485BPOS 1 d257704d485bpos.txt METROPOLITAN LIFE SEPARATE ACCOUNT E - MFFS B, L, C AND E-BONUS REGISTRATION NOS. 333-83716/811-04001 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------- FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X] POST-EFFECTIVE AMENDMENT NO. 16 [X] AND/OR REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 AMENDMENT NO. 169 [X] ----------------- METROPOLITAN LIFE SEPARATE ACCOUNT E (EXACT NAME OF REGISTRANT) METROPOLITAN LIFE INSURANCE COMPANY (EXACT NAME OF DEPOSITOR) 200 PARK AVENUE, NEW YORK, NEW YORK 10166 (ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (212) 578-3067 (DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE) ----------------- NICHOLAS D. LATRENTA, ESQ. EXECUTIVE VICE-PRESIDENT AND GENERAL COUNSEL METROPOLITAN LIFE INSURANCE COMPANY 200 PARK AVENUE NEW YORK, NEW YORK 10166 (NAME AND ADDRESS OF AGENT FOR SERVICE) ----------------- COPIES TO: DIANE E. AMBLER, ESQ. K&L GATES LLP 1601 K STREET, N.W. WASHINGTON, D.C. 20006 ----------------- IT IS PROPOSED THAT THE FILING WILL BECOME EFFECTIVE: [_] immediately upon filing pursuant to paragraph (b) of Rule 485 [X] on April 30, 2012 pursuant to paragraph (b) of Rule 485 [_] 60 days after filing pursuant to paragraph (a)(1) of Rule 485 [_] on [date] pursuant to paragraph (a)(1) of Rule 485 PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT HAS REGISTERED AN INDEFINITE AMOUNT OF SECURITIES. REGISTRANT'S RULE 24F-2 NOTICE FOR THE YEAR ENDED DECEMBER 31, 2011 WAS FILED WITH THE COMMISSION ON OR ABOUT MARCH 22, 2012. ================================================================================ April 30, 2012 MetLife Financial Freedom Select(R) Variable Annuity Contracts Issued by Metropolitan Life Insurance Company This Prospectus describes MetLife Financial Freedom Select group and individual deferred variable annuity contracts ("Deferred Annuities"). -------------------------------------------------------------------------------- You decide how to allocate your money among the various available investment choices. The investment choices available to You are listed in the Contract for your Deferred Annuity. Your choices may include the Fixed Interest Account (not offered or described in this Prospectus) and Investment Divisions available through Metropolitan Life Separate Account E which, in turn, invest in the following corresponding portfolios of the Metropolitan Series Fund ("Metropolitan Fund"), a portfolio of the Calvert Variable Series, Inc. ("Calvert Fund"), portfolios of the Met Investors Series Trust ("Met Investors Fund") and funds of the American Funds Insurance Series(R) ("American Funds(R)"). For convenience, the portfolios and the funds are referred to as "Portfolios" in this Prospectus. AMERICAN FUNDS(R) AMERICAN FUNDS BOND AMERICAN FUNDS GROWTH AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION AMERICAN FUNDS GROWTH-INCOME CALVERT FUND CALVERT VP SRI BALANCED MET INVESTORS FUND AMERICAN FUNDS(R) BALANCED ALLOCATION MET/FRANKLIN MUTUAL SHARES AMERICAN FUNDS(R) GROWTH ALLOCATION MET/FRANKLIN TEMPLETON FOUNDING STRATEGY AMERICAN FUNDS(R) MODERATE ALLOCATION MET/TEMPLETON GROWTH BLACKROCK LARGE CAP CORE METLIFE AGGRESSIVE STRATEGY CLARION GLOBAL REAL ESTATE MFS(R) RESEARCH INTERNATIONAL HARRIS OAKMARK INTERNATIONAL MORGAN STANLEY MID CAP GROWTH INVESCO SMALL CAP GROWTH PIMCO INFLATION PROTECTED BOND JANUS FORTY PIMCO TOTAL RETURN LAZARD MID CAP RCM TECHNOLOGY LORD ABBETT BOND DEBENTURE SSGA GROWTH AND INCOME ETF LORD ABBETT MID CAP VALUE SSGA GROWTH ETF MET/FRANKLIN INCOME T. ROWE PRICE MID CAP GROWTH MET/FRANKLIN LOW DURATION TOTAL RETURN THIRD AVENUE SMALL CAP VALUE METROPOLITAN FUND BARCLAYS CAPITAL AGGREGATE BOND INDEX METLIFE MODERATE ALLOCATION BLACKROCK BOND INCOME METLIFE MODERATE TO AGGRESSIVE ALLOCATION BLACKROCK LARGE CAP VALUE METLIFE STOCK INDEX BLACKROCK LEGACY LARGE CAP GROWTH MFS(R) TOTAL RETURN DAVIS VENTURE VALUE MFS(R) VALUE FI VALUE LEADERS MSCI EAFE(R) INDEX JENNISON GROWTH NEUBERGER BERMAN GENESIS LOOMIS SAYLES SMALL CAP CORE RUSSELL 2000(R) INDEX LOOMIS SAYLES SMALL CAP GROWTH T. ROWE PRICE LARGE CAP GROWTH MET/ARTISAN MID CAP VALUE T. ROWE PRICE SMALL CAP GROWTH METLIFE CONSERVATIVE ALLOCATION WESTERN ASSET MANAGEMENT STRATEGIC BOND METLIFE CONSERVATIVE TO MODERATE ALLOCATION OPPORTUNITIES METLIFE MID CAP STOCK INDEX WESTERN ASSET MANAGEMENT U.S. GOVERNMENT
Certain Portfolios have been subject to a change. Please see Appendix V -- "Additional Information Regarding the Portfolios". HOW TO LEARN MORE: Before investing, read this Prospectus. The Prospectus contains information about the Deferred Annuities and Metropolitan Life Separate Account E which You should know before investing. Keep this Prospectus for future reference. For more information, request a copy of the Statement of Additional Information ("SAI"), dated April 30, 2012. The SAI is considered part of this Prospectus as though it were included in the Prospectus. The Table of Contents of the SAI appears on page 86 of this Prospectus. To request a free copy of the SAI or to ask questions, write or call: Metropolitan Life Insurance Company P.O. Box 10342 Des Moines, IA 50306-0342 (800) 638-7732 Deferred Annuities Available: . TSA . TSA ERISA . Simplified Employee Pensions (SEPs) . SIMPLE Individual Retirement Annuities . 457(b) Eligible Deferred Compensation Arrangements (457(b)s) . 403(a) Arrangements Classes Available for each Deferred Annuity . B . C . L A word about investment risk: An investment in any of these variable annuities involves investment risk. You could lose money You invest. Money invested is NOT: . a bank deposit or obligation; . federally insured or guaranteed; or . endorsed by any bank or other financial institution. Each class of the Deferred Annuities has its own Separate Account charge and Withdrawal Charge schedule. Each provides the opportunity to invest for retirement. The Securities and Exchange Commission has a Web site (http://www.sec.gov) which You may visit to view this Prospectus, SAI and other information. The Securities and Exchange Commission has not approved or disapproved these securities or determined if this Prospectus is truthful or complete. Any representation otherwise is a criminal offense. 2 TABLE OF CONTENTS Important Terms You Should Know............................. 5 Table of Expenses........................................... 8 Accumulation Unit Values Tables............................. 15 MetLife..................................................... 16 Metropolitan Life Separate Account E........................ 16 Variable Annuities.......................................... 16 Replacement of Annuity Contracts........................ 17 The Deferred Annuity.................................... 17 Classes of the Deferred Annuity............................. 19 Your Investment Choices..................................... 20 Deferred Annuities.......................................... 26 The Deferred Annuity and Your Retirement Plan........... 26 403(b) Plan Terminations............................ 26 Automated Investment Strategies......................... 27 Purchase Payments....................................... 28 Purchase Payments--Section 403(b) Plans............. 28 Allocation of Purchase Payments..................... 28 Limits on Purchase Payments......................... 28 The Value of Your Investment............................ 29 Transfer Privilege...................................... 29 Access to Your Money.................................... 32 Systematic Withdrawal Program....................... 32 Minimum Distribution................................ 34 Charges................................................. 34 Separate Account Charge............................. 34 Investment-Related Charge........................... 35 Annual Contract Fee..................................... 35 Optional Guaranteed Minimum Income Benefit.......... 35 Optional Lifetime Withdrawal Guarantee Benefit...... 36 Premium and Other Taxes................................. 36 Withdrawal Charges...................................... 36 When No Withdrawal Charge Applies................... 37 Free Look............................................... 39 Death Benefit--Generally................................ 39 Standard Death Benefit.............................. 40 Optional Death Benefits................................. 41 Annual Step-Up Death Benefit............................ 41 Living Benefits......................................... 42 Withdrawal Benefit...................................... 50 Pay-Out Options (or Income Options)..................... 59 Income Payment Types................................ 60 Allocation.......................................... 61 Minimum Size of Your Income Payment................. 61
3 The Value of Your Income Payments........................................ 61 Reallocation Privilege................................................... 62 Charges.................................................................. 63 General Information.............................................................. 64 Administration............................................................... 64 Purchase Payments........................................................ 64 Confirming Transactions.................................................. 64 Processing Transactions.................................................. 65 By Telephone or Internet.............................................. 65 After Your Death...................................................... 65 Misstatement.......................................................... 66 Third Party Requests.................................................. 66 Valuation--Suspension of Payments..................................... 66 Advertising Performance...................................................... 66 Changes to Your Deferred Annuity............................................. 68 Voting Rights................................................................ 69 Who Sells the Deferred Annuities............................................. 69 Financial Statements......................................................... 72 Your Spouse's Rights......................................................... 72 When We Can Cancel Your Deferred Annuity..................................... 72 Income Taxes..................................................................... 73 Legal Proceedings................................................................ 85 Table of Contents for the Statement of Additional Information.................... 86 Appendix I Premium Tax Table..................................................... 87 Appendix II What You Need To Know If You Are A Texas Optional Retirement Program Participant.................................................................... 88 Appendix III Accumulation Unit Values for Each Investment Division............... 89 Appendix IV Portfolio Legal and Marketing Names.................................. 111 Appendix V Additional Information Regarding the Portfolios....................... 112
The Deferred Annuities are not intended to be offered anywhere that they may not lawfully be offered and sold. MetLife has not authorized any information or representations about the Deferred Annuities other than the information in this Prospectus, supplements to the Prospectus or any supplemental sales material we authorize. 4 IMPORTANT TERMS YOU SHOULD KNOW ACCOUNT BALANCE When You purchase a Deferred Annuity, an account is set up for You. Your Account Balance is the total amount of money credited to You under your Deferred Annuity including money in the Investment Divisions of the Separate Account and the Fixed Interest Account. ACCUMULATION UNIT VALUE With a Deferred Annuity, money paid-in or transferred into an Investment Division of the Separate Account is credited to You in the form of accumulation units. Accumulation units are established for each Investment Division. We determine the value of these accumulation units as of the close of the Exchange (see definition below) each day the Exchange is open for regular trading. The Exchange usually closes at 4 p.m. Eastern Time but may close earlier or later. The values increase or decrease based on the investment performance of the corresponding underlying Portfolios. ADMINISTRATIVE OFFICE Your Administrative Office is the MetLife office that will generally handle the administration of all your requests concerning your Deferred Annuity. Your Contract will indicate the address of your Administrative Office. We will notify You if there is a change in the address of your Administrative Office. The telephone number to call to initiate a request is 1-800-638-7732. ANNUITANT The natural person whose life is the measure for determining the duration and the dollar amount of income payments. ANNUITY UNIT VALUE With a variable pay-out option, the money paid-in or reallocated into an Investment Division of the Separate Account is held in the form of annuity units. Annuity units are established for each Investment Division. We determine the value of these annuity units as of the close of the Exchange each day the Exchange is open for regular trading. The Exchange usually closes at 4 p.m. Eastern Time but may close earlier or later. The values increase or decrease based on the investment performance of the corresponding underlying Portfolios. ASSUMED INVESTMENT RETURN (AIR) Under a variable pay-out option, the AIR is the assumed percentage rate of return used to determine the amount of the first variable income payment. The AIR is also the benchmark that is used to calculate the investment performance of a given Investment Division to determine all subsequent payments to You. BENEFICIARY The person or persons who receives a benefit, including continuing payments or a lump sum payment, if the owner dies. CONTRACT A Contract is the legal agreement between You and MetLife or between MetLife and the employer, plan trustee or other entity or the certificate issued to You under a group annuity Contract. This document contains relevant provisions of your Deferred Annuity. MetLife issues Contracts for each of the annuities described in this Prospectus. 5 CONTRACT ANNIVERSARY An anniversary of the date we issue the Deferred Annuity. CONTRACT YEAR The Contract Year for a Deferred Annuity is the one year period starting on the date we issue the Deferred Annuity and each Contract Anniversary thereafter. For the TSA Deferred Annuity issued to a plan subject to the Employee Retirement Income Security Act of 1974 ("TSA ERISA Deferred Annuity"), 457(b) and 403(a) Deferred Annuities, for convenience, Contract Year also refers to the one year period starting on the date the participant enrolls in the plan funded by the Deferred Annuity. EXCHANGE In this Prospectus, the New York Stock Exchange is referred to as the "Exchange." GOOD ORDER A request or transaction generally is considered in "Good Order" if it complies with our administrative procedures and the required information is complete and correct. A request or transaction may be rejected or delayed if not in Good Order. If You have any questions, You should contact us or your sales representative before submitting the form or request. INVESTMENT DIVISION Investment Divisions are subdivisions of the Separate Account. When You allocate a purchase payment, transfer money or make reallocations of your income payment to an Investment Division, the Investment Division purchases shares of a Portfolio (with the same name) within the Metropolitan Fund, the Calvert Fund, the Met Investors Fund or the American Funds(R). METLIFE MetLife is Metropolitan Life Insurance Company which is the company that issues the Deferred Annuities. Throughout this Prospectus, MetLife is also referred to as "we," "us" or "our." SEPARATE ACCOUNT A separate account is an investment account. All assets contributed to Investment Divisions under the Deferred Annuities are pooled in the Separate Account and maintained for the benefit of investors in Deferred Annuities. VARIABLE ANNUITY An annuity in which returns/income payments are based upon the performance of investments such as stocks and bonds held by one or more underlying Portfolios. You assume the investment risk for any amounts allocated to the Investment Divisions in a Variable Annuity. WITHDRAWAL CHARGE The Withdrawal Charge is the amount we deduct from the amount You have withdrawn from your Deferred Annuity, if You withdraw money prematurely from a Deferred Annuity. This charge is often referred to as a deferred sales load or back-end sales load. 6 YOU In this Prospectus, depending on the context, "You" is the owner of the Deferred Annuity or the participant or Annuitant for whom money is invested under certain group arrangements. In cases where we are referring to giving instructions or making payments to us for 457(b), 403(a), TSA ERISA and certain TSA non-ERISA Deferred Annuities, "You" means the trustee or employer. Under 457(b), 403(a) and 403(b) plans where the participant or Annuitant is permitted to choose among investment choices, "You" means the participant or Annuitant who is giving us instructions about the investment choices. In connection with a 403(b) plan termination, as of the date of the Contract or cash distribution under such plan termination, "You" means the participant who has received such Contract or cash distribution. 7 TABLE OF EXPENSES--METLIFE FINANCIAL FREEDOM SELECT DEFERRED ANNUITIES The following tables describe the expenses You will pay when You buy, hold or withdraw amounts from your Deferred Annuity. The first table describes charges You will pay at the time You purchase the Deferred Annuity, make withdrawals from your Deferred Annuity or make transfers between the Investment Divisions. There are no fees for the Fixed Interest Account. The tables do not show premium taxes (ranging from 0.5% to 3.5%, which are applicable only in certain jurisdictions--see Appendix I) and other taxes which may apply. -------------------------------------------------------------------------------- Contract Owner Transaction Expenses Sales Charge Imposed on Purchase Payments............................. None Withdrawal Charge (as a percentage of the amount withdrawn) (1)....... Up to 9% Maximum Guaranteed Charge: $25 Transfer Fee (2)...................................................... Current Charge: None
-------------------------------------------------------------------------------- The second table describes the fees and expenses that You will bear periodically during the time You hold the Deferred Annuity, but does not include fees and expenses for the Portfolios. You pay the Separate Account charge designated under the appropriate class for the Standard Death Benefit or the Optional Annual Step-Up Death Benefit. Annual Contract Fee (3)......................................... $30
Current Annual Separate Account Charge (as a percentage of your average Account Balance) for all Investment Divisions except the American Funds Growth-Income, American Funds Growth, American Funds Bond and American Funds Global Small Capitalization Divisions (4) B CLASS C CLASS L CLASS Death Benefit ------- ------- ------- Standard Death Benefit..................... 1.15% 1.45% 1.30% Optional Annual Step-Up Death Benefit...... 1.25% 1.55% 1.40%
Current Annual Separate Account Charge (as a percentage of your average Account Balance) for the American Funds Growth- Income, American Funds Growth, American Funds Bond and American Funds Global Small Capitalization Divisions and maximum guaranteed Separate Account charge (as a percentage of your Account Balance) for all future Investment Divisions (4) B CLASS C CLASS L CLASS Death Benefit ------- ------- ------- Standard Death Benefit........................ 1.40% 1.70% 1.55% Optional Annual Step-Up Death Benefit......... 1.50% 1.80% 1.65% Optional Guaranteed Minimum Income Benefit (5).................. 0.70% Optional Lifetime Withdrawal Guarantee Benefit (6) - maximum charge........................................................ 0.95% Optional Lifetime Withdrawal Benefit (6) - current charge....... 0.95%
---------------------------------------------------------------------------- The third table shows the minimum and maximum total operating expenses charged by the Portfolios, as well as the operating expenses for each Portfolio, that You may bear periodically while You hold the Deferred Annuity. All the Portfolios listed below are Class B except for the Portfolios of the American Funds(R), which are Class 2 Portfolios, American Funds(R) Balanced Allocation Portfolio, American Funds(R) Growth Allocation Portfolio and American Funds(R) Moderate Allocation Portfolio of the Met Investors Fund which are Class C Portfolios, and the Calvert VP SRI Balanced Portfolio. Certain Portfolios may impose a redemption fee in the future. More details concerning the Metropolitan Fund, the Calvert Fund, the Met Investors Fund and the American Funds(R) fees and expenses are contained in their respective prospectuses. Current prospectuses for the Portfolios can be obtained by calling 800-638-7732. 8 Minimum and Maximum Total Annual Underlying Fund Operating Expenses Total Annual American Funds(R), Calvert Fund, Met Minimum* Maximum Investors Fund, and Metropolitan Fund Operating Expenses for the fiscal year ending December 31, 2011 (expenses that are deducted from Underlying Fund 0.52% 1.21% assets, including management fees, distribution and/or service (12b-1) fees, and other expenses)
* Does not take into consideration any American Funds(R) Portfolio, for which an additional Separate Account charge applies. /1/A Withdrawal Charge may apply if You take a withdrawal from your Deferred Annuity. The charge on the amount withdrawn for each class is calculated according to the following schedule:
IF WITHDRAWN DURING CONTRACT YEAR B CLASS C CLASS L CLASS --------------------------------- ------- ------- ------- 1............................................. 9% None 9% 2............................................. 9% 8% 3............................................. 9% 7% 4............................................. 9% 6% 5............................................. 8% 5% 6............................................. 7% 4% 7............................................. 6% 2% 8............................................. 5% 0% 9............................................. 4% 0% 10............................................ 3% 0% 11............................................ 2% 0% 12............................................ 1% 0% Thereafter.................................... 0% 0%
There are times when the Withdrawal Charge does not apply to amounts that are withdrawn from a Deferred Annuity. For example, after the first Contract Year, each year You may withdraw up to 10% of your Account Balance without a Withdrawal Charge. These withdrawals are made on a non-cumulative basis. For Deferred Annuities issued in Connecticut and certain other states or for public school employees in certain states, the Withdrawal Charge for the B Class are as follows: during Contract Year 1:10%, Year 2: 9%, Year 3: 8%, Year 4: 7%, Year 5: 6%, Year 6: 5%, Year 7: 4%, Year 8: 3%, Year 9: 2%, Year 10: 1%, Year 11 and Thereafter: 0%. For Deferred Annuities issued in New York and certain other states, the Withdrawal Charges for the B Class are as follows: during Contract Year 1: 9%; Year 2: 9%; Year 3: 8%; Year 4: 7%; Year 5: 6%; Year 6: 5%; Year 7: 4%; Year 8: 3%; Year 9: 2%; Year 10: 1%; Year 11 and thereafter: 0%. /2/We reserve the right to limit transfers as described later in this Prospectus. We reserve the right to impose a transfer fee. The amount of this fee will be no greater than $25 per transfer. /3/This fee may be waived under certain circumstances. This fee is waived if your total purchase payments for the prior 12 months are at least $2,000 on the day the fee is deducted or if your Account Balance is at least $25,000 on the day the fee is deducted. The fee will be deducted on a pro-rata basis (determined based upon the number of complete months that have elapsed since the prior Contract Anniversary) if You take a total withdrawal of your Account Balance. This fee will not be deducted if You are on medical leave approved by your employer or called to active armed service duty at the time the fee is to be deducted and your employer has informed us of your status. During the pay-out phase we reserve the right to deduct this fee. /4/You pay the Separate Account charge with the Standard Death Benefit for your class of the Deferred Annuity during the pay-out phase of your Contract. Charges for optional benefits are those for a Deferred Annuity purchased after April 30, 2009. Different charges may have been in effect for prior time periods. We reserve the right to impose an additional Separate Account charge on Investment Divisions that we add to the Contract in the future. The additional amount will not exceed the annual rate of 0.25% of the average Account Balance in any such Investment Divisions, as shown in the table labeled "Current Separate Account Charge for the American Funds(R) Investment Divisions and maximum guaranteed Separate Account Charge for all future Investment Divisions". We are waiving 0.08% of the Separate Account charge for the Investment Division investing in the BlackRock Large-Cap Core Portfolio. /5/You may not have the Guaranteed Minimum Income Benefit and the Lifetime Withdrawal Benefit in effect at the same time. The charge for the Guaranteed Minimum Income Benefit is a percentage of your guaranteed minimum income base, as defined later in this Prospectus, and is deducted at the end of each Contract Year by withdrawing amounts on a pro-rata basis from your Fixed Interest Account Balance and Separate Account Balance (net of any loans). (We take amounts from the Separate Account by canceling, if available, accumulation units from your Separate Account.) You do not pay this charge once You are in the pay-out phase of your Contract. Different charges for the Guaranteed Minimum Income Benefit were in effect prior to May 4, 2009. /6/The charge for the Lifetime Withdrawal Guarantee Benefit is a percentage of your Total Guaranteed Withdrawal Amount, as defined later in this Prospectus, and is deducted at the end of each Contract Year by withdrawing amounts on a pro-rata basis from your Fixed Interest Account Balance and Separate Account Balance. (We take amounts from the Separate Account by canceling accumulation units from your Separate Account Balance.) You do not pay this charge once You are in the pay-out phase of your Contract or after your rider terminates. If an Automatic Annual Step-Up occurs under a Lifetime Withdrawal Guarantee Benefit, we may increase the Lifetime Withdrawal Guarantee Benefit charge to then current charge, but no more than a maximum of 0.95%. Different charges for the optional Lifetime Withdrawal Guarantee Benefit were in effect prior to May 4, 2009. If, at the time the Contract was issued, the current charge for the benefit was equal to the maximum charge, then the charge for the benefit will not increase upon an Automatic Annual Step-Up. (See Lifetime Withdrawal Guarantee Benefit for more information.) 9
AMERICAN FUNDS(R)--CLASS 2 ANNUAL EXPENSES FOR FISCAL YEAR ENDING DECEMBER 31, 2011 ----------------------- (as a percentage of average CONTRACTUAL daily net assets) DISTRIBUTION ACQUIRED TOTAL FEE WAIVER NET TOTAL AND/OR FUND ANNUAL AND/OR ANNUAL MANAGEMENT SERVICE OTHER FEES AND OPERATING EXPENSE OPERATING FEE (12B-1) FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES ---------------------------------------------------------------------------------------------------------- American Funds Bond Fund...... 0.36% 0.25% 0.02% -- 0.63% -- 0.63% American Funds Global Small Capitalization Fund......... 0.70% 0.25% 0.04% -- 0.99% -- 0.99% American Funds Growth Fund.... 0.32% 0.25% 0.02% -- 0.59% -- 0.59% American Funds Growth-Income Fund........................ 0.27% 0.25% 0.01% -- 0.53% -- 0.53% -----------------------
CALVERT FUND--ANNUAL EXPENSES FOR FISCAL YEAR ENDING DECEMBER 31, 2011 ----------------------- (as a percentage of average CONTRACTUAL daily net assets) DISTRIBUTION ACQUIRED TOTAL FEE WAIVER NET TOTAL AND/OR FUND ANNUAL AND/OR ANNUAL MANAGEMENT SERVICE OTHER FEES AND OPERATING EXPENSE OPERATING FEE (12B-1) FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES ---------------------------------------------------------------------------------------------------------- Calvert VP SRI Balanced Portfolio................... 0.70% -- 0.21% -- 0.91% -- 0.91% -----------------------
MET INVESTORS FUND--ANNUAL EXPENSES FOR FISCAL YEAR ENDING DECEMBER 31, 2011 ----------------------- (as a percentage of average CONTRACTUAL daily net assets) DISTRIBUTION ACQUIRED TOTAL FEE WAIVER NET TOTAL AND/OR FUND ANNUAL AND/OR ANNUAL MANAGEMENT SERVICE OTHER FEES AND OPERATING EXPENSE OPERATING FEE (12B-1) FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES ---------------------------------------------------------------------------------------------------------- American Funds(R) Balanced Allocation Portfolio -- Class C..................... 0.06% 0.55% 0.01% 0.37% 0.99% -- 0.99% American Funds(R) Growth Allocation Portfolio -- Class C..................... 0.07% 0.55% 0.01% 0.39% 1.02% -- 1.02% American Funds(R) Moderate Allocation Portfolio -- Class C..................... 0.06% 0.55% 0.01% 0.36% 0.98% -- 0.98% BlackRock Large Cap Core Portfolio -- Class B........ 0.59% 0.25% 0.05% -- 0.89% 0.01% 0.88% Clarion Global Real Estate Portfolio -- Class B........ 0.61% 0.25% 0.06% -- 0.92% -- 0.92% Harris Oakmark International Portfolio -- Class B........ 0.77% 0.25% 0.08% -- 1.10% 0.02% 1.08% Invesco Small Cap Growth Portfolio -- Class B........ 0.85% 0.25% 0.03% -- 1.13% 0.02% 1.11% Janus Forty Portfolio -- Class B..................... 0.63% 0.25% 0.03% -- 0.91% 0.01% 0.90% Lazard Mid Cap Portfolio -- Class B..................... 0.69% 0.25% 0.06% -- 1.00% -- 1.00% Lord Abbett Bond Debenture Portfolio -- Class B........ 0.50% 0.25% 0.04% -- 0.79% -- 0.79% Lord Abbett Mid Cap Value Portfolio -- Class B........ 0.67% 0.25% 0.06% -- 0.98% 0.02% 0.96% Met/Franklin Income Portfolio -- Class B.................. 0.74% 0.25% 0.08% -- 1.07% 0.08% 0.99% Met/Franklin Low Duration Total Return Portfolio -- Class B..................... 0.50% 0.25% 0.09% -- 0.84% 0.03% 0.81% Met/Franklin Mutual Shares Portfolio -- Class B........ 0.80% 0.25% 0.07% -- 1.12% 0.00% 1.12% Met/Franklin Templeton Founding Strategy Portfolio -- Class B.................. 0.05% 0.25% 0.01% 0.83% 1.14% 0.01% 1.13% Met/Templeton Growth Portfolio -- Class B........ 0.68% 0.25% 0.14% -- 1.07% 0.02% 1.05% MetLife Aggressive Strategy Portfolio -- Class B........ 0.09% 0.25% 0.01% 0.75% 1.10% 0.00% 1.10% MFS(R) Research International Portfolio -- Class B........ 0.68% 0.25% 0.09% -- 1.02% 0.06% 0.96% Morgan Stanley Mid Cap Growth Portfolio -- Class B........ 0.65% 0.25% 0.07% -- 0.97% 0.01% 0.96% PIMCO Inflation Protected Bond Portfolio -- Class B... 0.47% 0.25% 0.04% -- 0.76% -- 0.76% -----------------------
10
MET INVESTORS FUND--ANNUAL EXPENSES FOR FISCAL YEAR ENDING DECEMBER 31, 2011 ----------------------- (as a percentage of average CONTRACTUAL daily net assets) DISTRIBUTION ACQUIRED TOTAL FEE WAIVER NET TOTAL AND/OR FUND ANNUAL AND/OR ANNUAL MANAGEMENT SERVICE OTHER FEES AND OPERATING EXPENSE OPERATING FEE (12B-1) FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES ---------------------------------------------------------------------------------------------------------- PIMCO Total Return Portfolio -- Class B.................. 0.48% 0.25% 0.03% -- 0.76% -- 0.76% RCM Technology Portfolio -- Class B..................... 0.88% 0.25% 0.07% -- 1.20% -- 1.20% SSgA Growth and Income ETF Portfolio -- Class B........ 0.31% 0.25% 0.01% 0.21% 0.78% -- 0.78% SSgA Growth ETF Portfolio -- Class B..................... 0.32% 0.25% 0.03% 0.24% 0.84% -- 0.84% T. Rowe Price Mid Cap Growth Portfolio -- Class B........ 0.75% 0.25% 0.03% -- 1.03% -- 1.03% Third Avenue Small Cap Value Portfolio -- Class B........ 0.74% 0.25% 0.03% -- 1.02% 0.01% 1.01% -----------------------
METROPOLITAN FUND--CLASS B ANNUAL EXPENSES FOR FISCAL YEAR ENDING DECEMBER 31, 2011 ----------------------- (as a percentage of average CONTRACTUAL daily net assets) DISTRIBUTION ACQUIRED TOTAL FEE WAIVER NET TOTAL AND/OR FUND ANNUAL AND/OR ANNUAL MANAGEMENT SERVICE OTHER FEES AND OPERATING EXPENSE OPERATING FEE (12B-1) FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES ---------------------------------------------------------------------------------------------------------- Barclays Capital Aggregate Bond Index Portfolio........ 0.25% 0.25% 0.03% -- 0.53% 0.01% 0.52% BlackRock Bond Income Portfolio................... 0.34% 0.25% 0.03% -- 0.62% 0.01% 0.61% BlackRock Large Cap Value Portfolio................... 0.63% 0.25% 0.03% -- 0.91% 0.03% 0.88% BlackRock Legacy Large Cap Growth Portfolio............ 0.71% 0.25% 0.02% -- 0.98% 0.01% 0.97% Davis Venture Value Portfolio. 0.70% 0.25% 0.03% -- 0.98% 0.05% 0.93% FI Value Leaders Portfolio.... 0.67% 0.25% 0.07% -- 0.99% -- 0.99% Jennison Growth Portfolio..... 0.62% 0.25% 0.02% -- 0.89% 0.07% 0.82% Loomis Sayles Small Cap Core Portfolio................... 0.90% 0.25% 0.06% -- 1.21% 0.08% 1.13% Loomis Sayles Small Cap Growth Portfolio............ 0.90% 0.25% 0.06% -- 1.21% 0.08% 1.13% Met/Artisan Mid Cap Value Portfolio................... 0.81% 0.25% 0.03% -- 1.09% -- 1.09% MetLife Conservative Allocation Portfolio........ 0.09% 0.25% 0.02% 0.53% 0.89% 0.01% 0.88% MetLife Conservative to Moderate Allocation Portfolio................... 0.07% 0.25% 0.01% 0.58% 0.91% 0.00% 0.91% MetLife Mid Cap Stock Index Portfolio................... 0.25% 0.25% 0.05% 0.01% 0.56% 0.00% 0.56% MetLife Moderate Allocation Portfolio................... 0.06% 0.25% -- 0.64% 0.95% 0.00% 0.95% MetLife Moderate to Aggressive Allocation Portfolio................... 0.06% 0.25% 0.01% 0.69% 1.01% 0.00% 1.01% MetLife Stock Index Portfolio. 0.25% 0.25% 0.02% -- 0.52% 0.01% 0.51% MFS(R) Total Return Portfolio. 0.54% 0.25% 0.05% -- 0.84% -- 0.84% MFS(R) Value Portfolio........ 0.70% 0.25% 0.03% -- 0.98% 0.13% 0.85% MSCI EAFE(R) Index Portfolio.. 0.30% 0.25% 0.11% 0.01% 0.67% 0.00% 0.67% Neuberger Berman Genesis Portfolio................... 0.82% 0.25% 0.04% -- 1.11% 0.01% 1.10% Russell 2000(R) Index Portfolio................... 0.25% 0.25% 0.06% 0.01% 0.57% 0.00% 0.57% T. Rowe Price Large Cap Growth Portfolio............ 0.60% 0.25% 0.04% -- 0.89% 0.01% 0.88% T. Rowe Price Small Cap Growth Portfolio............ 0.49% 0.25% 0.06% -- 0.80% -- 0.80% Western Asset Management Strategic Bond Opportunities Portfolio..... 0.61% 0.25% 0.06% -- 0.92% 0.04% 0.88% Western Asset Management U.S. Government Portfolio........ 0.47% 0.25% 0.02% -- 0.74% 0.01% 0.73% -----------------------
11 The Net Total Annual Operating Expenses shown in the table reflect contractual arrangements currently in effect under which the investment managers of certain Portfolios have agreed to waive fees and/or pay expenses of the Portfolios until at least April 30, 2013. In the table, "0.00%" in the Contractual Fee Waiver and/or Expense Reimbursement column indicates that there is a contractual arrangement in effect for that Portfolio, but the expenses of the Portfolio are below the level that would trigger the waiver or reimbursement. The Net Total Annual Operating Expenses shown do not reflect voluntary waiver or expense reimbursement arrangements or arrangements that terminate prior to April 30, 2013. The Portfolios provided the information on their expenses, and we have not independently verified the information. Certain Portfolios that have "Acquired Fund Fees and Expenses" are "fund of funds." Each "fund of funds" invests substantially all of its assets in other portfolios. Because the Portfolio invests in other underlying portfolios, the Portfolio will bear its pro rata portion of the operating expenses of the underlying portfolios in which it invests, including the management fee. See the Portfolio prospectus for more information. EXAMPLES These Examples are intended to help You compare the cost of investing in the Contract with the cost of investing in other variable annuity contracts. These costs include contract owner transaction expenses, Annual Contract fees, if any, Separate Account charges, and underlying Portfolio fees and expenses. Examples 1 through 3 assume You purchased the Contract with optional benefits that resulted in the highest possible combination of charges. Examples 4 through 6 assume You purchased the Contract with no optional benefits that resulted in the least expensive combination of charges. Example 1. This example shows the dollar amount of expenses that You would bear directly or indirectly on a $10,000 investment for the time periods indicated. Your actual costs may be higher or lower. Assumptions: . your total Account Balance is $16,000 (for purposes of determining the impact of the Annual Contract Fee); . there was no allocation to the Fixed Interest Account; . You bear the minimum or maximum fees and expenses of any of the Portfolios (without reimbursement and/or waiver of expenses); . You select the B Class; . the underlying Portfolio earns a 5% annual return; . You select the Annual Step-Up Death Benefit; and . You select the Lifetime Withdrawal Guarantee Benefit. You surrender your Contract, with applicable Withdrawal Charges deducted.
1 3 5 10 YEAR YEARS YEARS YEARS ---------------------------------------------------------------------------- Maximum......................................... $1,275 $1,959 $2,678 $4,407 Minimum......................................... $1,206 $1,750 $2,325 $3,683
You do not surrender your Contract or You elect to annuitize (elect a pay-out option with an income payment type under which You receive income payments over your lifetime) (no Withdrawal Charges will be deducted).
1 3 5 10 YEAR YEARS YEARS YEARS -------------------------------------------------------------------------- Maximum......................................... $375 $1,149 $1,958 $4,137 Minimum......................................... $306 $940 $1,605 $3,413
12 Example 2. This example shows the dollar amount of expenses that You would bear directly or indirectly on a $10,000 investment for the time periods indicated. Your actual costs may be higher or lower. Assumptions: . your total Account Balance is $16,000 (for purposes of determining the impact of the Annual Contract Fee); . there was no allocation to the Fixed Interest Account; . You bear the minimum or maximum fees and expenses of any of the Portfolios (without reimbursement and/or waiver of expenses); . You select the C Class; . the underlying Portfolio earns a 5% annual return; . You select the Annual Step-Up Death Benefit; and . You select the Lifetime Withdrawal Guarantee Benefit. You fully surrender your Contract, You elect to annuitize (select a pay-out option with an income payment type under which You receive income payments over your lifetime) or You do not elect to annuitize (no Withdrawal Charges apply to the C Class).
1 3 5 10 YEAR YEARS YEARS YEARS -------------------------------------------------------------------------- Maximum......................................... $405 $1,238 $2,102 $4,411 Minimum......................................... $336 $1,029 $1,752 $3,697
Example 3. This example shows the dollar amount of expenses that You would bear directly or indirectly on a $10,000 investment for the time periods indicated. Your actual costs may be higher or lower. Assumptions: . your total Account Balance is $16,000 (for purposes of determining the impact of the Annual Contract Fee); . there was no allocation to the Fixed Interest Account; . You bear the minimum or maximum fees and expenses of any of the Portfolios (without reimbursement and/or waiver of expenses); . You select the L Class; . the underlying Portfolio earns a 5% annual return; . You select the Annual Step-Up Death Benefit; and . You select the Lifetime Withdrawal Guarantee Benefit. You fully surrender your Contract, with applicable Withdrawal Charges deducted.
1 3 5 10 YEAR YEARS YEARS YEARS ---------------------------------------------------------------------------- Maximum......................................... $1,290 $1,824 $2,480 $4,275 Minimum......................................... $1,221 $1,615 $2,129 $3,556
You do not surrender your Contract or You elect to annuitize (elect a pay-out option with an income payment type under which You receive income payments over your lifetime) (no Withdrawal Charges will be deducted).
1 3 5 10 YEAR YEARS YEARS YEARS -------------------------------------------------------------------------- Maximum......................................... $390 $1,194 $2,030 $4,275 Minimum......................................... $321 $985 $1,679 $3,556
13 Example 4. This example shows the dollar amount of expenses that You would bear directly or indirectly on a $10,000 investment for the time periods indicated. Your actual costs may be higher or lower. Assumptions: . your total Account Balance is $16,000 (for purposes of determining the impact of the Annual Contract Fee); . there was no allocation to the Fixed Interest Account; . You bear the minimum or maximum fees and expenses of any of the Portfolios (without reimbursement and/or waiver of expenses); . You select the B Class; and . the underlying Portfolio earns a 5% annual return. You surrender your Contract, with applicable charges deducted.
1 3 5 10 YEAR YEARS YEARS YEARS ------------------------------------------------------------------------------ Maximum........................................... $1,165 $1,623 $2,103 $3,189 Minimum........................................... $1,097 $1,411 $1,743 $2,423
You do not surrender your Contract or You elect to annuitize (elect a pay-out option with an income payment type under which You receive income payments over your lifetime) (no Withdrawal Charges will be deducted).
1 3 5 10 YEAR YEARS YEARS YEARS ------------------------------------------------------------------------- Maximum......................................... $265 $813 $1,383 $2,919 Minimum......................................... $197 $601 $1,023 $2,153
Example 5. This example shows the dollar amount of expenses that You would bear directly or indirectly on a $10,000 investment for the time periods indicated. Your actual costs may be higher or lower. Assumptions: . your total Account Balance is $16,000 (for purposes of determining the impact of the Annual Contract Fee); . there was no allocation to the Fixed Interest Account; . You bear the minimum or maximum fees and expenses of any of the Portfolios (without reimbursement and/or waiver of expenses); . You select the C Class; and . the underlying Portfolio earns a 5% annual return. You fully surrender your Contract, You elect to annuitize (select a pay-out option with an income payment type under which You receive income payments over your lifetime) or You do not elect to annuitize (no Withdrawal Charges apply to the C Class).
1 3 5 10 YEAR YEARS YEARS YEARS ------------------------------------------------------------------------- Maximum......................................... $295 $902 $1,532 $3,212 Minimum......................................... $226 $691 $1,173 $2,456
Example 6. This example shows the dollar amount of expenses that You would bear directly or indirectly on a $10,000 investment for the time periods indicated. Your actual costs may be higher or lower. Assumptions: . your total Account Balance is $16,000 (for purposes of determining the impact of the Annual Contract Fee); . there was no allocation to the Fixed Interest Account; . You bear the minimum or maximum fees and expenses of any of the Portfolios (without reimbursement and/or waiver of expenses); . You select the L Class; and . the underlying Portfolio earns a 5% annual return. 14 You surrender your Contract, with applicable charges deducted.
1 3 5 10 YEAR YEARS YEARS YEARS ------------------------------------------------------------------------------ Maximum........................................... $1,180 $1,487 $1,908 $3,066 Minimum........................................... $1,111 $1,276 $1,548 $2,306
You do not surrender your Contract or You elect to annuitize (elect a pay-out option with an income payment type under which You receive income payments over your lifetime) (no Withdrawal Charges will be deducted).
