information of Broker/Dealer’s and/or General Agent’s clients or prospective clients or Company’s insureds or prospective insureds. Therefore, notwithstanding anything to the contrary contained in this Agreement, the parties agree that: (1) they shall not disclose or use any Client Data except to the extent necessary to carry out their obligations under this Agreement and for no other purpose, (2) they shall not disclose Client Data to any third party, including, without limitation, their respective third party service providers except to the extent necessary to carry out their obligations under this Agreement and then only with an agreement in writing from the third party to use or disclose such Client Data only to the extent necessary to carry out their respective obligations under this Agreement and for no other purposes, (3) they shall maintain, and shall require all third parties approved under subsection (2) to maintain effective information security measures to protect Client Data from unauthorized disclosure or use, and (4) they shall provide each other with information regarding such security measures upon the reasonable request of the other party and promptly provide the other with information regarding any failure of such security measures or any security breach related to Client Data. The obligations set forth in this Section shall survive termination of the Agreement. For the purposes of this Agreement, Client Data means the nonpublic personal information (as defined in 15 U.S.C. § 6809(4)) of the parties’ clients or prospective clients or insureds or prospective insureds received by the other party in connection with the performance of its obligations under the Agreement, including, but not limited to (I) an

individual’s name, address, e-mail address, IP address, telephone number and/or social security number, (II) the fact that an individual has a relationship with the other party and their parents, affiliated or subsidiary companies, or (III) an individual’s account information.

The parties acknowledge that each of them may be under a separate duty to effect compliance with the GLBA. The parties shall use their best efforts to coordinate their actions in the performance of the actions contemplated by this Agreement so as to ensure both compliance with GLBA and avoid conflicts among themselves.

XVII. Anti-Money Laundering

Broker/Dealer acknowledges that it has in place procedures to comply with all applicable provisions of the USA PATRIOT Act, including: (a) the requirement for an anti-money laundering program; (b) the requirement for a Customer Identification Program (CIP); (c) the requirement to file suspicious activity reports; and (d) that Broker/Dealer has an ongoing training program on products subject to Anti-Money Laundering regulations for its affiliated registered representatives and will produce documentation of specific registered representatives upon request.

Broker/Dealer will not knowingly sell any product issued by the Company to: (1) any investor listed on the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) list of prohibited persons, entities, and countries, or (2) a foreign shell bank, as defined in the USA PATRIOT Act.

Broker/Dealer, General Agent and the Company each agree that, if authorized by law to do so, each may choose to share information with one another pursuant to Section 314 of the USA PATRIOT Act as to matters for which such sharing is permitted.

Company has developed and implemented Anti-Money Laundering procedures in accordance with applicable laws and regulations. General Agent shall use reasonable efforts to support Company with such procedures. Notwithstanding the foregoing, General Agent acknowledges that Company will rely on General Agent to have in place appropriate AML and CIP procedures and controls as specified above, and to follow such procedures and controls in connection therewith relating to the sale of Company’s products.

XVIII. Advertising Approval

A. The Company agrees that it will make available to General Agent for General Agent’s review and prior approval any advertising or sales promotional material to be sent to or used by General Agent’s designated producers, employees, representatives, and/or customers which relates to the sale of the Products, at least thirty (30) days prior to the scheduled release of such information or material directly to General Agent’s designated producers, employees, representatives, and/or customers. Such material shall have been reviewed and approved by the Company’s legal and/or compliance personnel, including a FINRA Registered Principal, as applicable. Such material will not be released to General Agent’s designated producers, employees, representatives, and/or customers without General Agent’s approval. The Company shall maintain product-specific advertising or sales promotional materials on an up-to-date basis and shall promptly notify General Agent when any previously- approved materials are withdrawn or are no longer accurate.

B. General Agent agrees that neither it nor its designated producers or employees shall use in any way create, print, publish, disseminate, or otherwise make available to its designated producers, employees or customers any press release, advertising or sales

promotional material which refers to the Company (or any affiliate thereof) or Products or contains any of the Company’s trademarks without the prior consent of the Company. The consideration for and the giving of such Company approval shall apply to each specific request and shall not be construed to have applied to any subsequent materials or programs.

