A.M. Best Affirms Rating of Merrill Lynch Insurance Group.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--June 12, 2003

A.M. Best Co. has affirmed the financial strength rating of A (Excellent) of Merrill Lynch Life Insurance Company (Arkansas) and ML Life Insurance Company of New York (together, the Merrill Lynch Insurance Group (MLIG)) and removed them from under review status with negative implications. The rating outlook is stable.

MLIG is the insurance manufacturing arm of Merrill Lynch & Co. Inc. (ML & Co.), one of the world's largest financial management and advisory companies, and its rating primarily reflects the significant advantages it enjoys as a subsidiary of ML & Co., Inc. A.M. Best acknowledges ML & Co.'s strong ongoing commitment to supporting its insurance subsidiaries. As evidence of this commitment, ML & Co. has a "keepwell" agreement for MLIG which is to the benefit of MLIG policyholders. ML & Co. also infused $50 million of new capital into MLIG in early 2003, and while this only partially offset 2002's balance sheet erosion, A.M. Best expects the parent to continue to make additional resources available to MLIG as needed. A.M. Best notes that given ML & Co.'s global capital management strategy, it is unlikely MLIG will return to historically high capital and surplus levels, but expects it to remain capitalized at a level commensurate with its rating.

In the fourth quarter of 2002, MLIG established $160 million of additional statutory reserves for life and annuity contracts related to its 2002 asset/liability adequacy analysis. As a result of these actions, MLIG's reported statutory capital and surplus at year-end 2002 was significantly lower than at the prior year-end, and its risk-adjusted capital position had sharply deteriorated. Capitalization has been partly restored through ML & Co.'s $50 million capital contribution, and further improvement is expected by year-end 2003 from retained statutory earnings and/or additional capital injections.

Based on discussions with company management, A.M. Best also believes MLIG has acceptable methodology in place to enable it to adequately monitor, measure and "stress test" its asset/liability risks going forward. The company has modified its investment strategy, product offerings and reinsurance usage, and adjusted its internal asset/liability testing process and capital management benchmarks to reduce future risk to the company.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.