1 3 5 10 YEAR YEARS YEARS YEARS ------------------------------------------------------------------------- Maximum......................................... $280 $857 $1,458 $3,066 Minimum......................................... $211 $646 $1,098 $2,306
ACCUMULATION UNIT VALUES FOR EACH INVESTMENT DIVISION See Appendix III. 15 METLIFE Metropolitan Life Insurance Company ("MLIC" or the "Company") is a leading provider of insurance, annuities, and employee benefits programs with operations throughout the United States. The Company offers life insurance and annuities to individuals, as well as group insurance and retirement & savings products and many other services to corporations and other institutions. The Company was formed under the laws of New York in 1868. The Company's home office is located at 200 Park Avenue, New York, New York 10166-0188. The Company is a wholly-owned subsidiary of MetLife, Inc. MetLife, Inc. is a leading global provider of insurance, annuities and employee benefit programs, serving 90 million customers in over 50 countries. Through its subsidiaries and affiliates, MetLife, Inc. holds leading market positions in the United States, Japan, Latin America, Asia Pacific, Europe and the Middle East. METROPOLITAN LIFE SEPARATE ACCOUNT E We established Metropolitan Life Separate Account E on September 27, 1983. The purpose of the Separate Account is to hold the variable assets that underlie the MetLife Financial Freedom Select Variable Annuity Contracts and some other Variable Annuity contracts we issue. We have registered the Separate Account with the Securities and Exchange Commission as a unit investment trust under the Investment Company Act of 1940, as amended ("1940 Act"). The Separate Account's assets are solely for the benefit of those who invest in the Separate Account and no one else, including our creditors. The assets of the Separate Account are held in our name on behalf of the Separate Account and legally belong to us. All the income, gains and losses (realized or unrealized) resulting from these assets are credited to or charged against the Contracts issued from this Separate Account without regard to our other business. We are obligated to pay all money we owe under the Contracts--such as death benefits and income payments--even if that amount exceeds the assets in the Separate Account. Any such amount that exceeds the assets in the Separate Account is paid from our general account. Any amount under any optional death benefit, optional Guaranteed Minimum Income Benefit or optional Guaranteed Withdrawal Benefit that exceeds the assets in the Separate Account are also paid from our general account. Benefit amounts paid from the general account are subject to the financial strength and claims paying ability of the Company and our long term ability to make such payments, and are not guaranteed by any other party. We issue other annuity contracts and life insurance policies where we pay all money we owe under those contracts and policies from our general account. MetLife is regulated as an insurance company under state law, which includes, generally, limits on the amount and type of investments in its general account. However, there is no guarantee that we will be able to meet our claims paying obligations; there are risks to purchasing any insurance product. VARIABLE ANNUITIES This Prospectus describes a type of Variable Annuity, a Deferred Annuity. These annuities are "variable" because the value of your account or income payment varies based on the investment performance of the Investment Divisions You choose. In short, the value of your Deferred Annuity and your income payments under a variable pay-out option of your Deferred Annuity may go up or down. Since the investment performance is not guaranteed, your money is at risk. The degree of risk will depend on the Investment Divisions You select. The Accumulation Unit Value or Annuity Unit Value for each Investment Division rises or falls based on the investment performance (or "experience") of the Portfolio with the same name. MetLife and its affiliates also offer other annuities not described in this Prospectus. 16 The Deferred Annuities have a fixed interest rate option called the "Fixed Interest Account." The Fixed Interest Account is not available to all contract owners. The Fixed Interest Account offers an interest rate that is guaranteed by us. The minimum interest rate depends on the date your Contract was issued but will not be less than 1%. The Fixed Interest Account is not available with a Deferred Annuity issued in New York State with the optional Guaranteed Minimum Income Benefit. The variable pay-out options under the Deferred Annuities have a fixed payment option called the "Fixed Income Option." Under the Fixed Income Option, we guarantee the amount of your fixed income payments. These fixed options are not described in this Prospectus although we occasionally refer to them. REPLACEMENT OF ANNUITY CONTRACTS EXCHANGE PROGRAMS: From time to time we may offer programs under which certain fixed or Variable Annuity contracts previously issued by us may be exchanged for the Deferred Annuity offered by this Prospectus. Currently, with respect to exchanges from certain of our Variable Annuity contracts to this Deferred Annuity, an existing contract is eligible for exchange if a withdrawal from, or surrender of, the contract would not trigger a Withdrawal Charge. The Account Balance of this Deferred Annuity attributable to the exchanged assets will not be subject to any withdrawal charge. Any additional purchase payments contributed to the new Deferred Annuity will be subject to all fees and charges, including the Withdrawal Charge described in the current Prospectus for the new Deferred Annuity. You should carefully consider whether an exchange is appropriate for You by comparing the death benefits, living benefits, and other guarantees provided by the contract You currently own to the benefits and guarantees that would be provided by the new Contract offered by this Prospectus. Then, You should compare the fees and charges (E.G., the death benefit charges, the living benefit charges, and the separate account charge) of your current contract to the fees and charges of the new Contract, which may be higher than your current contract. These programs will be made available on terms and conditions determined by us, and any such programs will comply with applicable law. We believe the exchanges will be tax free for Federal income tax-purposes; however, You should consult your tax adviser before making any such exchange. OTHER EXCHANGES: Generally, You can exchange one variable annuity contract for another in a tax-free exchange under Section 1035 of the Internal Revenue Code. Before making an exchange, You should compare both annuities carefully. If You exchange another annuity for the one described in this Prospectus, unless the exchange occurs under one of our exchange programs described above, You might have to pay a surrender charge on your old annuity, and there will be a new surrender charge period for this Deferred Annuity. Other charges may be higher (or lower) and the benefits may be different. Also, because we will not issue the Deferred Annuity until we have received the initial purchase payments from your existing insurance company, the issuance of the Deferred Annuity may be delayed. Generally, it is not advisable to purchase a Deferred Annuity as a replacement for an existing variable annuity contract. Before You exchange another annuity for our Deferred Annuity, ask your registered representative whether the exchange would be advantageous, given the Contract features, benefits and charges. THE DEFERRED ANNUITY You accumulate money in your account during the pay-in phase by making one or more purchase payments. MetLife will hold your money and credit investment returns as long as the money remains in your account. All TSA plans (ERISA and non-ERISA), IRAs (including SEPs and SIMPLE IRAs), 457(b) plans and 403(a) arrangements receive tax deferral under the Internal Revenue Code. There are no additional tax benefits from funding TSA ERISA or non-ERISA plans, IRAs (including SEPs and SIMPLE IRAs), 457(b) plans and 403(a) arrangements with a Deferred Annuity. Therefore, there should be reasons other than tax deferral for acquiring the Deferred Annuity, such as the availability of a guaranteed income for life, the death benefits or the other optional benefits available under this Deferred Annuity. Under the Internal Revenue Code ("Code"), spousal continuation and certain distribution options are available only to a person who is defined as a "spouse" under the Federal Defense of Marriage Act or other applicable Federal law. All 17 Contract provisions will be interpreted and administered in accordance with the requirements of the Code. Therefore, under current Federal law, a purchaser who has or is contemplating a civil union or same-sex marriage should note that the favorable tax treatment afforded under Federal law would not be available to such same-sex partner or same-sex spouse. Same-sex partners or spouses who own or are considering the purchase of annuity products that provide benefits based upon status as a spouse should consult a tax adviser. A Deferred Annuity consists of two phases: the accumulation or "pay-in" phase and the income or "pay-out" phase. The pay-out phase begins when You either take all of your money out of the account or elect income payments using the money in your account. The number and the amount of the income payments You receive will depend on such things as the type of pay-out option You choose, your investment choices, and the amount used to provide your income payments. Because Deferred Annuities offer the insurance benefit of income payment options, including our guarantee of income for your lifetime, they are "annuities." The Deferred Annuity is offered in several variations, which we call "classes." Your employer, association or other group contract holder may limit the availability of certain classes. If available, only the C Class is available to the 457(b) Deferred Annuity issued to state and local governments in New York State. Each has its own Separate Account charge and applicable Withdrawal Charge (except C Class which has no Withdrawal Charges). The Deferred Annuity also offers You the opportunity to choose optional benefits ("riders"), each for a charge in addition to the Separate Account charge with the Standard Death Benefit for that class. If You purchase the optional death benefit You receive the optional benefit in place of the Standard Death Benefit. In deciding what class of the Deferred Annuity to purchase, You should consider the amount of Separate Account and Withdrawal Charges You are willing to bear relative to your needs. In deciding whether to purchase the optional benefits, You should consider the desirability of the benefit relative to its additional cost and to your needs. Unless You tell us otherwise, we will assume that You are purchasing the B Class Deferred Annuity with the Standard Death Benefit and no optional benefits. These optional benefits are: . an Annual Step-Up Death Benefit; . a Guaranteed Minimum Income Benefit ("GMIB"); and . a Lifetime Withdrawal Guarantee Benefit ("LWG"). Each of these optional benefits is described in more detail later in this Prospectus. Optional benefits may not be available in all states. We may restrict the investment choices available to You if You select certain optional benefits. These restrictions are intended to reduce the risk of investment losses which could require the Company to use its general account assets to pay amounts due under the selected optional benefit. Certain withdrawals, depending on the amount and timing, may negatively impact the benefits and guarantees provided by your Contract. You should carefully consider whether a withdrawal under a particular circumstance will have any negative impact to your benefits or guarantees. The impact of withdrawals generally on your benefits and guarantees is discussed in the corresponding sections of the Prospectus describing such benefits and guarantees. We make available other classes of the Deferred Annuity based upon the characteristics of the group. Such characteristics include, but are not limited to, the nature of the group, size, the facility by which purchase payments will be paid, aggregate amount of anticipated purchase payments or anticipated persistency. The availability of other classes to contract owners will be made in a reasonable manner and will not be unfairly discriminatory to the interests of any contract owner. 18 CLASSES OF THE DEFERRED ANNUITY B CLASS The B Class has a 1.15% annual Separate Account charge (1.40% in the case of each American Funds(R) Investment Division) and a declining twelve year (ten years for a Deferred Annuity issued in Connecticut and certain other states) Withdrawal Charge on the amount withdrawn. If You choose the optional death benefit, the Separate Account charge would be 1.25% or, in the case of each American Funds(R) Investment Division, 1.50%. C CLASS The C Class has a 1.45% annual Separate Account charge (1.70% in the case of each American Funds(R) Investment Division) and no Withdrawal Charge. If You choose the optional death benefit, the Separate Account charge would be 1.55% or, in the case of each American Funds(R) Investment Division, 1.80%. As of April 30, 2012, the C Class is no longer available. For employer groups with TSA ERISA, 457(b) and 403(a) Deferred Annuities that were established prior to April 30, 2012, participants who submit an application on or after April 30, 2012 will be able to choose the C Class if permitted under the Contract. L CLASS The L Class has a 1.30% annual Separate Account charge (1.55% in the case of each American Funds(R) Investment Division) and a declining seven year Withdrawal Charge on the amount withdrawn. If You choose the optional death benefit, the Separate Account charge would be 1.40% or, in the case of each American Funds(R) Investment Division, 1.65%. ELIGIBLE ROLLOVER DISTRIBUTION AND DIRECT TRANSFER CREDIT FOR B AND L CLASSES During the first two Contract Years, for the B and L Classes, we currently credit 3% (2% in New York State) to each of your purchase payments which consist of money from eligible rollover distributions or direct transfers from annuities or mutual funds that are not products of MetLife or its affiliates. (For Deferred Annuities issued in Connecticut and certain other states, the credit also applies to purchase payments which consist of money from eligible rollover distributions or direct transfers from annuities and mutual funds that are products of MetLife or its affiliates. For Deferred Annuities issued in New York State, the credit applies to purchase payments made from salary reductions and from eligible rollover distributions or direct transfers from annuities or mutual funds that are not products of MetLife or its affiliates.) The credit may not be available in all states. Your employer, association or other group contract holder may limit the availability of the rollover distribution and direct transfer credit. The credit will be applied pro-rata to the Fixed Interest Account, if available, and the Investment Divisions of the Separate Account based upon your allocation for your purchase payments at the time the transfer or rollover amount is credited. You may only receive the 3% credit if You are less than 66 years old at date of issue. The credit is provided, based upon certain savings we realize, instead of reducing expenses directly. You do not pay any additional charge to receive the credit. For 457(b), 403(a) and TSA ERISA Deferred Annuities, the eligible rollover distribution and direct transfer credit amounts must be allocated to the Fixed Interest Account and remain in the Fixed Interest Account for a period of five years to receive the credit. If the amount is withdrawn prior to the fifth year, the entire credit will be forfeited. If a portion is withdrawn prior to the fifth year, a portion of the credit that is in the same proportion as the withdrawal is to the applicable eligible rollover distribution and direct transfer credit will be forfeited. For the TSA Deferred Annuity, any 3% credit does not become yours until after the "free look" period; we retrieve it if You exercise the "free look". Your exercise of the "free look" is the only circumstance under which the 3% credit will be retrieved (commonly called "recapture"). We then will refund either your purchase payments or Account Balance, depending upon your state law. In the case of a refund of Account Balance, the refunded amount will include any investment performance on amounts attributable to the 3% credit. If there have been any losses from the investment performance on the amounts attributable to the 3% credit, we will bear that loss. 19 YOUR INVESTMENT CHOICES The Metropolitan Fund, the Calvert Fund, the Met Investors Fund and the American Funds(R) and each of their Portfolios are more fully described in their respective prospectuses and SAIs. The SAIs are available upon your request. You should read these prospectuses carefully before making purchase payments to the Investment Divisions. Except for the Calvert Fund, all classes of shares available to the Deferred Annuities have a 12b-1 Plan fee. The investment choices are listed in alphabetical order below, (based upon the Portfolios' legal names). (See Appendix IV Portfolio Legal and Marketing Names.) The Investment Divisions generally offer the opportunity for greater returns over the long term than our Fixed Interest Account. You should understand that each Portfolio incurs its own risk which will be dependent upon the investment decisions made by the respective Portfolio's investment manager. Furthermore, the name of a Portfolio may not be indicative of all the investments held by the Portfolio. The degree of investment risk You assume will depend on the Investment Divisions You choose. While the Investment Divisions and their comparably named Portfolios may have names, investment objectives and management which are identical or similar to publicly available mutual funds, these Investment Divisions and Portfolios are not those mutual funds. The Portfolios most likely will not have the same performance experience as any publicly available mutual fund. Since your Account Balance or income payments are subject to the risks associated with investing in stocks and bonds, your Account Balance or variable income payments based on amounts allocated to the Investment Divisions may go down as well as up. Each Portfolio has different investment objectives and risks. The Portfolio prospectuses contain more detailed information on each Portfolio's investment strategy, investment managers and its fees. You may obtain a Portfolio prospectus by calling 1-800-638-7732, or through your registered representative. We do not guarantee the investment results of the Portfolios. The current Portfolios are listed below, along with their investment managers and any sub-investment manager.
PORTFOLIO INVESTMENT OBJECTIVE --------- -------------------- AMERICAN FUNDS(R) -------------- AMERICAN FUNDS BOND FUND SEEKS AS HIGH A LEVEL OF CURRENT INCOME AS IS CONSISTENT WITH THE PRESERVATION OF CAPITAL. AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION SEEKS LONG-TERM GROWTH OF CAPITAL. FUND AMERICAN FUNDS GROWTH FUND SEEKS GROWTH OF CAPITAL. AMERICAN FUNDS GROWTH-INCOME FUND SEEKS LONG-TERM GROWTH OF CAPITAL AND INCOME. CALVERT FUND ------------ CALVERT VP SRI BALANCED PORTFOLIO SEEKS TO ACHIEVE A COMPETITIVE TOTAL RETURN THROUGH AN ACTIVELY MANAGED PORTFOLIO OF STOCKS, BONDS AND MONEY MARKET INSTRUMENTS WHICH OFFER INCOME AND CAPITAL GROWTH OPPORTUNITY AND WHICH SATISFY THE INVESTMENT CRITERIA, INCLUDING FINANCIAL, SUSTAINABILITY AND SOCIAL RESPONSIBILITY FACTORS. MET INVESTORS FUND ------------------ AMERICAN FUNDS(R) BALANCED ALLOCATION PORTFOLIO SEEKS A BALANCE BETWEEN A HIGH LEVEL OF CURRENT INCOME AND GROWTH OF CAPITAL, WITH A GREATER EMPHASIS ON GROWTH OF CAPITAL. AMERICAN FUNDS(R) GROWTH ALLOCATION PORTFOLIO SEEKS GROWTH OF CAPITAL. AMERICAN FUNDS(R) MODERATE ALLOCATION PORTFOLIO SEEKS A HIGH TOTAL RETURN IN THE FORM OF INCOME AND GROWTH OF CAPITAL, WITH A GREATER EMPHASIS ON INCOME.
INVESTMENT MANAGER/ ------------------- PORTFOLIO SUB-INVESTMENT MANAGER --------- ---------------------- AMERICAN FUNDS(R) -------------- AMERICAN FUNDS BOND FUND CAPITAL RESEARCH AND MANAGEMENT COMPANY AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION CAPITAL RESEARCH AND MANAGEMENT COMPANY FUND AMERICAN FUNDS GROWTH FUND CAPITAL RESEARCH AND MANAGEMENT COMPANY AMERICAN FUNDS GROWTH-INCOME FUND CAPITAL RESEARCH AND MANAGEMENT COMPANY CALVERT FUND ------------ CALVERT VP SRI BALANCED PORTFOLIO CALVERT INVESTMENT MANAGEMENT, INC. SUB-INVESTMENT MANAGER: NEW AMSTERDAM PARTNERS LLC MET INVESTORS FUND ------------------ AMERICAN FUNDS(R) BALANCED ALLOCATION PORTFOLIO METLIFE ADVISERS, LLC AMERICAN FUNDS(R) GROWTH ALLOCATION PORTFOLIO METLIFE ADVISERS, LLC AMERICAN FUNDS(R) MODERATE ALLOCATION PORTFOLIO METLIFE ADVISERS, LLC
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PORTFOLIO INVESTMENT OBJECTIVE --------- -------------------- BLACKROCK LARGE CAP CORE PORTFOLIO SEEKS LONG-TERM CAPITAL GROWTH. CLARION GLOBAL REAL ESTATE PORTFOLIO SEEKS TOTAL RETURN THROUGH INVESTMENT IN REAL ESTATE SECURITIES, EMPHASIZING BOTH CAPITAL APPRECIATION AND CURRENT INCOME. HARRIS OAKMARK INTERNATIONAL PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION. INVESCO SMALL CAP GROWTH PORTFOLIO SEEKS LONG-TERM GROWTH OF CAPITAL. JANUS FORTY PORTFOLIO SEEKS CAPITAL APPRECIATION. LAZARD MID CAP PORTFOLIO SEEKS LONG-TERM GROWTH OF CAPITAL. LORD ABBETT BOND DEBENTURE PORTFOLIO SEEKS HIGH CURRENT INCOME AND THE OPPORTUNITY FOR CAPITAL APPRECIATION TO PRODUCE A HIGH TOTAL RETURN. LORD ABBETT MID CAP VALUE PORTFOLIO SEEKS CAPITAL APPRECIATION THROUGH INVESTMENTS, PRIMARILY IN EQUITY SECURITIES, WHICH ARE BELIEVED TO BE UNDERVALUED IN THE MARKETPLACE. MET/FRANKLIN INCOME PORTFOLIO SEEKS TO MAXIMIZE INCOME WHILE MAINTAINING PROSPECTS FOR CAPITAL APPRECIATION. MET/FRANKLIN LOW DURATION TOTAL RETURN SEEKS A HIGH LEVEL OF CURRENT INCOME, WHILE PORTFOLIO SEEKING PRESERVATION OF SHAREHOLDERS' CAPITAL. MET/FRANKLIN MUTUAL SHARES PORTFOLIO SEEKS CAPITAL APPRECIATION, WHICH MAY OCCASIONALLY BE SHORT-TERM. THE PORTFOLIO'S SECONDARY INVESTMENT OBJECTIVE IS INCOME. MET/FRANKLIN TEMPLETON FOUNDING STRATEGY PRIMARILY SEEKS CAPITAL APPRECIATION AND PORTFOLIO SECONDARILY SEEKS INCOME. MET/TEMPLETON GROWTH PORTFOLIO SEEKS LONG-TERM CAPITAL GROWTH. METLIFE AGGRESSIVE STRATEGY PORTFOLIO SEEKS GROWTH OF CAPITAL. MFS(R) RESEARCH INTERNATIONAL PORTFOLIO SEEKS CAPITAL APPRECIATION. MORGAN STANLEY MID CAP GROWTH PORTFOLIO SEEKS CAPITAL APPRECIATION. PIMCO INFLATION PROTECTED BOND PORTFOLIO SEEKS MAXIMUM REAL RETURN, CONSISTENT WITH PRESERVATION OF CAPITAL AND PRUDENT INVESTMENT MANAGEMENT. PIMCO TOTAL RETURN PORTFOLIO SEEKS MAXIMUM TOTAL RETURN, CONSISTENT WITH THE PRESERVATION OF CAPITAL AND PRUDENT INVESTMENT MANAGEMENT. RCM TECHNOLOGY PORTFOLIO SEEKS CAPITAL APPRECIATION; NO CONSIDERATION IS GIVEN TO INCOME. SSGA GROWTH AND INCOME ETF PORTFOLIO SEEKS GROWTH OF CAPITAL AND INCOME. SSGA GROWTH ETF PORTFOLIO SEEKS GROWTH OF CAPITAL.
INVESTMENT MANAGER/ ------------------- PORTFOLIO SUB-INVESTMENT MANAGER --------- ---------------------- BLACKROCK LARGE CAP CORE PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: BLACKROCK ADVISORS, LLC CLARION GLOBAL REAL ESTATE PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: CBRE CLARION SECURITIES LLC HARRIS OAKMARK INTERNATIONAL PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: HARRIS ASSOCIATES L.P. INVESCO SMALL CAP GROWTH PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: INVESCO ADVISERS, INC. JANUS FORTY PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: JANUS CAPITAL MANAGEMENT LLC LAZARD MID CAP PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: LAZARD ASSET MANAGEMENT LLC LORD ABBETT BOND DEBENTURE PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: LORD, ABBETT & CO. LLC LORD ABBETT MID CAP VALUE PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: LORD, ABBETT & CO. LLC MET/FRANKLIN INCOME PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: FRANKLIN ADVISERS, INC. MET/FRANKLIN LOW DURATION TOTAL RETURN METLIFE ADVISERS, LLC PORTFOLIO SUB-INVESTMENT MANAGER: FRANKLIN ADVISERS, INC. MET/FRANKLIN MUTUAL SHARES PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: FRANKLIN MUTUAL ADVISERS, LLC MET/FRANKLIN TEMPLETON FOUNDING STRATEGY METLIFE ADVISERS, LLC PORTFOLIO MET/TEMPLETON GROWTH PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: TEMPLETON GLOBAL ADVISORS LIMITED METLIFE AGGRESSIVE STRATEGY PORTFOLIO METLIFE ADVISERS, LLC MFS(R) RESEARCH INTERNATIONAL PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: MASSACHUSETTS FINANCIAL SERVICES COMPANY MORGAN STANLEY MID CAP GROWTH PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: MORGAN STANLEY INVESTMENT MANAGEMENT INC. PIMCO INFLATION PROTECTED BOND PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: PACIFIC INVESTMENT MANAGEMENT COMPANY LLC PIMCO TOTAL RETURN PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: PACIFIC INVESTMENT MANAGEMENT COMPANY LLC RCM TECHNOLOGY PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: RCM CAPITAL MANAGEMENT LLC SSGA GROWTH AND INCOME ETF PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: SSGA FUNDS MANAGEMENT, INC. SSGA GROWTH ETF PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: SSGA FUNDS MANAGEMENT, INC.
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PORTFOLIO INVESTMENT OBJECTIVE --------- -------------------- T. ROWE PRICE MID CAP GROWTH PORTFOLIO SEEKS LONG-TERM GROWTH OF CAPITAL. THIRD AVENUE SMALL CAP VALUE PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION. METROPOLITAN FUND ----------------- BARCLAYS CAPITAL AGGREGATE BOND INDEX SEEKS TO TRACK THE PERFORMANCE OF THE PORTFOLIO BARCLAYS U.S. AGGREGATE BOND INDEX. BLACKROCK BOND INCOME PORTFOLIO SEEKS A COMPETITIVE TOTAL RETURN PRIMARILY FROM INVESTING IN FIXED-INCOME SECURITIES. BLACKROCK LARGE CAP VALUE PORTFOLIO SEEKS LONG-TERM GROWTH OF CAPITAL. BLACKROCK LEGACY LARGE CAP GROWTH PORTFOLIO SEEKS LONG-TERM GROWTH OF CAPITAL. DAVIS VENTURE VALUE PORTFOLIO SEEKS GROWTH OF CAPITAL. FI VALUE LEADERS PORTFOLIO SEEKS LONG-TERM GROWTH OF CAPITAL. JENNISON GROWTH PORTFOLIO SEEKS LONG-TERM GROWTH OF CAPITAL. LOOMIS SAYLES SMALL CAP CORE PORTFOLIO SEEKS LONG-TERM CAPITAL GROWTH FROM INVESTMENTS IN COMMON STOCKS OR OTHER EQUITY SECURITIES. LOOMIS SAYLES SMALL CAP GROWTH PORTFOLIO SEEKS LONG-TERM CAPITAL GROWTH. MET/ARTISAN MID CAP VALUE PORTFOLIO SEEKS LONG-TERM CAPITAL GROWTH. METLIFE CONSERVATIVE ALLOCATION PORTFOLIO SEEKS A HIGH LEVEL OF CURRENT INCOME, WITH GROWTH OF CAPITAL AS A SECONDARY OBJECTIVE. METLIFE CONSERVATIVE TO MODERATE ALLOCATION SEEKS HIGH TOTAL RETURN IN THE FORM OF INCOME PORTFOLIO AND GROWTH OF CAPITAL, WITH A GREATER EMPHASIS ON INCOME. METLIFE MID CAP STOCK INDEX PORTFOLIO SEEKS TO TRACK THE PERFORMANCE OF THE STANDARD & POOR'S MIDCAP 400(R) COMPOSITE STOCK PRICE INDEX. METLIFE MODERATE ALLOCATION PORTFOLIO SEEKS A BALANCE BETWEEN A HIGH LEVEL OF CURRENT INCOME AND GROWTH OF CAPITAL, WITH A GREATER EMPHASIS ON GROWTH OF CAPITAL. METLIFE MODERATE TO AGGRESSIVE ALLOCATION SEEKS GROWTH OF CAPITAL. PORTFOLIO METLIFE STOCK INDEX PORTFOLIO SEEKS TO TRACK THE PERFORMANCE OF THE STANDARD & POOR'S 500(R) COMPOSITE STOCK PRICE INDEX. MFS(R) TOTAL RETURN PORTFOLIO SEEKS A FAVORABLE TOTAL RETURN THROUGH INVESTMENT IN A DIVERSIFIED PORTFOLIO. MFS(R) VALUE PORTFOLIO SEEKS CAPITAL APPRECIATION. MSCI EAFE(R) INDEX PORTFOLIO SEEKS TO TRACK THE PERFORMANCE OF THE MSCI EAFE(R) INDEX.
INVESTMENT MANAGER/ ------------------- PORTFOLIO SUB-INVESTMENT MANAGER --------- ---------------------- T. ROWE PRICE MID CAP GROWTH PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: T. ROWE PRICE ASSOCIATES, INC. THIRD AVENUE SMALL CAP VALUE PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: THIRD AVENUE MANAGEMENT LLC METROPOLITAN FUND ----------------- BARCLAYS CAPITAL AGGREGATE BOND INDEX METLIFE ADVISERS, LLC PORTFOLIO SUB-INVESTMENT MANAGER: METLIFE INVESTMENT ADVISORS COMPANY, LLC BLACKROCK BOND INCOME PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: BLACKROCK ADVISORS, LLC BLACKROCK LARGE CAP VALUE PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: BLACKROCK ADVISORS, LLC BLACKROCK LEGACY LARGE CAP GROWTH PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: BLACKROCK ADVISORS, LLC DAVIS VENTURE VALUE PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: DAVIS SELECTED ADVISERS, L.P. FI VALUE LEADERS PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: PYRAMIS GLOBAL ADVISORS, LLC JENNISON GROWTH PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: JENNISON ASSOCIATES LLC LOOMIS SAYLES SMALL CAP CORE PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: LOOMIS, SAYLES & COMPANY, L.P. LOOMIS SAYLES SMALL CAP GROWTH PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: LOOMIS, SAYLES & COMPANY, L.P. MET/ARTISAN MID CAP VALUE PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: ARTISAN PARTNERS LIMITED PARTNERSHIP METLIFE CONSERVATIVE ALLOCATION PORTFOLIO METLIFE ADVISERS, LLC METLIFE CONSERVATIVE TO MODERATE ALLOCATION METLIFE ADVISERS, LLC PORTFOLIO METLIFE MID CAP STOCK INDEX PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: METLIFE INVESTMENT ADVISORS COMPANY, LLC METLIFE MODERATE ALLOCATION PORTFOLIO METLIFE ADVISERS, LLC METLIFE MODERATE TO AGGRESSIVE ALLOCATION METLIFE ADVISERS, LLC PORTFOLIO METLIFE STOCK INDEX PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: METLIFE INVESTMENT ADVISORS COMPANY, LLC MFS(R) TOTAL RETURN PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: MASSACHUSETTS FINANCIAL SERVICES COMPANY MFS(R) VALUE PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: MASSACHUSETTS FINANCIAL SERVICES COMPANY MSCI EAFE(R) INDEX PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: METLIFE INVESTMENT ADVISORS COMPANY, LLC
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INVESTMENT MANAGER/ ------------------- PORTFOLIO INVESTMENT OBJECTIVE SUB-INVESTMENT MANAGER --------- -------------------- ---------------------- NEUBERGER BERMAN GENESIS PORTFOLIO SEEKS HIGH TOTAL RETURN, CONSISTING PRINCIPALLY METLIFE ADVISERS, LLC OF CAPITAL APPRECIATION. SUB-INVESTMENT MANAGER: NEUBERGER BERMAN MANAGEMENT LLC RUSSELL 2000(R) INDEX PORTFOLIO SEEKS TO TRACK THE PERFORMANCE OF THE RUSSELL METLIFE ADVISERS, LLC 2000(R) INDEX. SUB-INVESTMENT MANAGER: METLIFE INVESTMENT ADVISORS COMPANY, LLC T. ROWE PRICE LARGE CAP GROWTH PORTFOLIO SEEKS LONG-TERM GROWTH OF CAPITAL AND, METLIFE ADVISERS, LLC SECONDARILY, DIVIDEND INCOME. SUB-INVESTMENT MANAGER: T. ROWE PRICE ASSOCIATES, INC. T. ROWE PRICE SMALL CAP GROWTH PORTFOLIO SEEKS LONG-TERM CAPITAL GROWTH. METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: T. ROWE PRICE ASSOCIATES, INC. WESTERN ASSET MANAGEMENT STRATEGIC BOND SEEKS TO MAXIMIZE TOTAL RETURN CONSISTENT METLIFE ADVISERS, LLC OPPORTUNITIES PORTFOLIO WITH PRESERVATION OF CAPITAL. SUB-INVESTMENT MANAGER: WESTERN ASSET MANAGEMENT COMPANY WESTERN ASSET MANAGEMENT U.S. GOVERNMENT SEEKS TO MAXIMIZE TOTAL RETURN CONSISTENT METLIFE ADVISERS, LLC PORTFOLIO WITH PRESERVATION OF CAPITAL AND MAINTENANCE SUB-INVESTMENT MANAGER: WESTERN ASSET OF LIQUIDITY. MANAGEMENT COMPANY
METROPOLITAN FUND ASSET ALLOCATION PORTFOLIOS The MetLife Conservative Allocation Portfolio, the MetLife Conservative to Moderate Allocation Portfolio, the MetLife Moderate Allocation Portfolio and the MetLife Moderate to Aggressive Allocation Portfolio, also known as the "asset allocation portfolios", are "fund of funds" Portfolios that invest substantially all of their assets in other Portfolios of the Metropolitan Fund or the Met Investors Fund. Therefore, each of these asset allocation portfolios will bear its pro-rata share of the fees and expenses incurred by the underlying Portfolios in which it invests in addition to its own management fees and expenses. This will reduce the investment return of each of the asset allocation portfolios. The expense levels will vary over time, depending on the mix of underlying Portfolios in which the asset allocation portfolio invests. Contract owners may be able to realize lower aggregate expenses by investing directly in the underlying Portfolios instead of investing in the asset allocation portfolios. A contract owner who chooses to invest directly in the underlying Portfolios would not, however, receive asset allocation services provided by MetLife Advisers, LLC. MET INVESTORS FUND ASSET ALLOCATION PORTFOLIOS The American Funds(R) Balanced Allocation Portfolio, the American Funds(R) Growth Allocation Portfolio and the American Funds(R) Moderate Allocation Portfolio, also known as "asset allocation portfolios", are "funds of funds" Portfolios that invest substantially all of their assets in portfolios of the American Funds Insurance Series(R). Therefore, each of these asset allocation portfolios will bear its pro-rata share of the fees and expenses incurred by the underlying portfolio in which it invests in addition to its own management fees and expenses. This will reduce the investment return of each of the asset allocation portfolios. The expense levels will vary over time, depending on the mix of underlying portfolios in which the asset allocation portfolio invests. Underlying portfolios consist of American Funds(R) Portfolios that are currently available for investment directly under the Contract and other underlying American Funds portfolios which are not made available directly under the Contract. The MetLife Aggressive Strategy Portfolio, also known as an "asset allocation portfolio", is a "fund of funds" Portfolio that invests substantially all of its assets in other Portfolios of the Metropolitan Fund or the Met Investors Fund. Therefore, this asset allocation portfolio will bear its pro-rata share of the fees and expenses incurred by the underlying Portfolio in which it invests in addition to its own management fees and expenses. This will reduce the investment return of the Portfolio. The expense level will vary over time, depending on the mix of underlying Portfolios in which the MetLife Aggressive Strategy Portfolio invests. Contract owners may be able to realize lower aggregate expenses by investing directly in the 23 underlying Portfolios instead of investing in this asset allocation portfolio. A contract owner who chooses to invest directly in the underlying Portfolios would not however receive asset allocation services provided by MetLife Advisers, LLC. MET/FRANKLIN TEMPLETON FOUNDING STRATEGY PORTFOLIO The Met/Franklin Templeton Founding Strategy Portfolio is a "funds of funds" Portfolio that invests equally in three other portfolios of the Met Investors Fund: the Met/Franklin Income Portfolio, the Met/Franklin Mutual Shares Portfolio and the Met/Templeton Growth Portfolio. Because the Portfolio invests in other underlying portfolios, the Portfolio will bear its pro rata portion of the operating expenses of the underlying portfolios in which it invests, including the management fee. EXCHANGE-TRADED FUNDS PORTFOLIOS The SSgA Growth ETF Portfolio and the SSgA Growth and Income ETF Portfolio are asset allocation Portfolios and "funds of funds" which invest substantially all of their assets in other investment companies known as exchange-traded funds ("Underlying ETFs"). As an investor in an Underlying ETF or other investment company, each Portfolio also will bear its pro-rata portion of the fees and expenses incurred by the Underlying ETF or other investment company in which it invests in addition to its own management fees and expenses. This will reduce the investment return of each of the Portfolios. The expense levels will vary over time depending on the mix of Underlying ETFs in which these Portfolios invest. ADDITIONAL INFORMATION ABOUT THE PORTFOLIOS Some of the investment choices may not be available under the terms of your Deferred Annuity. Your Contract or other correspondence we provide You will indicate the Investment Divisions that are available to You. Your investment choices may be limited because: . Your employer, association or other group contract holder limits the available Investment Divisions. . We have restricted the available Investment Divisions. The Investment Divisions buy and sell shares of corresponding mutual fund Portfolios. These Portfolios, which are part of either the Metropolitan Fund, the Calvert Fund, the Met Investors Fund or the American Funds(R) invest in stocks, bonds and other investments. All dividends declared by the Portfolios are earned by the Separate Account and are reinvested. Therefore, no dividends are distributed to You under the Deferred Annuities. You pay no transaction expenses (i.e., front-end or back-end sales load charges) as a result of the Separate Account's purchase or sale of these mutual fund shares. The Portfolios of the Metropolitan Fund and the Met Investors Fund are available by purchasing annuities and life insurance policies from MetLife or certain of its affiliated insurance companies and are never sold directly to the public. The Calvert Fund and American Funds(R) Portfolios are made available by the Calvert Fund and the American Funds(R) only through various insurance company annuities and life insurance policies. The Metropolitan Fund, the Calvert Fund, the Met Investors Fund and the American Funds(R) are each "series" type funds registered with the Securities and Exchange Commission as an "open-end management investment company" under the 1940 Act. A "series" fund means that each Portfolio is one of several available through the fund. The Portfolios of the Metropolitan Fund and Met Investors Fund pay MetLife Advisers, LLC, a MetLife affiliate, a monthly fee for its services as their investment manager. The Portfolio of the Calvert Fund pays Calvert Asset Management Company, Inc. a monthly fee for its services as its investment manager. The Portfolios of the American Funds(R) pay Capital Research and Management Company a monthly fee for its services as their investment manager. These fees, as well as the operating expenses paid by each Portfolio, are described in the applicable prospectus and SAI for the Metropolitan Fund, the Calvert Fund, the Met Investors Fund and the American Funds(R). In addition, the Metropolitan Fund and the Met Investors Fund prospectuses each discuss other separate accounts of MetLife and its affiliated insurance companies and certain qualified retirement plans that invest in the Metropolitan Fund or the Met Investors Fund. The risks of these arrangements are discussed in each Fund's prospectus. 24 Certain Payments We Receive with Regard to the Portfolios. An investment manager (other than our affiliate MetLife Advisers, LLC) or sub-investment manager of a Portfolio, or its affiliates, may make payments to us and/or certain of our affiliates. These payments may be used for a variety of purposes, including payment of expenses for certain administrative, marketing, and support services with respect to the Deferred Annuities and, in the Company's role as an intermediary, with respect to the Portfolios. The Company and its affiliates may profit from these payments. These payments may be derived, in whole or in part, from the advisory fee deducted from Portfolio assets. Contract owners, through their indirect investment in the Portfolios, bear the costs of these advisory fees (see the Portfolios' prospectuses for more information). The amount of the payments we receive is based on a percentage of assets of the Portfolios attributable to the Deferred Annuities and certain other variable insurance products that we and our affiliates issue. These percentages differ and some investment managers or sub-investment managers (or other affiliates) may pay us more than others. These percentages currently range up to 0.50%. Additionally, an investment manager or sub-investment manager of a Portfolio or its affiliates may provide us with wholesaling services that assist in the distribution of the Contracts and may pay us and/or certain of our affiliates amounts to participate in sales meetings. These amounts may be significant and may provide the Adviser or sub-investment manager (or their affiliate) with increased access to persons involved in the distribution of the Contracts. We and/or certain of our affiliated insurance companies have a joint ownership interest in our affiliated investment manager MetLife Advisers, LLC, which is formed as a "limited liability company". Our ownership interest in MetLife Advisers, LLC entitles us to profit distributions if the Adviser makes a profit with respect to the advisory fees it receives from the Portfolios. We will benefit accordingly from assets allocated to the Portfolios to the extent they result in profits to the investment manager. (See the Table of Expenses for information on the investment management fees paid by the Portfolios.) Certain Portfolios have adopted a Distribution Plan under Rule 12b-1 of the 1940 Act. A Portfolio's 12b-1 Plan, if any, is described in more detail in the prospectuses for the Portfolios. See the Table of Expenses and "Who Sells the Deferred Annuities". Any payments we receive pursuant to those 12b-1 Plans are paid to us or our distributor. Payments under a Portfolio's 12b-1 Plan decrease the Portfolios' investment return. Portfolio Selection. We select the Portfolios offered through this Contract based on a number of criteria, including asset class coverage, the strength of the investment manager's or sub-investment manager's reputation and tenure, brand recognition, performance, and the capability and qualification of each investment firm. Another factor we consider during the selection process is whether the Portfolios' investment manager or sub-investment manager is one of our affiliates or whether the Portfolio, its investment manager, its sub-investment manager(s), or an affiliate will make payments to us or our affiliates. In this regard, the profit distributions we receive from our affiliated investment manager are a component of the total revenue that we consider in configuring the features and investment choices available in the variable insurance products that we and our affiliated insurance companies issue. Since we and our affiliated insurance companies may benefit more from the allocation of assets to portfolios advised by our affiliates than those that are not, we may be more inclined to offer portfolios advised by our affiliates in the variable insurance products we issue. We review the Portfolios periodically and may remove a Portfolio or limit its availability to new purchase payments and/or transfers of contract value if we determine that the Portfolio no longer meets one or more of the selection criteria, and/or if the Portfolio has not attracted significant allocations from contract owners. In some cases, we have included Portfolios based on recommendations made by selling firms. These selling firms may receive payments from the Portfolios they recommend and may benefit accordingly from the allocation of contract value to such Portfolios. WE DO NOT PROVIDE ANY INVESTMENT ADVICE AND DO NOT RECOMMEND OR ENDORSE ANY PARTICULAR PORTFOLIO. YOU BEAR THE RISK OF ANY DECLINE IN YOUR ACCOUNT BALANCE OF YOUR DEFERRED ANNUITY RESULTING FROM THE PERFORMANCE OF THE PORTFOLIO YOU HAVE CHOSEN. We make certain payments to American Funds Distributors, Inc., principal underwriter for the American Funds Insurance Series(R). (See "Who Sells The Deferred Annuities".) 25 DEFERRED ANNUITIES This Prospectus describes the following Deferred Annuities under which You can accumulate money: . TSA (Tax Sheltered Annuities) . TSA ERISA (Tax Sheltered Annuities subject to ERISA) . SEPs (Simplified Employee Pensions) . SIMPLE IRAs (Savings Incentive Match Plan for Employees Individual Retirement Annuities) . 457(b)s (Section 457(b) Eligible Deferred Compensation Arrangements) . 403(a) Arrangements A form of the deferred annuity may be issued to a bank that does nothing but hold them as a contract holder. THE DEFERRED ANNUITY AND YOUR RETIREMENT PLAN These Deferred Annuities may be issued either to You as an individual or to a group. You are then a participant under the group's Deferred Annuity. If You participate through a retirement plan or other group arrangement, the Deferred Annuity may provide that all or some of your rights or choices as described in this Prospectus are subject to the plan's terms. For example, limitations on your rights may apply to investment choices, automated investments strategies, purchase payments, withdrawals, transfers, loans, the death benefit and pay-out options. The Deferred Annuity may provide that a plan administrative fee will be paid by making a withdrawal from your Account Balance. We may rely on your employer's or plan administrator's statements to us as to the terms of the plan or your entitlement to any amounts. We are not a party to your employer's retirement plan. We will not be responsible for determining what your plan says. You should consult the Deferred Annuity Contract and plan document to see how You may be affected. If You are a Texas Optional Retirement Program participant, please see Appendix II for specific information which applies to You. 403(B) PLAN TERMINATIONS Upon a 403(b) plan termination, your employer is required to distribute your plan benefits under the Contract to You. Your employer may permit You to receive your distribution of your 403(b) plan benefit in cash or in the form of the Contract. If You elect to receive your distributions in cash, the distribution is a withdrawal under the Contract and any amounts withdrawn are subject to applicable Withdrawal Charges. Outstanding loans will be satisfied (paid) from your cash benefit prior to its distribution to You. In addition, your cash distributions are subject to withholding, ordinary income tax and applicable Federal income tax penalties. (See "Income Taxes".) Contract Withdrawal Charges will be waived if the net distribution is made under the exceptions listed in the "When No Withdrawal Charge Applies" section of the Prospectus. However, if your employer chooses to distribute cash as the default option, your employer may not give You the opportunity to instruct MetLife to make, at a minimum, a direct transfer to another funding option or annuity contract issued by us or one of our affiliates, which may avoid a Withdrawal Charge. In that case, You will receive the net cash distribution, less any applicable Withdrawal Charge and withholding. In addition, You would forfeit any accrued benefit under a GMIB or LWG rider or guaranteed death benefit. If You receive the distribution in form of the Contract, we will continue to administer the Contract according to its terms. However in that case, You may not make any additional purchase payments or take any loans. In addition MetLife will rely on You to provide certain information that would otherwise be provided to MetLife by the employer or plan administrator. 26 The employer may choose distribution of the Contract as the default option. The employer may not choose distribution of a Contract as a default option when that Contract is an investment vehicle for a TSA ERISA plan. AUTOMATED INVESTMENT STRATEGIES There are four automated investment strategies available to You. We created these investment strategies to help You manage your money. You decide if one is appropriate for You, based upon your risk tolerance and savings goals. The Index Selector is not available with a Deferred Annuity with the optional LWG. These are available to You without any additional charges. As with any investment program, none of them can guarantee a gain--You can lose money. We may modify or terminate any of the strategies at any time. You may have only one strategy in effect at a time. You may not have a strategy in effect while You also have an outstanding loan. Your employer, association or other group contract holder may limit the availability of any investment strategy. The Equity Generator(R): An amount equal to the interest earned in the Fixed Interest Account is transferred monthly to any one Investment Division based on your selection. If your Fixed Interest Account Balance at the time of a scheduled transfer is zero, this strategy is automatically discontinued. The Rebalancer(R): You select a specific asset allocation for your entire Account Balance from among the Investment Divisions and the Fixed Interest Account, if available. Each quarter we transfer amounts among these options to bring the percentage of your Account Balance in each option back to your original allocation. In the future, we may permit You to allocate less than 100% of your Account Balance to this strategy. The Index Selector(R): You may select one of five asset allocation models (the Conservative Model, the Conservative to Moderate Model, the Moderate Model, the Moderate to Aggressive Model and the Aggressive Model) which are designed to correlate to various risk tolerance levels. Based on the model You choose, your entire Account Balance is allocated among the Barclays Capital Aggregate Bond Index, MetLife Stock Index, MSCI EAFE(R) Index, Russell 2000(R) Index and MetLife Mid Cap Stock Index Investment Divisions and the Fixed Interest Account. Each quarter the percentage in each of these Investment Divisions and the Fixed Interest Account is brought back to the selected model percentage by transferring amounts among the Investment Divisions and the Fixed Interest Account. In the future, we may permit You to allocate less than 100% of your Account Balance to this strategy. We will continue to implement the Index Selector strategy using the percentage allocations of the model that were in effect when You elected the Index Selector strategy. You should consider whether it is appropriate for You to continue this strategy over time if your risk tolerance, time horizon or financial situation changes. This strategy may experience more volatility than our other strategies. We provide the elements to formulate the models. We may rely on a third party for its expertise in creating appropriate allocations. The asset allocation models used in the Index Selector strategy may change from time to time. If You are interested in an updated model, please contact your sales representative. You may choose another Index Selector strategy or terminate your Index Selector strategy at any time. If You choose another Index Selector strategy, You must select from the asset allocation models available at that time. After termination, if You then wish to again select the Index Selector strategy, You must select from the asset allocation models available at that time. The Allocator/SM/: Each month a dollar amount You choose is transferred from the Fixed Interest Account to any of the Investment Divisions You choose. You select the day of the month and the number of months over which the transfers will occur. A minimum periodic transfer of $50 is required. Once your Fixed Interest Account Balance is exhausted, this strategy is automatically discontinued. 