The provision of Products and Sales Material to General Agent, or sales material referring to the General Agent, shall not provide the receiving party with any license to use any tradenames, trademarks, service marks or logos or proprietary information of the providing party, except to the extent explicitly allowed in writing by the providing party necessary to carry out the purposes of this Agreement.

C. The Company agrees that neither it nor its agents, or employees shall use in any way, print, publish, disseminate, or otherwise make available to its agents, employees, or customers any press release, advertising or sales promotional material which refers to General Agent or contains any of General Agent’s trademarks without the prior consent of General Agent.

D. “Advertising or Sales Promotional Material” for the purpose of this contract shall include:

	(1)		printed and published material, audiovisual material, billboards and similar displays, descriptive literature used in direct mail, newspapers, magazines, radio and television scripts;

	(2)		descriptive literature and sales aids of all kinds including but not limited to circulars, leaflets, booklets, marketing guides, seminar material, computer print-outs, depictions, illustrations and form letters;

	(3)		material used for the training and education of designated producers which is designed to be used or is used to induce the public to purchase or retain Products; and

	(4)		prepared sales talks, presentations and material for use by designated producers.

E. Any sales or promotional materials developed by one party and delivered to the other will be owned solely by the party that developed the materials.

F. Any unused materials furnished by one party to the other shall always remain the property of the party who furnished such materials and shall be accounted for and returned to the owner on demand.

XIV. Software

From time to time the Company may develop and make available to General Agent computer software or related materials (“Software”) in magnetic, written, or other form, to be used in connection with the sale of the Products. The Company hereby grants General Agent a non-exclusive royalty-free license to use any such Software. The Company warrants that all such Software is and shall remain its exclusive property, free from all third party claims. The Company shall indemnify and defend General Agent from and against any and all losses or claims (including the costs of reasonable attorneys’ fees, investigation and defense of such claims) relating to General Agent’s non-exclusive, royalty-fee, license to use such Software. General Agent agrees not to use such Software for any purpose except for which it was provided and not to copy such Software except as required to perform its obligations hereunder, nor to

generate or obtain written copies of Software supplied in magnetic form and to return all such Software and all copies upon demand or upon written termination of this Agreement.

The Company represents, warrants, and covenants that (i) all Software shall be free from significant programming errors and defects; and (ii) all Software (and all updates thereto) shall be delivered free of any “worm”, “virus”, “lock out”, or “self destruct” devices, as such terms are understood in the computer industry.

This Section XIV shall survive termination of this Agreement.

XX. Training

The Company will, at its own costs, provide the necessary personnel to provide training sessions to General Agent’s employees and representatives in order to familiarize them with the Products and to introduce new Products to be marketed hereunder. The Company will provide additional initial training as mutually agreed to by General Agent and the company at General Agent’s Jacksonville, Florida location to General Agent’s licensing, commission and marketing operations. Training sessions shall be conducted thereafter at locations as mutually agreed between the parties on at least a semi-annual basis, or as otherwise mutually agreed between the parties.

XXI. Processing Standards

The Company will implement reportable processing standards with regard to supporting new business and in-force servicing of General Agent’s business. During and after the term of this Agreement, the Company shall use its best efforts to meet processing standards as identified in Appendix C for business sold under this Agreement. During the term of this Agreement, the

Company shall measure and report to General Agent, as reasonably requested, actual performance against these standards.

XXII. Amendment; Assignment

This Agreement may be amended, modified or waived, in whole or in part, only by a writing signed by the party against whom enforcement thereof is sought. This Agreement may be assigned by either party only with the prior written consent of the other party. This Agreement shall be binding on the parties’ respective successors and assigns.