27 The Allocator and the Equity Generator are dollar cost averaging strategies. Dollar cost averaging involves investing at regular intervals of time. Since this involves continuously investing regardless of fluctuating prices, You should consider whether You wish to continue the strategy through periods of fluctuating prices. We will terminate all transactions under any automated investment strategy upon notification of your death. PURCHASE PAYMENTS There is no minimum purchase payment. You may continue to make purchase payments while You receive Systematic Withdrawal Program payments, as described later in this Prospectus, unless your purchase payments are made through payroll deduction. We will not issue the Deferred Annuity to You if You are age 80 or older or younger than age 18 for the TSA Deferred Annuity described in this Prospectus. For SEPs and SIMPLE IRAs Deferred Annuities, the minimum issue age is 21. You will not receive the 3% credit associated with the B and L Classes (described in the section titled "Eligible Rollover Distribution and Direct Transfer Credit for B and L Classes") unless You are less than 66 years old at date of issue. We will not accept your purchase payments if You are age 90 or older. PURCHASE PAYMENTS--SECTION 403(B) PLANS The Internal Revenue Service announced new regulations affecting Section 403(b) plans and arrangements, which were generally effective January 1, 2009. As part of these regulations, employers will need to meet certain requirements in order for their employees' annuity contracts that fund these programs to retain a tax deferred status under Section 403(b). Prior to the new rules, transfers of one annuity contract to another would not result in a loss of tax deferred status under 403(b) under certain conditions (so-called "90-24 transfers"). The new regulations have the following effect regarding transfers: (1) a newly issued contract funded by a transfer which is completed AFTER September 24, 2007, is subject to the employer requirements referred to above; (2) additional purchase payments made AFTER September 24, 2007, to a contract that was funded by a 90-24 transfer ON OR BEFORE September 24, 2007, MAY subject the contract to this new employer requirement. In consideration of these regulations, we have determined to only make available the Contract for purchase (including transfers) where your employer currently permits salary reduction contributions to be made to the Contract. If your Contract was issued previously as a result of a 90-24 transfer completed on or before September 24, 2007, and You have never made salary reduction contributions into your Contract, we urge You to consult with your tax adviser prior to making additional purchase payments. ALLOCATION OF PURCHASE PAYMENTS You decide how your money is allocated among the Fixed Interest Account, if available, and the Investment Divisions. You can change your allocations for future purchase payments. We will make allocation changes when we receive your request for a change. You may also specify an effective date for the change as long as it is within 30 days after we receive the request. LIMITS ON PURCHASE PAYMENTS Your ability to make purchase payments may be limited by: . Federal tax laws or regulatory requirements; . Our right to limit the total of your purchase payments to $1,000,000; 28 . Our right to restrict purchase payments to the Fixed Interest Account if (1) the interest rate we credit in the Fixed Interest Account is equal to the guaranteed minimum rate as stated in your Deferred Annuity; or (2) your Fixed Interest Account Balance is equal to or exceeds our maximum for a Fixed Interest Account allocation (e.g., $1,000,000); . Participation in the Systematic Withdrawal Program (as described later); and . Leaving your job. THE VALUE OF YOUR INVESTMENT Accumulation Units are credited to You when You make purchase payments or transfers into an Investment Division. When You withdraw or transfer money from an Investment Division (as well as when we apply the Annual Contract Fee and the GMIB or LWG charge, if chosen as an optional benefit), accumulation units are liquidated. We determine the number of accumulation units by dividing the amount of your purchase payment, transfer or withdrawal by the Accumulation Unit Value on the date of the transaction. This is how we calculate the Accumulation Unit Value for each Investment Division: . First, we determine the change in investment performance (including any investment-related charge) for the underlying Portfolio from the previous trading day to the current trading day; . Next, we subtract the daily equivalent of the Separate Account charge (for the class of the Deferred Annuity You have chosen, including any optional benefits) for each day since the last Accumulation Unit Value was calculated; and . Finally, we multiply the previous Accumulation Unit Value by this result. Examples Calculating the Number of Accumulation Units Assume You make a purchase payment of $500 into one Investment Division and that Investment Division's Accumulation Unit Value is currently $10.00. You would be credited with 50 accumulation units. $500 = 50 accumulation units --- $10 Calculating the Accumulation Unit Value Assume yesterday's Accumulation Unit Value was $10.00 and the number we calculate for today's investment experience (minus charges) for an underlying Portfolio is 1.05. Today's Accumulation Unit Value is $10.50. The value of your $500 investment is then $525 (50 x $10.50 = $525). $10.00 x 1.05 = $10.50 is the new Accumulation Unit Value However, assume that today's investment experience (minus charges) is .95 instead of 1.05. Today's Accumulation Unit Value is $9.50. The value of your $500 investment is then $475 (50 x $9.50 = $475). $10.00 x .95 = $9.50 is the new Accumulation Unit Value TRANSFER PRIVILEGE You may make tax-free transfers among Investment Divisions or between the Investment Divisions and the Fixed Interest Account, if available. For us to process a transfer, You must tell us: . The percentage or dollar amount of the transfer; . The Investment Divisions (or Fixed Interest Account) from which You want the money to be transferred; 29 . The Investment Divisions (or Fixed Interest Account) to which You want the money to be transferred; and . Whether You intend to start, stop, modify or continue unchanged an automated investment strategy by making the transfer. If You receive the eligible rollover distribution and direct transfer credit and You have a 457(b), 403(a) or TSA ERISA Deferred Annuity, You must allocate this amount to the Fixed Interest Account and You must keep any such amounts in the Fixed Interest Account for five years or You will forfeit the credit. We reserve the right to restrict transfers to the Fixed Interest Account if (1) the interest rate we credit in the Fixed Interest Account is equal to the guaranteed minimum rate as stated in your Deferred Annuity; or (2) your Fixed Interest Account Balance is equal to or exceeds our maximum for Fixed Interest Account allocations (e.g., $1,000,000). Your transfer request must be in Good Order and completed prior to the close of the Exchange on a business day if You want the transaction to take place on that day. All other transfer requests in Good Order will be processed on our next business day. We may require You to use our original forms and maintain a minimum Account Balance (if the transfer is in connection with an automated investment strategy or if there is an outstanding loan from the Fixed Interest Account). "MARKET TIMING" POLICIES AND PROCEDURES The following is a discussion of our market timing policies and procedures. They apply to both the "pay-in" and "pay-out" phase of your Deferred Annuity. Frequent requests from contract owners to make transfers/reallocations may dilute the value of a Portfolio's shares if the frequent transfers/reallocations involve an attempt to take advantage of pricing inefficiencies created by a lag between a change in the value of the securities held by the Portfolio and the reflection of that change in the Portfolio's share price ("arbitrage trading"). Regardless of the existence of pricing inefficiencies, frequent transfers/reallocations may also increase brokerage and administrative costs of the underlying Portfolios and may disrupt Portfolio management strategy, requiring a Portfolio to maintain a high cash position and possibly resulting in lost investment opportunities and forced liquidations ("disruptive trading"). Accordingly, arbitrage trading and disruptive trading activities (referred to collectively as "market timing") may adversely affect the long-term performance of the Portfolios, which may in turn adversely affect contract owners and other persons who may have an interest in the Contracts (e.g., Annuitants and Beneficiaries). We have policies and procedures that attempt to detect and deter frequent transfers/reallocations in situations where we determine there is a potential for arbitrage trading. Currently, we believe that such situations may be presented in the international, small-cap, and high-yield Portfolios (i.e., American Funds Global Small Capitalization, Clarion Global Real Estate, Harris Oakmark International, Invesco Small Cap Growth, Loomis Sayles Small Cap Core, Loomis Sayles Small Cap Growth, Lord Abbett Bond Debenture, MFS(R) Research International, Met/Templeton Growth, MSCI EAFE(R) Index, Neuberger Berman Genesis, Russell 2000(R) Index, T. Rowe Price Small Cap Growth, Third Avenue Small Cap Value, and Western Asset Management Strategic Bond Opportunities--the "Monitored Portfolios") and we monitor transfer/reallocation activity in those Monitored Portfolios. In addition, as described below, we intend to treat all American Funds Insurance Series(R) Portfolios ("American Funds portfolios") as Monitored Portfolios. We employ various means to monitor transfer/reallocation activity, such as examining the frequency and size of transfers/reallocations into and out of the Monitored Portfolios within given periods of time. For example, we currently monitor transfer/reallocation activity to determine if, for each category of international, small-cap, and high-yield portfolios, in a 12-month period there were, (1) six or more transfers/reallocations involving the given category; (2) cumulative gross transfers/reallocations involving the given category that exceed the current Account Balance; and (3) two or more "round-trips" involving any Monitored 30 Portfolio in the given category. A round-trip generally is defined as a transfer/reallocation in followed by a transfer/reallocation out within the next seven calendar days or a transfer/reallocation out followed by a transfer/reallocation in within the next seven calendar days, in either case subject to certain other criteria. We do not believe that other Portfolios present a significant opportunity to engage in arbitrage trading and therefore do not monitor transfer/reallocation activity in those Portfolios. We may change the Monitored Portfolios at any time without notice in our sole discretion. In addition to monitoring transfer/reallocation activity in certain Portfolios, we rely on the underlying Portfolios to bring any potential disruptive transfer/reallocation activity they identify to our attention for investigation on a case-by-case basis. We will also investigate other harmful transfer/reallocation activity that we identify from time to time. We may revise these policies and procedures in our sole discretion at any time without prior notice. As a condition to making their portfolios available in our products, American Funds(R) requires us to treat all American Funds portfolios as Monitored Portfolios under our current market timing and excessive trading policies and procedures. Further, American Funds(R) requires us to impose additional specified monitoring criteria for all American Funds portfolios available under the Contract, regardless of the potential for arbitrage trading. We are required to monitor transfer/reallocation activity in American Funds portfolios to determine if there were two or more transfers/reallocations in followed by transfers/reallocations out, in each case of a certain dollar amount or greater, in any 30 day period. A first violation of the American Funds(R) monitoring policy will result in a written notice of violation; each additional violation will result in the imposition of a six-month restriction, during which period we will require all transfer requests to or from an American Funds portfolio to be submitted with an original signature. Further, as Monitored Portfolios, all American Funds portfolios also will be subject to our current market timing and excessive trading policies, procedures and restrictions, (described below) and transfer/reallocation restrictions may be imposed upon a violation of either monitoring policy. Our policies and procedures may result in transfer/reallocation restrictions being applied to deter market timing. Currently, when we detect transfer/reallocation activity in the Monitored Portfolios that exceeds our current transfer/reallocation limits, or other transfer/reallocation activity that we believe may be harmful to other contract owners or other persons who have an interest in the Contracts, we require all future requests to or from any Monitored Portfolios or other identified Portfolios under that Contract to be submitted with an original signature. Transfers made under a dollar cost averaging program, a rebalancing program or, if applicable, any asset allocation program described in this prospectus are not treated as transfers when we evaluate patterns for market timing. The detection and deterrence of harmful transfer/reallocation activity involves judgments that are inherently subjective, such as the decision to monitor only those Portfolios we believe are susceptible to arbitrage trading or the determination of the transfer/reallocation limits. Our ability to detect and/or restrict such transfer/reallocation activity may be limited by operational and technological systems, as well as our ability to predict strategies employed by contract owners to avoid such detection. Our ability to restrict such transfer/reallocation activity also may be limited by provisions of the Contract. Accordingly, there is no assurance that we will prevent all transfer/reallocation activity that may adversely affect contract owners and other persons with interests in the Contracts. We do not accommodate market timing in any Portfolios and there are no arrangements in place to permit any contract owner to engage in market timing; we apply our policies and procedures without exception, waiver, or special arrangement. The Portfolios may have adopted their own policies and procedures with respect to market timing transactions in their respective shares, and we reserve the right to enforce these policies and procedures. For example, Portfolios may assess a redemption fee (which we reserve the right to collect) for shares held for a relatively short period. The prospectuses for the Portfolios describe any such policies and procedures, which may be more or less restrictive than the policies and procedures we have adopted. Although we may not have the contractual authority or the operational capacity to apply the market timing policies and procedures of the Portfolios, we have entered in a written agreement, as required by SEC regulation, with each Portfolio or its principal underwriter that obligates us to provide to the Portfolio promptly upon 31 request certain information about the trading activity of individual contract owners, and to execute instructions from the Portfolio to restrict or prohibit further purchases or transfers/reallocations by specific contract owners who violate the frequent trading policies established by the Portfolio. In addition, contract owners and other persons with interests in the Contracts should be aware that the purchase and redemption orders received by the Portfolios generally are "omnibus" orders from intermediaries such as retirement plans or separate accounts funding variable insurance contracts. The omnibus orders reflect the aggregation and netting of multiple orders from individual owners of variable insurance contracts and/or individual retirement plan participants. The omnibus nature of these orders may limit the Portfolios in their ability to apply their market timing policies and procedures. In addition, the other insurance companies and/or retirement plans may have different policies and procedures or may not have any such policies and procedures because of contractual limitations. For these reasons we cannot guarantee that the Portfolios (and thus contract owners) will not be harmed by transfer/reallocation activity relating to the other insurance companies and/or retirement plans that may invest in the Portfolios. If a Portfolio believes that an omnibus order reflects one or more transfer/reallocation requests from contract owners engaged in disruptive trading activity, the Portfolio may reject the entire omnibus order. In accordance with applicable law, we reserve the right to modify or terminate the transfer/reallocation privilege at any time. We also reserve the right to defer or restrict the transfer/reallocation privilege at any time that we are unable to purchase or redeem shares of any of the Portfolios, including any refusal or restriction on purchases or redemptions of their shares as a result of their own policies and procedures on market timing and disruptive trading activities (even if an entire omnibus order is rejected due to the market timing or disruptive trading activity of a single contract owner). You should read the Portfolio prospectuses for more details. ACCESS TO YOUR MONEY You may withdraw either all or part of your Account Balance from the Deferred Annuity. Other than those made through the Systematic Withdrawal Program, withdrawals must be at least $500 or the Account Balance, if less. If any withdrawal would decrease your Account Balance below $2,000, we may consider this a request for a full withdrawal. To process your request, we need the following information: . The percentage or dollar amount of the withdrawal; and . The Investment Divisions (or Fixed Interest Account) from which You want the money to be withdrawn. Your withdrawal may be subject to Withdrawal Charges. Generally, if You request, we will make payments directly to other investments on a tax-free basis. You may only do so if all applicable tax and state regulatory requirements are met and we receive all information necessary for us to make the payment. We may require You to use our original forms. We may withhold payment of withdrawal proceeds if any portion of those proceeds would be derived from your check that has not yet cleared (I.E., that could still be dishonored by your banking institution). We may use telephone, fax, Internet or other means of communication to verify that payment from your check has been or will be collected. We will not delay payment longer than necessary for us to verify that payment has been or will be collected. You may avoid the possibility of delay in the disbursement of proceeds coming from a check that has not yet cleared by providing us with a certified check. SYSTEMATIC WITHDRAWAL PROGRAM If we agree and if approved in your state, You may choose to automatically withdraw a specific dollar amount or a percentage of your Account Balance each Contract Year. This program is not available under the 457(b) Deferred Annuity issued to tax-exempt organizations. This amount is then paid in equal portions throughout the Contract Year according to the time frame You select, e.g., monthly, quarterly, semi-annually or annually. Once the Systematic Withdrawal Program is 32 initiated, the payments will automatically renew each Contract Year. Income taxes, tax penalties and Withdrawal Charges may apply to your withdrawals. Program payment amounts are subject to our required minimums and administrative restrictions. Your Account Balance will be reduced by the amount of your Systematic Withdrawal Program payments and applicable Withdrawal Charges. Payments under this program are not the same as income payments You would receive from a Deferred Annuity pay-out option. The Systematic Withdrawal Program is not available to the B and L Classes of the Deferred Annuities until the second Contract Year. The Systematic Withdrawal Program is not available in conjunction with any automated investment strategy. If You elect to withdraw a dollar amount, we will pay You the same dollar amount each Contract Year. If You elect to withdraw a percentage of your Account Balance, each Contract Year we recalculate the amount You will receive based on your new Account Balance. Calculating Your Payment Based on a Percentage Election for the First Contract Year You Elect the Systematic Withdrawal Program: If You choose to receive a percentage of your Account Balance, we will determine the amount payable on the date these payments begin. When You first elect the program, we will pay this amount over the remainder of the Contract Year. For example, if You select to receive payments on a monthly basis with the percentage of your Account Balance You request equaling $12,000, and there are six months left in the Contract Year, we will pay You $2,000 a month. Calculating Your Payment for Subsequent Contract Years of the Systematic Withdrawal Program: For each subsequent year that your Systematic Withdrawal Program remains in effect, we will deduct from your Deferred Annuity and pay You over the Contract Year either the amount that You chose or an amount equal to the percentage of your Account Balance You chose. For example, if You select to receive payments on a monthly basis, ask for a percentage and that percentage of your Account Balance equals $12,000 at the start of a Contract Year, we will pay You $1,000 a month. If You do not provide us with your desired allocation, or there are insufficient amounts in the Investment Divisions or the Fixed Interest Account that You selected, the payments will be taken out pro rata from the Fixed Interest Account and any Investment Divisions in which You then have money. Selecting a Payment Date: You select a payment date which becomes the date we make the withdrawal. We must receive your request in Good Order at least 10 days prior to the selected payment date. (If You would like to receive your Systematic Withdrawal Program payment on or about the first of the month, You should request payment by the 20th of the month.) If we do not receive your request in time, we will make the payment the following month on the date You selected. If You do not select a payment date, we will automatically begin systematic withdrawals within 30 days after we receive your request. Changes in the dollar amount, percentage or timing of the payments can be made once a year at the beginning of any Contract Year and one other time during the Contract Year. If You make any of these changes, we will treat your request as though You were starting a new Systematic Withdrawal Program. You may request to stop your Systematic Withdrawal Program at any time. We must receive any request in Good Order at least 30 days in advance. Although we need your written authorization to begin this program, You may cancel this program at any time by telephone or by writing to us at your MetLife Administrative Office. We will also terminate your participation in the program upon notification of your death. Systematic Withdrawal Program payments may be subject to a Withdrawal Charge unless an exception to this charge applies. For purposes of determining how much of the annual payment amount is exempt from this charge under the free withdrawal provision (discussed later), all payments from a Systematic Withdrawal Program in a Contract Year are characterized as a single lump sum withdrawal as of your first payment date in that Contract Year. When You first elect the program, we will calculate the percentage of your Account Balance your Systematic Withdrawal Program payment represents based on your Account Balance on the first Systematic Withdrawal Program payment date. For all subsequent Contract Years, we will calculate the percentage of your Account Balance your Systematic Withdrawal Program payment represents based on your Account Balance on the first Systematic Withdrawal Program payment date of that Contract 33 Year. We will determine separately the Withdrawal Charge and any relevant factors (such as applicable exceptions) for each Systematic Withdrawal Program payment as of the date it is withdrawn from your Deferred Annuity. See "LWG -- Annual Benefit Payment -- Systematic Withdrawal Program" for more information concerning utilizing the Systematic Withdrawal Program in conjunction with the LWG. Participation in the Systematic Withdrawal Program is subject to our administrative procedures. MINIMUM DISTRIBUTION In order for You to comply with certain tax law provisions, You may be required to take money out of your Deferred Annuity. Rather than receiving your minimum required distribution in one annual lump-sum payment, You may request that we pay it to You in installments throughout the calendar year. However, we may require that You maintain a certain Account Balance at the time You request these payments. You may not have a Systematic Withdrawal Program in effect if we pay your minimum required distribution in installments. We will terminate your participation in the program upon notification of your death. CHARGES There are two types of charges You pay while You have money in an Investment Division: . Separate Account charge, and . Investment-related charge. We describe these charges below. The amount of the charge may not necessarily correspond to costs associated with providing the services or benefits indicated by the designation of the charge or associated with the Deferred Annuity. For example, the Withdrawal Charge may not fully cover all of the sales and distribution expenses actually incurred by us, and proceeds from other charges, including the Separate Account charge, may be used in part to cover such expenses. We can profit from certain Deferred Annuity charges. SEPARATE ACCOUNT CHARGE Each class of the Deferred Annuity has a different annual Separate Account charge that is expressed as a percentage of average account value. A portion of the annual Separate Account charge is paid to us daily based upon the value of the amount You have in the Separate Account on the day the charge is assessed. You pay an annual Separate Account charge that, during the pay-in phase, for the Standard Death Benefit will not exceed 1.15% for the B Class, 1.45% for the C Class and 1.30% for the L Class of the amounts in the Investment Divisions or, in the case of each American Funds(R) Investment Division, 1.40% for the B Class, 1.70% for the C Class and 1.55% for the L Class. This charge pays us for the risk that You may live longer than we estimated. Then, we could be obligated to pay You more in payments from a pay-out option than we anticipated. Also, we bear the risk that the guaranteed death benefit we would pay should You die during your pay-in phase is larger than your Account Balance. This charge also includes the risk that our expenses in administering the Deferred Annuity may be greater than we estimated. The Separate Account charge also pays us for distribution costs to both our licensed salespersons and other broker-dealers. The chart below summarizes the maximum Separate Account charge for each class of the Deferred Annuity with each death benefit prior to entering the pay-out phase of the Contract. The Separate Account charge You pay will not reduce the number of accumulation units credited to You. Instead, we deduct the charges as part of the calculation of the Accumulation Unit Value. We guarantee that the Separate Account insurance-related charge will not increase while You have the Deferred Annuity. 34 SEPARATE ACCOUNT CHARGES*
---------------------------------------------------------------- B Class C Class L Class ---------------------------------------------------------------- StandardDeath Benefit 1.15% 1.45% 1.30% ---------------------------------------------------------------- OptionalAnnual Step-Up Death Benefit 1.25% 1.55% 1.40% ----------------------------------------------------------------
* We currently charge an additional Separate Account charge of 0.25% of average daily net assets in the American Funds Growth-Income, American Funds Growth, American Funds Bond and American Funds Global Small Capitalization Investment Divisions. We reserve the right to impose an additional Separate Account charge on Investment Divisions that we add to the Contract in the future. The additional amount will not exceed the annual rate of 0.25% of average daily net assets in any such Investment Divisions. INVESTMENT-RELATED CHARGE This charge has two components. The first pays the investment managers for managing money in the Portfolios. The second consists of Portfolio operating expenses and 12b-1 Plan fees. The percentage You pay for the investment-related charge depends on which Investment Divisions You select. Each class of shares available to the Deferred Annuities, except for the Calvert Fund, has a 12b-1 Plan fee, which pays for distribution expenses. Class B shares available in the Metropolitan Fund and the Met Investors Fund have a 0.25% 12b-1 Plan fee. Class C shares available in the Met Investors Fund have a 0.55% 12b-1 Plan fee. Class 2 shares available in the American Funds(R) have a 0.25% 12b-1 Plan fee. The Calvert Fund shares which are available have no 12b-1 Plan fee. Amounts for each Investment Division for the previous year are listed in the Table of Expenses. ANNUAL CONTRACT FEE There is a $30 Annual Contract Fee which is deducted on a pro-rata basis from the Investment Divisions on the last business day prior to the Contract Anniversary. This fee is waived if your total purchase payments for the prior 12 months are at least $2,000 on the day the fee is to be deducted or if your Account Balance is at least $25,000 on the day the fee is to be deducted. This fee will also be waived if You are on medical leave approved by your employer or called to active armed service duty at the time the fee is to be deducted and your employer has informed us of your status. The fee will be deducted at the time of a total withdrawal of your Account Balance on a pro-rata basis (determined based upon the number of complete months that have elapsed since the prior Contract Anniversary). This fee pays us for our miscellaneous administrative costs. These costs which we incur include financial, actuarial, accounting and legal expenses. We reserve the right to waive the Annual Contract Fee for specific groups based upon the nature of the group, size, aggregate amount of anticipated purchase payments or anticipated persistency. The waiver will be implemented in a reasonable manner and will not be unfairly discriminatory to the interests of any contract owner. OPTIONAL GMIB The optional GMIB is available for an additional charge of 0.70% of the guaranteed minimum income base (as defined later in this Prospectus), deducted at the end of each Contract Year by withdrawing amounts on a pro-rata basis from your Fixed Interest Account Balance (net of any outstanding loans) and Separate Account Balance. (We take amounts from the Separate Account by canceling accumulation units from your Separate Account). If You make a total withdrawal of your Account Balance or elect to receive income payments under your Contract, a pro-rata portion of the annual optional benefit charge will be assessed based on the number of months from the last Contract Anniversary to the date of the withdrawal or the beginning of income payments. Prior to May 4, 2009, the charge for the optional GMIB is 0.35% of the guaranteed minimum income base. (For employer groups with TSA ERISA, 457(b) and 403(a) Deferred Annuities that were established on or before May 1, 2009 which elected at issue to make available the GMIB under their group Contract, participants who submit an application after May 1, 2009, will receive the lower charge of 0.35%.) 35 OPTIONAL LWG The LWG is available for an additional charge of 0.95% of the Total Guaranteed Withdrawal Amount (as defined later in this Prospectus), deducted at the end of each Contract Year after applying any 5% Compounding Income Amount and prior to taking into account any Automatic Annual Step-Up occurring on the Contract Anniversary, by withdrawing amounts on a pro-rata basis from your Fixed Interest Account Balance and Separate Account Balance. We take amounts from the Separate Account by canceling accumulation units from your Separate Account Balance. If an Automatic Annual Step-Up occurs under a LWG, we may increase the LWG charge to the then current charge for the same optional benefit, but no more than a maximum of 0.95%. If the LWG is in effect, the charge will continue even if your Remaining Guaranteed Withdrawal Amount equals zero. Prior to May 4, 2009, the charge for the optional Lifetime Withdrawal Guarantee Benefit prior to any Automatic Step-Up is 0.50% of the Total Guaranteed Withdrawal Amount and the maximum charge upon an Automatic Annual Step-Up is 0.95%. PREMIUM AND OTHER TAXES Some jurisdictions tax what are called "annuity considerations." These may apply to purchase payments, Account Balances and death benefits. In most jurisdictions, we currently do not deduct any money from purchase payments, Account Balances or death benefits to pay these taxes. Generally, our practice is to deduct money to pay premium taxes (also known as "annuity" taxes) only when You exercise a pay-out option. In certain jurisdictions, we may deduct money to pay premium taxes on lump sum withdrawals or when You exercise a pay-out option. We may deduct an amount to pay premium taxes some time in the future since the laws and the interpretation of the laws relating to annuities are subject to change. Premium taxes, if applicable, currently depend on the Deferred Annuity You purchase and your home state or jurisdiction. The chart in Appendix I shows the jurisdictions where premium taxes are charged and the amount of these taxes. We also reserve the right to deduct from purchase payments, Account Balances, withdrawals or income payments, any taxes (including, but not limited to, premium taxes) paid by us to any government entity relating to the Contracts. Examples of these taxes include, but are not limited to, generation skipping transfer tax or a similar excise tax under Federal or state tax law which is imposed on payments we make to certain persons and income tax withholdings on withdrawals and income payments to the extent required by law. We will, at our sole discretion, determine when taxes relate to the Contracts. We may, at our sole discretion, pay taxes when due and deduct that amount from the Account Balance at a later date. Payment at an earlier date does not waive any right we may have to deduct amounts at a later date. WITHDRAWAL CHARGES A Withdrawal Charge may apply if You make a withdrawal from your Deferred Annuity. There are no Withdrawal Charges for the C Class Deferred Annuity or in certain situations or upon the occurrence of certain events (see "When No Withdrawal Charges Applies"). A Withdrawal Charge may be assessed if amounts are withdrawn pursuant to divorce or a separation instrument, if permissible under tax law. The Withdrawal Charge will be determined separately for each Investment Division from which a withdrawal is made. The Withdrawal Charge is assessed against the amount withdrawn. For a full withdrawal, we multiply the amount to which the Withdrawal Charge applies by the percentage shown, keep the result as a Withdrawal Charge and pay You the rest. For partial withdrawals, we multiply the amount to which the Withdrawal Charge applies by the percentage shown, keep the result as a Withdrawal Charge and pay You the rest. We will treat your request as a request for a full withdrawal if your Account Balance is not sufficient to pay both the requested withdrawal and the Withdrawal Charge, or if the withdrawal leaves an Account Balance that is less than the minimum required. 36 The Withdrawal Charge on the amount withdrawn for each class is as follows:
IF WITHDRAWN DURING CONTRACT YEAR B CLASS C CLASS L CLASS --------------------------------- ------- ------- ------- 1...................... 9% None 9% 2...................... 9% 8% 3...................... 9% 7% 4...................... 9% 6% 5...................... 8% 5% 6...................... 7% 4% 7...................... 6% 2% 8...................... 5% 0% 9...................... 4% 0% 10..................... 3% 0% 11..................... 2% 0% 12..................... 1% 0% Thereafter............. 0% 0%
(For Deferred Annuities issued in Connecticut and certain other states or for public school employees in certain states, the Withdrawal Charge for the B Class is as follows: During Contract Year 1: 10%, Year 2: 9%, Year 3: 8%, Year 4: 7%, Year 5: 6%, Year 6: 5%, Year 7: 4%, Year 8: 3%, Year 9: 2%, Year 10: 1%, Year 11 and thereafter: 0%.) (For Deferred Annuities issued in New York and certain other states, the Withdrawal Charges for the B Class are as follows: during Contract Year 1: 9%; Year 2: 9%; Year 3: 8%; Year 4: 7%; Year 5: 6%; Year 6: 5%; Year 7: 4%; Year 8: 3%; Year 9: 2%; Year 10: 1%; Year 11 and thereafter: 0%.) The Withdrawal Charge reimburses us for our costs in selling the Deferred Annuities. We may use our profits (if any) from the Separate Account charge to pay for our costs to sell the Deferred Annuities which exceed the amount of Withdrawal Charges we collect. WHEN NO WITHDRAWAL CHARGE APPLIES In some cases, we will not charge You the Withdrawal Charge when You make a withdrawal. We may, however, ask You to prove that You meet any of the conditions listed below. You do not pay a Withdrawal Charge: . If You have a C Class Deferred Annuity. . On transfers You make within your Deferred Annuity among the Investment Divisions and transfers to or from the Fixed Interest Account. . On the amount surrendered after twelve Contract Years (ten years in Connecticut and certain other states) for the B Class and seven years for the L Class. . If You choose payments over one or more lifetimes, except, in certain cases, under the GMIB. . If You die during the pay-in phase. Your Beneficiary will receive the full death benefit without deduction. . After the first Contract Year, if You withdraw up to 10% of your total Account Balance, per Contract Year. This 10% total withdrawal may be taken in an unlimited number of partial withdrawals during that Contract Year. These withdrawals are made on a non-cumulative basis. 37 . If the withdrawal is to avoid required Federal income tax penalties or to satisfy Federal income tax rules concerning minimum distribution requirements that apply to your Deferred Annuity. For purposes of this exception, we assume that the Deferred Annuity is the only Contract or funding vehicle from which distributions are required to be taken and we will ignore all other account balances. This exception does not apply if the withdrawal is to satisfy Section 72(t) requirements under the Internal Revenue Code. . The Waiver of Withdrawal Charge for Nursing Home or Hospital Confinement Rider and Waiver of Withdrawal Charge for Terminal Illness Rider are only available if You are less than 80 years old on the Contract issue date. For the TSA, SEP and SIMPLE Deferred Annuities, after the first Contract Year, except in Massachusetts, and your Contract provides for these riders, to withdrawals to which a Withdrawal Charge would otherwise apply, if You as owner or participant under a Contract: . Have been a resident of certain nursing home facilities or a hospital for a minimum of 90 consecutive days or for a minimum total of 90 days where there is no more than a 6 month break in that residency and the residencies are for related causes, where You have exercised this right no later than 90 days of exiting the nursing home facility or hospital; or . Are diagnosed with a terminal illness and not expected to live more than 12 months. . This Contract feature is only available if You are less than 65 years old on the date You became disabled and if the disability commences subsequent to the first Contract Anniversary. After the first Contract Year, if approved in your state, and your Contract provides for this, if You are disabled as defined in the Federal Social Security Act and if You have been the participant continuously since the issue of the Contract. . If You have transferred money which is not subject to a withdrawal charge (because You have satisfied contractual provisions for a withdrawal without the imposition of a contract withdrawal charge) from certain eligible MetLife contracts or certain eligible contracts of MetLife affiliates into the Deferred Annuity, and the withdrawal is of these transferred amounts and we agree. Any purchase payments made after the transfer are subject to the usual Withdrawal Charge schedule. . For the TSA, SEP and SIMPLE IRAs Deferred Annuities, if You retire from the employer You had at the time You purchased this annuity, after continuous participation in the Contract for 5 Contract Years. . For the TSA, SEP and SIMPLE IRAs Deferred Annuities, if You leave your job with the employer You had at the time You purchased this annuity, after continuous participation in the Contract for 5 Contract Years. . If You make a direct transfer to other investment vehicles we have pre-approved. . If You retire or leave your job with the employer You had at the time You became a participant in the 403(a) arrangement or 457 or TSA ERISA plan that is funded by the Deferred Annuity. (Amounts withdrawn that received the eligible rollover distribution and direct transfer credit are, however, subject to forfeiture.) . If your plan or group of which You are a participant or member permits account reduction loans, You take an account reduction loan and the withdrawal consists of these account reduction loan amounts. . If approved in your state, and if You elect the LWG and take your Annual Benefit Payment through the Systematic Withdrawal Program and only withdraw your Annual Benefit Payment. . If permitted in your state, and after the first Contract Year, if You elect the LWG and only make withdrawals each Contract Year that do not exceed on a cumulative basis your Annual Benefit Payment. . Subject to availability in your state, if the early Withdrawal Charge that would apply if not for this provision (1) would constitute less than 0.50% of your Account Balance and (2) You transfer your total Account Balance to certain eligible contracts issued by MetLife or its affiliated companies and we agree. . If permitted in your state, for TSA, TSA ERISA, 457(b) and 403(a) Deferred Annuities, if You make a direct transfer to another funding option or annuity contract issued by us or by one of our affiliates and we agree. 38 FREE LOOK You may cancel your TSA Deferred Annuity within a certain time period. This is known as a "free look." Not all Contracts issued are subject to free look provisions under state law. We must receive your request to cancel in writing by the appropriate day in your state, which varies from state to state. The time period may also vary depending on your age and whether You purchased your Deferred Annuity from us directly, through the mail or with money from another annuity or life insurance policy. Depending on state law, we may refund all of your purchase payments or your Account Balance as of the date your refund request is received at your Administrative Office in Good Order. For the TSA Deferred Annuity, any 3% credit from direct transfer and eligible distribution purchase payments does not become yours until after the "free look" period; we retrieve it if You exercise the "free look". Your exercise of any "free look" is the only circumstance under which the 3% credit will be retrieved (commonly called "recapture"). If your state requires us to refund your Account Balance, the refunded amount will include any investment performance attributable to the 3% credit. If there are any losses from investment performance attributable to the 3% credit, we will bear that loss. DEATH BENEFIT--GENERALLY One of the insurance guarantees we provide You under your Deferred Annuity is that your beneficiaries will be protected during the "pay-in" phase against market downturns. You name your Beneficiary(ies). If You intend to purchase the Deferred Annuity for use with a SEP or SIMPLE IRA, please refer to the discussion concerning IRAs in the Tax Section of this Prospectus. The standard death benefit is described below. An additional optional death benefit is described in the "Optional Benefits" section. Check your Contract and riders for the specific provisions applicable to You. The optional death benefit may not be available in your state (check with your registered representative regarding availability). The death benefit is determined as of the end of the business day on which we receive both due proof of death and an election for the payment method. If we are presented with notification of your death before any requested transaction is completed (including transactions under automated investment strategies, the minimum distribution program and the Systematic Withdrawal Program), we will cancel the request. As described above, the death benefit will be determined when we receive due proof of death and an election for the payment method. Where there are multiple Beneficiaries, the death benefit will only be determined as of the time the first Beneficiary submits the necessary documentation in Good Order. If the death benefit payable is an amount that exceeds the Account Balance on the day it is determined, we will apply to the Contract an amount equal to the difference between the death benefit payable and the Account Balance, in accordance with the current allocation of the Account Balance. This death benefit amount remains in the Investment Divisions until each of the other Beneficiaries submits the necessary documentation in Good Order to claim his/her death benefit. Any death benefit amounts held in the Investment Divisions on behalf of the remaining Beneficiaries are subject to investment risk. There is no additional death benefit guarantee. Your Beneficiary has the option to apply the death benefit less any applicable premium taxes to a pay-out option offered under your Deferred Annuity. Your Beneficiary may, however, decide to take payment in one sum, including either by check, by placing the amount in an account that earns interest, or by any other method of payment that provides the Beneficiary with immediate and full access to the proceeds or under other settlement options that we may make available. 39 TOTAL CONTROL ACCOUNT The Beneficiary may elect to have the Contract's death proceeds paid through a settlement option called the Total Control Account. The Total Control Account is an interest-bearing account through which the Beneficiary has immediate and full access to the proceeds, with unlimited draft writing privileges. We credit interest to the account at a rate that will not be less than a guaranteed minimum annual effective rate. Assets backing the Total Control Accounts are maintained in our general account and are subject to the claims of our creditors. We will bear the investment experience of such assets; however, regardless of the investment experience of such assets, the interest credited to the Total Control Account will never fall below the applicable guaranteed minimum annual effective rate. Because we bear the investment experience of the assets backing the Total Control Accounts, we may receive a profit from these assets. The Total Control Account is not insured by the FDIC or any other governmental agency. STANDARD DEATH BENEFIT If You die during the pay-in phase and You have not chosen the optional death benefit, the death benefit the Beneficiary receives will be equal to the greatest of: 1. Your Account Balance, less any outstanding loans; or 2. Total purchase payments reduced proportionately by the percentage reduction in Account Balance attributable to each partial withdrawal, less any outstanding loans (including any applicable Withdrawal Charge). EXAMPLE
---------------------------------------------------------------------------------------------------- Date Amount ------------------------------ ----------------------- A Initial Purchase Payment 10/1/2012 $100,000 ---------------------------------------------------------------------------------------------------- B Account Balance 10/1/2013 $104,000 (First Contract Anniversary) ---------------------------------------------------------------------------------------------------- C Death Benefit As of 10/1/2013 $104,000 (= greater of A and B) ---------------------------------------------------------------------------------------------------- D Account Balance 10/1/2014 $90,000 (Second Contract Anniversary) ---------------------------------------------------------------------------------------------------- E Death Benefit 10/1/2014 $100,000 (= greater of A and D) ---------------------------------------------------------------------------------------------------- F Withdrawal 10/2/2014 $9,000 ---------------------------------------------------------------------------------------------------- G Percentage Reduction in 10/2/2014 10% Account Balance (= F/D) ---------------------------------------------------------------------------------------------------- H Account Balance 10/2/2014 $81,000 after Withdrawal (= D - F) ---------------------------------------------------------------------------------------------------- I Purchase Payments reduced for Withdrawal As of $90,000 10/2/2014 [= A - (A X G)] ---------------------------------------------------------------------------------------------------- J Death Benefit 10/2/2014 $90,000 (= greater of H and I) ----------------------------------------------------------------------------------------------------
Notes to Example: Any Withdrawal Charge withdrawn from the Account Balance is included when determining the percentage of Account Balance withdrawn. Account Balances on 10/1/13 and 10/2/13 are assumed to be equal prior to the withdrawal. There are no loans. 40 OPTIONAL DEATH BENEFIT Please note that the decision to purchase the optional death benefit is made at the time of application and is irrevocable. The optional death benefit is available subject to state approval. Your employer, association or other group contract holder may limit the availability of any optional benefit. (An account reduction loan will decrease the value of any optional benefit purchased with this Contract. See your employer for more information about the availability and features of account reduction loans.). ANNUAL STEP-UP DEATH BENEFIT The Annual Step-Up Death Benefit is designed to provide protection against adverse investment experience. In general, it guarantees that the death benefit will not be less than the greater of (1) your Account Balance; or (2) your "Highest Anniversary Value" (as described below) as of each Contract Anniversary. You may purchase at application a death benefit that provides that the death benefit amount is equal to the greater of: 1. The Account Balance, less any outstanding loans; 2. Total purchase payments reduced proportionately for withdrawals and any outstanding loans (including any applicable Withdrawal Charge); or 3. "Highest Anniversary Value" as of each Contract Anniversary, determined as follows: . At issue, the Highest Anniversary Value is your initial purchase payment; . Increase the Highest Anniversary Value by each subsequent purchase payment; . Reduce the Highest Anniversary Value proportionately by the percentage reduction in Account Balance attributable to each subsequent partial withdrawal, less any outstanding loans (including any applicable Withdrawal Charge); . On each Contract Anniversary before your 81st birthday, compare the (1) then-Highest Anniversary Value to the (2) current Account Balance and set the Highest Anniversary Value equal to the greater of the two. . After the Contract Anniversary immediately preceding your 81st birthday, adjust the Highest Anniversary Value only to: . Increase the Highest Anniversary Value by each subsequent purchase payment or . Reduce the Highest Anniversary Value proportionately by the percentage reduction in Account Balance attributable to each subsequent partial withdrawal, less any outstanding loans (including any applicable Withdrawal Charge). For purposes of determining the Highest Anniversary Value as of the applicable Contract Anniversary, purchase payments increase the Highest Anniversary Value on a dollar for dollar basis. Partial withdrawals, however, reduce the Highest Anniversary Value proportionately, that is, the percentage reduction is equal to the dollar amount of the withdrawal (plus applicable Withdrawal Charges) divided by the Account Balance immediately before the withdrawal. The Annual Step-Up Death Benefit is available for a charge, in addition to the Standard Death Benefit charge, of 0.10% annually of the average daily value of the amount You have in the Separate Account. 41 EXAMPLE: -------------------------------------------------------------------------------------- Date Amount ------------------------------ ----------------------- A Initial Purchase 10/1/2012 $100,000 Payment -------------------------------------------------------------------------------------- B Account Balance 10/1/2013 $104,000 (First Contract Anniversary) -------------------------------------------------------------------------------------- C Death Benefit As of 10/1/2013 $104,000 (Highest Anniversary (= greater of A and B) Value) -------------------------------------------------------------------------------------- D Account Balance 10/1/2014 $90,000 (Second Contract Anniversary) -------------------------------------------------------------------------------------- E Death Benefit 10/1/2014 $104,000 (Highest (= greater of C and D) Contract Year Anniversary) -------------------------------------------------------------------------------------- F Withdrawal 10/2/2014 $9,000 -------------------------------------------------------------------------------------- G Percentage 10/2/2014 10% Reduction in Account Balance (= F/D) -------------------------------------------------------------------------------------- H Account Balance 10/2/2014 $81,000 after Withdrawal (= D-F) -------------------------------------------------------------------------------------- I Highest Anniversary As of 10/2/2014 $93,600 Balance reduced for Withdrawal (= E-(E X G)) -------------------------------------------------------------------------------------- J Death Benefit 10/2/2014 $93,600 (= greater of H and I) --------------------------------------------------------------------------------------
Notes to Example: Any Withdrawal Charge withdrawn from the Account Balance is included when determining the percentage of Account Balance withdrawn. The Account Balances on 10/1/13 and 10/2/13 are assumed to be equal prior to the withdrawal. The purchaser is age 60 at issue. There are no loans. LIVING BENEFITS GMIB--(MAY ALSO BE KNOWN AS THE "PREDICTOR" IN OUR SALES LITERATURE AND ADVERTISING) We offer the GMIB that, for an additional charge, offers protection against market risk (the risk that your investments may decline in value or underperform your expectations). Our guaranteed income benefit, called GMIB, is designed to allow You to invest your Account Balance in the market while at the same time assuring a specified guaranteed level of minimum fixed income payments if You elect to receive income payments ("annuitize"). The fixed annuity payment amount is guaranteed regardless of investment performance or the actual Account Balance at the time You elect income payments. Prior to exercising this optional benefit and annuitizing your Contract, You may make withdrawals up to a maximum level and still maintain the optional benefit amount. This optional benefit must be elected at Contract issue. This optional benefit is designed to guarantee a predictable, minimum level of fixed income payments, regardless of investment performance of your Account Value during the pay-in phase. HOWEVER, IF APPLYING YOUR ACTUAL ACCOUNT 42 BALANCE AT THE TIME YOU ANNUITIZE THE CONTRACT TO THEN CURRENT ANNUITY PURCHASE RATES (OUTSIDE OF THE OPTIONAL BENEFIT) PRODUCES HIGHER INCOME PAYMENTS, YOU WILL RECEIVE THE HIGHER PAYMENTS, AND THUS YOU WILL HAVE PAID FOR THE OPTIONAL BENEFIT EVEN THOUGH IT WAS NOT USED. Also, prior to exercising the optional benefit, You may make specified withdrawals that reduce your income base (as explained below) during the pay-in phase and still leave the optional benefit guarantees intact, provided the conditions of the optional benefit are met. Your registered representative can provide You an illustration of the amounts You would receive, with or without withdrawals, if You exercised the optional benefit. The GMIB is available in all states except New York. In the states of Montana, Utah and West Virginia, GMIB is only available for elective TSA (non-ERISA) and SEP/SIMPLE Deferred Annuities. In Oregon, GMIB is only available for TSA ERISA, 403(a) and 457(b) Deferred Annuities. Once elected, the optional benefit cannot be terminated except as discussed below. GMIB AND QUALIFIED CONTRACTS THE GMIB MAY HAVE LIMITED USEFULNESS IN CONNECTION WITH A QUALIFIED CONTRACT, SUCH AS TSA, TSA ERISA, IRA, 403(A) OR 457(B), IN CIRCUMSTANCES WHERE, DUE TO THE TEN YEAR WAITING PERIOD AFTER PURCHASE, THE OWNER IS UNABLE TO EXERCISE THE BENEFIT UNTIL AFTER THE REQUIRED BEGINNING DATE OF REQUIRED MINIMUM DISTRIBUTIONS UNDER THE CONTRACT. In such event, required minimum distributions received from the Contract during the ten year waiting period will have the effect of reducing the income base either on a proportionate or dollar for dollar basis, as the case may be. THIS MAY HAVE THE EFFECT OF REDUCING OR ELIMINATING THE VALUE OF ANNUITY PAYMENTS UNDER THE GMIB. YOU SHOULD CONSULT YOUR TAX ADVISER PRIOR TO ELECTING A GMIB. If You take a full withdrawal of your Account Balance, your Contract is terminated by us due to its small Account Balance and inactivity (see "When We Can Cancel Your Contract"), your Contract lapses for any reason, or in those instances where your employer has the ability to do so your employer terminates the Contract, and there remains any income base, You forfeit your income base and any further rights to the GMIB. FACTS ABOUT THE GUARANTEED INCOME BENEFIT INCOME BASE AND GMIB INCOME PAYMENTS. We calculate an "income base" (as described below) that determines, in part, the minimum amount You receive as an income payment upon exercising the GMIB and annuitizing the Contract. IT IS IMPORTANT TO RECOGNIZE THAT THIS INCOME BASE IS NOT AVAILABLE FOR CASH WITHDRAWALS AND DOES NOT ESTABLISH OR GUARANTEE YOUR ACCOUNT BALANCE OR A MINIMUM RETURN FOR ANY INVESTMENT DIVISION. After a minimum 10-year waiting period, and not more than 30 days after the Contract Anniversary following your 85th birthday, You may exercise the benefit. We then will apply the income base calculated at the time of exercise to the GMIB Annuity Table (as described below) specified in the rider in order to determine your minimum guaranteed lifetime fixed monthly income payments. (Your actual payment may be higher than this minimum if, as discussed above, the base Contract under its terms would provide a higher payment). If your employer, association or other group contract holder has instituted account reduction loans for its plan or arrangement, You have taken a loan and You have also purchased the GMIB, we will not treat amounts withdrawn from your Account Balance on account of a loan as a withdrawal from the Contract for purposes of determining the income base. In addition, we will not treat the repayment of loan amounts as a purchase payment to the Contract for the purposes of determining the income base. THE GMIB ANNUITY TABLE. The GMIB Annuity Table is specified in the rider. This table is calculated based on the Annuity 2000 Mortality Table with a 7-year age set back with interest of 2.5% per year. As with other pay-out types, the 43 amount You receive as an income payment also depends on the income type You select, your age, and your sex (where permitted by state law). THE ANNUITY RATES IN THE GMIB ANNUITY TABLE ARE CONSERVATIVE AND A WITHDRAWAL CHARGE MAY BE APPLICABLE, SO THE AMOUNT OF GUARANTEED MINIMUM LIFETIME INCOME THAT THE GMIB PRODUCES MAY BE LESS THAN THE AMOUNT OF ANNUITY INCOME THAT WOULD BE PROVIDED BY APPLYING YOUR ACCOUNT BALANCE ON YOUR ANNUITY DATE TO THEN-CURRENT ANNUITY PURCHASE RATES. If You exercise the GMIB, your income payments will be the greater of: . the income payment determined by applying the amount of the income base to the GMIB Annuity Table, or . the income payment determined for the same income type in accordance with the base Contract. (See "Pay-Out Options (or Income Options)".) If You choose not to receive income payments as guaranteed under the GMIB, You may elect any of the income options available under the Contract. IF THE AMOUNT OF THE GUARANTEED MINIMUM LIFETIME INCOME THAT THE GMIB PRODUCES IS LESS THAN THE AMOUNT OF ANNUITY INCOME THAT WOULD BE PROVIDED BY APPLYING YOUR ACCOUNT BALANCE ON THE ANNUITY DATE TO THE THEN-CURRENT ANNUITY PURCHASE RATES, THEN YOU WOULD HAVE PAID FOR AN OPTIONAL BENEFIT YOU DID NOT USE. DESCRIPTION OF THE GMIB In states where approved, the GMIB is available only up to but not including age 76 and You can only elect the GMIB at the time You purchase the Contract. THE GMIB MAY BE EXERCISED AFTER A 10-YEAR WAITING PERIOD AND THEN ONLY WITHIN 30 DAYS FOLLOWING A CONTRACT ANNIVERSARY, PROVIDED THAT THE EXERCISE MUST OCCUR NO LATER THAN THE 30-DAY PERIOD FOLLOWING THE CONTRACT ANNIVERSARY FOLLOWING YOUR 85TH BIRTHDAY. INCOME BASE The income base is equal to the greater of (a) or (b) below: (a) Highest Anniversary Value: On the issue date, the "Highest Anniversary Value" is equal to your initial purchase payment. Thereafter, the Highest Anniversary Value will be increased by subsequent purchase payments and reduced proportionately by the percentage reduction in Account Balance attributable to each subsequent withdrawal (including any applicable Withdrawal Charge). On each Contract Anniversary prior to the your 81st birthday, the Highest Anniversary Value will be recalculated and set equal to the greater of the Highest Anniversary Value before the recalculation or the Account Balance on the date of the recalculation. The Highest Anniversary Value does not change after the Contract Anniversary immediately preceding your 81st birthday, except that it is increased for each subsequent purchase payment and reduced proportionally by the percentage reduction in Account Balance attributable to each subsequent withdrawal (including any applicable Withdrawal Charge). (b) Annual Increase Amount: On the date we issue your Contract, the "Annual Increase Amount" is equal to your initial purchase payment. Thereafter, the Annual Increase Amount is equal to (i) less (ii), where: (i) is purchase payments accumulated at the Annual Increase Rate of 6% (as defined below); and (ii)is withdrawal adjustments (as defined below) accumulated at the Annual Increase Rate. The Highest Anniversary Value and Annual Increase Amount are calculated independently of each other. When the Highest Anniversary Value is recalculated and set equal to the Account Balance, the Annual Increase Amount is not set equal to the Account Balance. 44 ANNUAL INCREASE RATE. As noted above we calculate an income base under the GMIB that helps determine the minimum amount You receive as an income payment upon exercising the benefit. One of the factors used in calculating the income base is called the "annual increase rate." Through the Contract Anniversary immediately prior to the your 81st birthday, the Annual Increase Rate is 6%. During the 30 day period following the Contract Anniversary immediately prior to the your 81st birthday, the annual increase rate is 0%. WITHDRAWAL ADJUSTMENTS. Withdrawal adjustments in a Contract Year are determined according to (a) or (b): (a) The withdrawal adjustment for each withdrawal in a Contract Year is the value of the Annual Increase Amount immediately prior to the withdrawal multiplied by the percentage reduction in Account Balance attributable to the withdrawal (including any applicable Withdrawal Charge); or (b) If total withdrawals in a Contract Year are not greater than the Annual Increase Rate multiplied by the Annual Increase Amount at the beginning of the Contract Year, and if these withdrawals are paid to You, the total withdrawal adjustments for that Contract Year will be set equal to the dollar amount of total withdrawals (including any applicable Withdrawal Charge) in that Contract Year. These withdrawal adjustments will replace the withdrawal adjustments defined in (a) immediately above and be treated as though the corresponding withdrawals occurred at the end of that Contract Year. As described in (a) above, if in any Contract Year You take cumulative withdrawals that exceed the Annual Increase Rate multiplied by the Annual Increase Amount at the beginning of the Contract Year, the Annual Increase Amount will be reduced in the same proportion that the entire withdrawal (including any applicable Withdrawal Charge) reduced the Account Balance. This reduction may be significant, particularly when the Account Balance is lower than the Annual Increase Amount, and could have the effect of reducing or eliminating the value of income payments under the GMIB optional benefit. Limiting your cumulative withdrawals during a Contract Year to not more than the Annual Increase Rate multiplied by the Annual Increase Amount at the beginning of the Contract Year, will result in dollar-for-dollar treatment of the withdrawals as described in (b) immediately above. Partial annuitizations are not permitted. No change in owner of the Contract or participant is permitted. In determining GMIB income payments, an amount equal to the Withdrawal Charge that would apply upon a complete withdrawal and the amount of any premium and other taxes that may apply will be deducted from the income base. For purposes of calculating the income base, purchase payment credits (I.E., bonus payments) are not included. EXERCISING THE GMIB. The only income types available with the purchase of this benefit are a Lifetime Income Annuity with a 10 Year Guarantee Period or a Lifetime Income Annuity for Two with a 10 Year Guarantee Period. If You decide to receive income payments under a Lifetime Income Annuity with a 10 year Guarantee Period after age 79, the 10 year guarantee is reduced as follows: ----------------------------------------------------- Age at Pay-Out Guarantee ----------------------------------------------------- 80 9 years ----------------------------------------------------- 81 8 years ----------------------------------------------------- 82 7 years ----------------------------------------------------- 83 6 years ----------------------------------------------------- 84 and 85 5 years ----------------------------------------------------- Lifetime Income Annuity for Two is available if the ages of the joint Annuitants are 10 years apart or less (or as permissible under our then current underwriting requirements, if more favorable). 45 EFFECT OF OUTSTANDING LOANS ON THE GWIB. You may not exercise this benefit if You have an outstanding loan balance. You may exercise this benefit if You repay your outstanding loan balance. If You desire to exercise this benefit and have an outstanding loan balance and repay the loan by making a partial withdrawal, your income base will be reduced to adjust for the repayment of the loan, according to the formula described above. TERMINATING THE GMIB. This benefit will terminate upon the earliest of: 1. The 30th day following the Contract Anniversary following your 85th birthday; 2. The date You make a total withdrawal of your Account Balance (a pro-rata portion of the annual benefit charge for the GMIB will be assessed); 3. You elect to receive income payments under the Contract and You do not elect to receive income payments under the GMIB (a pro-rata portion of the annual benefit charge for the GMIB will be assessed); 4. On the day there are insufficient amounts to deduct the charge for the GMIB from Your Account Balance; or 5. If You die. For more information on when we may or may not terminate your Contract, see "When We Can Cancel Your Deferred Annuity". CHARGES. The GMIB is available in Deferred Annuities for an additional charge of 0.70% (except for the states of Texas and Virginia for TSA ERISA, 403(a) and 457(b) Deferred Annuities, where the charge is 0.35%) of the income base, deducted at the end of each Contract Year on the Contract Anniversary, by withdrawing amounts on a pro-rata basis from your Fixed Interest Account Balance (net of any outstanding loans) and Separate Account Balance. We take amounts from the Separate Account by canceling accumulation units from your Separate Account Balance. If You make a total withdrawal of your Account Balance or elect to receive income payments under your Contract, a pro-rata portion of the annual optional benefit charge will be assessed based on the number of months from the last Contract Anniversary to the date of the withdrawal or the beginning of income payments. Prior to May 4, 2009, the charge for the optional GMIB is 0.35% of the income base. (For employer groups with TSA ERISA, 457(b) and 403(a) Deferred Annuities that were established on or before May 1, 2009 which elected at issue to make available the GMIB under their group Contract, participants who submit an application after May 1, 2009, will receive the lower charge of 0.35%.) GRAPHIC. The purpose of the following graphic is to illustrate the operation of the GMIB. The investment results shown are hypothetical and are not representative of past or future performance. Actual investment results may be more or less than those shown and will depend upon a number of factors, including investment allocations and the investment experience of the Investment Divisions chosen. THE GRAPHIC DOES NOT REFLECT THE DEDUCTION OF FEES AND CHARGES, WITHDRAWAL CHARGES OR INCOME TAXES OR PENALTIES. 46 (1)THE 6% ANNUAL INCREASE AMOUNT OF THE INCOME BASE Determining a value upon which future income payments will be based ------------------------------------------------------------------- Prior to annuitization, your Account Balance fluctuates above and below your initial purchase payment depending on the investment performance of the Investment Divisions You selected. Your purchase payments accumulate at the annual increase rate of 6%, through the Contract Anniversary immediately preceding your 81st birthday. Your purchase payments are also adjusted for any withdrawals (including any applicable Withdrawal Charge) made during this period. The line (your purchase payments accumulated at 6% a year adjusted for withdrawals and charges "the 6% Annual Increase Amount of the Income Base") is the value upon which future income payments can be based. Determining your guaranteed lifetime income stream Assume that You decide to annuitize your Contract and begin taking annuity payments after 30 years. In this example, your 6% Annual Increase Amount of the Income Base is higher than the Highest Anniversary Value and will produce a higher income benefit. Accordingly, the 6% Annual Increase Amount of the Income Base will be applied to the annuity pay-out rates in the GMIB Annuity Table to determine Your lifetime annuity payments. THE INCOME BASE IS NOT AVAILABLE FOR CASH WITHDRAWALS AND IS ONLY USED FOR PURPOSES OF CALCULATING THE GMIB PAYMENT AND THE CHARGE FOR THE BENEFIT. 47 (2)THE "HIGHEST ANNIVERSARY VALUE" ("HAV") Determining a value upon which future income payments will be based Prior to annuitization, the Highest Anniversary Value at each Contract Anniversary begins to lock in growth. The Highest Anniversary Value is adjusted upward each Contract Anniversary if the Account Balance at that time is greater than the amount of the current Highest Anniversary Value. Upward adjustments will continue until the Contract Anniversary immediately prior to the contract owner's 81st birthday. The Highest Anniversary Value also is adjusted for any withdrawals taken (including any applicable Withdrawal Charge) or any additional payments made. The Highest Anniversary Value line is the value upon which future income payments can be based. [CHART] Determining your guaranteed lifetime income stream Assume that You decide to annuitize your Contract and begin taking annuity payments after 20 years. In this example, the Highest Anniversary Value is higher than the Account Balance. Accordingly, the Highest Anniversary Value will be applied to the annuity pay-out rates in the GMIB Annuity Table to determine your lifetime annuity payments. THE INCOME BASE IS NOT AVAILABLE FOR CASH WITHDRAWALS AND IS ONLY USED FOR PURPOSES OF CALCULATING THE GMIB PAYMENT AND THE CHARGE FOR THE BENEFIT. 48 (3)PUTTING IT ALL TOGETHER Prior to annuitization, the income base (the 6% Annual Increase Amount of the Income Base and the Highest Anniversary Value) work together to protect your future income. Upon annuitization of the Contract, You will receive income payments for life and the guaranteed minimum income base and the Account Balance will cease to exist. Also, the GMIB may only be exercised no later than the Contract Anniversary on or following the contract owner's 80th birthday, after a 10 year waiting period, and then only within a 30 day period following the Contract Anniversary. With the GMIB, the income base is applied to special, conservative GMIB annuity purchase factors, which are guaranteed at the time the Contract is issued. However, if then-current annuity purchase factors applied to the Account Balance would produce a greater amount of income, then You will receive the greater amount. In other words, when You annuitize your Contract You will receive whatever amount produces the greatest income payment. THEREFORE, IF YOUR ACCOUNT BALANCE WOULD PROVIDE GREATER INCOME THAN WOULD THE AMOUNT PROVIDED UNDER THE GMIB, YOU WILL HAVE PAID FOR THE GMIB ALTHOUGH IT WAS NEVER USED. EXAMPLE: (This calculation ignores the impact of Highest Anniversary Value which could further increase the guaranteed minimum income base.) Age 55 at issue Purchase Payment = $100,000. No additional purchase payments or partial withdrawals. Guaranteed minimum income base at age 65 = $100,000 X 1.06/10/ = $179,085 where 10 equals the number of years the purchase payment accumulates for purposes of calculating this benefit. 49 Guaranteed minimum income floor = guaranteed minimum income base applied to the GMIB annuity table. GMIB annuity factor, unisex, age 65 = $4.21 per month per $1,000 applied for lifetime income with 10 years guaranteed. $179,085 X $4.21 = $754 per month. $1,000
-------------------------------------------------------------------------------- Guaranteed Issue Age Age at Pay-Out Minimum Income Floor -------------------------------------------------------------------------------- 55 65 $754 -------------------------------------------------------------------------------- 70 $1,131 -------------------------------------------------------------------------------- 75 $1,725 --------------------------------------------------------------------------------
The above chart ignores the impact of premium and other taxes. WITHDRAWAL BENEFIT LWG In states where approved, we offer the LWG for elective TSA (non-ERISA), SEP and SIMPLE IRA Deferred Annuities. If You elect the LWG, Roth TSA purchase payments may be permitted. THE LWG DOES NOT ESTABLISH OR GUARANTEE AN ACCOUNT BALANCE OR MINIMUM RETURN FOR ANY INVESTMENT DIVISION. THE REMAINING GUARANTEED WITHDRAWAL AMOUNT AND TOTAL GUARANTEED WITHDRAWAL AMOUNT ARE NOT AVAILABLE FOR WITHDRAWAL AS A LUMP SUM. WITHDRAWALS ARE SUBJECT TO APPLICABLE CONTRACT WITHDRAWAL CHARGES UNLESS YOU TAKE THE NECESSARY STEPS TO ELECT TO TAKE YOUR ANNUAL BENEFIT PAYMENT UNDER A SYSTEMATIC WITHDRAWAL PROGRAM. Ordinary income taxes apply to withdrawals under this benefit and an additional 10% penalty tax may apply if You are under age 59 1/2. Consult your own tax adviser to determine if an exception to the 10% penalty tax applies. You may not have this benefit and the GMIB in effect at the same time. You should carefully consider if the LWG is best for You. Here are some of the key features of the LWG. . Guaranteed Payments for Life. So long as You make your first withdrawal on or after the date You reach age 59 1/2, the LWG guarantees that we will make payments to You over your lifetime, even if your Remaining Guaranteed Withdrawal Amount and/or Account Balance decline to zero. . Automatic Annual Step-Ups. The LWG provides automatic step-ups on each Contract Anniversary prior to the owner's 86th birthday (and offers the owner the ability to opt out of the step-ups if the charge for this optional benefit should increase). Each of the Automatic Step-Ups will occur only prior to the owner's 86th birthday. . Withdrawal Rates. The LWG uses a 5% withdrawal rate to determine the Annual Benefit Payment. . Cancellation. The LWG provides the ability to cancel the rider every five Contract Years for the first fifteen Contract Years and annually thereafter within 30 days following the eligible Contract Anniversary. . Allocation Restrictions. If You elect the LWG, You are limited to allocating your purchase payments and Account Balance among the Fixed Interest Account, and certain Investment Divisions (as described below). . TAX TREATMENT. THE TAX TREATMENT OF WITHDRAWALS UNDER THE LWG IS UNCERTAIN. IT IS CONCEIVABLE THAT THE AMOUNT OF POTENTIAL GAIN COULD BE DETERMINED BASED ON THE REMAINING GUARANTEED WITHDRAWAL AMOUNT AT THE TIME OF THE WITHDRAWAL, IF THE REMAINING GUARANTEED WITHDRAWAL AMOUNT IS GREATER THAN THE ACCOUNT BALANCE (PRIOR TO WITHDRAWAL CHARGES, IF APPLICABLE). THIS COULD RESULT IN A GREATER AMOUNT OF TAXABLE INCOME REPORTED UNDER A WITHDRAWAL AND CONCEIVABLY A LIMITED ABILITY TO RECOVER ANY REMAINING BASIS IF THERE IS A LOSS ON SURRENDER OF THE CONTRACT. CONSULT YOUR TAX ADVISER PRIOR TO PURCHASE. 50 . Rider Charges. We will continue to assess the LWG rider charge even in the case where your Remaining Guaranteed Withdrawal Amount, as described below, equals zero. . Qualified Plans, If your plan determines to terminate the Contract at a time when You have elected LWG, You forfeit any income base and any other rights to the LWG You have accrued under the LWG upon termination of the Contract. In considering whether to purchase the LWG, You must consider your desire for protection and the cost of the benefit with the possibility that had You not purchased the benefit, your Account Balance may be higher. In considering the benefit of the lifetime withdrawals, You should consider the impact of inflation. Even relatively low levels of inflation may have significant effect on purchasing power. The Automatic Annual Step-Up, as described below, may provide protection against inflation, if and when there are strong investment returns. As with any guaranteed withdrawal benefit, the LWG, however, does not assure that You will receive strong, let alone any, return on your investments. The LWG must be elected at Contract issue; You must be age 80 or younger at time of purchase. TOTAL GUARANTEED WITHDRAWAL AMOUNT. The Total Guaranteed Withdrawal Amount may be referred to as the "income base" in marketing or other materials. The Total Guaranteed Withdrawal Amount is the minimum amount that You are guaranteed to receive over time while the LWG is in effect. We assess the LWG charge as a percentage of the Total Guaranteed Withdrawal Amount. The initial Total Guaranteed Withdrawal Amount is equal to your initial purchase payment, without taking into account any purchase payment credits (i.e., credit or bonus payments). The Total Guaranteed Withdrawal Amount is increased by each additional purchase payments (up to a maximum benefit amount of $5,000,000). If, however, a withdrawal results in cumulative withdrawals for the current Contract Year that exceed the Annual Benefit Payment, the Total Guaranteed Withdrawal Amount will be reduced by an amount equal to the difference between the Total Guaranteed Withdrawal Amount after the withdrawal and the Account Balance after the withdrawal (if such Account Balance is lower than the Total Guaranteed Withdrawal Amount). THIS REDUCTION MAY BE SIGNIFICANT. Cumulative withdrawals in a given Contract Year will not decrease the Total Guaranteed Withdrawal Amount if such withdrawals do not exceed the Annual Benefit Payment in that Contract Year. REMAINING GUARANTEED WITHDRAWAL AMOUNT. The Remaining Guaranteed Withdrawal Amount is the remaining amount guaranteed to be received over time. The initial Remaining Guaranteed Withdrawal Amount is equal to the initial Total Guaranteed Withdrawal Amount. We increase the Remaining Guaranteed Withdrawal Amount (up to a maximum amount of $5,000,000) by each additional purchase payment without taking into account any purchase payment credits (i.e., credit or bonus payments). The Remaining Guaranteed Withdrawal Amount is also increased by the 5% Compounding Income Amount, as described below. All withdrawals (including applicable Withdrawal Charges) reduce the Remaining Guaranteed Withdrawal Amount, not just withdrawals that exceed the Annual Benefit Payment (as with the Total Guaranteed Withdrawal Amount). If the withdrawal exceeds the Annual Benefit Payment, then we will additionally reduce the Remaining Guaranteed Withdrawal Amount to equal the difference between the Remaining Guaranteed Withdrawal Amount after the withdrawal and the Account Balance after the withdrawal (if lower) THIS REDUCTION MAY BE SIGNIFICANT. The Remaining Guaranteed Withdrawal Amount is also used to calculate an alternate death benefit available under the LWG. (See "Additional Information" below.) 5% COMPOUNDING INCOME AMOUNT. On each Contract Anniversary until the earlier of: (a) the date of the first withdrawal from the Contract or (b) the tenth Contract Anniversary, the Total Guaranteed Withdrawal Amount and the Remaining Guaranteed Withdrawal Amount are increased by an amount equal to 5% multiplied by the Total Guaranteed Withdrawal Amount and the Remaining Guaranteed Withdrawal Amount before such increase (up to a maximum benefit amount of $5,000,000). We take the Total Guaranteed Withdrawal Amount and the Remaining Guaranteed Withdrawal Amount as of the last day of the Contract Year to determine the amount subject to the increase. The Total Guaranteed Withdrawal Amount and the Remaining Guaranteed Withdrawal Amount may also be increased by the Automatic Annual Step-Up, if that would result in a higher Total Guaranteed Withdrawal Amount and Remaining Guaranteed Withdrawal Amount. 51 AUTOMATIC ANNUAL STEP-UP. On each Contract Anniversary prior to the owner's 86th birthday, an Automatic Annual Step-Up will occur, provided that the Account Balance exceeds the Total Guaranteed Withdrawal Amount immediately before the Step-Up (and provided that You have not chosen to decline the Step-Up as described below). The Automatic Annual Step-Up will: . reset the Total Guaranteed Withdrawal Amount and the Remaining Guaranteed Withdrawal Amount to the Account Balance on the date of the Step-Up, up to a maximum of $5,000,000, regardless of whether or not You have taken any withdrawals; . reset the Annual Benefit Payment equal to 5% of the Total Guaranteed Withdrawal Amount after the Step-Up; and . reset the LWG charge to the then current charge, up to a maximum of 0.95% for the same optional benefit. In the event that the charge applicable to Contract purchases at the time of the Step-Up is higher than your current LWG charge, and we elect to increase the benefit charge in connection with the Step-Up we will notify You in writing a minimum of 30 days in advance of the applicable Contract Anniversary and inform You that You may choose to decline the Automatic Annual Step-Up. If You choose to decline the Automatic Annual Step-Up, You must notify us in accordance with our administrative procedures (currently we require You to submit your request in writing at our Administrative Office no less than seven calendar days prior to the applicable Contract Anniversary). Once You notify us of your decision to decline the Automatic Annual Step-Up, You will no longer be eligible for future Automatic Annual Step-Ups unless You notify us in writing at our Administrative Office that You wish to reinstate the Step-Ups. This reinstatement will take effect at the next Contract Anniversary after we receive your request for reinstatement. Please note that the Automatic Annual Step-up may be of limited benefit if You intend to make purchase payments that would cause your Account Balance to approach $5,000,000 because the Total Guaranteed Withdrawal Amount and Remaining Guaranteed Withdrawal Amount cannot exceed $5,000,000. ANNUAL BENEFIT PAYMENT. The initial Annual Benefit Payment is equal to the initial Total Guaranteed Withdrawal Amount multiplied by the 5% withdrawal rate. The Annual Benefit Payment may be referred to as "annual income amount" in marketing and or other materials. If the Total Guaranteed Withdrawal Amount is later recalculated (for example, because of additional purchase payments, the 5% compounding amount, the Automatic Annual Step-Up, or withdrawals greater than the Annual Benefit Payment), the Annual Benefit Payment is reset equal to the new Total Guaranteed Withdrawal Amount multiplied by the 5% withdrawal rate. IMPORTANT TO NOTE. . If You take your first withdrawal before the date You reach age 59 1/2, we will continue to pay the Annual Benefit Payment each year until the Remaining Guaranteed Withdrawal Amount is depleted, even if your Account Balance declines to zero. This means if your Account Balance is depleted due to withdrawals not greater than the Annual Benefit Payment or the deduction of the benefit charge, and your Remaining Guaranteed Withdrawal Amount is greater than zero, we will pay You the remaining Annual Benefit Payment, if any, not yet withdrawn during the Contract Year that the Account Balance was depleted, and beginning in the following Contract Year, we will continue paying the Annual Benefit Payment to You each year until your Remaining Guaranteed Withdrawal Amount is depleted. This guarantees that You will receive your purchase payments even if your Account Balance declines to zero DUE TO MARKET PERFORMANCE so long as You do not take withdrawals greater than the Annual Benefit Payment; however, You will not be guaranteed income for the rest of your life. . If You take your first withdrawal on or after the date You reach age 59 1/2, we will continue to pay the Annual Benefit Payment each year for the rest of your life, even if your Remaining Guaranteed Withdrawal Amount and/or Account Balance declines to zero. This means if your Remaining Guaranteed Withdrawal Amount and/or your Account Balance is depleted due to withdrawals not greater than the Annual Benefit Payment or the deduction of 52 the benefit charge, we will pay to You the remaining Annual Benefit Payment, if any, not yet withdrawn during that Contract Year that the Account Balance was depleted, and beginning in the following Contract Year, we will continue paying the Annual Benefit Payment to You each year for the rest of your life. Therefore, You will be guaranteed income for life. YOU SHOULD CAREFULLY CONSIDER WHEN TO BEGIN TAKING WITHDRAWALS IF YOU HAVE ELECTED THE LWG BENEFIT. IF YOU BEGIN WITHDRAWALS TOO SOON, YOUR TOTAL GUARANTEED WITHDRAWAL AMOUNT AND REMAINING GUARANTEED WITHDRAWAL AMOUNT ARE NO LONGER INCREASED BY THE 5% ANNUAL COMPOUNDING INCREASE. ON THE OTHER HAND, IF YOU DELAY TAKING WITHDRAWALS FOR TOO LONG, YOU MAY LIMIT THE NUMBER OF YEARS AVAILABLE FOR YOU TO TAKE WITHDRAWALS IN THE FUTURE (DUE TO LIFE EXPECTANCY), AND YOU MAY BE PAYING FOR A BENEFIT YOU ARE NOT USING. You have the option of receiving withdrawals under the LWG or receiving payments under a pay-out option. You should consult with your registered representative when deciding how to receive income under this Contract. In making this decision, You should consider many factors, including the relative amount of current income provided by the two options, the potential ability to receive higher future payments through potential increases to the value of the LWG, your potential need to make additional withdrawals in the future, and the relative values to You of the death benefits available prior to and after annuitization. At any time during the pay-in phase, You can elect to annuitize under current annuity rates in lieu of continuing the LWG. This may provide higher income amounts and/or different tax treatment than the payments received under the LWG. EFFECT OF OUTSTANDING LOANS ON THE TOTAL GUARANTEED WITHDRAWAL AMOUNT AND REMAINING GUARANTEED WITHDRAWAL AMOUNT. If there is an outstanding loan balance (including loans in default which we cannot offset or collect due to tax restrictions), any additional withdrawals will be treated as withdrawals in excess of the Annual Benefit Payment. In that event, the Total Guaranteed Withdrawal Amount will be reduced. The reduction will be equal to the difference between the Total Guaranteed Withdrawal Amount after the withdrawal and the Account Balance after the withdrawal. If the Account Balance after the withdrawal and minus any loan in default is higher than the Total Guaranteed Withdrawal Amount, no reduction will be made. In the event an outstanding loan balance is in default and we can withdraw the defaulted amount from your Account Balance, if the amount of the default does not exceed the Annual Benefit Payment, then the Total Guaranteed Withdrawal Amount will not be decreased. If the amount of the default exceeds the Annual Benefit Payment, the Total Guaranteed Withdrawal Amount will be reduced. The reduction will be equal to the difference between the Total Guaranteed Withdrawal Amount after the withdrawal and the Account Balance after the withdrawal. If the Account Balance after the withdrawal and minus any loan in default is higher than the Total Guaranteed Withdrawal Amount, no reduction will be made. Also, an additional reduction will be made to the Remaining Guaranteed Withdrawal Amount. This additional reduction will be equal to the difference between the Remaining Guaranteed Withdrawal Amount after the withdrawal and the Account Balance after the withdrawal. If the Account Balance after the withdrawal and minus any loan in default is higher than the Remaining Guaranteed Withdrawal Amount, no reduction will be made. MANAGING YOUR WITHDRAWALS. It is important that You carefully manage your annual withdrawals. To ensure that You retain the full guarantees of this benefit, your annual withdrawals cannot exceed the Annual Benefit Payment each Contract Year. If a Withdrawal Charge does apply, the charge is not included in the amount withdrawn for the purpose of calculating whether annual withdrawals during a Contract Year exceed the Annual Benefit Payment. IF A WITHDRAWAL FROM YOUR CONTRACT DOES RESULT IN ANNUAL WITHDRAWALS DURING A CONTRACT YEAR EXCEEDING THE ANNUAL BENEFIT PAYMENT, THE TOTAL GUARANTEED WITHDRAWAL AMOUNT WILL BE RECALCULATED AND THE ANNUAL BENEFIT PAYMENT WILL BE REDUCED TO THE NEW TOTAL GUARANTEED WITHDRAWAL AMOUNT MULTIPLIED BY THE 5% WITHDRAWAL RATE. IN ADDITION, AS NOTED ABOVE, IF A WITHDRAWAL RESULTS IN CUMULATIVE WITHDRAWALS FOR THE CURRENT CONTRACT YEAR EXCEEDING THE ANNUAL 53 BENEFIT PAYMENT, THE REMAINING GUARANTEED WITHDRAWAL AMOUNT WILL ALSO BE REDUCED BY AN ADDITIONAL AMOUNT EQUAL TO THE DIFFERENCE BETWEEN THE REMAINING GUARANTEED WITHDRAWAL AMOUNT AFTER THE WITHDRAWAL AND THE ACCOUNT BALANCE AFTER THE WITHDRAWAL (IF SUCH ACCOUNT BALANCE IS LOWER THAN THE REMAINING GUARANTEED WITHDRAWAL AMOUNT). THESE REDUCTIONS IN THE TOTAL GUARANTEED WITHDRAWAL AMOUNT, ANNUAL BENEFIT PAYMENT, AND REMAINING GUARANTEED WITHDRAWAL AMOUNT MAY BE SIGNIFICANT. You are still eligible to receive either lifetime payments or the remainder of the Remaining Guaranteed Withdrawal Amount so long as the withdrawal that exceeded the Annual Benefit Payment did not cause your Account Balance to decline to zero. A WITHDRAWAL THAT RESULTS IN CUMULATIVE WITHDRAWALS IN THE CURRENT CONTRACT YEAR EXCEEDING THE ANNUAL BENEFIT PAYMENT THAT REDUCES THE ACCOUNT BALANCE TO ZERO WILL TERMINATE THE CONTRACT. You can always take annual withdrawals less than the Annual Benefit Payment. However, if You choose to receive only a part of your Annual Benefit Payment in any given Contract Year, your Annual Benefit Payment is not cumulative and your Remaining Guaranteed Withdrawal Amount and Annual Benefit Payment will not increase. For example, since your Annual Benefit Payment is 5% of your Remaining Guaranteed Withdrawal Amount, You cannot withdraw 3% in one year and then withdraw 7% the next year without exceeding your Annual Benefit Payment in the second year. SYSTEMATIC WITHDRAWAL PROGRAM. If available in your state, You may choose to take your Annual Benefit Payment under the Systematic Withdrawal Program, including the first Contract Year. If You do so, any Withdrawal Charges that would otherwise apply to such withdrawals will be waived. Your Systematic Withdrawal Program withdrawal amount will be adjusted on each Contract Anniversary for any changes in the Annual Benefit Payment as a result of Automatic Annual Step-Ups, additional purchase payments or transfers received during the Contract Year. Any withdrawals taken outside of the Systematic Withdrawal Program will cause the Systematic Withdrawal Program to terminate. If the commencement of the Systematic Withdrawal Program does not coincide with a Contract Anniversary, the initial Systematic Withdrawal Program period will be adjusted to end on a Contract Anniversary. REQUIRED MINIMUM DISTRIBUTIONS. You may be required to take withdrawals to fulfill minimum distribution requirements generally beginning at age 70 1/2. These required distributions may be larger than your Annual Benefit Payment. After the first Contract Year, we will increase your Annual Benefit Payment to equal your required minimum distribution amount for that year, if such amounts are greater than your Annual Benefit Payment. YOU MUST BE ENROLLED IN THE AUTOMATED REQUIRED MINIMUM DISTRIBUTION SERVICE TO QUALIFY FOR THIS INCREASE IN THE ANNUAL BENEFIT PAYMENT. THE FREQUENCY OF YOUR WITHDRAWALS MUST BE ANNUAL. THE AUTOMATED REQUIRED MINIMUM DISTRIBUTION SERVICE IS BASED ON INFORMATION RELATING TO THIS CONTRACT ONLY. To enroll in the automated required minimum distribution service, please contact your Administrative Office. INVESTMENT ALLOCATION RESTRICTIONS. If You elect the LWG, You are limited to allocating your purchase payments and Account Balance among the Fixed Interest Account and the following Investment Divisions: 1. MetLife Conservative Allocation Investment Division 2. MetLife Conservative to Moderate Allocation Investment Division 3. MetLife Moderate Allocation Investment Division 4. MetLife Moderate to Aggressive Allocation Investment Division CANCELLATION. You may elect to cancel the LWG every fifth Contract Anniversary for the first fifteen Contract Years and annually thereafter. We must receive your cancellation request within 30 days following the eligible Contract Anniversary in writing at our Administrative Office. The cancellation will take effect on the day we receive your request. If cancelled, the LWG will terminate, we will no longer deduct the LWG charge, and the allocation restrictions described above will no longer apply. The Contract, however, will continue. 54 TERMINATION. The LWG will terminate upon the earliest of: 1. The date of a full withdrawal of the Account Balance (A pro rata portion of the annual charge will be assessed; You are still eligible to receive either the Remaining Guaranteed Withdrawal Amount or lifetime payments provided the withdrawal did not exceed the Annual Benefit Payment and the provisions and conditions of this optional benefit have been met); 2. The date the Account Balance is applied to a pay-out option (A pro-rata portion of the annual charge for this rider will be assessed); 3. The date there are insufficient funds to deduct the charge from your Account Balance and your Contract is thereby terminated (whatever Account Balance is available to pay the annual charge for the benefit will be applied; You are still eligible to receive either the Remaining Guaranteed Withdrawal Amount or lifetime payments, provided the provisions and conditions of this optional benefit have been met; however, You will have no other benefits under the Contract); 4. The date a defaulted loan balance, once offset, causes the Account Balance to reduce to zero; 5. The contract owner dies; 6. There is a change in contract owner, for any reason, unless we agree otherwise (A pro-rata portion of the annual charge for this rider will be assessed); 7. The Contract is terminated (A pro-rata portion of the annual charge for this rider will be assessed except for termination because of death of the owner, then no charge will be assessed based on the period from the most recent Contract Anniversary to the date of termination takes effect) or; 8. The effective date of cancellation of this benefit. ADDITIONAL INFORMATION. The LWG may affect the death benefit available under your Contract. If the owner should die while the LWG is in effect, an alternative death benefit amount will be calculated under the LWG that can be taken in a lump sum. The LWG death benefit amount that may be taken as a lump sum will be equal to total purchase payments less any partial withdrawals and any outstanding loan balance. If this death benefit amount is greater than the death benefit provided by your Contract, and if withdrawals in each Contract Year did not exceed the Annual Benefit Payment, then this death benefit amount will be paid instead of the death benefit provided by the Contract. All other provisions of your Contract's death benefit will apply. Alternatively, the Beneficiary may elect to receive the Remaining Guaranteed Withdrawal Amount as a death benefit, in which case we will pay the Remaining Guaranteed Withdrawal Amount on a monthly basis (or any mutually agreed upon frequency, but no less frequently than annually) until the Remaining Guaranteed Withdrawal Amount is exhausted. This death benefit will be paid instead of the applicable contractual death benefit (the basic death benefit, the additional death benefit amount calculated under the LWG as described above, or the Annual Step-Up Death Benefit, if that benefit had been purchased by the owner). Otherwise, the provisions of those contractual death benefits will determine the amount of the death benefit. Except as may be required by the Internal Revenue Code, an annual payment will not exceed the Annual Benefit Payment. If your Beneficiary dies while such payments are made, we will continue making the payments to the Beneficiary's estate unless we have agreed to another payee in writing. Federal income tax law generally requires that such payments be substantially equal and begin over a period no longer than the Beneficiary's remaining life expectancy with payments beginning no later than the end of the calendar year immediately following the year of your death. We reserve the right to accelerate any payment that is less than $500 or to comply with requirements under the Internal Revenue Code (including minimum distribution requirement). If You terminate the LWG because (1) You make a total withdrawal of your Account Balance; (2) your Account Balance is insufficient to pay the LWG charge; or (3) the contract owner dies, You may not make additional purchase payments under the Contract. LWG CHARGE. The LWG is available in Deferred Annuities, for an additional charge of 0.95% of the Total Guaranteed Withdrawal Amount, deducted at the end of each Contract Year by withdrawing amounts on a pro-rata basis from your 55 Fixed Interest Account Balance and Separate Account Balance, after applying any 5% Compounding Income Amount and prior to taking into account any Automatic Annual Step-Up occurring on the Contract Anniversary. We take amounts from the Separate Account by canceling accumulation units from your Separate Account Balance. If an Automatic Annual Step-Up occurs under a LWG, we may increase the LWG charge to the then current charge for the same optional benefit, but no more than a maximum of 0.95%. If, at the time the Contract was issued, the current charge for the benefit was equal to the maximum charge, then the charge for the benefit will not increase upon an Automatic Annual Step-Up. IF THE LWG IS IN EFFECT, THE CHARGE WILL CONTINUE EVEN IF YOUR REMAINING GUARANTEED WITHDRAWAL AMOUNT EQUALS ZERO. EXAMPLES The purpose of these examples is to illustrate the operation of the LWG. The investment results shown are hypothetical and are not representative of past or future performance. Actual investment results may be more or less than those shown and will depend upon a number of factors, including investment allocations and the investment experience of the Investment Divisions chosen. The examples do not reflect the deduction of fees and charges, Withdrawal Charges and applicable income taxes and penalties. For purposes of the examples, it is assumed that no loans have been taken. A. LWG 1. When Withdrawals Do Not Exceed the Annual Benefit Payment Assume that a Contract had an initial purchase payment of $100,000. The initial Account Balance would be $100,000, the Total Guaranteed Withdrawal Amount would be $100,000, the initial Remaining Guaranteed Withdrawal Amount would be $100,000 and the initial Annual Benefit Payment would be $5,000 ($100,000 X 5%). Assume that $5,000 is withdrawn each year, beginning before the contract owner attains age 59 1/2. The Remaining Guaranteed Withdrawal Amount is reduced by $5,000 each year as withdrawals are taken (the Guaranteed Total Withdrawal Amount is not reduced by these withdrawals). The Annual Benefit Payment of $5,000 is guaranteed to be received until the Remaining Guaranteed Withdrawal Amount is depleted, even if the Account Balance is reduced to zero. If the first withdrawal is taken after age 59 1/2, then the Annual Benefit Payment of $5,000 is guaranteed to be received for the owner's lifetime, even if the Remaining Guaranteed Withdrawal Amount and the Account Balance are reduced to zero. [CHART] Annual Benefit Cumulative Account Payment Withdrawals Balance -------------- ----------- ----------- 1 $5,000 $ 5,000 $100,000.00 2 5,000 10,000 90,250.00 3 5,000 15,000 80,987.50 4 5,000 20,000 72,188.13 5 5,000 25,000 63,828.72 6 5,000 30,000 55,887.28 7 5,000 35,000 48,342.92 8 5,000 40,000 41,175.77 9 5,000 45,000 34,366.98 10 5,000 50,000 27,898.63 11 5,000 55,000 21,753.70 12 5,000 60,000 15,916.02 13 5,000 65,000 10,370.22 14 5,000 70,000 5,101.71 15 5,000 75,000 96.62 16 5,000 80,000 0 17 5,000 85,000 0 18 5,000 90,000 -13,466.53 19 5,000 95,000 0 20 5,000 100,000 0 56 2. When Withdrawals Do Exceed the Annual Benefit Payment Assume that a Contract had an initial purchase payment of $100,000. The initial Account Balance would be $100,000, the Total Guaranteed Withdrawal Amount would be $100,000, the initial Remaining Guaranteed Withdrawal Amount would be $100,000 and the initial Annual Benefit Payment would be $5,000 ($100,000 X 5%). Assume that the Remaining Guaranteed Withdrawal Amount is reduced to $95,000 due to a withdrawal of $5,000 in the first year. Assume the Account Balance was further reduced to $75,000 at year two due to poor market performance. If You withdrew $10,000 at this time, your Account Balance would be reduced to $75,000 - $10,000 = $65,000. Your Remaining Guaranteed Withdrawal Amount would be reduced to $95,000 - $10,000 = $85,000. Since the withdrawal of $10,000 exceeded the Annual Benefit Payment of $5,000 and the resulting Remaining Guaranteed Withdrawal Amount would be greater than the resulting Account Balance, there would be an additional reduction to the Remaining Guaranteed Withdrawal Amount. The Remaining Guaranteed Withdrawal Amount after the withdrawal would be set equal to the Account Balance after the withdrawal ($65,000). This new Remaining Guaranteed Withdrawal Amount of $65,000 would now be the amount guaranteed to be available to be withdrawn over time. The Total Guaranteed Withdrawal Amount would also be reduced to $65,000. The Annual Benefit Payment would be set equal to 5% X $65,000 = $3,250. B. LWG-- 5% Compounding Amount Assume that a Contract had an initial purchase payment of $100,000. The initial Remaining Guaranteed Withdrawal Amount would be $100,000, the Total Guaranteed Withdrawal Amount would be $100,000, and the Annual Benefit Payment would be $5,000 ($100,000 X 5%). The Total Guaranteed Withdrawal Amount will increase by 5% of the Total Guaranteed Withdrawal Amount until the earlier of the first withdrawal or the 10th Contract Anniversary. The Annual Benefit Payment will be recalculated as 5% of the new Total Guaranteed Withdrawal Amount. If the first withdrawal is taken in the first Contract Year then there would be no increase: the Total Guaranteed Withdrawal Amount would remain at $100,000 and the Annual Benefit Payment will remain at $5,000 ($100,000 X 5%). If the first withdrawal is taken in the second Contract Year then the Total Guaranteed Withdrawal Amount would increase to $105,000 ($100,000 X 105%), and the Annual Benefit Payment would increase to $5,250 ($105,000 X 5%). If the first withdrawal is taken in the third Contract Year then the Total Guaranteed Withdrawal Amount would increase to $110,250 ($105,000 X 105%), and the Annual Benefit Payment would increase to $5,513 ($110,250 X 5%). 