XXIII. Indemnification

A. The Company shall indemnify and hold General Agent, its officers, employees and agents harmless against all civil liability, including attorneys’ fees and costs of investigation and defense incident thereto arising as a result of errors, omissions, negligence, misrepresentation, fault, wrongful action or breach of any representation or warranty by the Company, its affiliates, agents (other than General Agent), or any officer, director or employee of the Company or said affiliates or agents (including) but not limited to (i) providing any unauthorized sales material or any verbal or written misrepresentations or any unlawful sales practices concerning the products by company’s employees or company’s agents to General Agent, (ii) failure to provide adequate disclosure including, but not limited to tax disclosure, concerning the Products or to properly administer the Products and (iii) failure to comply with any applicable federal law or regulation, state law or regulation, administrative or exchange rule or regulation, or rule of any applicable self-regulatory organization) in the performance of obligations hereunder.

B. General Agent shall indemnify and hold the Company, its officers and employees harmless against all civil liability, including attorneys’ fees and costs of investigation and defense incident thereto arising as a result of errors, omissions, negligence, misrepresentation, fault or wrongful action of General Agent or its affiliates, or of any officer, director, employee of General Agent or sales persons associated with General Agent including but not limited to (i) any unauthorized use of sales materials or any verbal or written misrepresentations or any unlawful sales practices concerning the Products by General Agent, its agents, employees, or representatives; (ii) claims for commissions, services fees, development allowances, reimbursements, or other compensation or remuneration of any type relating to any Broker or former Broker or relating to any employee General Agent or any of its Broker; (iii) failure to comply with any applicable federal law or regulation, state law or regulation, administrative or exchange rule or regulation, or rule of any applicable self-regulatory organization, in the performance of obligations hereunder.

C. This Section XXIII shall survive the termination of this Agreement.

XXIV. Arbitration

A. Any and all disputes arising under this agreement shall be settled by arbitration in New York City, NY or such other place as may be mutually agreed upon by the parties, under the then current rules of the American Arbitration Association, and judgment may be entered upon the award in any court of competent jurisdiction. The arbitration will be determined by one neutral arbitrator mutually agreed to by each party. If the parties fail to appoint an arbitrator on a timely basis or are unable to agree on the choice of an arbitrator on a timely basis, any one of the

parties may apply to the America Arbitration Association to appoint a neutral arbitrator to sit and hear the arbitration.

B. The determination of the arbitrators shall be final and binding on all parties to the extent that arbitrator(s) do not exceed their statutory authority. The costs of arbitration shall be equally borne by the Company and General Agent provided, however, that the arbitrators may assess one party more heavily than the other for these costs upon a finding that the party did not make a good faith effort to settle the dispute informally when it first arose. Each party hereto hereby waives the right to a trial by either a jury or a court, including but not limited to a trial of any issue concerning the validity of this section and the right of appeal from the arbitrator’s award. Each party waives any claim to recover punitive damages and non-compensator damages against the others.

XXV. Termination

A. Termination

After the initial annual term of this Agreement, it may be terminated at any time, with or without cause, by either party upon ninety (90) days prior written notice of such termination to the other party. This Agreement will additionally terminate automatically without notice: (1) if either party ceases to exist (this shall not apply to General Agent unless all of the separate corporations referred to collectively as General Agent cease to exist) or either party becomes bankrupt or insolvent; (2) if this Agreement is assigned by either party without the consent of the other party, voluntarily or involuntarily; (3) as to any Products, if the Company ceases to issue such Products pursuant to the terms of this Agreement or if General Agent provides the Company with written notice that it will no longer market such Products; and (4) in any

jurisdiction in which either the Company or General Agent no longer has all necessary licenses to perform its duties under this Agreement. Should either party lose a license to perform its duties hereunder, said party shall promptly advise the other.

B. Consequences of Termination

In the event of termination, compensation on business previously written hereunder, or business submitted to the Company through General Agent prior to the date of such termination and then issued, shall be payable as it becomes due in accordance with the terms of this Agreement. No new applications shall be submitted by General Agent and General Agent shall return or destroy all property of the Company unless otherwise agreed between the parties. If such property is destroyed, General Agent shall furnish the Company with written verification. Each party will promptly pay the other any fees, commissions, or other monies owed hereunder, and all obligations of each party to the other shall terminate other than as specifically otherwise indicated herein. Outstanding initial and subsequent compensation shall be paid in the event of termination as indicated below:

(1) Initial Premiums. All commissions, trails, overrides and allowances for Products in the process of delivery, or for Products which may be subsequently issued on applications then pending, shall be payable to General Agent according to the applicable compensation schedules in effect at the time the properly completed application was submitted.

(2) Subsequent Payments. All commissions, trails, overrides and allowances shall be payable to General Agent, unless otherwise prohibited by law, according to the applicable compensation schedules in effect at the time the contract was issued.

In the event of termination, the Company shall continue to provide General Agent with current customer information regarding continued in-force business pursuant to Section XIII (C).

XXVI. Market Timing

Market timing is against Broker/Dealer’s policy. The Company and Broker/Dealer mutually agree to notify the other immediately should it suspect market timing activity in any contracts sold under this Agreement. The parties acknowledge that each of them may be under a separate duty to effect compliance with legislation and regulation regarding market timing activities. The parties shall use their best efforts to conform and coordinate their actions under, and interpretations of, their respective polices and procedures in the performance of the actions contemplated by this Agreement so as to ensure both compliance with such legislation and regulation, and avoid conflicts among themselves. The Company reserves the right to reject any purchase orders submitted by any parties whom (or whose clients) Company determines to be engaging in market timing activity but only upon consultation with General Agent.

XXVII. Waiver

Forbearance, neglect or failure of either party to enforce strict compliance with any or all provisions of this Agreement shall not waive any such provision or release the other party hereto in any way. A waiver of a past act or circumstance shall not constitute or be a course of conduct or waiver of any subsequent action or circumstance.

XXVIII. Complete Agreement

This Agreement, together with its attachments, contains the entire Agreement between the parties concerning any transactions entered into on or after the date hereof and replaces and

supersedes all other Agreements (written and oral) between the parties with regard to the subject matter. General Agent and Company hereby acknowledge that they have not relied upon any representations other than the representations expressly by contained within this Agreement.

XXIX. Miscellaneous

A. This Agreement incorporates by reference all of its attachments and their terms and conditions. In the event of a conflict between the terms and conditions of this Agreement and any of its attachments, the terms and conditions of the Agreement shall govern.

B. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

C. This Agreement shall be construed and enforced according to the laws of the State of New York.

D. For convenience, this instrument may be executed in one or more counterparts, each of which shall be deemed in all respects an original.

IN WITNESS WHEREOF, the Company and General Agent have caused this instrument to be signed by their duly authorized officers effective as of the day and year first above written.


Merrill Lynch Life Insurance Company		Merrill Lynch, Pierce, Fenner & Smith, Incorporated


By:	/s/ Ronald L. Ziegler	By:	/s/ Barry G. Skolnick
	Name: Ronald L. Ziegler		Barry G. Skolnick
	Title: SVP		First Vice President

Date: December 28, 2007		Date: December 28, 2007


Merrill Lynch Life Agency Inc.		Merrill Lynch Life Agency Inc.
A Montana Corporation		An Puerto Rico Corporation
13-2910703		13-3113174

Merrill Lynch Life Agency Inc.		Merrill Lynch Life Agency Inc.
A Washington Corporation		A Virgin Islands Corporation
13-2808480		13-3072924



	By:	/s/ Mark T. Buchinsky
		Mark T. Buchinsky
		Vice President

	Date:	December 28, 2007

Appendix A —
Available Products & Commission Schedule

(As of 03/03)

Gross compensation paid to Merrill Lynch Life Agency is confidential and must not be disclosed to wholesalers or Financial Advisors.

B-Share & Bonus (upfront)


Ages	Upfront			Trails
0-80		5.25	%	.45% in CDSC; .50% post CDSC
81-85		2.75	%	.45% in CDSC; .50% post CDSC
86-90		1.75	%	.45% in CDSC; .50% post CDSC

B-Share & Bonus (level)


Ages	Upfront			Trails
0-80		1.20	%	1.20% yrs 2-3; 1.0% yrs 4+
81-85		.75	%	.75% yrs 2+
86-90		.75	%	.75% yrs 2+

C-Share


Ages	Upfront			Trails
0-80		1.20	%	1.20%
81-85		.75	%	.75%
86-90		.75	%	.75%

L-Share


Ages	Upfront			Trails
0-80		2.75	%	1.00%
81-85		1.60	%	1.00%
86-90		.80	%	.80%

•		Chargebacks on surrenders for all Variable Annuities: 100% months 0-6, 50% months 7-12

•		Trails paid monthly within 10 business days after month end.