57 If the first withdrawal is taken after the 10th Contract Year then the Total Guaranteed Withdrawal Amount would increase to $162,890 (the initial $100,000, increased by 5% per year, compounded annually for 10 years), and the Annual Benefit Payment would increase to $8,144 ($162,890 X 5%). [CHART] Delay taking withdrawals and receive higher guaranteed payments Year of First Withdrawal 1 2 3 4 5 6 7 8 9 10 11 ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- 5,000 5,250 5,513 5,788 6,078 6,381 6,700 7,036 7,387 7,757 8,144 C. LWG -- Automatic Annual Step-Ups and 5% Compounding Amount (No Withdrawals or loans) Assume that a Contract had an initial purchase payment of $100,000. Assume that no withdrawals or loans are taken. At the first Contract Anniversary, provided that no withdrawals or loans are taken, the Total Guaranteed Withdrawal Amount is increased to $105,000 ($100,000 increased by 5%, compounded annually). Assume the Account Balance has increased to $110,000 at the first Contract Anniversary due to good market performance. The Automatic Annual Step-Up will increase the Total Guaranteed Withdrawal Amount from $105,000 to $110,000 and reset the Annual Benefit Payment to $5,500 ($110,000 X 5%). At the second Contract Anniversary, provided that no withdrawals or loans are taken, the Total Guaranteed Withdrawal Amount is increased to $115,500 ($110,000 increased by 5%, compounded annually). Assume the Account Balance has increased to $120,000 at the second Contract Anniversary due to good market performance. The Automatic Annual Step-Up will increase the Total Guaranteed Withdrawal Amount from $115,500 to $120,000 and reset the Annual Benefit Payment to $6,000 ($120,000 X 5%). Provided that no withdrawals or loans are taken, each year the Total Guaranteed Withdrawal Amount would increase by 5%, compounded annually, from the second Contract Anniversary through the ninth Contract Anniversary, and at that point would be equal to $168,852. Assume that during these Contract Years the Account Balance does not exceed the Total Guaranteed Withdrawal Amount due to poor market performance. Assume the Account Balance at the ninth Contract Anniversary has increased to $180,000 due to good market performance. The Automatic Annual Step-Up will increase the Total Guaranteed Withdrawal Amount from $168,852 to $180,000 and reset the Annual Benefit Payment to $9,000 ($180,000 X 5%). 58 At the 10th Contract Anniversary, provided that no withdrawals or loans are taken, the Total Guaranteed Withdrawal Amount is increased to $189,000 ($180,000 increased by 5%, compounded annually). Assume the Account Balance is less than $189,000. There is no Automatic Annual Step-Up since the Account Balance is below the Total Guaranteed Withdrawal Amount; however, due to the 5% increase in the Total Guaranteed Withdrawal Amount, the Annual Benefit Payment is increased to $9,450 ($189,000 X 5%). LWG--AUTOMATIC ANNUAL STEP-UPS AND 5% COMPOUNDING AMOUNT (NO WITHDRAWALS OR LOANS) [CHART] PAY-OUT OPTIONS (OR INCOME OPTIONS) You may convert your Deferred Annuity into a regular stream of income after your "pay-in" or "accumulation" phase. The pay-out phase is often referred to as either "annuitizing" your Contract or taking an income annuity. When You select your pay-out option, You will be able to choose from the range of options we then have available. You have the flexibility to select a stream of income to meet your needs. If You decide You want a pay-out option, we withdraw some or all of your Account Balance (less any premium taxes, applicable Contract fees and any outstanding loans), then we apply the net amount to the option. See "Income Taxes" for a discussion of partial annuitization. You are not required to hold your Deferred Annuity for any minimum time period before You may annuitize. However, You may not be older than 95 years old to select a pay-out option (90 in New York State). (These requirements may be changed by us.) You must convert at least $5,000 of your Account Balance to receive income payments. PLEASE BE AWARE THAT ONCE YOUR CONTRACT IS ANNUITIZED YOU ARE INELIGIBLE TO RECEIVE THE DEATH BENEFIT YOU HAVE SELECTED. ADDITIONALLY, IF YOU HAVE SELECTED THE GMIB OR LWG, ANNUITIZING YOUR CONTRACT TERMINATES THE RIDER AND ANY DEATH BENEFIT PROVIDED BY THE RIDER. When considering a pay-out option, You should think about whether You want: . Payments guaranteed by us for the rest of your life (or for the rest of two lives) or the rest of your life (or for the rest of two lives) with a guaranteed period; and . A fixed dollar payment or a variable payment. Your income option provides You with a regular stream of payments for either your lifetime or your lifetime with a guaranteed period. You may choose the frequency of your income payments. For example, You may receive your payments on a monthly, quarterly, semiannual or annual basis. Your income payment amount will depend upon your choices. For lifetime options, the age of the measuring lives (Annuitants) will also be considered. For example, if You select a pay-out option guaranteeing payments for your lifetime 59 and your spouse's lifetime, your payments will typically be lower than if You select a pay-out option with payments over only your lifetime. Income payment types that guarantee that payments will be made for a certain number of years regardless of whether the Annuitant or joint Annuitant is alive (such as Lifetime Income Annuity with a Guarantee Period and Lifetime Income Annuity for Two with a Guarantee Period, as defined below) result in income payments that are smaller than with income payment types without such a guarantee (such as Lifetime Income Annuity and Lifetime Income Annuity for Two, as defined below). In addition, to the extent the income payment type has a guarantee period, choosing a shorter guarantee period will result in each income payment being larger. We do not guarantee that your variable payments will be a specific amount of money. You may choose to have a portion of the payment fixed and guaranteed under the Fixed Income Option. Should our current rates for a fixed pay-out option for your class of the Deferred Annuity provide for greater payments than those guaranteed in your Contract, the greater payment will be made. If You do not tell us otherwise, your Fixed Interest Account Balance will be used to provide a Fixed Income Option and your Separate Account Balance will be used to provide a variable pay-out option. INCOME PAYMENT TYPES Currently, we provide You with a wide variety of income payment types to suit a range of personal preferences. You decide the income payment type when You decide to take a pay-out option. Your decision is irrevocable. There are three people who are involved in payments under your pay-out option: . Contract owner: the person or entity which has all rights including the right to direct who receives payment. . Annuitant: the natural person whose life is the measure for determining the duration and the dollar amount of payments. . Beneficiary: the person who receives continuing payments or a lump sum payment, if any, if the contract owner dies. Many times, the contract owner and the Annuitant are the same person. When deciding how to receive income, consider: . The amount of income You need; . The amount You expect to receive from other sources; . The growth potential of other investments; and . How long You would like your income to be guaranteed. The following income payment types are currently available. We may make available other income payment types if You so request and we agree. Where required by state law or under a qualified retirement plan, the Annuitant's sex will not be taken into account in calculating income payments. Annuity rates will not be less than the rates guaranteed in the Contract at the time of purchase for the AIR and income payment type elected. Due to underwriting, administrative or Internal Revenue Code considerations, the choice of the percentage reduction and/or the duration of the guarantee period may be limited. Lifetime Income Annuity: A variable income that is paid as long as the Annuitant is living. Lifetime Income Annuity with a Guarantee Period: A variable income that continues as long as the Annuitant is living but is guaranteed to be paid for a number of years. If the Annuitant dies before all of the guaranteed payments have been made, payments are made to the contract owner of the annuity (or the Beneficiary, if the contract owner dies during the guarantee period) until the end of the guarantee period. No payments are made once the guarantee period has expired and the Annuitant is no longer living. 60 Lifetime Income Annuity for Two: A variable income that is paid as long as either of the two Annuitants is living. After one Annuitant dies, payments continue to be made as long as the other Annuitant is living. In that event, payments may be the same as those made while both Annuitants were living or may be a smaller percentage that is selected when the annuity is first converted to an income stream. No payments are made once both Annuitants are no longer living. Lifetime Income Annuity for Two with a Guarantee Period: A variable income that continues as long as either of the two Annuitants is living but is guaranteed to be paid (unreduced by any percentage selected) for a number of years. If both Annuitants die before all of the guaranteed payments have been made, payments are made to the contract owner of the annuity (or the Beneficiary, if the contract owner dies during the guarantee period) until the end of the guaranteed period. If one Annuitant dies after the guarantee period has expired, payments continue to be made as long as the other Annuitant is living. In that event, payments may be the same as those made while both Annuitants were living or may be a smaller percentage that is selected when the annuity is first converted to an income stream. No payments are made once the guarantee period has expired and both Annuitants are no longer living. ALLOCATION You decide how your money is allocated among the Fixed Income Option and the Investment Divisions. MINIMUM SIZE OF YOUR INCOME PAYMENT Your initial income payment must be at least $100. If You live in Massachusetts, the initial income payment must be at least $20. This means that the amount used from a Deferred Annuity to provide a pay-out option must be large enough to produce this minimum initial income payment. THE VALUE OF YOUR INCOME PAYMENTS AMOUNT OF INCOME PAYMENTS Variable income payments from an Investment Division will depend upon the number of annuity units held in that Investment Division (described below) and the Annuity Unit Value (described later) as of the 10th day prior to a payment date. This initial variable income payment is computed based on the amount of the purchase payment applied to the specific Investment Division (net any applicable premium tax owed or Contract charge), the AIR, the age of the measuring lives and the income payment type selected. The initial payment amount is then divided by the Annuity Unit Value for the Investment Division to determine the number of annuity units held in that Investment Division. The number of annuity units held remains the same for the duration of the Contract if no reallocations are made. The dollar amount of subsequent variable income payments will vary with the amount by which investment performance is greater or less than the AIR. Each Deferred Annuity provides that, when a pay-out option is chosen, the payment will not be less than the payment produced by the then current Fixed Income Option purchase rates for that Contract class. The purpose of this provision is to assure the Annuitant that, at retirement, if the Fixed Income Option purchase rates for new Contracts are significantly more favorable than the rates guaranteed by a Deferred Annuity of the same class, the Annuitant will be given the benefit of the higher rates. ANNUITY UNITS Annuity units are credited to You when You first convert your Deferred Annuity into an income stream or make a reallocation of your income payment into an Investment Division during the pay-out phase. Before we determine the number of annuity units to credit to You, we reduce your Account Balance by any premium taxes and the Annual Contract Fee, if applicable. (The premium taxes and the Annual Contract Fee are not applied against reallocations.) We then 61 compute an initial income payment amount using the AIR, your income payment type and the age of the measuring lives. We then divide the initial income payment (allocated to an Investment Division) by the Annuity Unit Value on the date of the transaction. The result is the number of annuity units credited for that Investment Division. The initial variable income payment is a hypothetical payment which is calculated based on the AIR. This initial variable income payment is used to establish the number of annuity units. It is not the amount of your actual first variable income payment unless your first income payment happens to be within 10 days after the date You convert your Deferred Annuity into an income stream. When You reallocate an income payment from an Investment Division, annuity units supporting that portion of your income payment in that Investment Division are liquidated. AIR Your income payments are determined by using the AIR to benchmark the investment experience of the Investment Divisions You select. We currently offer an AIR of 3% or 4%. The higher your AIR, the higher your initial variable income payment will be. Your next variable income payment will increase approximately in proportion to the amount by which the investment experience (for the time period between the payments) for the underlying Portfolio minus the Standard Death Benefit Separate Account charge (the resulting number is the net investment return) exceeds the AIR (for the time period between the payments). Likewise, your next variable income payment will decrease to the approximate extent the investment experience (for the time period between the payments) for the underlying Portfolio minus the Standard Death Benefit Separate Account charge (the net investment return) is less than the AIR (for the time period between the payments). A lower AIR will result in a lower initial variable income payment, but subsequent variable income payments will increase more rapidly or decline more slowly than if You had elected a higher AIR as changes occur in the investment experience of the Investment Divisions. The amount of each variable income payment is determined 10 days prior to your income payment date. If your first income payment is scheduled to be paid less than 10 days after You convert your Deferred Annuity to an income stream, then the amount of that payment will be determined on the date You convert your Deferred Annuity to a pay-out option. VALUATION This is how we calculate the Annuity Unit Value for each Investment Division: . First, we determine the change in investment experience (which reflects the deduction for any investment-related charge) for the underlying Portfolio from the previous trading day to the current trading day; . Next, we subtract the daily equivalent of the Standard Death Benefit Separate Account charge for each day since the last day the Annuity Unit Value was calculated; the resulting number is the net investment return; . Then, we multiply by an adjustment based on your AIR for each day since the last Annuity Unit Value was calculated; and . Finally, we multiply the previous Annuity Unit Value by this result. REALLOCATION PRIVILEGE During the pay-out phase of the Deferred Annuity, You may make reallocations among Investment Divisions or from the Investment Divisions to the Fixed Income Option. Once You reallocate your income payment into the Fixed Income Option, You may not later reallocate it into an Investment Division. There is no Withdrawal Charge to make a reallocation. For us to process a reallocation, You must tell us: . The percentage of the income payment to be reallocated; . The Investment Divisions (or Fixed Income Option) to which You want to reallocate your income payment; and . The Investment Divisions from which You want to reallocate your income payment. 62 Reallocations will be made at the end of the business day, at the close of the Exchange, if received in Good Order prior to the close of the Exchange, on that business day. All other reallocation requests will be processed on the next business day. When You request a reallocation from an Investment Division to the Fixed Income Option, the payment amount will be adjusted at the time of reallocation. Your payment may either increase or decrease due to this adjustment. The adjusted payment will be calculated in the following manner. . First, we update the income payment amount to be reallocated from the Investment Division based upon the applicable Annuity Unit Value at the time of the reallocation; . Second, we use the AIR to calculate an updated annuity purchase rate based upon your age, if applicable, and expected future income payments at the time of the reallocation; . Third, we calculate another updated annuity purchase rate using our current annuity purchase rates for the Fixed Income Option on the date of your reallocation; . Finally, we determine the adjusted payment amount by multiplying the updated income amount determined in the first step by the ratio of the annuity purchase rate determined in the second step divided by the annuity purchase rate determined in the third step. When You request a reallocation from one Investment Division to another, annuity units in one Investment Division are liquidated and annuity units in the other Investment Division are credited to You. There is no adjustment to the income payment amount. Future income payment amounts will be determined based on the Annuity Unit Value for the Investment Division to which You have reallocated. You generally may make a reallocation on any day the Exchange is open. At a future date we may limit the number of reallocations You may make, but never to fewer than one a month. If we do so, we will give You advance written notice. We may limit a Beneficiary's ability to make a reallocation. Here are examples of the effect of a reallocation on the income payment: . Suppose You choose to reallocate 40% of your income payment supported by Investment Division A to the Fixed Income Option and the recalculated income payment supported by Investment Division A is $100. Assume that the updated annuity purchase rate based on the AIR is $125, while the updated annuity purchase rate based on fixed income annuity pricing is $100. In that case, your income payment from the Fixed Income Option will be increased by $40 x ($125/$100) or $50, and your income payment supported by Investment Division A will be decreased by $40. (The number of annuity units in Investment Division A will be decreased as well.) . Suppose You choose to reallocate 40% of your income payment supported by Investment Division A to Investment Division B and the recalculated income payment supported by Investment Division A is $100. Then, your income payment supported by Investment Division B will be increased by $40 and your income payment supported by Investment Division A will be decreased by $40. (Changes will also be made to the number of annuity units in both Investment Divisions as well.) We may require that You use our original forms to make reallocations. Please see the "Transfer Privilege" section regarding our market timing policies and procedures. CHARGES You pay the Standard Death Benefit Separate Account charge for your Contract class during the pay-out phase of the Deferred Annuity. In addition, You pay the applicable investment-related charge during the pay-out phase of your Deferred Annuity. During the pay-out phase, we reserve the right to deduct the Annual Contract Fee. If we do so, it will be deducted pro-rata from each income payment. The Separate Account charge You pay will not reduce the number of annuity units credited to You. Instead, we deduct the charges as part of the calculation of the Annuity Unit Value. 63 GENERAL INFORMATION ADMINISTRATION All transactions will be processed in the manner described below. PURCHASE PAYMENTS Purchase payments may be sent, by check, cashier's check or certified check made payable to "MetLife," to the Administrative Office, or MetLife sales office, if that office has been designated for this purpose. (We reserve the right to receive purchase payments by other means acceptable to us.) We do not accept cash, money orders or traveler's checks. We will provide You with all necessary forms. We must have all documents in Good Order to credit your purchase payments. If You send your purchase payments or transaction requests to an address other than the one we have designated for receipt of such purchase payments or requests, we may return the purchase payment to You, or there may be delay in applying the purchase payment or transaction to your Contract. We reserve the right to refuse purchase payments made via a personal check in excess of $100,000. Purchase payments over $100,000 may be accepted in other forms, including but not limited to, EFT/wire transfers, certified checks, corporate checks, and checks written on financial institutions. The form in which we receive a purchase payment may determine how soon subsequent disbursement requests may be fulfilled. See "Access to Your Money." Purchase payments (including any portion of your Account Balance under a Deferred Annuity which You apply to a pay-out option) are effective and valued as of the close of the Exchange on the day we receive them in Good Order at your Administrative Office, except when they are received: . On a day when the Accumulation Unit Value/Annuity Unit Value is not calculated, or . After the close of the Exchange. In those cases, the purchase payments will be effective the next day the Accumulation Unit Value or Annuity Unit Value, as applicable, is calculated. We reserve the right to credit your initial purchase payment to You within two days after its receipt at your Administrative Office or MetLife sales office, as applicable. However, if You fill out our forms incorrectly or incompletely or other documentation is not completed properly or otherwise not in Good Order, we have up to five business days to credit the payment. If the problem cannot be resolved by the fifth business day, we will notify You and give You the reasons for the delay. At that time, You will be asked whether You agree to let us keep your money until the problem is resolved. If You do not agree or we cannot reach You by the fifth business day, your money will be returned. Under the Deferred Annuities, your employer or the group in which You are a participant or member must identify You on its reports to us and tell us how your money should be allocated among the Investment Divisions and the Fixed Interest Account, if available. CONFIRMING TRANSACTIONS You will receive a written statement confirming that a transaction was recently completed. Certain transactions made on a periodic basis, such as Systematic Withdrawal Program payments, and automated investment strategy transfers, may be confirmed quarterly. Salary reduction or deduction purchase payments under the TSA and TSA ERISA Deferred Annuity are confirmed quarterly. Unless You inform us of any errors within 60 days of receipt, we will consider these communications to be accurate and complete. 64 PROCESSING TRANSACTIONS We permit You to request transactions by mail and telephone. We make Internet access available to You. We may suspend or eliminate telephone or Internet privileges at any time, without prior notice. We reserve the right not to accept requests for transactions by facsimile. If mandated by applicable law, including, but not limited to, Federal anti-money laundering laws, we may be required to reject a purchase payment. We may also be required to block a contract owner's account and, consequently, refuse to implement requests for transfers, withdrawals, surrenders or death benefits, until instructions are received from the appropriate governmental authority. BY TELEPHONE OR INTERNET You may initiate a variety of transactions and obtain information by telephone or the Internet virtually 24 hours a day, 7 days a week, unless prohibited by state law or your employer. Some of the information and transactions accessible to You include: . Account Balance . Unit Values . Current rates for the Fixed Interest Account . Transfers . Changes to investment strategies . Changes in the allocation of future purchase payments. Your transaction must be in Good Order and completed prior to the close of the Exchange on one of our business days if You want the transaction to be valued and effective on that day. Transactions will not be valued and effective on a day when the Accumulation or Annuity Unit Value is not calculated or after the close of the Exchange. We will value and make effective these transactions on our next business day. We have put into place reasonable security procedures to insure that instructions communicated by telephone or Internet are genuine. For example, all telephone calls are recorded. Also, You will be asked to provide some personal data prior to giving your instructions over the telephone or through the Internet. When someone contacts us by telephone or Internet and follows our security procedures, we will assume that You are authorizing us to act upon those instructions. Neither the Separate Account nor MetLife will be liable for any loss, expense or cost arising out of any requests that we or the Separate Account reasonably believe to be authentic. In the unlikely event that You have trouble reaching us, requests should be made in writing to your Administrative Office. Response times for the telephone or Internet may vary due to a variety of factors, including volumes, market conditions and performance of the systems. We are not responsible or liable for: . any inaccuracy, error, or delay in or omission of any information You transmit or deliver to us; or . any loss or damage You may incur because of such inaccuracy, error, delay or omission; non-performance; or any interruption of information beyond our control. AFTER YOUR DEATH If we are notified of your death before any requested transaction is completed (including transactions under automated investment strategies, minimum distribution program and Systematic Withdrawal Program), we will cancel the request. As described above, the death benefit will be determined when we receive due proof 65 of death and an election for the payment method. If You are receiving income payments, we will cancel the request and continue making payments to your Beneficiary if your income type so provides. Or, depending on the income type, we may continue making payments to a joint Annuitant. MISSTATEMENT We may require proof of age of the owner, Beneficiary or Annuitant before making any payments under this Deferred Annuity that are measured by the owner's, Beneficiary's or Annuitant's life. If the age of the measuring life has been misstated, the amount payable will be the amount that would have been provided at the correct age. Once income payments have begun, any underpayments will be made up in one sum with the next income payment in a manner agreed to by us. Any overpayment will be deducted first from future income payments. In certain states, we are required to pay interest on any under payments. THIRD PARTY REQUESTS Generally, we only accept requests for transactions or information from You. We reserve the right not to accept or to process transactions requested on your behalf by third parties. This includes processing transactions by an agent You designate, through a power of attorney or other authorization, who has the ability to control the amount and timing of transfers/reallocations for a number of other contract owners and who simultaneously makes the same request or series of requests on behalf of other contract owners. VALUATION -- SUSPENSION OF PAYMENTS We separately determine the Accumulation Unit Value and Annuity Unit Value, as applicable, for each Investment Division once each day when the Exchange is open for trading. If permitted by law, we may change the period between calculations but we will give You 30 days notice. When You request a transaction, we will process the transaction on the basis of the Accumulation Unit Value or Annuity Unit Value next determined after receipt of the request. Subject to our procedure, we will make withdrawals and transfers/reallocations at a later date, if You request. If your withdrawal request is to elect a variable pay-out option under your Deferred Annuity, we base the number of annuity units You receive on the next available Annuity Unit Value. We reserve the right to suspend or postpone payment for a withdrawal or transfer/reallocation when: . rules of the Securities and Exchange Commission so permit (trading on the Exchange is restricted, the Exchange is closed other than for customary weekend or holiday closings or an emergency exists which makes pricing or sale of securities not practicable); or . during any other period when the Securities and Exchange Commission by order so permits. ADVERTISING PERFORMANCE We periodically advertise the performance of the Investment Divisions. You may get performance information from a variety of sources including your quarterly statements, your MetLife representative, the Internet, annual reports and semiannual reports. All performance numbers are based upon historical earnings. These numbers are not intended to indicate future results. We may state performance in terms of "yield," "change in Accumulation Unit Value/Annuity Unit Value," "average annual total return" or some combination of these terms. YIELD is the net income generated by an investment in a particular Investment Division for 30 days or a month. These figures are expressed as percentages. This percentage yield is compounded semiannually. For the money market Investment Division, we state yield for a seven day period. 66 CHANGE IN ACCUMULATION/ANNUITY UNIT VALUE ("Non-Standard Performance") is calculated by determining the percentage change in the value of an accumulation (or annuity) unit for a certain period. These numbers may also be annualized. Change in Accumulation/Annuity Unit Value may be used to demonstrate performance for a hypothetical investment (such as $10,000) over a specified period. These performance numbers reflect the deduction of the Separate Account charges (with the Basic Death Benefit), the additional Separate Account charge for the American Funds Bond, American Funds Growth, American Funds Growth-Income and American Funds Global Small Capitalization Investment Divisions and the Annual Contract Fee; however, yield and change in Accumulation/Annuity Unit Value performance do not reflect the possible imposition of Withdrawal Charges, the charge for the GMIB and the charge for the LWG. Withdrawal Charges would reduce performance experience. AVERAGE ANNUAL TOTAL RETURN ("Standard Performance") calculations reflect the Separate Account charge, the additional Separate Account charge for the American Funds Growth, American Funds Growth-Income, American Funds Bond and American Funds Global Small Capitalization Investment Divisions and the Annual Contract Fee and applicable Withdrawal Charges since the Investment Division inception date, which is the date the corresponding Portfolio or predecessor Portfolio was first offered under the Separate Account that funds the Deferred Annuity. These figures also assume a steady annual rate of return. They assume that combination of optional benefits (including the Annual Step-Up Death Benefit) that would produce the greatest total Separate Account charge. Performance figures will vary among the various classes of the Deferred Annuities and the Investment Divisions as a result of different Separate Account charges and Withdrawal Charges. We may calculate performance for certain investment strategies including Equity Generator and each asset allocation model of the Index Selector. We calculate the performance as a percentage by presuming a certain dollar value at the beginning of a period and comparing this dollar value with the dollar value based on historical performance at the end of that period. We assume the Separate Account charge reflects the Standard Death Benefit. The information does not assume the charge for the GMIB or LWG. This percentage return assumes that there have been no withdrawals or other unrelated transactions. For purposes of presentation of Non-Standard Performance, we may assume that the Deferred Annuities were in existence prior to the inception date of the Investment Divisions in the Separate Account that funds the Deferred Annuity. In these cases, we calculate performance based on the historical performance of the underlying Metropolitan Fund, Calvert Fund, Met Investors Fund and American Funds(R) Portfolios since the Portfolio inception date. We use the actual accumulation unit or annuity unit data after the inception date. Any performance data that includes all or a portion of the time between the Portfolio inception date and the Investment Division inception date is hypothetical. Hypothetical returns indicate what the performance data would have been if the Deferred Annuity had been introduced as of the Portfolio inception date. We may also present average annual total return calculations which reflect all Separate Account charges and applicable Withdrawal Charges since the Portfolio inception date. We use the actual accumulation unit or annuity unit data after the inception date. Any performance data that includes all or a portion of the time between the Portfolio inception date and the Investment Division inception date is hypothetical. Hypothetical returns indicate what the performance data would have been if the Deferred Annuity had been introduced as of the Portfolio inception date. Past performance is no guarantee of future results. We may demonstrate hypothetical future values of Account Balances over a specified period based on assumed rates of return (which will not exceed 12% and which will include an assumption of 0% as well) for the Portfolios. These presentations reflect the deduction of the Separate Account charge, the Annual Contract Fee, if any, and the weighted average of investment-related charges for all Portfolios to depict investment-related charges. 67 We may demonstrate hypothetical future values of Account Balances for a specific Portfolio based upon the assumed rates of return previously described, the deduction of the Separate Account charge and the Annual Contract Fee, if any, and the investment-related charges for the specific Portfolio to depict investment-related charges. We may demonstrate the hypothetical historical value of each optional benefit for a specified period based on historical net asset values of the Portfolios and the annuity purchase rate, if applicable, either for an individual for whom the illustration is to be produced or based upon certain assumed factors (e.g., unisex, age 65). These presentations reflect the deduction of the Separate Account charge and the Annual Contract Fee, if any, the investment-related charge and the charge for the optional benefit being illustrated. We may demonstrate hypothetical future values of each optional benefit over a specified period based on assumed rates of return (which will not exceed 12% and which will include an assumption of 0% as well) for the Portfolios, the annuity purchase rate, if applicable, either for an individual for whom the illustration is to be produced or based upon certain assumed factors (e.g., unisex, age 65). These presentations reflect the deduction of the Separate Account charge and the Annual Contract Fee, if any, the weighted average of investment-related charges for all Portfolios to depict investment-related charges and the charge for the optional benefit being illustrated. We may demonstrate hypothetical values of income payments over a specified period based on historical net asset values of the Portfolios and the applicable annuity purchase rate, either for an individual for whom the illustration is to be produced or based upon certain assumed factors (e.g., unisex, age 65). These presentations reflect the deduction of the Separate Account charge, the investment-related charge and the Annual Contract Fee, if any. We may demonstrate hypothetical future values of income payments over a specified period based on assumed rates of return (which will not exceed 12% and which will include an assumption of 0% as well) for the Portfolios, the applicable annuity purchase rate, either for an individual for whom the illustration is to be produced or based upon certain assumed factors (e.g., unisex, age 65). These presentations reflect the deduction of the Separate Account charge, the Annual Contract Fee, if any, and the weighted average of investment-related charges for all Portfolios to depict investment-related charges. Any illustration should not be relied on as a guarantee of future results. CHANGES TO YOUR DEFERRED ANNUITY We have the right to make certain changes to your Deferred Annuity, but only as permitted by law. We make changes when we think they would best serve the interest of annuity owners or would be appropriate in carrying out the purposes of the Deferred Annuity. If the law requires, we will also get your approval and the approval of any appropriate regulatory authorities. Examples of the changes we may make include: . To operate the Separate Account in any form permitted by law. . To take any action necessary to comply with or obtain and continue any exemptions under the law (including favorable treatment under the Federal income tax laws) including limiting the number, frequency or types of transfers/reallocations permitted. . To transfer any assets in an Investment Division to another Investment Division, or to one or more separate accounts, or to our general account, or to add, combine or remove Investment Divisions in the Separate Account. . To substitute for the Portfolio shares in any Investment Division, the shares of another class of the Metropolitan Fund, the Calvert Fund, the Met Investors Fund or the shares of another investment company or any other investment permitted by law. . To make any necessary technical changes in the Deferred Annuities in order to conform with any of the above-described actions. 68 If any changes result in a material change in the underlying investments of an Investment Division in which You have a balance or an allocation, we will notify You of the change. You may then make a new choice of Investment Divisions. For Deferred Annuities issued in Pennsylvania, we will ask your approval before making any technical changes. VOTING RIGHTS Based on our current view of applicable law, You have voting interests under your Deferred Annuity concerning Metropolitan Fund, Calvert Fund, Met Investors Fund or American Funds(R) proposals that are subject to a shareholder vote. Therefore, You are entitled to give us instructions for the number of shares which are deemed attributable to your Deferred Annuity. We will vote the shares of each of the underlying Portfolios held by the Separate Account based on instructions we receive from those having a voting interest in the corresponding Investment Divisions. However, if the law or the interpretation of the law changes, we may decide to exercise the right to vote the Portfolio's shares based on our own judgment. You are entitled to give instructions regarding the votes attributable to your Deferred Annuity in your sole discretion. There are certain circumstances under which we may disregard voting instructions. However, in this event, a summary of our action and the reasons for such action will appear in the next semiannual report. If we do not receive your voting instructions, we will vote your interest in the same proportion as represented by the votes we receive from other investors. The effect of this proportional voting is that a small number of contract owners may control the outcome of a vote. Shares of the Metropolitan Fund, the Calvert Fund, the Met Investors Fund or the American Funds(R) that are owned by our general account or by any of our unregistered separate accounts will be voted in the same proportion as the aggregate of: . The shares for which voting instructions are received, and . The shares that are voted in proportion to such voting instructions. However, if the law or the interpretation of the law changes, we may decide to exercise the right to vote the Portfolio's shares based on our judgment. WHO SELLS THE DEFERRED ANNUITIES MetLife Investors Distribution Company ("MLIDC") is the principal underwriter and distributor of the securities offered through this Prospectus. MLIDC, which is our affiliate, also acts as the principal underwriter and distributor of some of the other Variable Annuity contracts and variable life insurance policies we and our affiliated companies issue. We reimburse MLIDC for expenses MLIDC incurs in distributing the Deferred Annuities (e.g., commissions payable to the retail broker-dealers who sell the Deferred Annuities, including our affiliated broker-dealers.) MLIDC does not retain any fees under the Deferred Annuities. MLIDC's principal executive offices are located at 5 Park Plaza, Suite 1900, Irvine, California 92614. MLIDC is registered as a broker-dealer with the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934, as well as the securities commissions in the states in which it operates, and is a member of the Financial Industry Regulatory Authority ("FINRA"). FINRA provides background information about broker-dealers and their registered representatives through FINRA BrokerCheck. You may contact the FINRA BrokerCheck Hotline at 1-800-289-9999, or log on to www.finra.org. An investor brochure that includes information describing FINRA BrokerCheck is available through the Hotline or on-line. Deferred Annuities are sold through MetLife licensed sales representatives who are associated with MetLife Securities, Inc. ("MSI"), our affiliate and a broker-dealer, which is paid compensation for the promotion and sale of the Deferred Annuities. Previously, Metropolitan Life Insurance Company was the broker-dealer through which MetLife sales 69 representatives sold the Deferred Annuities. The Deferred Annuities are also sold through the registered representatives of our other affiliated broker-dealers. MSI and our affiliated broker-dealers are registered with the SEC as broker-dealers under the Securities Exchange Act of 1934 and are also members of FINRA. The Deferred Annuities may also be sold through other registered broker-dealers. The Deferred Annuity may also be sold through the mail or the Internet. There is no front-end sales load deducted from purchase payments to pay sales commissions. Distribution costs are recovered through the Separate Account charge. Our sales representatives in our MetLife Resources division must meet a minimum level of sales production in order to maintain employment with us. MetLife sales representatives who are not in our MetLife Resources division ("non-MetLife Resources MetLife sales representatives") must meet a minimum level of sales of proprietary products in order to maintain employment with us. Non-MetLife Resources MetLife sales representatives and MetLife Resources sales representatives receive cash payments for the products they sell and service based upon a 'gross dealer concession' model. With respect to the Deferred Annuities, the gross dealer concession ranges from 0.75% to 9% (depending on the class purchased) of each purchase payment each year the Contract is in force and, starting in the second Contract Year, ranges from 0.25% to 1.00% (depending on the class purchased) of the Account Balance each year that the Contract is in force for servicing the Deferred Annuity. Gross dealer concession may also be paid when the Contract is annuitized. The amount of this gross dealer concession payable upon annuitization depends on several factors, including the number of years the Deferred Annuity has been in force. Compensation to the sales representative is all or part of the gross dealer concession. Compensation to sales representatives in the MetLife Resources division is based upon premiums and purchase payments applied to all products sold and serviced by the representative. Compensation to non-MetLife Resources MetLife sales representatives is determined based upon a formula that recognizes premiums and purchase payments applied to proprietary products sold and serviced by the representative as well as certain premiums and purchase payments applied to non-proprietary products sold by the representative. Proprietary products are those issued by us or our affiliates. Because one of the factors determining the percentage of gross dealer concession that applies to a non-MetLife Resources MetLife sales representative's compensation is sales of proprietary products, these sales representatives have an incentive to favor the sale of proprietary products. Because non-MetLife Resources MetLife sales managers' compensation is based upon the sales made by the representatives they supervise, these sales managers also have an incentive to favor the sale of proprietary products. Non-MetLife Resources MetLife sales representatives and MetLife Resources sales representatives and their managers and the sales representatives and managers of our affiliates may be eligible for additional cash compensation, such as bonuses, equity awards (such as stock options), training allowances, supplemental salary, financial arrangements, marketing support, medical and other insurance benefits, and retirement benefits and other benefits based primarily on the amount of proprietary products sold. Because additional cash compensation paid to non-MetLife Resources MetLife sales representatives and MetLife Resources sales representatives and their managers and the sales representatives and their managers of our affiliates is based primarily on the sale of proprietary products, non-MetLife Resources MetLife sales representatives and MetLife Resources sales representatives and their managers and the sales representatives and their managers of our affiliates have an incentive to favor the sale of proprietary products. Sales representatives who meet certain productivity, persistency, and length of service standards and/or their managers may be eligible for additional cash compensation. Moreover, managers may be eligible for additional cash compensation based on the sales production of the sales representatives that the manager supervises. Our sales representatives and their managers may be eligible for non-cash compensation incentives, such as conferences, trips, prizes and awards. Other non-cash compensation payments may be made for other services that are not directly related to the sale of products. These payments may include support services in the form of recruitment and training of personnel, production of promotional services and other support services. 