•		Consistent age breaks as noted above

Appendix B — Communication and Data Exchange Standards

Company will provide electronic means for data communication with General Agent in a mutually agreed upon manner and form as set forth herein.

Depository Trust & Clearing Corporation (“DTCC”) Interface

The parties intend that the DTCC Insurance Processing System (IPS) Commissions, Positions and Financial Activity interfaces will be used to transmit inforce policy/contract values and commission information to General Agent on a daily basis.

The DTCC IPS and the electronic file formats defined by that system, shall be used by all companies for the transmission of information to the General Agent on a daily basis. Company shall also support additional functions, such as daily Licensing and Appointments and Electronic Applications using the DTCC processing capability. Settlement of cash associated with transactions processed through the DTCC system will be made using the money settlement services of the DTCC.

Electronic Order Entry for New Annuity Sales

General Agent requires that Company issue all new annuity contracts and accepts subsequent premium transactions based upon the electronic transmission of an electronic order entry system in accordance with General Agent specifications. The parties intend that the AnnuityNet system will be used to transmit new annuity contracts and subsequent premium transactions.

Appointment Processing

General Agent requires that the appointment process between the Jacksonville servicing location and the Company home office be automated via the DTCC Licensing and Appointment interface prior to introducing the Company into the General Agent distribution channel.

Daily files need to be sent via the DTCC Licensing and Appointment interface.

Commissions Processing

Daily electronic feed of all commissions payable to General Agent provided via DTCC interface.

In-force Policy/Contract Information/Financial Activity Reporting & Positions

Daily Feed of in-force policy/contract information/positions provided via the DTCC Financial Activity Reporting (FAR) and Positions interface.

Scrub Files

General Agent requires Company to receive a monthly electronic feed of ML account numbers and associated agents for all inforce business provided via a download file. Company will implement a monthly upload of this data into their systems no less than five business days upon receipt.

E-Mail Connectivity

E-mail connectivity is required between the Company and General Agent through a standard Internet process. Both parties will provide appropriate e-mail addresses.

Future Enhancements

If Company has a website that is accessible by producers that contains pending and inforce policy information, Company shall design a separate home page for access by the General Agent and its designated producers. The technological, security protection and access specifications as well as the aesthetic considerations of this General Agent home page will be dictated by General Agent. Company shall employ all appropriate measures to ensure that this separate home page is accessible only to General Agent and its designated producers as dictated by General Agent and inaccessible to any unauthorized third party. This General Agent home page will contain links to the following sections of the Company’s website: General Agent-approved policy forms and marketing materials, pending case status, inforce policy information, state availability grids/charts, producer licensing status and underwriting requirements. Access to pending case status and inforce policy information shall be limited on a producer-level basis, with full access being granted to General Agent home office staff. Company shall employ all encryption methods required by General Agent in connection with accessing and transmitting information.

Appendix C

Customer Service Standards


Processing Transaction	Description	Start Date	End Date	Processing Standard

*Fund Transfers*	The contract owner requests reallocation of contract value of funds within the variable annuity	The day Company receives a request to reallocate funds within the variable annuity	The day Company service representative finalizes request and notifies the client	Same day of receipt of request in good order

*Surrenders*	The contract owner terminates the contract	The day Company receives a request to cancel the contract and begins to analyze for client	The day Company service representative mails or wires funds to client	Same day of receipt of request in good order

*Annuity Contract Issuance*	The contract owner requests new contract	The day Company receives documentation and new money in good order	The day Company mails issued contract to the client	Same day of receipt of request in good order

*External 1035*	The contract owner requests external exchange	The day Company receives an exchange request and begins to analyze for client	The day Company service representative finalizes request and notifies the client	5 business days from receipt or request in good order

*Beneficiary Changes*	The contract owner requests a change of beneficiary	The day Company receives a request and begins to analyze for client	The day Company service representative finalizes request and notifies the client	4 business days from receipt of request in good order

*Owner Name Changes*	The contract owner requests a change of owner or name	The day Company receives a request and begins to analyze for client	The day Company service representative finalizes request and notifies the client	5 business days from receipt of request in good order

*Address Changes*	The contract owner reports a change of mailing address	The day Company receives a request by mail or phone	The day Company service representative processes request	3 business days from receipt of request in good order

*FA Changes*	The contract owner or ML requests a change in FA number	The day Company receives a request by mail or phone	The day Company service representative processes request	5 business days from receipt of request in good order


Processing Transaction	Description	Start Date	End Date	Processing Standard

*ML Account Number Changes*	The contract owner or ML requests a change in ML account number	The day Company receives a request by mail or phone	The day Company service representative processes request	5 business days from receipt of request in good order

*Client Service Phone Standards*	The contract owner or ML contacts the Company service representative by phone	When call is received at Company	When call is ended at Company	98% of call answered 80% answered within 30 seconds 80% point of call resolution

EX-10.14 4 w50994exv10w14.htm EXHIBIT 10.14 exv10w14

Exhibit 10.14

KEEP WELL AGREEMENT

AGREEMENT, dated as of December 28, 2007 between AEGON USA, Inc. (“AUSA”) and Merrill Lynch Life Insurance Company (“MLLIC”).

WITNESSETH:

WHEREAS, AUSA is a holding company indirectly owning 100% of MLLIC, and

WHEREAS, AUSA intends to continue to be an affiliated company of MLLIC and does not intend directly or indirectly to pledge or otherwise dispose of any such shares of stock; and

WHEREAS, the corporate interests of AUSA will be furthered and the value of MLLIC will be preserved and potentially enhanced by it’s entering into this Agreement.

NOW THEREFORE, the parties agree as follows:

1.		Maintenance of Tangible Net Worth: AUSA will cause MLLIC at all times to have a Tangible Net Worth of at least $5 million. “Tangible Net Worth” shall mean, as of the time of any determination thereof, the sum of (i) the par value (or value stated on the books of MLLIC) of the common stock of all classes of MLLIC plus (or minus in the case of a deficiency) (ii) the amount of the paid-in capital and surplus of MLLIC all determined in accordance with accounting principles as required by regulatory authorities and as in effect on the date of determination.

2.		No Guarantee: This Agreement is not, and nothing herein contained and nothing done pursuant hereto by AUSA shall be deemed to constitute, a direct or indirect guarantee by AUSA of the payment of any debt or other obligation, indebtedness or liability, of any kind or character whatsoever, of MLLIC or its subsidiaries, if any.

3.		Modification and Amendment: This Agreement may only be modified or amended in ways not less favorable to MLLIC or its policyholders and only upon the mutual consent of both parties.

4.		Duration and Termination: This Agreement shall have a duration of three years only so long as MLLICNY is a wholly owned affiliate of AUSA. This Agreement may be terminated by either party upon one year’s written notice to such other party.

5.		Successors: The agreements herein set forth shall be mutually binding upon, and inure to the mutual benefit of AUSA, MLLIC and their respective policyholders and successors provided, however, that this agreement creates no third party beneficiaries.

6.		Governing Law: This Agreement shall be governed by and construed in accordance with the law of the State of Iowa.

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of the day and year first above written.


/s/ John T. Mallett		/s/ James A Beardsworth

Merrill Lynch Life Insurance Company		AEGON USA, Inc.

EX-23.1 5 w50994exv23w1.htm EXHIBIT 23.1 exv23w1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-133223 and 333-133225 on Form S-3 of our report dated March 2, 2007, (which report expresses an unqualified opinion) relating to the financial statements of Merrill Lynch Life Insurance Company, appearing in this Annual Report on Form 10-K of Merrill Lynch Life Insurance Company for the year ended December 31, 2006.

/s/ Deloitte & Touche LLP

New York, New York
March 25, 2008

EX-23.2 6 w50994exv23w2.htm EXHIBIT 23.2 exv23w2

Exhibit 23.02

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in Registration Statement Form S-3 No. 333-133223 and 333-133225 of our report dated March 14, 2008, with respect to the financial statements of Merrill Lynch Life Insurance Company, included in this Annual report on
Form 10-K for the year ended December 31, 2007.