70 Other incentives and additional cash compensation provide sales representatives and their managers with an incentive to favor the sale of proprietary products. The business unit responsible for the operation of our distribution system is also paid. MLIDC also pays compensation for the sale of the Deferred Annuities by affiliated broker-dealers. The compensation paid to broker-dealers for sales of the Deferred Annuities is generally not expected to exceed, on a present value basis, the aggregate amount of total compensation that is paid with respect to sales made through MetLife representatives. (The total compensation includes payments that we make to our business unit that is responsible for the operation of the distribution systems through which the Deferred Annuities are sold.) These firms pay their sales representatives all or a portion of the commissions received for their sales of Deferred Annuities; some firms may retain a portion of commissions. The amount that selling firms pass on to their sales representatives is determined in accordance with their internal compensation programs. Those programs may also include other types of cash and non-cash compensation and other benefits. Sales representatives of affiliated broker-dealers and their managers may be eligible for various cash benefits and non-cash compensation (as described above) that we may provide jointly with affiliated broker-dealers. Because of the receipt of this cash and non-cash compensation, sales representatives and their managers of our affiliated broker-dealers have an incentive to favor the sale of proprietary products. MLIDC may also enter into preferred distribution arrangements with certain affiliated broker-dealer firms such as New England Securities Corporation, Walnut Street Securities, Inc. and Tower Square Securities, Inc. These arrangements are sometimes called "shelf space" arrangements. Under these arrangements, MLIDC may pay separate, additional compensation to the broker-dealer firm for services the broker-dealer firm provides in connection with the distribution of the Contracts. These services may include providing us with access to the distribution network of the broker-dealer firm, the hiring and training of the broker-dealer firm's sales personnel, the sponsoring of conferences and seminars by the broker-dealer firm, or general marketing services performed by the broker-dealer firm. The broker-dealer firm may also provide other services or incur other costs in connection with distributing the Contracts. MLIDC also pays compensation for the sale of Contracts by unaffiliated broker-dealers. The compensation paid to unaffiliated broker-dealers for sales of the Deferred Annuities is generally not expected to exceed, on a present value basis, the aggregate amount of total compensation that is paid with respect to sales made through MetLife representatives. (The total compensation includes payments that we make to our business unit that is responsible for the operation of the distribution systems through which the Deferred annuities are sold.) Broker-dealers pay their sales representatives all or a portion of the commissions received for their sales of the Contracts. Some firms may retain a portion of commissions. The amount that the broker-dealer passes on to its sales representatives is determined in accordance with its internal compensation programs. Those programs may also include other types of cash and non-cash compensation and other benefits. We and our affiliates may also provide sales support in the form of training, sponsoring conferences, defraying expenses at vendor meetings, providing promotional literature and similar services. An unaffiliated broker-dealer or sales representative of an unaffiliated broker-dealer may receive different compensation for selling one product over another and/or may be inclined to favor one product provider over another product provider due to differing compensation rates. Ask your sales representative further information about what your sales representative and the broker-dealer for which he or she works may receive in connection with your purchase of a Contract. We or our affiliates pay American Funds Distributors, Inc., the principal underwriter for the American Funds(R), a percentage of all purchase payments allocated to the following Portfolios for the services it provides in marketing the Portfolios' shares in connection with the Deferred Annuity: American Funds Growth Portfolio, the American Funds Growth-Income Portfolio, the American Funds Bond Portfolio, the American Funds Global Small Capitalization Portfolio, the American Funds Balanced Allocation Portfolio, the American Funds Growth Allocation Portfolio and the American Funds Moderate Allocation Portfolio. 71 From time to time, MetLife pays organizations, associations and non-profit organizations fees to sponsor MetLife's Variable Annuity Contracts. We may also obtain access to an organization's members to market our Variable Annuity Contracts. These organizations are compensated for their sponsorship of our Variable Annuity Contracts in various ways. Primarily, they receive a flat fee from MetLife. We also compensate these organizations by our funding of their programs, scholarships, events or awards, such as a principal of the year award. We may also lease their office space or pay fees for display space at their events, purchase advertisements in their publications or reimburse or defray their expenses. In some cases, we hire organizations to perform administrative services for us, for which they are paid a fee based upon a percentage of the Account Balances their members hold in the Contract. We also may retain finders and consultants to introduce MetLife to potential clients and for establishing and maintaining relationships between MetLife and various organizations. The finders and consultants are primarily paid flat fees and may be reimbursed for their expenses. We or our affiliates may also pay duly licensed individuals associated with these organizations cash compensation for the sales of the Contracts. FINANCIAL STATEMENTS Our financial statements and the financial statements of the Separate Account have been included in the SAI. YOUR SPOUSE'S RIGHTS If You received your Contract through a qualified retirement plan and your plan is subject to ERISA (the Employee Retirement Income Security Act of 1974) and You are married, the income payments, withdrawal and loan provisions, and methods of payment of the death benefit under your Deferred Annuity may be subject to your spouse's rights. If your benefit is worth $5,000 or less, your plan may provide for distribution of your entire interest in a lump sum without your spouse's consent. For details or advice on how the law applies to your circumstances, consult your tax adviser or attorney. WHEN WE CAN CANCEL YOUR DEFERRED ANNUITY We may cancel your Deferred Annuity only if we do not receive any purchase payments from You for 24 consecutive months (36 consecutive months in New York State) and your Account Balance is less than $2,000. Accordingly, no Deferred Annuity will be terminated due solely to negative investment performance. We will only do so to the extent allowed by law. If we do so, we will return the full Account Balance, less any outstanding loans. Federal tax law may impose additional restrictions on our right to cancel your SEP and SIMPLE IRA Deferred Annuity. The tax law may also restrict payment of surrender proceeds to participants under certain employer retirement plans prior to reaching certain permissible triggering events. We will not terminate the Contract where we keep records of your account if it includes an LWG rider. In addition, we will not terminate any Contract where we keep records of your account that includes a GMIB rider or a guaranteed death benefit if at the time the termination would otherwise occur the income/benefit base of the rider or the guaranteed amount under any death benefit is greater than the Account Balance. For all other Contracts, we reserve the right to exercise this termination provision, subject to obtaining any required regulatory approvals. We will not exercise this provision, under Contracts issued in New York. However, if your plan determines to terminate the Contract at a time when You have an income/benefit base of the rider or a guaranteed amount under any death benefit that is greater than the Account Balance, You forfeit any income/benefit base of the rider or any guaranteed amount under any death benefit You have accrued upon termination of the Contract. 72 INCOME TAXES The following information on taxes is a general discussion of the subject. It is not intended as tax advice. The Internal Revenue Code (Code) is complex and subject to change regularly. Failure to comply with the tax law may result in significant adverse tax consequences and tax penalties. Consult your own tax adviser about your circumstances, any recent tax developments, and the impact of state income taxation. For purposes of this section, we address Deferred Annuities and income payments under the Deferred Annuities together. You should read the general provisions and any sections relating to your type of annuity to familiarize yourself with some of the tax rules for your particular Contract. You are responsible for determining whether your purchase of a Deferred Annuity, withdrawals, income payments and any other transactions under your Deferred Annuity satisfy applicable tax law. We are not responsible for determining if your employer's plan or arrangement satisfies the requirements of the Code and/or the Employee Retirement Income Security Act of 1974 (ERISA). Where otherwise permitted under the Deferred Annuity, the transfer of ownership of a Deferred Annuity, the designation or change in designation of an Annuitant, payee or other Beneficiary who is not also a contract owner, the selection of certain maturity dates, the exchange of a Deferred Annuity, or the receipt of a Deferred Annuity in an exchange, may result in income tax and other tax consequences, including additional withholding, estate tax, gift tax and generation skipping transfer tax, that are not discussed in this Prospectus. The SAI may contain additional information. Please consult your tax adviser. PUERTO RICO TAX CONSIDERATIONS The amount of income on annuity distributions (payable over your lifetime) is calculated differently under the Puerto Rico Internal Revenue Code of 2011 (the "2011 PR Code"). Since the U.S. source income generated by a Puerto Rico bona fide resident is subject to U.S. income tax and the Internal Revenue Service issued guidance in 2004 which indicated that the income from an annuity contract issued by a U.S. life insurer would be considered U.S. source income, the timing of recognition of income from an annuity contract could vary between the two jurisdictions. Although the 2011 PR Code provides a credit against the Puerto Rico income tax for U.S. income taxes paid, an individual may not get full credit because of the timing differences. You should consult with a personal tax adviser regarding the tax consequences of purchasing an annuity Contract and/or any proposed distribution, particularly a partial distribution or election to annuitize. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS Purchasers that are not U.S. citizens or residents will generally be subject to U.S. Federal withholding tax on taxable distributions from annuity contracts at a 30% rate, unless a lower treaty rate applies. In addition, purchasers may be subject to state and/or municipal taxes and taxes that may be imposed by the purchaser's country of citizenship or residence. Prospective purchasers are advised to consult with a qualified tax adviser regarding U.S. state and foreign taxation with respect to purchasing an annuity Contract. MetLife does not expect to incur Federal, state or local income taxes on the earnings or realized capital gains attributable to the Separate Account. However, if we do incur such taxes in the future, we reserve the right to charge amounts allocated to the Separate Account for these taxes. To the extent permitted under Federal tax law, we may claim the benefit of the corporate dividends received deduction and of certain foreign tax credits attributable to taxes paid by certain of the Portfolios to foreign jurisdictions. 73 GENERAL Deferred annuities are a means of setting aside money for future needs, usually retirement. Congress recognizes how important saving for retirement is and has provided special rules in the Code. All TSAs (ERISA and non-ERISA), 457(b), 403(a) and IRAs (including SEPs and SIMPLEs) receive tax deferral under the Code. Although there are no additional tax benefits by funding such retirement arrangements with an annuity, doing so offers You additional insurance benefits such as the availability of a guaranteed income for life. Under current Federal income tax law, the taxable portion of distributions and withdrawals from variable annuity contracts (including TSAs, 457(b), 403(a) and IRAs) are subject to ordinary income tax and are not eligible for the lower tax rates that apply to long term capital gains and qualifying dividends. WITHDRAWALS When money is withdrawn from your Contract (whether by You or your Beneficiary), the amount treated as taxable income and taxed as ordinary income differs depending on the type of annuity You purchase (e.g., IRA or TSA) and payment method or income payment type You elect. If You meet certain requirements, your designated Roth earnings are free from Federal income taxes. We will withhold a portion of the amount of your withdrawal for income taxes, unless You are eligible to and You elect otherwise. The amount we withhold is determined by the Code. WITHDRAWALS BEFORE AGE 59 1/2 Because these products are intended for retirement, if You make a taxable withdrawal before age 59 1/2 You may incur a 10% tax penalty, in addition to ordinary income taxes. Also, please see the section below titled "Separate Account Charges" for further information regarding withdrawals. As indicated in the chart below, some taxable distributions prior to age 59 1/2 are exempt from the penalty. Some of these exceptions include amounts received:
Type of Contract ---------------------------------- TSA and TSA SIMPLE ERISA IRA/1/ SEP 457(b)/3/ 403(a) ------- ------ --- -------- ------ In a series of substantially equal payments made annually (or more frequently) for life or life expectancy (SEPP) x/2/ x x x/2/ x/2/ After You die x x x x x After You become totally disabled (as defined in the Code) x x x x x To pay deductible medical expenses x x x x x After separation from service if You are over 55 at time of separation/2/ x x x After December 31, 1999 for IRS levies x x x x x To pay medical insurance premiums if You are unemployed x x For qualified higher education expenses x x For qualified first time home purchases up to $10,000 x x Pursuant to qualified domestic relations orders x x x
/1/ For SIMPLE IRAs the 10% tax penalty for early withdrawals is generally increased to 25% for withdrawals within the first two years of your participation in the SIMPLE IRA. /2/ You must be separated from service at the time payments begin. /3/ Distributions from 457(b) plans are generally not subject to the 10% penalty; however, the 10% penalty does apply to distributions from the 457(b) plans of state or local government employers to the extent that the distribution is attributable to rollovers accepted from other types of eligible retirement plans. 74 SYSTEMATIC WITHDRAWAL PROGRAM FOR SUBSTANTIALLY EQUAL PERIODIC PAYMENTS (SEPP) AND INCOME OPTIONS If You are considering using the Systematic Withdrawal Program or selecting an income option for the purpose of meeting the SEPP exception to the 10% tax penalty, consult with your tax adviser. It is not clear whether certain withdrawals or income payments under a variable annuity will satisfy the SEPP exception. If You receive systematic payments that You intend to qualify for the SEPP exception, any modifications (except due to death or disability) to your payment before age 59 1/2 or within five years after beginning SEPP payments, whichever is later, will result in the retroactive imposition of the 10% penalty with interest. Such modifications may include additional purchase payments or withdrawals (including tax-free transfers or rollovers of income payments) from the Deferred Annuity. SEPARATE ACCOUNT CHARGES It is conceivable that the charges for certain benefits such as any of the guaranteed death benefits (Annual Step Up Death Benefit) and certain living benefits (e.g. the GMIB and LWG) could be considered to be taxable each year as deemed distributions from the Contract to pay for non-annuity benefits. We currently treat these charges as an intrinsic part of the annuity Contract and do not tax report these as taxable income. However, it is possible that this may change in the future if we determine that this is required by the IRS. If so, the charge could also be subject to a 10% penalty tax if the taxpayer is under age 59 1/2. INCIDENTAL BENEFITS Certain death benefits may be considered incidental benefits under a tax qualified plan, which are limited under the Code. Failure to satisfy these limitations may have adverse tax consequences to the plan and to the participant. Where otherwise permitted to be offered under annuity contracts issued in connection with qualified plans, the amount of life insurance is limited under the incidental death benefit rules. You should consult your own tax adviser prior to purchase of the Contract under any type of IRA, 403(b) arrangement or qualified plan as a violation of these requirements could result in adverse tax consequences to the plan and to the participant including current taxation of amounts under the Contract. GUARANTEED WITHDRAWAL BENEFITS If You have purchased the LWG, where otherwise made available, note the following: In the event that the Account Balance goes to zero, and either the Remaining Guaranteed Withdrawal Amount is paid out in fixed installments or the Annual Benefit Payment is paid for life, we will treat such payments as income annuity payments under the tax law and allow recovery of any remaining basis ratably over the expected number of payments. In determining your required minimum distribution each year, the actuarial value of this benefit as of the prior December 31st must be taken into account in addition to the Account Balance of the Contract. PURCHASE PAYMENTS Generally, all purchase payments will be contributed on a before-tax basis. This means that the purchase payments entitle You to a tax deduction or are not subject to current income tax. Under some circumstances "after-tax" purchase payments can be made to certain annuities. These purchase payments do not reduce your taxable income or give You a tax deduction. There are different annual purchase payments limits for the annuities offered in this Prospectus. Purchase payments in excess of the limits may result in adverse tax consequences. 75 Your Contract may accept certain direct transfers and rollovers from other qualified plan accounts and contracts; such transfers and rollovers are generally not subject to annual limitations on purchase payments. WITHDRAWALS, TRANSFERS AND INCOME PAYMENTS Because your purchase payments are generally on a before-tax basis, You generally pay income taxes on the full amount of money You withdraw as well as income earned under the Contract. Withdrawals and income payments attributable to any after-tax contributions are not subject to income tax (except for the portion of the withdrawal or payment allocable to earnings). If certain requirements are met, You may be able to transfer amounts in your Contract to another eligible retirement plan or IRA. For 457(b) plans maintained by non-governmental employers, if certain conditions are met, amounts may be transferred into another 457(b) plan maintained by a non-governmental employer. Your Deferred Annuity is not forfeitable (e.g., not subject to claims of your creditors) and You may not transfer it to someone else. For certain qualified employer plans, an important exception is that your account may be transferred pursuant to a qualified domestic relations order (QDRO). Please consult the specific section for the type of annuity You purchased to determine if there are restrictions on withdrawals, transfers or income payments. Minimum distribution requirements also apply to the Deferred Annuities. These are described separately later in this section. Certain mandatory distributions made to participants in an amount in excess of $1,000 (but less than $5,000) must be automatically rolled over to an IRA designated by the plan, unless the participant elects to receive it in cash or roll it over to a different IRA or eligible retirement plan. ELIGIBLE ROLLOVER DISTRIBUTIONS AND 20% MANDATORY WITHHOLDING For certain qualified employer plans, we are required to withhold 20% of the taxable portion of your withdrawal that constitutes an "eligible rollover distribution" for Federal income taxes. We are not required to withhold this money if You direct us, the trustee or the custodian of the plan, to directly rollover your eligible rollover distribution to a traditional IRA or another eligible retirement plan. Generally, an "eligible rollover distribution" is any taxable amount You receive from your Contract. (In certain cases, after-tax amounts may also be considered eligible rollover distributions). However, it does not include taxable distributions such as: . Withdrawals made to satisfy minimum distribution requirements; or . Certain withdrawals on account of financial hardship. Other exceptions to the definition of eligible rollover distribution may exist. For taxable withdrawals that are not "eligible rollover distributions", the Code requires different withholding rules. The withholding amounts are determined at the time of payment. In certain instances, You may elect out of these withholding requirements. You may be subject to the 10% penalty tax if You withdraw taxable money before You turn age 59 1/2. MINIMUM DISTRIBUTION REQUIREMENTS Generally, You must begin receiving retirement plan withdrawals by April 1 of the latter of: . the calendar year following the year in which You reach age 70 1/2 or . the calendar year following the calendar year You retire, provided You do not own 5% or more of your employer. 76 For IRAs (including SEP and SIMPLE IRAs), You must begin receiving withdrawals by April 1 of the calendar year following the calendar year in which You reach age 70 1/2 even if You have not retired. For after-death required minimum distributions ("RMD"), the five year rule is applied without regard to calendar year 2009 due to the 2009 required minimum distribution waiver. For instance, for a contract owner who died in 2007, the five year period would end in 2013 instead of 2012. The required minimum distribution rules are complex, so consult with your tax adviser because the application of these rules to your particular circumstances may have been impacted by the 2009 required minimum distribution waiver. In general the amount of required minimum distribution (including death benefit distributions discussed below) must be calculated separately with respect to each 403(b) arrangement, but then the aggregate amount of the required distribution may be taken under the tax law from any one or more of the participant's several 403(b) arrangements. Otherwise, You may not satisfy minimum distributions for an employer's qualified plan (ie, 401(a)/403(b), 457(b)) with distributions from another qualified plan of the same or a different employer. Complex rules apply to the calculation of these withdrawals. A tax penalty of 50% applies to withdrawals which should have been taken but were not. It is not clear whether income payments under a variable annuity will satisfy these rules. Consult your tax adviser prior to choosing a pay-out option. In general, the amount of required minimum distribution (including death benefit distributions discussed below) must be calculated separately with respect to each IRA or SEP IRA and each SIMPLE IRA, but then the aggregate amount of the required distribution may be generally taken under the tax law for the IRAs/SEP IRAs from any one or more of the taxpayer's IRAs/SEP IRAs. For SIMPLE IRAs, the aggregate amount of the required distribution may be taken from any one or more of the taxpayer's SIMPLE IRAs. Otherwise, You may not satisfy minimum distributions for one type of IRA or qualified plan with distributions from an account or annuity contract under another type of IRA or qualified plan (e.g. IRA and 403(b)). In general, Income Tax regulations permit income payments to increase based not only with respect to the investment experience of the underlying funds but also with respect to actuarial gains. Additionally, these regulations permit payments under income annuities to increase due to a full withdrawal or to a partial withdrawal under certain circumstances. Where made available, it is not clear whether the purchase or exercise of a withdrawal option after the first two years under a life contingent Income Annuity with a guarantee period where only the remaining guaranteed payments are reduced due to the withdrawal will satisfy minimum distribution requirements. Consult your tax adviser prior to purchase. The regulations also require that the value of benefits under a deferred annuity, including certain death benefits in excess of cash value, must be added to the amount credited to your account in computing the amount required to be distributed over the applicable period. You should consult your own tax adviser as to how these rules affect your own Contract. We will provide You with additional information regarding the amount that is subject to minimum distribution under this rule. If You intend to receive your minimum distributions which are payable over the joint lives of You and a Beneficiary who is not your spouse (or over a period not exceeding the joint life expectancy of You and your non-spousal Beneficiary), be advised that Federal tax rules may require that payments be made over a shorter period or may require that payments to the Beneficiary be reduced after your death to meet the minimum distribution incidental benefit rules and avoid the 50% excise tax. Consult your tax adviser. 77 DEATH BENEFITS The death benefit is taxable to the recipient in the same manner as if paid to the contract owner (under the rules for withdrawals or income payments, whichever is applicable). Generally, if You die before required minimum distribution withdrawals have begun, we must make payment of your entire interest by December 31st of the year that is the fifth anniversary of your death or begin making payments over a period and in a manner allowed by the Code to your Beneficiary by December 31st of the year after your death. Consult your tax adviser because the application of these rules to your particular circumstances may have been impacted by the 2009 RMD waiver (see Minimum Distribution Requirements section for additional information). If your spouse is your Beneficiary, and your Contract permits, your spouse may delay the start of these payments until December 31 of the year in which You would have reached age 70 1/2. Alternatively, if your spouse is your sole Beneficiary and the Contract is an IRA, he or she may elect to rollover the death proceeds into his or her own IRA (or, if You meet certain requirements, a Roth IRA and pay tax on the taxable portion of the death proceeds in the year of the rollover) and treat the IRA (or Roth IRA) as his or her own. If your spouse is your Beneficiary, your spouse may also be able to rollover the death proceeds into another eligible retirement plan in which he or she participates, if permitted under the receiving plan. Under Federal tax rules, a same-sex spouse is treated as a non-spouse Beneficiary. If your spouse is not your Beneficiary and your Contract permits, your Beneficiary may also be able to rollover the death proceeds via a direct trustee-to-trustee transfer into an inherited IRA. However, such Beneficiary may not treat the inherited IRA as his or her own IRA. Certain employer plans (i.e., 401(a), 403(a), 403(b), and governmental 457 plans) are required to permit a non-spouse direct trustee-to-trustee rollover. If You die after required minimum distributions begin, payments of your entire balance must be made in a manner and over a period as provided by the Code (and any applicable regulations). If an IRA Contract is issued in your name after your death for the benefit of your designated Beneficiary with a purchase payment which is directly transferred to the Contract from another IRA or eligible retirement plan, the death benefit must continue to be distributed to your Beneficiary's Beneficiary in a manner at least as rapidly as the method of distribution in effect at the time of your Beneficiary's death. TAX-SHELTERED ANNUITIES (ERISA AND NON-ERISA) GENERAL Tax-sheltered annuities fall under Section 403(b) of the Code ("403(b) arrangements"), which provides certain tax benefits to eligible employees of public school systems and organizations that are tax exempt under Section 501(c)(3) of the Code. In general, contributions to Section 403(b) arrangements are subject to contribution limitations under Section 415(c) of the Code (the lesser of 100% of includable compensation or the applicable limit for the year). On July 26, 2007, final 403(b) regulations were issued by the U.S. Treasury which impact how we administer your 403(b) Contract. In order to satisfy the 403(b) final regulations and prevent your Contract from being subject to adverse tax consequences including potential penalties, contract exchanges after September 24, 2007 must, at a minimum, meet the following requirements: (1) the plan must allow the exchange, (2) the exchange must not result in a reduction in the participant or beneficiary's accumulated benefit, (3) the receiving contract includes distribution restrictions that are no less stringent than those imposed on the contract being exchanged, and (4) the employer enters into an agreement with the issuer of the receiving contract to provide information to enable the contract provider to comply with Code 78 requirements. Such information would include details concerning severance from employment, hardship withdrawals, loans and tax basis. You should consult your tax or legal counsel for any advice relating to contract exchanges or any other matter relating to these regulations. WITHDRAWALS AND INCOME PAYMENTS If You are under 59 1/2, You generally cannot withdraw money from your TSA Contract unless the withdrawal: . Relates to purchase payments made prior to 1989 (and pre-1989 earnings on those purchase payments). . Is directly transferred to another permissible investment under Section 403(b) arrangements; . Relates to amounts that are not salary reduction elective deferrals if your plan allows it; . Occurs after You die, have a severance from employment or become disabled (as defined by the Code); . Is for financial hardship (but only to the extent of purchase payments) if your plan allows it; . Distributions attributable to certain Tax Sheltered Annuity plan terminations if the conditions of the new income tax regulations are met; . Relates to rollover or after-tax contributions; or . Is for the purchase of permissive service credit under a governmental defined benefit plan. Recent income tax regulations also provide certain new restrictions on withdrawals of amounts from tax sheltered annuities that are not attributable to salary reduction contributions. Under these regulations, a Section 403(b) contract is permitted to distribute retirement benefits attributable to pre-tax contributions other than elective deferrals to the participant no earlier than upon the earlier of the participant's severance from employment or upon the prior occurrence of some event, such as after a fixed number of years, the attainment of a stated age, or disability. DESIGNATED ROTH ACCOUNT FOR 403(B) PLANS Employers that established and maintain a 403(b) plan ("the Plan") may also establish a Qualified Roth Contribution Program under Section 402A of the Code ("Designated Roth Accounts") to accept after tax contributions as part of the TSA plan. In accordance with our administrative procedures, we may permit these contributions to be made as purchase payments to a Section 403(b) Contract under the following conditions: . The employer maintaining the plan has demonstrated to our satisfaction that Designated Roth Accounts are permitted under the Plan. . In accordance with our administrative procedures, the amount of elective deferrals has been irrevocably designated as an after-tax contribution to the Designated Roth Account. . All state regulatory approvals have been obtained to permit the Contract to accept such after-tax elective deferral contributions (and, where permitted under the Qualified Roth Contribution Program and the Contract, rollovers and trustee-to-trustee transfers from other Designated Roth Accounts). . In accordance with our procedures and in a form satisfactory to us, we may accept rollovers from other funding vehicles under any Qualified Roth Contribution Program of the same type in which the employee participates as well as trustee-to-trustee transfers from other funding vehicles under the same Qualified Roth Contribution Program for which the participant is making elective deferral contributions to the Contract. . Recently enacted legislation allows (but does not require) 403(b) plans that offer designated Roth accounts to permit participants to roll their non-Roth account assets into a designated Roth account under the same plan, provided the non-Roth assets are distributable under the plan and otherwise eligible for rollover. . No other contribution types (including employer contributions, matching contributions, etc.) will be allowed as designated Roth contributions, unless they become permitted under the Code. 79 . If permitted under the Federal tax law, we may permit both pre-tax contributions under a 403(b) plan as well as after-tax contributions under that Plan's Qualified Roth Contribution Program to be made under the same Contract as well as rollover contributions and contributions by trustee-to-trustee transfers. In such cases, we will account separately for the designated Roth contributions and the earnings thereon from the contributions and earnings made under the pre-tax TSA plan (whether made as elective deferrals, rollover contributions or trustee-to-trustee transfers). As between the pre-tax or traditional Plan and the Qualified Roth Contribution Program, we will allocate any living benefits or death benefits provided under the Contract on a reasonable basis, as permitted under the tax law. . We may refuse to accept contributions made as rollovers and trustee-to-trustee transfers, unless we are furnished with a breakdown as between participant contributions and earnings at the time of the contribution. You and your employer should consult their own tax and legal advisers prior to making or permitting contributions to be made to a Qualified Roth Contribution Program. . The IRS was given authority in the final Roth account regulations to issue additional guidance addressing the potential for improper transfers of value to Roth accounts due to the allocation of contract income, expenses, gains and losses. The IRS has not issued the additional guidance and, as a result, there is uncertainty regarding the status of Roth accounts and particularly Roth accounts under annuity contracts that allocate charges for guarantees. You should consult your tax or legal counsel for advice relating to Roth accounts and other matters relating to the final Roth account regulations. LOANS If your employer's plan and TSA Contract permit loans, such loans will be made only from any Fixed Interest Account Balance and only up to certain limits. In that case, we credit your Fixed Interest Account Balance up to the amount of the outstanding loan balance with a rate of interest that is less than the interest rate we charge for the loan. The Code and applicable income tax regulations limit the amount that may be borrowed from your Contract and all your employer plans in the aggregate and also require that loans be repaid, at a minimum, in scheduled level payments over a prescribed term. Your employer's plan and Contract will indicate whether loans are permitted. The terms of the loan are governed by the Contract and loan agreement. Failure to satisfy loan limits under the Code or to make any scheduled payments according to the terms of your loan agreement and Federal tax law could have adverse tax consequences. Consult a tax adviser and read your loan agreement and Contract prior to taking any loan. INDIVIDUAL RETIREMENT ANNUITIES IRAs: Traditional IRA, Roth IRA, SIMPLE IRA and SEPs The sale of a Contract for use with an IRA may be subject to special disclosure requirements of the IRS. Purchasers of a Contract for use with IRAs will be provided with supplemental information required by the IRS or other appropriate agency. A Contract issued in connection with an IRA may be amended as necessary to conform to the requirements of the Code. IRA contracts may not invest in life insurance. The Deferred Annuity offers death benefits and optional benefits that in some cases may exceed the greater of the purchase payments or the Account Balance which could conceivably be characterized as life insurance. The Roth IRA tax endorsement is based on the IRS model form 5305-RB (rev 0302). The Deferred Annuity (and optional death benefits and appropriate IRA tax endorsements) has not yet been submitted to the IRS for review and approval as to 80 form. Disqualification of the Deferred Annuity as an IRA could result in the immediate taxation of amounts held in the Contract and other adverse tax consequences. Generally, except for Roth IRAs, IRAs can accept deductible (or pre-tax) purchase payments. Deductible or pre-tax purchase payments will be taxed when distributed from the Contract. You must be both the contract owner and the Annuitant under the Contract. Your IRA annuity is not forfeitable and You may not transfer, assign or pledge it to someone else. You are not permitted to borrow from the Contract. You can transfer your IRA proceeds to a similar IRA, certain eligible retirement plans of an employer (or a SIMPLE IRA to a Traditional IRA or eligible retirement plan after two years of participation in your employer's SIMPLE IRA plan) without incurring Federal income taxes if certain conditions are satisfied. Consult your tax adviser prior to the purchase of the Contract as a Traditional IRA, Roth IRA, SIMPLE IRA or SEP. TRADITIONAL IRA ANNUITIES PURCHASE PAYMENTS Purchase payments (except for permissible rollovers and direct transfers) are generally not permitted after the calendar year in which You attain age 69 1/2. Except for permissible rollovers and direct transfers, purchase payments to Traditional and Roth IRAs for individuals under age 50 are limited in the aggregate to the lesser of 100% of compensation or the deductible amount established each year under the Code. A purchase payment up to the deductible amount can also be made for a non-working spouse provided the couple's compensation is at least equal to their aggregate contributions. See the SAI for additional information. Also, see IRS Publication 590 available at www.irs.gov. . Individuals age 50 or older can make an additional "catch-up" purchase payment (assuming the individual has sufficient compensation). . If You or your spouse are an active participant in a retirement plan of an employer, your deductible contributions may be limited. . Purchase payments in excess of these amounts may be subject to a penalty tax. . If contributions are being made under a SEP or a SAR-SEP plan of your employer, additional amounts may be contributed as permitted by the Code and the terms of the employer's plan. . These age and dollar limits do not apply to tax-free rollovers or transfers from other IRAs or other eligible retirement plans. . If certain conditions are met, You can change your Traditional IRA purchase payment to a Roth IRA before You file your income tax return (including filing extensions). WITHDRAWALS AND INCOME PAYMENTS Withdrawals (other than tax free transfers or rollovers to other individual retirement arrangements or eligible retirement plans) and income payments are included in income except for the portion that represents a return of non- deductible purchase payments. This portion is generally determined based on a ratio of all non-deductible purchase payments to the total values of all your Traditional IRAs. We will withhold a portion of the amount of your withdrawal for income taxes, unless You elect otherwise. The amount we withhold is determined by the Code. Also see general section titled "Withdrawals" above. 81 DEATH BENEFITS The death benefit is taxable to the recipient in the same manner as if paid to the contract owner (under the rules for withdrawals or income payments, whichever is applicable). Generally, if You die before required minimum distribution withdrawals have begun, we must make payment of your entire interest by December 31st of the year that is the fifth anniversary of your death or begin making payments over a period and in a manner allowed by the Code to your Beneficiary by December 31st of the year after your death. Consult your tax adviser because the application of these rules to your particular circumstances may have been impacted by the 2009 required minimum distribution waiver (see Minimum Distribution Requirements section for additional information). If your spouse is your Beneficiary, and your Contract permits, your spouse may delay the start of these payments until December 31 of the year in which You would have reached age 701/2. Alternatively, if your spouse is your Beneficiary, he or she may elect to continue as "contract owner" of the Contract. Naming a non-natural person, such as a trust or estate, as a Beneficiary under the Contract will generally eliminate the Beneficiary's ability to stretch or a spousal Beneficiary's ability to continue the Contract and the living and/or death benefits. If You die after required distributions begin, payments of your entire remaining interest must be made in a manner and over a period as provided under the Code (and any applicable regulations). If the Contract is issued in your name after your death for the benefit of your designated Beneficiary with a purchase payment which is directly transferred to the Contract from another IRA account or IRA annuity You owned, the death benefit must continue to be distributed to your Beneficiary's Beneficiary in a manner at least rapidly as the method of distribution in effect at the time of your Beneficiary's death. SIMPLE IRAS AND SEPS ANNUITIES PURCHASE PAYMENTS TO SEPS. If contributions are being made under a SEP plan of your employer, additional amounts may be contributed as permitted by the Code and the terms of the employer's plan. Except for permissible contributions under the Code made in accordance with the employer's SEP plan, permissible rollovers and direct transfers, purchase payments to SEPs for individuals under age 50 are limited to the lesser of 100% of compensation or the deductible amount each year. This deductible amount is $5,000 in 2008 (adjusted for inflation thereafter). Participants age 50 or older can make an additional "catch-up" purchase payment of $1,000 a year (assuming the individual has sufficient compensation). Purchase payments in excess of this amount may be subject to a penalty tax. Purchase payments (except for permissible rollovers and direct transfers) are generally not permitted after the calendar year in which You attain age 69 1/2. These age and dollar limits do not apply to tax-free rollovers or transfers. PURCHASE PAYMENTS TO SIMPLE IRAS The Code allows contributions up to certain limits to be made under a valid salary reduction agreement to a SIMPLE IRA and also allows for employer contributions up to certain applicable limits under the Code. 82 The Code allows "catch up" contributions for participants age 50 and older in excess of these limits ($2,500 in 2008 and years thereafter unless adjusted for inflation). Transfers and rollovers from other SIMPLE IRA funding vehicles may also be accepted under your SIMPLE IRA Deferred Annuity. Purchase payments (except for permissible rollovers and direct transfers) are generally not permitted after the calendar year in which You attain age 69 1/2. These age and dollar limits do not apply to tax-free rollovers or transfers. WITHDRAWALS AND INCOME PAYMENTS Withdrawals and income payments are included in income except for the portion that represents a return of non-deductible purchase payments. This portion is generally determined based on a ratio of all non-deductible purchase payments to the total values of all your Traditional IRAs including SIMPLE and SEP IRAs. DEATH BENEFITS The death benefit is taxable to the recipient in the same manner as if paid to the owner (under the rules for withdrawals or income payments, whichever is applicable). Generally, if You die before required minimum distribution withdrawals have begun, we must make payment of your entire interest by December 31st of the year that is the fifth anniversary of your death or begin making payments over a period and in a manner allowed by the Code to your Beneficiary by December 31st of the year after your death. Consult your tax advisor because the application of these rules to your particular circumstances may have been impacted by the 2009 RMD waiver (see Minimum Distribution Requirements section for additional information). If your spouse is your Beneficiary, your spouse may delay the start of these payments until December 31 of the year in which You would have reached age 70 1/2. Alternatively, if your spouse is your Beneficiary, he or she may elect to continue as "owner" of the Contract and treat it as his/her own Traditional IRA (in the case of SEPs) or his/her own SIMPLE IRA (if so eligible, in the case of SIMPLE IRA). Under Federal tax rules, a same-sex spouse is treated as a non-spouse Beneficiary. If You die after required distributions begin, payments of your entire remaining interest must be made in a manner and over a period as provided under the Code (and any applicable regulations). If the Contract is issued in your name after your death for the benefit of your designated Beneficiary with a purchase payment which is directly transferred to the Contract from another IRA account or IRA annuity You owned, the death benefit must continue to be distributed to your Beneficiary's Beneficiary in a manner at least as rapidly as the method of distribution in effect at the time of your Beneficiary's death. 457(B) PLANS GENERAL 457(b) plans are available to state or local governments and certain tax-exempt organizations as described in Section 457(b) and 457(e)(1) of the Code. The plans are not available for churches and qualified church-controlled organizations. 457(b) annuities maintained by a state or local government are for the exclusive benefit of plan participants and their Beneficiaries. 457(b) annuities other than those maintained by state or local governments are solely the property of the employer and are subject to the claims of the employer's general creditors until they are "made available" to You. 83 Recently enacted legislation allows (but does not require) governmental 457(b) plans to permit participants to make designated Roth contributions to a designated Roth account under the plan. This new legislation also allows (but does not require) such plans to permit participants to roll their non-Roth account assets into a designated Roth account under the same plan, provided the non-Roth assets are distributable under the plan and otherwise eligible for rollover. WITHDRAWALS Generally, because contributions are on a before-tax basis, withdrawals from your annuity are subject to income tax. Generally, monies in your Contract can not be "made available" to You until You reach age 70 1/2, leave your job (or your employer changes) or have an unforeseen emergency (as defined by the Code). SPECIAL RULES Special rules apply to certain non-governmental 457(b) plans deferring compensation from taxable years beginning before January 1, 1987 (or beginning later but based on an agreement in writing on August 16, 1986). LOANS In the case of a 457(b) plan maintained by a state or local government, the plan may permit loans. The Code and applicable income tax regulations limit the amount that may be borrowed from your 457(b) plan and all employer plans in the aggregate and also require that loans be repaid, at minimum, in scheduled level payments over a certain term. Your 457(b) plan will indicate whether plan loans are permitted. The terms of the loan are governed by your loan agreement with the plan. Failure to satisfy loan limits under the Code or to make any scheduled payments according to the terms of your loan agreement and Federal tax law could have adverse tax consequences. Consult a tax adviser and read your loan agreement and Contract prior to taking any loan. 403(A) GENERAL The employer adopts a 403(a) plan as a qualified retirement plan to provide benefits to participating employees. The plan generally works in a similar manner to a corporate qualified retirement plan except that the 403(a) plan does not have a trust or a trustee. See the "General" headings under Income Taxes for a brief description of the tax rules that apply to 403(a) annuities. 84 LEGAL PROCEEDINGS In the ordinary course of business, MetLife, similar to other life insurance companies, is involved in lawsuits (including class action lawsuits), arbitrations and other legal proceedings. Also, from time to time, state and Federal regulators or other officials conduct formal and informal examinations or undertake other actions dealing with various aspects of the financial services and insurance industries. In some legal proceedings involving insurers, substantial damages have been sought and/or material settlement payments have been made. It is not possible to predict with certainty the ultimate outcome of any pending legal proceeding or regulatory action. However, MetLife does not believe any such action or proceeding will have a material adverse effect upon the Separate Account or upon the ability of MLIDC to perform its contract with the Separate Account or of MetLife to meet its obligations under the Contracts. 85 TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION
PAGE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM................................... 2 PRINCIPAL UNDERWRITER........................................................... 2 DISTRIBUTION AND PRINCIPAL UNDERWRITING AGREEMENT............................... 2 EXPERIENCE FACTOR............................................................... 3 VARIABLE INCOME PAYMENTS........................................................ 3 CALCULATING THE ANNUITY UNIT VALUE.............................................. 5 ADVERTISEMENT OF THE SEPARATE ACCOUNT........................................... 6 VOTING RIGHTS................................................................... 9 ERISA........................................................................... 10 TAXES........................................................................... 11 WITHDRAWALS..................................................................... 12 ACCUMULATION UNIT VALUES TABLES................................................. 13 FINANCIAL STATEMENTS OF THE SEPARATE ACCOUNT.................................... 1 FINANCIAL STATEMENTS OF METLIFE................................................. F-1
86 APPENDIX I PREMIUM TAX TABLE If You are a resident of one of the following jurisdictions, the percentage amount listed by that jurisdiction is the premium tax rate applicable to your annuity.