/s/ Ernst & Young LLP

Des Moines, Iowa
March 25, 2008

EX-24.1 7 w50994exv24w1.htm EXHIBIT 24.1 exv24w1

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I, John T. Mallett, Director and Treasurer and Chief Financial Officer of Merrill Lynch Life Insurance Company, an Arkansas corporation, do hereby appoint Darin D. Smith and Frank A. Camp, and each of them severally, my true and lawful attorney-in-fact, for me and in my name, place and stead to execute any Annual Report on Form 10-K of Merrill Lynch Life Insurance Company pursuant to the provisions of the Securities Exchange Act of 1934 and, further, to execute any and all amendments to such Annual Report, and to file same, with all exhibits and schedules thereto and all other documents in connection therewith, with the Securities and Exchange Commission, and to have full power and authority to do or cause to be done in my name, place and stead each and every act and thing necessary or appropriate in order to effectuate the same, as fully to all intents and purposes I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or any of them, may do or cause to be done by virtue hereof. Each said attorney-in-fact shall have power to act hereunder without the others.

IN WITNESS WHEREOF, I have hereunto set my hand this 19^th day of March, 2008.



	/s/ John T. Mallett
	John T. Mallett
	Director and Treasurer and Chief Financial Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I, Robert R. Frederick, Director and Senior Vice President of Merrill Lynch Life Insurance Company, an Arkansas corporation, do hereby appoint Darin D. Smith and Frank A. Camp, and each of them severally, my true and lawful attorney-in-fact, for me and in my name, place and stead to execute any Annual Report on Form 10-K of Merrill Lynch Life Insurance Company pursuant to the provisions of the Securities Exchange Act of 1934 and, further, to execute any and all amendments to such Annual Report, and to file same, with all exhibits and schedules thereto and all other documents in connection therewith, with the Securities and Exchange Commission, and to have full power and authority to do or cause to be done in my name, place and stead each and every act and thing necessary or appropriate in order to effectuate the same, as fully to all intents and purposes I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or any of them, may do or cause to be done by virtue hereof. Each said attorney-in-fact shall have power to act hereunder without the others.

IN WITNESS WHEREOF, I have hereunto set my hand this 19^th day of March, 2008.



	/s/ Robert R. Frederick
	Robert R. Frederick
	Director and Senior Vice President

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I, Lon J. Olejniczak, Director and President of Merrill Lynch Life Insurance Company, an Arkansas corporation, do hereby appoint Darin D. Smith and Frank A. Camp, and each of them severally, my true and lawful attorney-in-fact, for me and in my name, place and stead to execute any Annual Report on Form 10-K of Merrill Lynch Life Insurance Company pursuant to the provisions of the Securities Exchange Act of 1934 and, further, to execute any and all amendments to such Annual Report, and to file same, with all exhibits and schedules thereto and all other documents in connection therewith, with the Securities and Exchange Commission, and to have full power and authority to do or cause to be done in my name, place and stead each and every act and thing necessary or appropriate in order to effectuate the same, as fully to all intents and purposes I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or any of them, may do or cause to be done by virtue hereof. Each said attorney-in-fact shall have power to act hereunder without the others.

IN WITNESS WHEREOF, I have hereunto set my hand this 19^th day of March, 2008.



	/s/ Lon J. Olejniczak
	Lon J. Olejniczak
	Director and President

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I, Brian C. Scott, Director and Senior Vice President - Operations of Merrill Lynch Life Insurance Company, an Arkansas corporation, do hereby appoint Darin D. Smith and Frank A. Camp, and each of them severally, my true and lawful attorney-in-fact, for me and in my name, place and stead to execute any Annual Report on Form 10-K of Merrill Lynch Life Insurance Company pursuant to the provisions of the Securities Exchange Act of 1934 and, further, to execute any and all amendments to such Annual Report, and to file same, with all exhibits and schedules thereto and all other documents in connection therewith, with the Securities and Exchange Commission, and to have full power and authority to do or cause to be done in my name, place and stead each and every act and thing necessary or appropriate in order to effectuate the same, as fully to all intents and purposes I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or any of them, may do or cause to be done by virtue hereof. Each said attorney-in-fact shall have power to act hereunder without the others.