TSA and TSA ERISA IRA and SEP 457(b) 403(a) Annuities Annuities Annuities Annuities California........ 0.5% 0.5% 2.35% 0.5% Florida(1)........ 1.0% 1.0% 1.0% 1.0% Maine............. -- -- 2.00% -- Nevada............ -- -- 3.50% -- Puerto Rico(2).... 1.0% 1.0% 1.0% 1.0% South Dakola(3)... -- -- 1.25% -- Wyoming........... -- -- 1.00% -- West Virginia..... 1.0% 1.0% 1.0% 1.0%
----------- /1/Annuity premiums are exempt from taxation provided the tax savings are passed back to the contract holders. Otherwise, they are taxable at 1%. [MetLife passes the tax savings back to contractholders and, therefore, annuity premiums are exempt from taxation.] /2/We will not deduct premium taxes paid by us to Puerto Rico from purchase payments, account balances, withdrawals, death benefits or income payments. /3/Special rate applies for large case annuity policies. Rate is 8/100 of 1% for that portion of the annuity considerations received on a contract exceeding $500,000 annually. Special rate on large case policies is not subject to retaliation. 87 APPENDIX II WHAT YOU NEED TO KNOW IF YOU ARE A TEXAS OPTIONAL RETIREMENT PROGRAM PARTICIPANT If You are a participant in the Texas Optional Retirement Program, Texas law permits us to make withdrawals on your behalf only if You die, retire or terminate employment in all Texas institutions of higher education, as defined under Texas law. Any withdrawal You ask for requires a written statement from the appropriate Texas institution of higher education verifying your vesting status and (if applicable) termination of employment. Also, we require a written statement from You that You are not transferring employment to another Texas institution of higher education. If You retire or terminate employment in all Texas institutions of higher education or die before being vested, amounts provided by the state's matching contribution will be refunded to the appropriate Texas institution. We may change these restrictions or add others without your consent to the extent necessary to maintain compliance with the law. 88 APPENDIX III ACCUMULATION UNIT VALUES FOR EACH INVESTMENT DIVISION These tables show fluctuations in the Accumulation Unit Values for two of the possible mixes offered within the Deferred Annuity for each Investment Division from year end to year end. The information in these tables has been derived from the Separate Account's full financial statements or other reports (such as the annual report). The first table shows the Deferred Annuity mix that bears the total highest charge, and the second table shows the Deferred Annuity mix that bears the total lowest charge. The mix with the total highest charge has these features: C Class, the Annual Step-Up Death Benefit and the LWG. (In terms of the calculation for this mix, the LWG charge is made by canceling accumulation units and, therefore, the charge is not reflected in the Accumulation Unit Value. However, purchasing this option with these other Contract features will result in the highest overall charge.) Lower charges for the GMIB and the LWG Benefit were in effect prior to May 4, 2009. The mix with the total lowest charge has these features: B Class and no optional benefit. All other possible mixes for each Investment Division within the Deferred Annuity appear in the SAI, which is available upon request without charge by calling 1-800-638-7732. METLIFE FINANCIAL FREEDOM SELECT HIGHEST POSSIBLE MIX 1.55 SEPARATE ACCOUNT CHARGE
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ American Funds(R) Balanced Allocation Investment Division (Class C)/(i)/............................................ 2008 $10.00 $ 7.00 0.00 2009 7.00 8.92 0.00 2010 8.92 9.85 0.00 2011 9.85 9.49 904.43 American Funds Bond Investment Division (Class 2)/(f)(j)/... 2006 14.30 14.97 0.00 2007 14.97 15.19 626.21 2008 15.19 13.52 621.58 2009 13.52 14.95 1,770.41 2010 14.95 15.63 2,530.41 2011 15.63 16.29 2,703.80 American Funds Global Small Capitalization Investment Division (Class 2)/(a)(j)/................................ 2002 11.95 10.61 0.00 2003 10.61 16.00 21.45 2004 16.00 19.00 738.73 2005 19.00 23.39 912.70 2006 23.39 28.50 981.29 2007 28.50 33.99 900.95 2008 33.99 15.51 868.13 2009 15.51 24.58 3,421.52 2010 24.58 29.55 3,407.48 2011 29.55 23.47 3,414.56 American Funds(R) Growth Allocation Investment Division (Class C)/(i)/............................................ 2008 9.99 6.35 0.00 2009 6.35 8.38 30.87 2010 8.38 9.37 371.52 2011 9.37 8.79 256.09
89
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ American Funds Growth Investment Division (Class 2)/(a)(j)/............................. 2002 $ 82.24 $ 79.31 0.00 2003 79.31 106.57 4.38 2004 106.57 117.74 99.26 2005 117.74 134.37 132.81 2006 134.37 145.47 178.10 2007 145.47 160.50 231.02 2008 160.50 88.31 455.68 2009 88.31 120.92 465.36 2010 120.92 140.96 622.86 2011 140.96 132.53 608.35 American Funds Growth-Income Investment Division (Class 2)/(a)(j)/.................... 2002 68.03 63.76 0.00 2003 63.76 82.93 17.28 2004 82.93 89.90 211.73 2005 89.90 93.45 368.52 2006 93.45 105.74 647.76 2007 105.74 109.08 593.98 2008 109.08 66.58 497.01 2009 66.58 85.82 548.75 2010 85.82 93.93 513.38 2011 93.93 90.57 376.56 American Funds(R) Moderate Allocation Investment Division (Class C)/(i)/............ 2008 10.01 7.68 0.00 2009 7.68 9.33 0.00 2010 9.33 10.09 30.47 2011 10.09 9.96 63.12 Barclays Capital Aggregate Bond Index Investment Division/(a)/...................... 2002 11.65 12.16 0.00 2003 12.16 12.38 895.64 2004 12.38 12.65 2,945.36 2005 12.65 12.69 5,824.53 2006 12.69 12.97 8,260.35 2007 12.97 13.62 4,624.05 2008 13.62 14.17 4,179.79 2009 14.17 14.64 5,554.77 2010 14.64 15.24 4,078.10 2011 15.24 16.10 4,404.30 BlackRock Bond Income Investment Division/(a)/.. 2002 39.28 40.74 0.00 2003 40.74 42.35 4.06 2004 42.35 43.44 158.65 2005 43.44 43.69 247.49 2006 43.69 44.80 474.85 2007 44.80 46.77 598.32 2008 46.77 44.36 490.78 2009 44.36 47.69 766.39 2010 47.69 50.74 808.72 2011 50.74 53.11 739.33 BlackRock Large Cap Core Investment Division*/(g)/................................ 2007 75.35 75.92 2.46 2008 75.92 46.86 2.36 2009 46.86 55.00 3.29 2010 55.00 60.90 7.70 2011 60.90 60.11 11.73
90
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ BlackRock Large Cap Investment Division/(a)(g)/................. 2002 $48.19 $45.64 0.00 2003 45.64 58.38 0.00 2004 58.38 63.57 2.76 2005 63.57 64.67 2.64 2006 64.67 72.49 2.55 2007 72.49 75.99 0.00 BlackRock Large Cap Value Investment Division/(a)/.............. 2002 8.60 7.90 0.00 2003 7.90 10.53 0.00 2004 10.53 11.74 194.35 2005 11.74 12.20 194.35 2006 12.20 14.32 464.48 2007 14.32 14.54 482.55 2008 14.54 9.29 743.82 2009 9.29 10.15 2,479.51 2010 10.15 10.89 3,379.69 2011 10.89 10.94 4,278.93 BlackRock Legacy Large Cap Growth Investment Division/(a)/...... 2002 20.14 17.58 0.00 2003 17.58 23.41 0.00 2004 23.41 25.03 0.00 2005 25.03 26.31 0.00 2006 26.31 26.91 0.00 2007 26.91 31.38 0.00 2008 31.38 19.56 94.31 2009 19.56 26.29 350.20 2010 26.29 30.92 291.39 2011 30.92 27.66 790.80 BlackRock Legacy Large Cap Growth Investment Division (formerly FI Large Cap Investment Division)/(k)/........................ 2006 16.84 17.02 0.00 2007 17.02 17.38 0.00 2008 17.38 9.42 81.56 2009 9.42 9.81 0.00 BlackRock Money Market Investment Division/(b)/................. 2003 21.52 21.37 0.00 2004 21.37 21.20 0.00 2005 21.20 21.42 0.00 2006 21.42 22.05 0.00 2007 22.05 22.76 0.00 2008 22.76 22.99 0.00 2009 22.99 22.69 0.00 2010 22.69 22.34 0.00 2011 22.34 22.00 0.00 Calvert VP SRI Balanced Investment Division/(a)/................ 2002 17.05 16.70 0.00 2003 16.70 19.63 64.25 2004 19.63 20.92 174.62 2005 20.92 21.76 293.02 2006 21.76 23.31 479.23 2007 23.31 23.58 470.09 2008 23.58 15.94 492.59 2009 15.94 19.67 637.61 2010 19.67 21.71 653.12 2011 21.71 22.35 622.68
91
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ Clarion Global Real Estate Investment Division/(d)/.............. 2004 $ 9.99 $12.82 102.93 2005 12.82 14.30 228.85 2006 14.30 19.37 1,068.24 2007 19.37 16.21 1,396.48 2008 16.21 9.31 504.24 2009 9.31 12.35 750.22 2010 12.35 14.11 828.35 2011 14.11 13.12 763.80 Davis Venture Value Investment Division/(a)/..................... 2002 21.94 21.34 0.00 2003 21.34 27.47 8.16 2004 27.47 30.28 53.71 2005 30.28 32.80 360.51 2006 32.80 36.92 1,253.80 2007 36.92 37.93 1,487.63 2008 37.93 22.58 1,289.76 2009 22.58 29.27 2,136.45 2010 29.27 32.20 2,510.37 2011 32.20 30.35 3,144.67 FI Value Leaders Investment Division/(a)/........................ 2002 19.24 18.26 0.00 2003 18.26 22.81 0.00 2004 22.81 25.50 0.00 2005 25.50 27.73 62.14 2006 27.73 30.49 241.29 2007 30.49 31.20 302.83 2008 31.20 18.71 261.76 2009 18.71 22.38 288.90 2010 22.38 25.18 308.19 2011 25.18 23.21 319.01 Harris Oakmark International Investment Division/(a)/............ 2002 9.88 8.81 0.00 2003 8.81 11.71 35.81 2004 11.71 13.90 194.72 2005 13.90 15.63 294.09 2006 15.63 19.83 322.96 2007 19.83 19.31 3,918.25 2008 19.31 11.24 831.83 2009 11.24 17.16 1,358.69 2010 17.16 19.67 1,730.46 2011 19.67 16.61 2,180.54 Invesco Small Cap Growth Investment Division/(a)/................ 2002 8.90 8.45 0.00 2003 8.45 11.56 0.00 2004 11.56 12.11 0.00 2005 12.11 12.91 0.00 2006 12.91 14.52 0.00 2007 14.52 15.88 0.00 2008 15.88 9.58 0.00 2009 9.58 12.62 20.04 2010 12.62 15.68 44.19 2011 15.68 15.27 69.10
92
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ Janus Forty Investment Division/(h)/............................. 2007 $140.44 $172.11 0.00 2008 172.11 98.28 5.48 2009 98.28 138.25 289.52 2010 138.25 148.91 261.19 2011 148.91 135.56 277.59 Lazard Mid Cap Investment Division/(a)/.......................... 2002 9.97 9.64 0.00 2003 9.64 11.98 33.34 2004 11.98 13.50 97.27 2005 13.50 14.36 145.98 2006 14.36 16.22 8.38 2007 16.22 15.53 0.00 2008 15.53 9.43 23.36 2009 9.43 12.70 39.18 2010 12.70 15.37 51.65 2011 15.37 14.34 89.68 Loomis Sayles Small Cap Core Investment Division/(a)/............ 2002 18.62 16.98 0.00 2003 16.98 22.81 0.00 2004 22.81 26.11 7.96 2005 26.11 27.43 28.32 2006 27.43 31.43 9.04 2007 31.43 34.55 13.95 2008 34.55 21.75 6.81 2009 21.75 27.82 6.61 2010 27.82 34.85 6.54 2011 34.85 34.43 6.31 Loomis Sayles Small Cap Growth Investment Division/(a)/.......... 2002 6.72 6.22 0.00 2003 6.22 8.86 2.97 2004 8.86 9.70 9.99 2005 9.70 9.97 49.72 2006 9.97 10.77 70.35 2007 10.77 11.06 108.16 2008 11.06 6.39 203.06 2009 6.39 8.16 257.60 2010 8.16 10.55 279.64 2011 10.55 10.68 339.16 Lord Abbett Bond Debenture Investment Division/(a)/.............. 2002 13.14 13.42 0.00 2003 13.42 15.75 9.98 2004 15.75 16.77 267.56 2005 16.77 16.76 476.24 2006 16.76 18.01 549.63 2007 18.01 18.90 605.15 2008 18.90 15.14 611.17 2009 15.14 20.40 840.58 2010 20.40 22.69 778.23 2011 22.69 23.34 755.52
93
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ Met/Artisan Mid Cap Value Investment Division/(a)/....... 2002 $22.20 $22.83 0.00 2003 22.83 29.75 3.50 2004 29.75 32.11 110.98 2005 32.11 34.69 177.17 2006 34.69 38.32 411.79 2007 38.32 35.06 1,056.10 2008 35.06 18.59 25.41 2009 18.59 25.85 84.98 2010 25.85 29.21 135.51 2011 29.21 30.63 177.98 Met/Franklin Income Investment Division/(i)/............. 2008 9.99 7.97 0.00 2009 7.97 10.04 0.00 2010 10.04 11.05 0.00 2011 11.05 11.11 0.00 Met/Franklin Low Duration Total Return Investment Division/(n)/.......................................... 2011 9.98 9.75 155.50 Met/Franklin Mutual Shares Investment Division/(i)/...... 2008 9.99 6.59 0.00 2009 6.59 8.10 0.00 2010 8.10 8.86 0.00 2011 8.86 8.67 10.36 Met/Franklin Templeton Founding Strategy Investment Division/(i)/.......................................... 2008 9.99 7.02 0.00 2009 7.02 8.89 714.78 2010 8.89 9.63 1,091.65 2011 9.63 9.32 674.83 Met/Templeton Growth Investment Division/(i)/............ 2008 9.99 6.56 0.00 2009 6.56 8.56 0.00 2010 8.56 9.08 19.41 2011 9.08 8.32 39.80 MetLife Aggressive Strategy Investment Division.......... 2011 12.05 10.31 3,029.44 MetLife Aggressive Strategy Investment Division (formerly MetLife Aggressive Allocation Investment Division)/(e)(m)/........................... 2005 9.99 11.13 0.00 2006 11.13 12.68 0.00 2007 12.68 12.89 0.00 2008 12.89 7.56 0.00 2009 7.56 9.79 3,054.68 2010 9.79 11.15 3,048.17 2011 11.15 12.08 0.00 MetLife Conservative Allocation Investment Division/(e)/. 2005 9.99 10.28 0.00 2006 10.28 10.82 0.00 2007 10.82 11.25 0.00 2008 11.25 9.48 0.00 2009 9.48 11.25 970.27 2010 11.25 12.20 1,916.09 2011 12.20 12.40 3,563.07 MetLife Conservative to Moderate Allocation Investment Division/(e)/.......................................... 2005 9.99 10.50 0.00 2006 10.50 11.32 0.00 2007 11.32 11.68 0.00 2008 11.68 9.01 0.00 2009 9.01 10.98 445.93 2010 10.98 12.05 1,032.41 2011 12.05 11.99 1,725.12
94
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ MetLife Mid Cap Stock Index Investment Division/(a)/............. 2002 $ 8.92 $ 8.58 0.00 2003 8.58 11.37 132.11 2004 11.37 12.96 552.05 2005 12.96 14.29 829.97 2006 14.29 15.46 593.70 2007 15.46 16.36 768.06 2008 16.36 10.25 2,071.59 2009 10.25 13.80 2,810.13 2010 13.80 17.13 2,949.46 2011 17.13 16.49 4,050.78 MetLife Moderate Allocation Investment Division/(e)/............. 2005 9.99 10.73 1,006.34 2006 10.73 11.82 3,215.90 2007 11.82 12.14 10,567.10 2008 12.14 8.53 14,709.62 2009 8.53 10.63 16,604.39 2010 10.63 11.84 28,653.60 2011 11.84 11.50 37,552.59 MetLife Moderate to Aggressive Allocation Investment Division/(e)/.................................................. 2005 9.99 10.96 0.00 2006 10.96 12.32 0.00 2007 12.32 12.60 2,154.57 2008 12.60 8.05 2,468.55 2009 8.05 10.23 3,196.22 2010 10.23 11.56 5,528.75 2011 11.56 10.95 4,944.15 MetLife Stock Index Investment Division/(a)/..................... 2002 27.57 26.29 0.00 2003 26.29 33.10 107.72 2004 33.10 35.94 1,158.16 2005 35.94 36.94 2,626.84 2006 36.94 41.90 2,222.83 2007 41.90 43.30 2,747.51 2008 43.30 26.75 3,562.19 2009 26.75 33.16 5,137.73 2010 33.16 37.38 4,837.03 2011 37.38 37.41 5,528.25 MFS(R) Research International Investment Division/(a)/........... 2002 7.78 7.26 0.00 2003 7.26 9.45 18.59 2004 9.45 11.12 5.33 2005 11.12 12.75 141.50 2006 12.75 15.89 350.25 2007 15.89 17.72 458.13 2008 17.72 10.06 531.84 2009 10.06 13.03 586.86 2010 13.03 14.29 1,135.26 2011 14.29 12.56 1,631.16
95
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ MFS(R) Total Return Investment Division/(a)/.................... 2002 $31.25 $30.99 0.00 2003 30.99 35.62 0.00 2004 35.62 38.93 2.34 2005 38.93 39.42 2.43 2006 39.42 43.45 81.70 2007 43.45 44.54 92.01 2008 44.54 34.05 105.08 2009 34.05 39.66 110.53 2010 39.66 42.88 30.19 2011 42.88 43.13 36.37 MFS(R) Value Investment Division/(a)/........................... 2002 9.95 9.61 0.00 2003 9.61 11.85 0.00 2004 11.85 12.97 352.34 2005 12.97 12.56 1,395.69 2006 12.56 14.57 2,347.73 2007 14.57 13.77 4,120.76 2008 13.77 8.99 237.00 2009 8.99 10.67 163.16 2010 10.67 11.68 169.12 2011 11.68 11.58 299.79 Morgan Stanley EAFE(R) Index Investment Division/(a)/........... 2002 7.82 6.94 0.00 2003 6.94 9.38 186.74 2004 9.38 11.01 929.69 2005 11.01 12.25 1,842.55 2006 12.25 15.13 1,524.97 2007 15.13 16.47 2,193.59 2008 16.47 9.37 3,646.15 2009 9.37 11.83 3,509.44 2010 11.83 12.57 3,450.31 2011 12.57 10.81 5,592.10 Morgan Stanley Mid Cap Growth Investment Division/(l)/.......... 2010 12.62 14.64 387.82 2011 14.64 13.42 478.16 Morgan Stanley Mid Cap Growth Investment Division (formerly FI Mid Cap Opportunities Investment Division)/(a)(c)/............ 2002 11.13 10.72 0.00 2003 10.72 14.17 0.00 2004 14.17 16.30 73.37 2005 16.30 17.12 88.39 2006 17.12 18.81 80.96 2007 18.81 20.02 100.36 2008 20.02 8.78 203.37 2009 8.78 11.55 273.99 2010 11.55 12.49 0.00 Neuberger Berman Genesis Investment Division/(a)/............... 2002 12.70 10.77 0.00 2003 10.77 15.89 14.56 2004 15.89 18.00 307.94 2005 18.00 18.42 630.26 2006 18.42 21.12 1,213.55 2007 21.12 20.02 1,339.97 2008 20.02 12.11 1,390.72 2009 12.11 13.45 1,827.11 2010 13.45 16.08 1,756.43 2011 16.08 16.70 1,598.37
96
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ Neuberger Berman Mid Cap Value Investment Division/(a)/.......... 2002 $13.89 $13.24 0.00 2003 13.24 17.76 12.87 2004 17.76 21.45 142.69 2005 21.45 23.64 718.13 2006 23.64 25.88 1,292.71 2007 25.88 26.30 1,764.93 2008 26.30 13.60 2,016.60 2009 13.60 19.78 2,600.28 2010 19.78 24.55 2,874.85 2011 24.55 22.56 2,909.57 Oppenheimer Capital Appreciation Investment Division/(a)/........ 2002 6.52 6.26 0.00 2003 6.26 7.93 0.00 2004 7.93 8.30 0.00 2005 8.30 8.56 0.00 2006 8.56 9.07 33.40 2007 9.07 10.21 40.56 2008 10.21 5.43 1,163.27 2009 5.43 7.69 1,599.59 2010 7.69 8.28 1,231.87 2011 8.28 8.04 1,218.98 PIMCO Inflation Protected Bond Investment Division/(f)/.......... 2006 10.94 11.04 0.00 2007 11.04 12.04 0.00 2008 12.04 11.04 431.09 2009 11.04 12.83 679.70 2010 12.83 13.61 1,033.07 2011 13.61 14.90 1,034.16 PIMCO Total Return Investment Division/(a)/...................... 2002 10.89 11.32 0.00 2003 11.32 11.63 532.41 2004 11.63 12.02 1,107.10 2005 12.02 12.10 398.28 2006 12.10 12.45 661.52 2007 12.45 13.19 497.47 2008 13.19 13.04 667.35 2009 13.04 15.15 1,923.24 2010 15.15 16.14 3,809.42 2011 16.14 16.39 2,724.68 RCM Technology Investment Division/(a)/.......................... 2002 3.66 2.95 0.00 2003 2.95 4.58 0.00 2004 4.58 4.31 29.00 2005 4.31 4.71 134.50 2006 4.71 4.89 27.68 2007 4.89 6.33 0.00 2008 6.33 3.46 155.02 2009 3.46 5.42 217.36 2010 5.42 6.81 267.75 2011 6.81 6.05 305.02
97
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ Russell 2000(R) Index Investment Division/(a)/................... 2002 $ 9.95 $ 9.21 0.00 2003 9.21 13.22 86.60 2004 13.22 15.28 343.81 2005 15.28 15.69 488.80 2006 15.69 18.17 363.46 2007 18.17 17.58 2,152.25 2008 17.58 11.48 768.81 2009 11.48 14.20 1,274.25 2010 14.20 17.70 1,649.26 2011 17.70 16.68 2,672.90 SSgA Growth ETF Investment Division/(f)/......................... 2006 10.69 11.39 0.00 2007 11.39 11.84 0.00 2008 11.84 7.81 0.00 2009 7.81 9.94 0.00 2010 9.94 11.17 0.00 2011 11.17 10.76 779.40 SSgA Growth and Income ETF Investment Division/(f)/.............. 2006 10.50 11.14 0.00 2007 11.14 11.56 0.00 2008 11.56 8.52 0.00 2009 8.52 10.48 0.00 2010 10.48 11.59 0.00 2011 11.59 11.53 575.45 T. Rowe Price Large Cap Growth Investment Division/(a)/.......... 2002 8.85 8.62 0.00 2003 8.62 11.09 0.00 2004 11.09 11.98 0.00 2005 11.98 12.55 0.00 2006 12.55 13.95 44.03 2007 13.95 14.99 1,825.84 2008 14.99 8.56 124.25 2009 8.56 12.05 150.18 2010 12.05 13.86 519.11 2011 13.86 13.46 667.62 T. Rowe Price Mid Cap Growth Investment Division/(a)/............ 2002 4.82 4.53 0.00 2003 4.53 6.09 0.00 2004 6.09 7.07 169.28 2005 7.07 7.98 604.86 2006 7.98 8.34 1,203.35 2007 8.34 9.66 4,123.98 2008 9.66 5.73 724.25 2009 5.73 8.21 1,303.86 2010 8.21 10.32 1,557.72 2011 10.32 10.00 1,889.95 T. Rowe Price Small Cap Growth Investment Division/(a)/.......... 2002 8.79 8.60 0.00 2003 8.60 11.93 20.78 2004 11.93 13.04 54.91 2005 13.04 14.22 62.70 2006 14.22 14.51 47.00 2007 14.51 15.64 47.09 2008 15.64 9.81 10.18 2009 9.81 13.39 558.00 2010 13.39 17.75 36.81 2011 17.75 17.74 162.50
98
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ Third Avenue Small Cap Value Investment Division/(a)/.......... 2002 $ 9.02 $ 8.22 0.00 2003 8.22 11.45 0.00 2004 11.45 14.26 54.51 2005 14.26 16.21 71.09 2006 16.21 18.06 50.17 2007 18.06 17.25 57.46 2008 17.25 11.91 89.54 2009 11.91 14.84 103.36 2010 14.84 17.51 105.41 2011 17.51 15.70 111.09 Western Asset Management Strategic Bond Opportunities Investment Division/(a)/..................................... 2002 15.87 16.78 0.00 2003 16.78 18.61 0.00 2004 18.61 19.47 233.67 2005 19.47 19.67 395.15 2006 19.67 20.30 654.64 2007 20.30 20.73 816.42 2008 20.73 17.30 694.32 2009 17.30 22.47 1,368.67 2010 22.47 24.88 1,762.86 2011 24.88 25.93 1,916.73 Western Asset Management U.S. Government Investment Division/(a)/................................................ 2002 14.92 15.36 0.00 2003 15.36 15.37 784.08 2004 15.37 15.54 1,320.26 2005 15.54 15.52 196.37 2006 15.52 15.88 718.72 2007 15.88 16.26 934.00 2008 16.26 15.93 830.02 2009 15.93 16.32 983.78 2010 16.32 16.96 1,117.28 2011 16.96 17.57 814.18
99 METLIFE FINANCIAL FREEDOM SELECT LOWEST POSSIBLE MIX 1.15 SEPARATE ACCOUNT CHARGE
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ American Funds(R) Balanced Allocation Investment Division (Class C)/(i)/......... 2008 $ 10.00 $ 7.02 121,674.19 2009 7.02 8.98 556,856.55 2010 8.98 9.96 1,051,071.36 2011 9.96 9.63 1,389,856.12 American Funds Bond Investment Division (Class 2)/(f)(j)/.......................... 2006 14.82 15.56 52,024.77 2007 15.56 15.85 174,819.77 2008 15.85 14.17 206,376.24 2009 14.17 15.73 277,083.25 2010 15.73 16.51 351,455.60 2011 16.51 17.28 370,197.45 American Funds Global Small Capitalization Investment Division (Class 2)/(a)(j)/...... 2002 12.16 10.81 63.62 2003 10.81 16.37 14,982.78 2004 16.37 19.51 80,216.60 2005 19.51 24.12 227,193.58 2006 24.12 29.51 447,880.61 2007 29.51 35.33 656,275.07 2008 35.33 16.19 882,590.75 2009 16.19 25.75 1,078,475.48 2010 25.75 31.09 1,218,773.78 2011 31.09 24.79 1,379,599.29 American Funds(R) Growth Allocation Investment Division (Class C)/(i)/......... 2008 9.99 6.37 194,988.37 2009 6.37 8.44 768,461.08 2010 8.44 9.47 1,297,995.99 2011 9.47 8.92 1,634,408.32 American Funds Growth Investment Division (Class 2)/(a)(j)/.......................... 2002 88.53 85.54 11.96 2003 85.54 115.40 13,543.19 2004 115.40 128.01 55,834.31 2005 128.01 146.68 129,239.16 2006 146.68 159.42 223,498.95 2007 159.42 176.61 293,354.57 2008 176.61 97.57 362,056.25 2009 97.57 134.13 427,118.96 2010 134.13 156.98 472,282.87 2011 156.98 148.18 507,110.40 American Funds Growth-Income Investment Division (Class 2)/(a)(j)/................. 2002 73.23 68.77 30.15 2003 68.77 89.81 18,970.96 2004 89.81 97.74 71,689.28 2005 97.74 102.01 143,320.39 2006 102.01 115.89 202,055.10 2007 115.89 120.03 259,197.84 2008 120.03 73.56 299,030.63 2009 73.56 95.20 339,192.74 2010 95.20 104.60 377,221.58 2011 104.60 101.26 392,047.42
100
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ American Funds(R) Moderate Allocation Investment Division (Class C)/(i)/......... 2008 $10.01 $ 7.70 204,533.60 2009 7.70 9.39 664,696.39 2010 9.39 10.20 1,095,529.66 2011 10.20 10.11 1,570,635.67 Barclays Capital Aggregate Bond Index Investment Division/(a)/................... 2002 11.82 12.36 3,448.86 2003 12.36 12.63 144,664.71 2004 12.63 12.97 428,405.73 2005 12.97 13.06 910,620.62 2006 13.06 13.40 1,382,777.48 2007 13.40 14.13 1,782,657.77 2008 14.13 14.75 1,647,058.68 2009 14.75 15.31 2,178,913.92 2010 15.31 16.00 2,647,051.81 2011 16.00 16.97 2,864,713.09 BlackRock Bond Income Investment Division/(a)/.............................. 2002 42.36 44.02 2.43 2003 44.02 45.94 12,384.39 2004 45.94 47.31 31,771.09 2005 47.31 47.78 64,260.01 2006 47.78 49.19 95,129.12 2007 49.19 51.55 113,272.33 2008 51.55 49.09 110,003.42 2009 49.09 52.99 134,615.77 2010 52.99 56.61 164,675.43 2011 56.61 59.49 170,965.15 BlackRock Large Cap Core Investment Division*/(g)/............................. 2007 82.90 83.75 27,200.84 2008 83.75 51.90 30,685.85 2009 51.90 61.16 37,979.27 2010 61.16 67.99 48,350.58 2011 67.99 67.38 64,258.02 BlackRock Large Cap Investment Division/(a)(g)/........................... 2002 52.00 49.35 0.91 2003 49.35 63.38 4,046.54 2004 63.38 69.29 11,627.54 2005 69.29 70.77 18,853.47 2006 70.77 79.64 21,780.72 2007 79.64 83.59 0.00 BlackRock Large Cap Value Investment Division/(a)/.............................. 2002 8.61 7.92 8.09 2003 7.92 10.60 3,799.75 2004 10.60 11.87 41,453.44 2005 11.87 12.39 90,472.98 2006 12.39 14.59 200,625.43 2007 14.59 14.87 338,503.06 2008 14.87 9.54 401,171.39 2009 9.54 10.47 571,838.16 2010 10.47 11.28 665,322.98 2011 11.28 11.38 785,364.96
101
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ BlackRock Legacy Large Cap Growth Investment Division/(a)/.............. 2002 $20.77 $18.17 0.00 2003 18.17 24.29 2,861.22 2004 24.29 26.06 3,633.57 2005 26.06 27.51 11,978.18 2006 27.51 28.25 22,086.50 2007 28.25 33.07 46,455.59 2008 33.07 20.70 86,121.65 2009 20.70 27.93 128,118.29 2010 27.93 32.99 152,192.29 2011 32.99 29.63 202,786.15 BlackRock Legacy Large Cap Growth Investment Division (formerly FI Large Cap Investment Division)/(k)/... 2006 17.50 17.74 10,134.75 2007 17.74 18.19 23,977.37 2008 18.19 9.89 37,277.29 2009 9.89 10.32 0.00 BlackRock Money Market Investment Division/(b)/......................... 2003 23.29 23.19 0.00 2004 23.19 23.09 0.00 2005 23.09 23.43 0.00 2006 23.43 24.21 0.00 2007 24.21 25.09 0.00 2008 25.09 25.44 0.00 2009 25.44 25.22 0.00 2010 25.22 24.93 0.00 2011 24.93 24.64 0.00 Calvert VP SRI Balanced Investment Division/(a)/......................... 2002 17.72 17.40 38.44 2003 17.40 20.52 6,664.49 2004 20.52 21.96 21,378.29 2005 21.96 22.94 41,201.23 2006 22.94 24.67 86,212.91 2007 24.67 25.06 125,591.07 2008 25.06 17.01 161,248.36 2009 17.01 21.07 205,769.79 2010 21.07 23.35 246,778.53 2011 23.35 24.13 260,730.34 Clarion Global Real Estate Investment Division/(d)/......................... 2004 9.99 12.85 32,361.21 2005 12.85 14.39 211,809.17 2006 14.39 19.58 488,853.51 2007 19.58 16.45 709,880.30 2008 16.45 9.48 802,996.74 2009 9.48 12.63 904,981.60 2010 12.63 14.50 961,544.85 2011 14.50 13.53 1,042,246.40 Davis Venture Value Investment Division/(a)/......................... 2002 22.63 22.05 19.62 2003 22.05 28.50 16,227.34 2004 28.50 31.54 89,201.49 2005 31.54 34.29 268,434.82 2006 34.29 38.76 475,212.75 2007 38.76 39.98 663,987.62 2008 39.98 23.90 779,914.92 2009 23.90 31.11 918,129.18 2010 31.11 34.35 1,021,833.33 2011 34.35 32.51 1,066,238.57
102
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ FI Value Leaders Investment Division/(a)/.... 2002 $ 19.96 $ 18.99 0.00 2003 18.99 23.81 2,262.03 2004 23.81 26.72 11,500.32 2005 26.72 29.17 35,920.78 2006 29.17 32.20 78,333.40 2007 32.20 33.09 101,164.80 2008 33.09 19.92 111,617.92 2009 19.92 23.92 130,067.79 2010 23.92 27.02 146,694.34 2011 27.02 25.01 156,435.99 Harris Oakmark International Investment Division/(a)/.............................. 2002 9.91 8.85 48.82 2003 8.85 11.82 19,511.29 2004 11.82 14.08 85,264.44 2005 14.08 15.90 251,803.76 2006 15.90 20.25 533,163.25 2007 20.25 19.80 812,437.99 2008 19.80 11.57 909,654.50 2009 11.57 17.73 1,043,965.44 2010 17.73 20.41 1,254,723.58 2011 20.41 17.30 1,533,863.38 Invesco Small Cap Growth Investment Division/(a)/.............................. 2002 8.93 8.49 2.30 2003 8.49 11.66 2,111.31 2004 11.66 12.27 5,419.83 2005 12.27 13.13 15,098.34 2006 13.13 14.83 37,039.55 2007 14.83 16.28 57,767.04 2008 16.28 9.86 68,209.44 2009 9.86 13.04 92,455.18 2010 13.04 16.27 106,043.37 2011 16.27 15.91 120,152.69 Janus Forty Investment Division/(h)/......... 2007 155.28 190.81 3,064.32 2008 190.81 109.41 30,321.52 2009 109.41 154.51 69,318.46 2010 154.51 167.10 97,045.35 2011 167.10 152.73 112,850.97 Lazard Mid Cap Investment Division/(a)/...... 2002 10.00 9.69 78.31 2003 9.69 12.09 2,865.13 2004 12.09 13.67 18,025.97 2005 13.67 14.61 52,664.20 2006 14.61 16.56 75,763.68 2007 16.56 15.92 130,448.12 2008 15.92 9.71 144,410.76 2009 9.71 13.13 184,744.22 2010 13.13 15.95 195,569.43 2011 15.95 14.93 202,888.53
103
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ Loomis Sayles Small Cap Core Investment Division/(a)/......................... 2002 $19.24 $17.58 2.82 2003 17.58 23.71 3,228.37 2004 23.71 27.25 8,561.34 2005 27.25 28.74 28,010.97 2006 28.74 33.07 59,402.51 2007 33.07 36.49 88,213.45 2008 36.49 23.06 107,403.97 2009 23.06 29.62 123,701.77 2010 29.62 37.25 136,862.89 2011 37.25 36.95 154,769.54 Loomis Sayles Small Cap Growth Investment Division/(a)/.............. 2002 6.75 6.26 6.52 2003 6.26 8.96 7,737.94 2004 8.96 9.84 31,713.66 2005 9.84 10.16 61,213.51 2006 10.16 11.02 103,113.29 2007 11.02 11.36 164,851.99 2008 11.36 6.59 200,034.78 2009 6.59 8.45 237,853.76 2010 8.45 10.97 247,239.17 2011 10.97 11.14 270,063.18 Lord Abbett Bond Debenture Investment Division/(a)/......................... 2002 13.47 13.79 9.63 2003 13.79 16.24 11,093.84 2004 16.24 17.36 52,230.11 2005 17.36 17.42 136,924.22 2006 17.42 18.80 227,247.93 2007 18.80 19.80 322,578.34 2008 19.80 15.93 340,532.94 2009 15.93 21.54 385,655.93 2010 21.54 24.06 431,883.49 2011 24.06 24.85 461,026.62 Met/Artisan Mid Cap Value Investment Division/(a)/......................... 2002 23.04 23.73 70.12 2003 23.73 31.04 30,181.02 2004 31.04 33.65 110,750.47 2005 33.65 36.50 227,513.06 2006 36.50 40.47 289,878.60 2007 40.47 37.18 333,726.00 2008 37.18 19.79 335,618.24 2009 19.79 27.63 354,998.61 2010 27.63 31.35 357,846.23 2011 31.35 33.00 351,579.05 Met/Franklin Income Investment Division/(i)/......................... 2008 9.99 8.00 18,925.96 2009 8.00 10.10 76,133.69 2010 10.10 11.17 175,335.25 2011 11.17 11.28 240,177.36 Met/Franklin Low Duration Total Return Investment Division/(n)/.............. 2011 9.98 9.78 10,939.78 Met/Franklin Mutual Shares Investment Division/(i)/......................... 2008 9.99 6.61 10,882.44 2009 6.61 8.16 64,918.25 2010 8.16 8.95 149,433.96 2011 8.95 8.80 190,177.92
104
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------- Met/Franklin Templeton Founding Strategy Investment Division/(i)/..... 2008 $ 9.99 $ 7.04 24,985.84 2009 7.04 8.95 116,165.26 2010 8.95 9.74 269,043.80 2011 9.74 9.46 334,760.39 Met/Templeton Growth Investment Division/(i)/......................... 2008 9.99 6.58 9,643.09 2009 6.58 8.62 43,892.66 2010 8.62 9.18 78,696.70 2011 9.18 8.45 120,504.72 MetLife Aggressive Strategy Investment Division.............................. 2011 12.34 10.59 1,909,145.85 MetLife Aggressive Strategy Investment Division (formerly MetLife Aggressive Allocation Investment Division)/(e)(m)/..................... 2005 9.99 11.16 6,670.59 2006 11.16 12.77 180,227.91 2007 12.77 13.03 513,196.27 2008 13.03 7.67 799,850.74 2009 7.67 9.97 1,297,216.65 2010 9.97 11.40 1,592,205.37 2011 11.40 12.38 0.00 MetLife Conservative Allocation Investment Division/(e)/.............. 2005 9.99 10.31 17,041.17 2006 10.31 10.90 43,214.85 2007 10.90 11.37 148,320.62 2008 11.37 9.62 279,644.96 2009 9.62 11.47 406,016.23 2010 11.47 12.48 593,216.03 2011 12.48 12.74 1,035,626.50 MetLife Conservative to Moderate Allocation Investment Division/(e)/... 2005 9.99 10.53 38,350.22 2006 10.53 11.39 327,965.49 2007 11.39 11.80 712,052.60 2008 11.80 9.15 1,176,507.34 2009 9.15 11.18 1,521,527.64 2010 11.18 12.33 2,226,031.92 2011 12.33 12.32 2,840,099.83 MetLife Mid Cap Stock Index Investment Division/(a)/......................... 2002 8.99 8.67 1,645.03 2003 8.67 11.53 91,255.87 2004 11.53 13.19 139,283.11 2005 13.19 14.61 266,173.33 2006 14.61 15.87 472,965.71 2007 15.87 16.86 662,368.42 2008 16.86 10.60 813,369.45 2009 10.60 14.34 944,409.27 2010 14.34 17.86 1,034,531.67 2011 17.86 17.27 1,188,691.65 MetLife Moderate Allocation Investment Division/(e)/......................... 2005 9.99 10.76 185,399.49 2006 10.76 11.90 1,036,118.92 2007 11.90 12.27 2,916,876.82 2008 12.27 8.66 4,590,335.22 2009 8.66 10.83 6,757,809.46 2010 10.83 12.12 9,166,120.55 2011 12.12 11.81 11,223,269.63
105
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------- MetLife Moderate to Aggressive Allocation Investment Division/(e)/........................ 2005 $ 9.99 $10.99 92,873.97 2006 10.99 12.41 872,058.09 2007 12.41 12.74 2,856,621.59 2008 12.74 8.17 5,013,875.02 2009 8.17 10.42 7,442,005.10 2010 10.42 11.82 9,546,593.21 2011 11.82 11.25 11,114,182.78 MetLife Stock Index Investment Division/(a)/...... 2002 28.95 27.66 1,512.09 2003 27.66 34.96 82,808.02 2004 34.96 38.11 275,038.70 2005 38.11 39.33 547,798.08 2006 39.33 44.79 783,095.95 2007 44.79 46.47 1,014,276.29 2008 46.47 28.82 1,356,676.50 2009 28.82 35.88 1,625,992.39 2010 35.88 40.61 1,882,506.27 2011 40.61 40.80 2,102,565.94 MFS(R) Research International Investment Division/(a)/................................... 2002 7.82 7.32 20.26 2003 7.32 9.56 17,836.97 2004 9.56 11.29 33,557.48 2005 11.29 13.00 89,994.11 2006 13.00 16.27 257,687.66 2007 16.27 18.22 469,870.91 2008 18.22 10.38 715,053.77 2009 10.38 13.50 929,902.72 2010 13.50 14.87 1,050,952.03 2011 14.87 13.12 1,195,052.67 MFS(R) Total Return Investment Division/(a)/...... 2002 33.21 33.00 1.50 2003 33.00 38.08 7,191.76 2004 38.08 41.78 24,289.54 2005 41.78 42.48 54,395.78 2006 42.48 47.01 84,211.32 2007 47.01 48.38 119,028.13 2008 48.38 37.14 124,603.51 2009 37.14 43.43 142,764.40 2010 43.43 47.14 158,075.19 2011 47.14 47.61 165,698.88 MFS(R) Value Investment Division/(a)/............. 2002 10.10 9.77 164.71 2003 9.77 12.09 57,143.48 2004 12.09 13.29 177,468.75 2005 13.29 12.92 372,897.00 2006 12.92 15.06 446,843.92 2007 15.06 14.28 542,706.43 2008 14.28 9.36 575,265.94 2009 9.36 11.16 661,514.74 2010 11.16 12.26 740,015.29 2011 12.26 12.20 771,580.97
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Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ Morgan Stanley EAFE(R) Index Investment Division/(a)/....... 2002 $ 7.94 $ 7.06 3,041.51 2003 7.06 9.57 142,473.29 2004 9.57 11.29 245,217.23 2005 11.29 12.60 488,217.83 2006 12.60 15.63 714,989.16 2007 15.63 17.08 975,903.28 2008 17.08 9.76 1,336,199.40 2009 9.76 12.37 1,607,780.30 2010 12.37 13.20 1,905,179.76 2011 13.20 11.40 2,353,835.92 Morgan Stanley Mid Cap Growth Investment Division/(l)/...... 2010 13.30 15.47 334,164.64 2011 15.47 14.24 379,574.41 Morgan Stanley Mid Cap Growth Investment Division (formerly FI Mid Cap Opportunities Investment Division)/(a)(c)/..... 2002 11.37 10.97 0.00 2003 10.97 14.56 0.00 2004 14.56 16.82 35,155.94 2005 16.82 17.74 64,889.51 2006 17.74 19.56 133,447.27 2007 19.56 20.90 166,623.10 2008 20.90 9.21 255,078.97 2009 9.21 12.16 298,919.30 2010 12.16 13.17 0.00 Neuberger Berman Genesis Investment Division/(a)/........... 2002 12.81 10.88 156.91 2003 10.88 16.11 48,453.97 2004 16.11 18.33 175,008.38 2005 18.33 18.82 287,683.69 2006 18.82 21.67 374,993.08 2007 21.67 20.63 454,086.47 2008 20.63 12.53 468,805.82 2009 12.53 13.98 539,322.97 2010 13.98 16.77 538,917.95 2011 16.77 17.49 531,388.36 Neuberger Berman Mid Cap Value Investment Division/(a)/..... 2002 14.09 13.47 1.13 2003 13.47 18.13 32,588.41 2004 18.13 21.98 136,845.70 2005 21.98 24.32 304,908.67 2006 24.32 26.74 489,376.42 2007 26.74 27.28 663,256.48 2008 27.28 14.16 797,929.68 2009 14.16 20.68 858,091.58 2010 20.68 25.77 904,609.58 2011 25.77 23.78 955,076.06 Oppenheimer Capital Appreciation Investment Division/(a)/... 2002 6.56 6.31 9.15 2003 6.31 8.02 8,584.95 2004 8.02 8.43 26,654.60 2005 8.43 8.73 71,232.08 2006 8.73 9.29 123,997.78 2007 9.29 10.49 195,153.29 2008 10.49 5.61 254,070.40 2009 5.61 7.97 316,145.01 2010 7.97 8.62 448,556.55 2011 8.62 8.40 482,660.92
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Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ PIMCO Inflation Protected Bond Investment Division/(f)/..... 2006 $11.07 $11.20 14,323.43 2007 11.20 12.27 53,603.10 2008 12.27 11.29 365,194.13 2009 11.29 13.18 533,777.77 2010 13.18 14.04 737,915.95 2011 14.04 15.42 890,455.58 PIMCO Total Return Investment Division/(a)/................. 2002 10.95 11.41 189.54 2003 11.41 11.76 70,150.27 2004 11.76 12.20 251,822.19 2005 12.20 12.34 587,365.40 2006 12.34 12.75 830,339.80 2007 12.75 13.55 990,487.69 2008 13.55 13.45 1,132,008.34 2009 13.45 15.70 1,495,095.67 2010 15.70 16.79 1,968,358.65 2011 16.79 17.12 2,139,928.09 RCM Technology Investment Division/(a)/..................... 2002 3.68 2.97 10.54 2003 2.97 4.63 19,825.87 2004 4.63 4.38 57,801.86 2005 4.38 4.81 109,550.02 2006 4.81 5.00 202,153.84 2007 5.00 6.51 318,061.62 2008 6.51 3.57 403,536.36 2009 3.57 5.62 587,559.45 2010 5.62 7.09 800,564.32 2011 7.09 6.31 940,219.48 Russell 2000(R) Index Investment Division/(a)/.............. 2002 10.10 9.36 860.44 2003 9.36 13.49 57,176.25 2004 13.49 15.66 92,647.13 2005 15.66 16.14 203,487.62 2006 16.14 18.77 330,869.18 2007 18.77 18.23 449,867.09 2008 18.23 11.95 520,314.13 2009 11.95 14.85 658,112.73 2010 14.85 18.59 717,969.90 2011 18.59 17.59 809,681.37 SSgA Growth ETF Investment Division/(f)/.................... 2006 10.71 11.45 2,722.18 2007 11.45 11.95 16,348.82 2008 11.95 7.92 16,025.29 2009 7.92 10.11 103,310.15 2010 10.11 11.40 249,877.19 2011 11.40 11.03 444,336.25 SSgA Growth and Income ETF Investment Division/(f)/......... 2006 10.52 11.19 3,054.10 2007 11.19 11.66 7,612.59 2008 11.66 8.64 13,071.93 2009 8.64 10.66 125,239.92 2010 10.66 11.83 421,848.35 2011 11.83 11.82 671,026.93
108
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ T. Rowe Price Large Cap Growth Investment Division/(a)/.............................. 2002 $ 8.98 $ 8.76 3.45 2003 8.76 11.33 22,582.04 2004 11.33 12.28 85,713.15 2005 12.28 12.91 160,902.73 2006 12.91 14.41 262,445.10 2007 14.41 15.55 364,181.00 2008 15.55 8.91 442,818.70 2009 8.91 12.60 524,705.52 2010 12.60 14.55 579,752.68 2011 14.55 14.19 625,657.21 T. Rowe Price Mid Cap Growth Investment Division/(a)/.............................. 2002 4.85 4.56 6.04 2003 4.56 6.16 14,813.41 2004 6.16 7.18 99,520.94 2005 7.18 8.14 203,186.34 2006 8.14 8.54 411,060.56 2007 8.54 9.93 605,999.98 2008 9.93 5.91 826,878.73 2009 5.91 8.51 1,049,482.42 2010 8.51 10.74 1,227,450.81 2011 10.74 10.44 1,444,698.15 T. Rowe Price Small Cap Growth Investment Division/(a)/.............................. 2002 8.98 8.80 2.02 2003 8.80 12.26 9,431.44 2004 12.26 13.46 41,674.45 2005 13.46 14.73 61,128.13 2006 14.73 15.09 119,926.48 2007 15.09 16.34 147,039.90 2008 16.34 10.28 178,819.10 2009 10.28 14.10 240,114.29 2010 14.10 18.77 319,841.50 2011 18.77 18.82 411,903.64 Third Avenue Small Cap Value Investment Division/(a)/.............................. 2002 9.02 8.24 0.00 2003 8.24 11.52 10,024.24 2004 11.52 14.41 23,882.79 2005 14.41 16.45 116,689.87 2006 16.45 18.40 218,803.53 2007 18.40 17.64 312,434.44 2008 17.64 12.24 345,244.78 2009 12.24 15.30 421,184.87 2010 15.30 18.13 458,491.15 2011 18.13 16.31 514,785.38 Western Asset Management Strategic Bond Opportunities Investment Division/(a)/..... 2002 16.37 17.34 63.10 2003 17.34 19.30 6,880.83 2004 19.30 20.28 37,987.88 2005 20.28 20.57 116,330.65 2006 20.57 21.31 234,231.30 2007 21.31 21.85 363,414.55 2008 21.85 18.31 359,771.96 2009 18.31 23.87 374,438.61 2010 23.87 26.54 407,645.88 2011 26.54 27.77 431,825.10