IN WITNESS WHEREOF, I have hereunto set my hand this 19^th day of March, 2008.



	/s/ Brian C. Scott
	Brian C. Scott
	Director and Senior Vice President - Operations

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I, Ronald L. Ziegler, Director and Senior Vice President of Merrill Lynch Life Insurance Company, an Arkansas corporation, do hereby appoint Darin D. Smith and Frank A. Camp, and each of them severally, my true and lawful attorney-in-fact, for me and in my name, place and stead to execute any Annual Report on Form 10-K of Merrill Lynch Life Insurance Company pursuant to the provisions of the Securities Exchange Act of 1934 and, further, to execute any and all amendments to such Annual Report, and to file same, with all exhibits and schedules thereto and all other documents in connection therewith, with the Securities and Exchange Commission, and to have full power and authority to do or cause to be done in my name, place and stead each and every act and thing necessary or appropriate in order to effectuate the same, as fully to all intents and purposes I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or any of them, may do or cause to be done by virtue hereof. Each said attorney-in-fact shall have power to act hereunder without the others.

IN WITNESS WHEREOF, I have hereunto set my hand this 19^th day of March, 2008.



	/s/ Ronald L. Ziegler
	Ronald L. Ziegler
	Director and Senior Vice President

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I, Eric J. Martin, Vice President and Corporate Controller of Merrill Lynch Life Insurance Company, an Arkansas corporation, do hereby appoint Darin D. Smith and Frank A. Camp, and each of them severally, my true and lawful attorney-in-fact, for me and in my name, place and stead to execute any Annual Report on Form 10-K of Merrill Lynch Life Insurance Company pursuant to the provisions of the Securities Exchange Act of 1934 and, further, to execute any and all amendments to such Annual Report, and to file same, with all exhibits and schedules thereto and all other documents in connection therewith, with the Securities and Exchange Commission, and to have full power and authority to do or cause to be done in my name, place and stead each and every act and thing necessary or appropriate in order to effectuate the same, as fully to all intents and purposes I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or any of them, may do or cause to be done by virtue hereof. Each said attorney-in-fact shall have power to act hereunder without the others.

IN WITNESS WHEREOF, I have hereunto set my hand this 19^th day of March, 2008.



	/s/ Eric J. Martin
	Eric J. Martin
	Vice President and Corporate Controller

EX-31.1 8 w50994exv31w1.htm EXHIBIT 31.1 exv31w1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Lon J. Olejniczak, certify that:

1. I have reviewed this annual report on Form 10-K of Merrill Lynch Life Insurance Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: March 27, 2008

/s/ Lon J. Olejniczak
Lon J. Olejniczak
President

EX-31.2 9 w50994exv31w2.htm EXHIBIT 31.2 exv31w2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, John T. Mallett, certify that:

1. I have reviewed this annual report on Form 10-K of Merrill Lynch Life Insurance Company;

Dated: March 27, 2008

/s/ John T. Mallett
John T. Mallett
Treasurer and Chief Financial Officer

EX-32.1 10 w50994exv32w1.htm EXHIBIT 32.1 exv32w1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Merrill Lynch Life Insurance Company (the “Company”) on Form 10-K for the year ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lon J. Olejniczak, President of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Lon J. Olejniczak
Lon J. Olejniczak
President

Dated: March 27, 2008

A signed original of this written statement required by Section 906 has been provided to Merrill Lynch Life Insurance Company and will be retained by Merrill Lynch Life Insurance Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2 11 w50994exv32w2.htm EXHIBIT 32.2 exv32w2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Merrill Lynch Life Insurance Company (the “Company”) on Form 10-K for the year ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John T. Mallett, Treasurer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

/s/ John T. Mallett
John T. Mallett
Treasurer and Chief Financial Officer

Dated: March 27, 2008

-----END PRIVACY-ENHANCED MESSAGE-----

(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	(1)		The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2)		The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.