109
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ Western Asset Management U.S. Government Investment Division/(a)/................... 2002 $15.39 $15.87 70.64 2003 15.87 15.95 17,717.61 2004 15.95 16.19 53,620.30 2005 16.19 16.23 126,212.33 2006 16.23 16.67 223,236.27 2007 16.67 17.15 292,693.44 2008 17.15 16.86 309,301.14 2009 16.86 17.35 361,216.45 2010 17.35 18.09 413,299.30 2011 18.09 18.82 418,185.51
----------- (a)The inception date for the Deferred Annuities was July 12, 2002. (b)Inception Date: May 1, 2003. (c)The Investment Division with the name FI Mid Cap Opportunities was merged into the Janus Mid Cap Investment Division prior to the opening of business May 3, 2004, and was renamed FI Mid Cap Opportunities. The Investment Division with the name FI Mid Cap Opportunities on April 30, 2004 ceased to exist. The Accumulation Unit Values history prior to May 1, 2004 is of the Investment Division which no longer exists. (d)Inception Date: May 1, 2004. (e)Inception Date: May 1, 2005. (f)Inception Date: May 1, 2006. (g)The assets of BlackRock Large Cap Investment Division (formerly BlackRock Investment Trust Investment Division) of the Metropolitan Fund were merged into the BlackRock Large Cap Core Investment Division of the Met Investors Fund on April 30, 2007. Accumulation Unit Values prior to April 30, 2007 are those of the BlackRock Large Cap Investment Division. (h)Inception date: April 30, 2007. (i)Inception date: April 28, 2008. (j)The Accumulation Unit Values for American Funds Bond, American Funds Growth-Income, American Funds Growth and American Funds Global Capitalization Investment Divisions are calculated with an additional .25% Separate Account charge as indicated in the Separate Account Charge section of the Table of Expenses. (k)The assets of FI Large Cap Investment Division of the Metropolitan Fund were merged into the BlackRock Legacy Large Cap Growth Investment Division of the Metropolitan Fund on May 1, 2009. Accumulation Unit Values prior to May 1, 2009 are those of the FI Large Cap Investment Division. (l)The assets of FI Mid Cap Opportunities Investment Division were merged into this Investment Division on May 3, 2010. Accumulation Unit Values prior to May 3, 2010 are those of FI Mid Cap Opportunities Investment Division (m)The assets of MetLife Aggressive Allocation Investment Division of the Metropolitan Fund were merged into the MetLife Aggressive Strategy Investment Division of the Met Investors Trust on May 2, 2011. Accumulation Unit Values prior to May 2, 2011 are those of the MetLife Aggressive Allocation Investment Division. (n)Inception Date: May 2, 2011. * We are waiving a portion of the Separate Account charge for the Investment Division investing in the BlackRock Large Cap Core Portfolio. Please see the Table of Expenses for more information. 110 APPENDIX IV PORTFOLIO LEGAL AND MARKETING NAMES
LEGAL NAME OF SERIES FUND/TRUST PORTFOLIO SERIES MARKETING NAME American Funds Insurance Series(R) Bond Fund American Funds Bond Fund American Funds Insurance Series(R) Global Small Capitalization Fund American Funds Global Small Capitalization Fund American Funds Insurance Series(R) Growth - Income Fund American Funds Growth-Income Fund American Funds Insurance Series(R) Growth Fund American Funds Growth Fund
111 APPENDIX V ADDITIONAL INFORMATION REGARDING THE PORTFOLIOS The Portfolios below were subject to a merger or name change. The chart identifies the former name and new name of each of these Portfolios. PORTFOLIO MERGERS
FORMER PORTFOLIO NEW PORTFOLIO MET INVESTORS FUND METROPOLITAN FUND Oppenheimer Jennison Growth Portfolio Capital Appreciation Portfolio METROPOLITAN FUND MET INVESTORS FUND Lord Abbett Mid Lord Abbett Mid Cap Value Portfolio Cap Value Portfolio
PORTFOLIO NAME CHANGES
FORMER PORTFOLIO NEW PORTFOLIO METROPOLITAN FUND METROPOLITAN FUND Neuberger Lord Abbett Mid Cap Value Portfolio Berman Mid Cap MSCI EAFE(R) Index Portfolio Value Portfolio Morgan Stanley EAFE(R) Index Portfolio
112 Request For a Statement of Additional Information/Change of Address If You would like any of the following Statements of Additional Information, or have changed your address, please check the appropriate box below and return to the address below. [_] Metropolitan Life Separate Account E, [_] Metropolitan Series Fund [_] Met Investors Series Trust [_] American Funds Insurance Series(R) [_] Calvert VP SRI Balanced Portfolio [_] I have changed my address. My current address is: _________________ Name ___ (Contract Number) Address _________________ _ (Signature) zip Metropolitan Life Insurance Company P.O. Box 10342 Des Moines, IA 50306-0342 April 30, 2012 MetLife Financial Freedom Select(R) Variable Annuity Contracts Issued by Metropolitan Life Insurance Company This Prospectus describes MetLife Financial Freedom Select group and individual deferred variable annuity contracts ("Deferred Annuities"). -------------------------------------------------------------------------------- You decide how to allocate your money among the various available investment choices. The investment choices available to You are listed in the Contract for your Deferred Annuity. Your choices may include the Fixed Interest Account (not offered or described in this Prospectus) and Investment Divisions available through Metropolitan Life Separate Account E which, in turn, invest in the following corresponding portfolios of the Metropolitan Series Fund ("Metropolitan Fund"), a portfolio of the Calvert Variable Series, Inc. ("Calvert Fund"), portfolios of the Met Investors Series Trust ("Met Investors Fund") and funds of the American Funds Insurance Series(R) ("American Funds(R)"). For convenience, the portfolios and the funds are referred to as "Portfolios" in this Prospectus. AMERICAN FUNDS(R) AMERICAN FUNDS BOND AMERICAN FUNDS GROWTH AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION AMERICAN FUNDS GROWTH-INCOME CALVERT FUND CALVERT VP SRI BALANCED MET INVESTORS FUND AMERICAN FUNDS(R) BALANCED ALLOCATION MET/FRANKLIN MUTUAL SHARES AMERICAN FUNDS(R) GROWTH ALLOCATION MET/FRANKLIN TEMPLETON FOUNDING STRATEGY AMERICAN FUNDS(R) MODERATE ALLOCATION MET/TEMPLETON GROWTH BLACKROCK LARGE CAP CORE METLIFE AGGRESSIVE STRATEGY CLARION GLOBAL REAL ESTATE MFS(R) RESEARCH INTERNATIONAL HARRIS OAKMARK INTERNATIONAL MORGAN STANLEY MID CAP GROWTH INVESCO SMALL CAP GROWTH PIMCO INFLATION PROTECTED BOND JANUS FORTY PIMCO TOTAL RETURN LAZARD MID CAP RCM TECHNOLOGY LORD ABBETT BOND DEBENTURE SSGA GROWTH AND INCOME ETF LORD ABBETT MID CAP VALUE SSGA GROWTH ETF MET/FRANKLIN INCOME T. ROWE PRICE MID CAP GROWTH MET/FRANKLIN LOW DURATION TOTAL RETURN THIRD AVENUE SMALL CAP VALUE METROPOLITAN FUND BARCLAYS CAPITAL AGGREGATE BOND INDEX METLIFE MODERATE ALLOCATION BLACKROCK BOND INCOME METLIFE MODERATE TO AGGRESSIVE ALLOCATION BLACKROCK LARGE CAP VALUE METLIFE STOCK INDEX BLACKROCK LEGACY LARGE CAP GROWTH MFS(R) TOTAL RETURN DAVIS VENTURE VALUE MFS(R) VALUE FI VALUE LEADERS MSCI EAFE(R) INDEX JENNISON GROWTH NEUBERGER BERMAN GENESIS LOOMIS SAYLES SMALL CAP CORE RUSSELL 2000(R) INDEX LOOMIS SAYLES SMALL CAP GROWTH T. ROWE PRICE LARGE CAP GROWTH MET/ARTISAN MID CAP VALUE T. ROWE PRICE SMALL CAP GROWTH METLIFE CONSERVATIVE ALLOCATION WESTERN ASSET MANAGEMENT STRATEGIC BOND METLIFE CONSERVATIVE TO MODERATE ALLOCATION OPPORTUNITIES METLIFE MID CAP STOCK INDEX WESTERN ASSET MANAGEMENT U.S. GOVERNMENT
Certain Portfolios have been subject to a change. Please see Appendix V -- "Additional Information Regarding the Portfolios". HOW TO LEARN MORE: Before investing, read this Prospectus. The Prospectus contains information about the Deferred Annuities and Metropolitan Life Separate Account E which You should know before investing. Keep this Prospectus for future reference. For more information, request a copy of the Statement of Additional Information ("SAI"), dated April 30, 2012. The SAI is considered part of this Prospectus as though it were included in the Prospectus. The Table of Contents of the SAI appears on page 86 of this Prospectus. To request a free copy of the SAI or to ask questions, write or call: Metropolitan Life Insurance Company P.O. Box 10342 Des Moines, IA 50306-0342 (800) 638-7732 Deferred Annuities Available: . TSA . TSA ERISA . Simplified Employee Pensions (SEPs) . SIMPLE Individual Retirement Annuities . 457(b) Eligible Deferred Compensation Arrangements (457(b)s) . 403(a) Arrangements Classes Available for each Deferred Annuity . e . e Bonus A word about investment risk: An investment in any of these variable annuities involves investment risk. You could lose money You invest. Money invested is NOT: . a bank deposit or obligation; . federally insured or guaranteed; or . endorsed by any bank or other financial institution. Each class of the Deferred Annuities has its own Separate Account charge and Withdrawal Charge schedule. Each provides the opportunity to invest for retirement. The expenses for the e Bonus Class of the Deferred Annuity may be higher than similar contracts without a bonus. The purchase payment credits ("Bonus") may be more than offset by the higher expenses for the e Bonus Class. The Securities and Exchange Commission has a Web site (http://www.sec.gov) which You may visit to view this Prospectus, SAI and other information. The Securities and Exchange Commission has not approved or disapproved these securities or determined if this Prospectus is truthful or complete. Any representation otherwise is a criminal offense. 2 TABLE OF CONTENTS Important Terms You Should Know..................................... 5 Table of Expenses................................................... 8 Accumulation Unit Values Tables..................................... 14 MetLife............................................................. 15 Metropolitan Life Separate Account E................................ 15 Variable Annuities.................................................. 15 Replacement of Annuity Contracts................................ 16 The Deferred Annuity............................................ 16 Classes of the Deferred Annuity..................................... 18 Your Investment Choices............................................. 20 Deferred Annuities.................................................. 26 The Deferred Annuity and Your Retirement Plan................... 26 403(b) Plan Terminations........................................ 26 Automated Investment Strategies................................. 27 Purchase Payments............................................... 28 Purchase Payments--Section 403(b) Plans..................... 28 Allocation of Purchase Payments............................. 29 Limits on Purchase Payments................................. 29 The Value of Your Investment.................................... 29 Transfer Privilege.............................................. 30 Access to Your Money............................................ 32 Systematic Withdrawal Program............................... 33 Minimum Distribution........................................ 34 Charges......................................................... 34 Separate Account Charge..................................... 34 Investment-Related Charge................................... 35 Annual Contract Fee............................................. 35 Optional Guaranteed Minimum Income Benefit.................. 36 Optional Lifetime Withdrawal Guarantee Benefit.............. 36 Premium and Other Taxes......................................... 36 Withdrawal Charges.............................................. 37 When No Withdrawal Charge Applies to the e Bonus Class...... 37 Free Look....................................................... 38 Death Benefit--Generally........................................ 39 Standard Death Benefit.......................................... 40 Optional Benefits............................................... 40 Annual Step-Up Death Benefit.................................... 41 Guaranteed Minimum Income Benefit........................... 42 Lifetime Withdrawal Guarantee Benefit....................... 49 Pay-Out Options (or Income Options)............................. 58 Income Payment Types............................................ 59 Allocation...................................................... 60 Minimum Size of Your Income Payment............................. 60
3 The Value of Your Income Payments............................................ 60 Reallocation Privilege................................................... 62 Charges.................................................................. 63 General Information.............................................................. 64 Administration............................................................... 64 Purchase Payments........................................................ 64 Confirming Transactions.................................................. 64 Processing Transactions.................................................. 65 By Telephone or Internet.............................................. 65 After Your Death...................................................... 65 Misstatement.......................................................... 66 Third Party Requests.................................................. 66 Valuation--Suspension of Payments..................................... 66 Advertising Performance...................................................... 66 Changes to Your Deferred Annuity............................................. 68 Voting Rights................................................................ 69 Who Sells the Deferred Annuities............................................. 69 Financial Statements......................................................... 72 Your Spouse's Rights......................................................... 72 When We Can Cancel Your Deferred Annuity..................................... 72 Income Taxes..................................................................... 73 Legal Proceedings................................................................ 85 Table of Contents for the Statement of Additional Information.................... 86 Appendix I Premium Tax Table..................................................... 87 Appendix II What You Need To Know If You Are A Texas Optional Retirement Program Participant.................................................................... 88 Appendix III Accumulation Unit Values For Each Investment Division............... 89 Appendix IV Portfolio Legal and Marketing Names.................................. 111 Appendix V Additional Information Regarding the Portfolios....................... 112
The Deferred Annuities are not to be offered anywhere that they may not lawfully be offered and sold. MetLife has not authorized any information or representations about the Deferred Annuities other than the information in this Prospectus, supplements to the Prospectus or any supplemental sales material we authorize. 4 IMPORTANT TERMS YOU SHOULD KNOW ACCOUNT BALANCE When You purchase a Deferred Annuity, an account is set up for You. Your Account Balance is the total amount of money credited to You under your Deferred Annuity including money in the Investment Divisions of the Separate Account and the Fixed Interest Account. ACCUMULATION UNIT VALUE With a Deferred Annuity, money paid-in or transferred into an Investment Division of the Separate Account is credited to You in the form of accumulation units. Accumulation units are established for each Investment Division. We determine the value of these accumulation units as of the close of the Exchange (see definition below) each day the Exchange is open for regular trading. The Exchange usually closes at 4 p.m. Eastern Time but may close earlier or later. The values increase or decrease based on the investment performance of the corresponding underlying Portfolios. ADMINISTRATIVE OFFICE Your Administrative Office is the MetLife office that will generally handle the administration of all your requests concerning your Deferred Annuity. Your Contract will indicate the address of your Administrative Office. We will notify You if there is a change in the address of your Administrative Office. The telephone number to call to initiate a request is 1-800-638-7732. ANNUITANT The natural person whose life is the measure for determining the duration and the dollar amount of income payments. ANNUITY UNIT VALUE With a variable pay-out option, the money paid-in or reallocated into an Investment Division of the Separate Account is held in the form of annuity units. Annuity units are established for each Investment Division. We determine the value of these annuity units as of the close of the Exchange each day the Exchange is open for regular trading. The Exchange usually closes at 4 p.m. Eastern Time but may close earlier or later. The values increase or decrease based on the investment performance of the corresponding underlying Portfolios. ASSUMED INVESTMENT RETURN (AIR) Under a variable pay-out option, the AIR is the assumed percentage rate of return used to determine the amount of the first variable income payment. The AIR is also the benchmark that is used to calculate the investment performance of a given Investment Division to determine all subsequent payments to You. 5 BENEFICIARY The person or persons who receives a benefit, including continuing payments or a lump sum payment, if the owner dies. CONTRACT A Contract is the legal agreement between You and MetLife or between MetLife and the employer, plan trustee or other entity or the certificate issued to You under a group annuity Contract. This document contains relevant provisions of your Deferred Annuity. MetLife issues Contracts for each of the annuities described in this Prospectus. CONTRACT ANNIVERSARY An anniversary of the date we issue the Deferred Annuity. CONTRACT YEAR The Contract Year for a Deferred Annuity is the one year period starting on the date we issue the Deferred Annuity and each Contract Anniversary thereafter. For the TSA Deferred Annuity issued to a plan subject to the Employee Retirement Income Security Act of 1974 ("TSA ERISA Deferred Annuity"), 457(b) and 403(a) Deferred Annuities, for convenience, Contract Year also refers to the one year period starting on the date the participant enrolls in the plan funded by the Deferred Annuity. EXCHANGE In this Prospectus, the New York Stock Exchange is referred to as the "Exchange." GOOD ORDER A request or transaction generally is considered in "Good Order" if it complies with our administrative procedures and the required information is complete and correct. A request or transaction may be rejected or delayed if not in Good Order. If You have any questions, You should contact us or your sales representative before submitting the form or request. INVESTMENT DIVISION Investment Divisions are subdivisions of the Separate Account. When You allocate a purchase payment, transfer money or make reallocations of your income payment to an Investment Division, the Investment Division purchases shares of a Portfolio (with the same name) within the Metropolitan Fund, the Calvert Fund, the Met Investors Fund or the American Funds(R). METLIFE MetLife is Metropolitan Life Insurance Company which is the company that issues the Deferred Annuities. Throughout this Prospectus, MetLife is also referred to as "we," "us" or "our." SEPARATE ACCOUNT A separate account is an investment account. All assets contributed to Investment Divisions under the Deferred Annuities are pooled in the Separate Account and maintained for the benefit of investors in Deferred Annuities. 6 VARIABLE ANNUITY An annuity in which returns/income payments are based upon the performance of investments such as stocks and bonds held by one or more underlying Portfolios. You assume the investment risk for any amounts allocated to the Investment Divisions in a Variable Annuity. WITHDRAWAL CHARGE The Withdrawal Charge is the amount we deduct from the amount You have withdrawn from your Deferred Annuity, if You withdraw money prematurely from a Deferred Annuity. This charge is often referred to as a deferred sales load or back-end sales load. YOU In this Prospectus, depending on the context, "You" is the owner of the Deferred Annuity or the participant or Annuitant for whom money is invested under certain group arrangements. In cases where we are referring to giving instructions or making payments to us for 457(b), 403(a), TSA ERISA and certain TSA non-ERISA Deferred Annuities, "You" means the trustee or employer. Under 457(b), 403(a), and 403(b) plans where the participant or Annuitant is permitted to choose among investment choices, "You" means the participant or Annuitant who is giving us instructions about the investment choices. In connection with a 403(b) plan termination, as of the date of the Contract or cash distribution under such plan termination, "You" means the participant who has received such Contract or cash distribution. 7 TABLE OF EXPENSES--METLIFE FINANCIAL FREEDOM SELECT DEFERRED ANNUITIES The following tables describe the expenses You will pay when You buy, hold or withdraw amounts from your Deferred Annuity. The first table describes charges You will pay at the time You purchase the Deferred Annuity, make withdrawals from your Deferred Annuity or make transfers between the Investment Divisions. There are no fees for the Fixed Interest Account. The tables do not show premium taxes (ranging from 0.5% to 3.5%, which are applicable only in certain jurisdictions--see Appendix I) and other taxes which may apply. -------------------------------------------------------------------------------- Contract Owner Transaction Expenses Sales Charge Imposed on Purchase Payments....................... None Withdrawal Charge (as a percentage of the amount withdrawn) (1). Up to 3% Transfer Fee (2)................................................ Maximum Guaranteed Charge: $25 Current Charge: None
The second table describes the fees and expenses that You will bear periodically during the time You hold the Deferred Annuity, but does not include fees and expenses for the Portfolios. You pay the Separate Account charge designated under the appropriate class for the Standard Death Benefit or the Optional Annual Step-Up Death Benefit. Annual Contract Fee (3)................................ $30
Current Annual Separate Account Charge (as a percentage of your average Account Balance) for all Investment Divisions except the American Funds Growth-Income, American Funds Growth and American Funds Global Small Capitalization Divisions (4) e CLASS e BONUS CLASS (5) Death Benefit ------- ----------------- Standard Death Benefit.......................... 0.50% 0.95% Optional Annual Step-Up Death Benefit........... 0.60% 1.05%
Current Annual Separate Account Charge (as a percentage of your average Account Balance) for the American Funds Growth-Income, American Funds Growth, American Funds Bond and American Funds Global Small Capitalization Divisions and maximum guaranteed Separate Account charge (as a percentage of your Account Balance) for all future Investment Divisions (4) e CLASS e BONUS CLASS (5) Death Benefit ------- ----------------- Standard Death Benefit.......................... 0.75% 1.20% Optional Annual Step-Up Death Benefit........... 0.85% 1.30% Optional Guaranteed Minimum Income Benefit (6)............ 0.70% Optional Lifetime Withdrawal Guarantee Benefit (7)-maximum charge...................................... 0.95% Optional Lifetime Withdrawal Guarantee Benefit (7)-current charge...................................... 0.95%
The third table shows the minimum and maximum total operating expenses charged by the Portfolios, as well as the operating expenses for each Portfolio, that You may bear periodically while You hold the Deferred Annuity. All the Portfolios listed below are Class B except for the Portfolios of the American Funds(R), which are Class 2 Portfolios, American Funds(R) Balanced Allocation Portfolio, American Funds(R) Growth Allocation Portfolio and American Funds(R) Moderate Allocation Portfolio of the Met Investors Fund which are Class C Portfolios, and the Calvert VP SRI Balanced Portfolio. Certain Portfolios may impose a redemption fee in the future. More details concerning the Metropolitan Fund, the Calvert Fund, the Met Investors Fund and the American Funds(R) fees and expenses are contained in their respective prospectuses. Current prospectuses for the Portfolios can be obtained by calling 800-638-7732. Minimum and Maximum Total Annual Fund Operating Expenses Total Annual American Funds(R), Calvert Fund, Met Minimum* Maximum Investors Fund and Metropolitan Fund Operating 0.52% 1.21% Expenses for the fiscal year ending December 31, 2011 (expenses that are deducted from Fund assets, including management fees, distribution and/or service (12b-1) fees and other expenses).
* Does not take into consideration any American Funds(R) Portfolio, for which an additional Separate Account charge applies. 8 /1/ A Withdrawal Charge may apply if You take a withdrawal from your Deferred Annuity. The charge on the amount withdrawn for each class is calculated according to the following schedule:
IF WITHDRAWN DURING CONTRACT YEAR e CLASS e BONUS CLASS --------------------------------- ------- ------------- 1...................... None 3% 2...................... 3% 3...................... 3% 4...................... 3% 5...................... 3% 6...................... 3% 7...................... 3% Thereafter............. 0%
There are times when the Withdrawal Charge does not apply to amounts that are withdrawn from a Deferred Annuity. For example, after the first Contract Year, each year You may withdraw up to 10% of your Account Balance without a Withdrawal Charge. These withdrawals are made on a non-cumulative basis. /2/ We reserve the right to limit transfers as described later in this Prospectus. We reserve the right to impose a transfer fee. The amount of this fee will be no greater than $25 per transfer. /3/ This fee may be waived under certain circumstances. This fee is waived if your Account Balance is at least $50,000 on the day the fee is deducted. The fee will be deducted on a pro-rata basis (determined based upon the number of complete months that have elapsed since the prior Contract Anniversary) if You take a total withdrawal of your Account Balance. This fee will not be deducted if You are on medical leave approved by your employer or called to active armed service duty at the time the fee is to be deducted and your employer has informed us of your status. During the pay-out phase we reserve the right to deduct this fee. /4/ You pay the Separate Account charge with the Standard Death Benefit for your class of the Deferred Annuity during the pay-out phase of your Contract. Charges for optional benefits are those for a Deferred Annuity purchased after April 30, 2009. Different charges may have been in effect for prior time periods. We reserve the right to impose an additional Separate Account charge on Investment Divisions that we add to the Contract in the future. The additional amount will not exceed the annual rate of 0.25% of the average daily net assets in any such Investment Divisions, as shown in the table labeled "Current Separate Account Charge for American Funds(R) Investment Divisions and maximum guaranteed Separate Account charge for all future Investment Divisions." We are waiving 0.08% of the Separate Account charge for the Investment Division investing in the BlackRock Large-Cap Core Portfolio. /5/ The Separate Account charge with the Standard Death Benefit for the e Bonus Class will be reduced by 0.45% to 0.50% (0.75% for amounts in the American Funds(R) Investment Divisions) after You have held the Contract for seven years. Similarly, the Separate Account charge will be reduced by 0.45% to 0.60% for the Annual Step-Up Death Benefit (0.85% for amounts held in the American Funds(R) Investment Divisions and for amounts held in the maximum guaranteed Separate Account charge Investment Divisions) after You Have held the Contract for seven years. /6/ You may not have the Guaranteed Minimum Income Benefit and the Lifetime Withdrawal Benefit in effect at the same time. The charge for the Guaranteed Minimum Income Benefit is a percentage of your guaranteed minimum income base, as defined later in this Prospectus, and is deducted at the end of each Contract Year by withdrawing amounts on a pro-rata basis from your Fixed Interest Account Balance (net of any outstanding loans) and Separate Account Balance. (We take amounts from the Separate Account by canceling, if available, accumulation units from your Separate Account Balance.) You do not pay this charge once You are in the pay-out phase of your Contract. Different charges for the Guaranteed Minimum Income Benefit were in effect prior to May 4, 2009. /7/ The charge for the Lifetime Withdrawal Guarantee Benefit is a percentage of your Total Guaranteed Withdrawal Amount, as defined later in this Prospectus, and is deducted at the end of each Contract Year by withdrawing amounts on a pro-rata basis from your Fixed Interest Account Balance and Separate Account Balance. (We take amounts from the Separate Account by canceling accumulation units from your Separate Account Balance.) You do not pay this charge once You are in the pay-out phase of your Contract or after your rider terminates. If an Automatic Annual Step-Up occurs under a Lifetime Withdrawal Guarantee Benefit, we may increase the Lifetime Withdrawal Guarantee Benefit charge to then current charge, but no more than a maximum of 0.95%. Different charges for the Lifetime Withdrawal Guarantee Benefit were in effect prior to May 4, 2009. If, at the time the Contract was issued, the current charge for the benefit was equal to the maximum charge, then the charge for the benefit will not increase upon an Automatic Annual Step-Up. (See Lifetime Withdrawal Guarantee Benefit for more information.) 9
AMERICAN FUNDS(R)--CLASS 2 ANNUAL EXPENSES FOR FISCAL YEAR ENDING DECEMBER 31, 2011 (as a percentage of average daily net assets) DISTRIBUTION ACQUIRED TOTAL CONTRACTUAL FEE NET TOTAL AND/OR FUND ANNUAL WAIVER AND/OR ANNUAL MANAGEMENT SERVICE OTHER FEES AND OPERATING EXPENSE OPERATING FEE (12B-1) FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES --------------------------------------------------------------------------------------------------------------------------- American Funds Bond Fund..................... 0.36% 0.25% 0.02% -- 0.63% -- 0.63% American Funds Global Small Capitalization Fund....................................... 0.70% 0.25% 0.04% -- 0.99% -- 0.99% American Funds Growth Fund................... 0.32% 0.25% 0.02% -- 0.59% -- 0.59% American Funds Growth-Income Fund............ 0.27% 0.25% 0.01% -- 0.53% -- 0.53% -------------------------
CALVERT FUND ANNUAL EXPENSES FOR FISCAL YEAR ENDING DECEMBER 31, 2011 (as a percentage of average daily net assets) DISTRIBUTION ACQUIRED TOTAL CONTRACTUAL FEE NET TOTAL AND/OR FUND ANNUAL WAIVER AND/OR ANNUAL MANAGEMENT SERVICE OTHER FEES AND OPERATING EXPENSE OPERATING FEE (12B-1) FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES --------------------------------------------------------------------------------------------------------------------------- Calvert VP SRI Balanced Portfolio............ 0.70% -- 0.21% -- 0.91% -- 0.91% -------------------------
MET INVESTORS FUND ANNUAL EXPENSES FOR FISCAL YEAR ENDING DECEMBER 31, 2011 (as a percentage of average daily net assets) DISTRIBUTION ACQUIRED TOTAL CONTRACTUAL FEE NET TOTAL AND/OR FUND ANNUAL WAIVER AND/OR ANNUAL MANAGEMENT SERVICE OTHER FEES AND OPERATING EXPENSE OPERATING FEE (12B-1) FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES --------------------------------------------------------------------------------------------------------------------------- American Funds(R) Balanced Allocation Portfolio -- Class C....................... 0.06% 0.55% 0.01% 0.37% 0.99% -- 0.99% American Funds(R) Growth Allocation Portfolio -- Class C....................... 0.07% 0.55% 0.01% 0.39% 1.02% -- 1.02% American Funds(R) Moderate Allocation Portfolio -- Class C....................... 0.06% 0.55% 0.01% 0.36% 0.98% -- 0.98% BlackRock Large Cap Core Portfolio -- Class B 0.59% 0.25% 0.05% -- 0.89% 0.01% 0.88% Clarion Global Real Estate Portfolio -- Class B.................................... 0.61% 0.25% 0.06% -- 0.92% -- 0.92% Harris Oakmark International Portfolio -- Class B.................................... 0.77% 0.25% 0.08% -- 1.10% 0.02% 1.08% Invesco Small Cap Growth Portfolio -- Class B 0.85% 0.25% 0.03% -- 1.13% 0.02% 1.11% Janus Forty Portfolio -- Class B............. 0.63% 0.25% 0.03% -- 0.91% 0.01% 0.90% Lazard Mid Cap Portfolio -- Class B.......... 0.69% 0.25% 0.06% -- 1.00% -- 1.00% Lord Abbett Bond Debenture Portfolio -- Class B.................................... 0.50% 0.25% 0.04% -- 0.79% -- 0.79% Lord Abbett Mid Cap Value Portfolio -- Class B.......................................... 0.67% 0.25% 0.06% -- 0.98% 0.02% 0.96% Met/Franklin Income Portfolio -- Class B..... 0.74% 0.25% 0.08% -- 1.07% 0.08% 0.99% Met/Franklin Low Duration Total Return Portfolio -- Class B....................... 0.50% 0.25% 0.09% -- 0.84% 0.03% 0.81% Met/Franklin Mutual Shares Portfolio -- Class B.................................... 0.80% 0.25% 0.07% -- 1.12% 0.00% 1.12% Met/Franklin Templeton Founding Strategy Portfolio -- Class B....................... 0.05% 0.25% 0.01% 0.83% 1.14% 0.01% 1.13% Met/Templeton Growth Portfolio -- Class B.... 0.68% 0.25% 0.14% -- 1.07% 0.02% 1.05% MetLife Aggressive Strategy Portfolio -- Class B.................................... 0.09% 0.25% 0.01% 0.75% 1.10% 0.00% 1.10% MFS(R) Research International Portfolio -- Class B.................................... 0.68% 0.25% 0.09% -- 1.02% 0.06% 0.96% Morgan Stanley Mid Cap Growth Portfolio -- Class B.................................... 0.65% 0.25% 0.07% -- 0.97% 0.01% 0.96% PIMCO Inflation Protected Bond Portfolio -- Class B.................................... 0.47% 0.25% 0.04% -- 0.76% -- 0.76% PIMCO Total Return Portfolio -- Class B...... 0.48% 0.25% 0.03% -- 0.76% -- 0.76% RCM Technology Portfolio -- Class B.......... 0.88% 0.25% 0.07% -- 1.20% -- 1.20% -------------------------
10
MET INVESTORS FUND ANNUAL EXPENSES FOR FISCAL YEAR ENDING DECEMBER 31, 2011 (as a percentage of average daily net assets) DISTRIBUTION ACQUIRED TOTAL CONTRACTUAL FEE NET TOTAL AND/OR FUND ANNUAL WAIVER AND/OR ANNUAL MANAGEMENT SERVICE OTHER FEES AND OPERATING EXPENSE OPERATING FEE (12B-1) FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES --------------------------------------------------------------------------------------------------------------------------- SSgA Growth and Income ETF Portfolio -- Class B.................................... 0.31% 0.25% 0.01% 0.21% 0.78% -- 0.78% SSgA Growth ETF Portfolio -- Class B......... 0.32% 0.25% 0.03% 0.24% 0.84% -- 0.84% T. Rowe Price Mid Cap Growth Portfolio -- Class B.................................... 0.75% 0.25% 0.03% -- 1.03% -- 1.03% Third Avenue Small Cap Value Portfolio -- Class B.................................... 0.74% 0.25% 0.03% -- 1.02% 0.01% 1.01% -------------------------
METROPOLITAN FUND--CLASS B ANNUAL EXPENSES FOR FISCAL YEAR ENDING DECEMBER 31, 2011 (as a percentage of average daily net assets) DISTRIBUTION ACQUIRED TOTAL CONTRACTUAL FEE NET TOTAL AND/OR FUND ANNUAL WAIVER AND/OR ANNUAL MANAGEMENT SERVICE OTHER FEES AND OPERATING EXPENSE OPERATING FEE (12B-1) FEES EXPENSES EXPENSES EXPENSES REIMBURSEMENT EXPENSES --------------------------------------------------------------------------------------------------------------------------- Barclays Capital Aggregate Bond Index Portfolio.................................. 0.25% 0.25% 0.03% -- 0.53% 0.01% 0.52% BlackRock Bond Income Portfolio.............. 0.34% 0.25% 0.03% -- 0.62% 0.01% 0.61% BlackRock Large Cap Value Portfolio.......... 0.63% 0.25% 0.03% -- 0.91% 0.03% 0.88% BlackRock Legacy Large Cap Growth Portfolio.. 0.71% 0.25% 0.02% -- 0.98% 0.01% 0.97% Davis Venture Value Portfolio................ 0.70% 0.25% 0.03% -- 0.98% 0.05% 0.93% FI Value Leaders Portfolio................... 0.67% 0.25% 0.07% -- 0.99% -- 0.99% Jennison Growth Portfolio.................... 0.62% 0.25% 0.02% -- 0.89% 0.07% 0.82% Loomis Sayles Small Cap Core Portfolio....... 0.90% 0.25% 0.06% -- 1.21% 0.08% 1.13% Loomis Sayles Small Cap Growth Portfolio..... 0.90% 0.25% 0.06% -- 1.21% 0.08% 1.13% Met/Artisan Mid Cap Value Portfolio.......... 0.81% 0.25% 0.03% -- 1.09% -- 1.09% MetLife Conservative Allocation Portfolio.... 0.09% 0.25% 0.02% 0.53% 0.89% 0.01% 0.88% MetLife Conservative to Moderate Allocation Portfolio.................................. 0.07% 0.25% 0.01% 0.58% 0.91% 0.00% 0.91% MetLife Mid Cap Stock Index Portfolio........ 0.25% 0.25% 0.05% 0.01% 0.56% 0.00% 0.56% MetLife Moderate Allocation Portfolio........ 0.06% 0.25% -- 0.64% 0.95% 0.00% 0.95% MetLife Moderate to Aggressive Allocation Portfolio.................................. 0.06% 0.25% 0.01% 0.69% 1.01% 0.00% 1.01% MetLife Stock Index Portfolio................ 0.25% 0.25% 0.02% -- 0.52% 0.01% 0.51% MFS(R) Total Return Portfolio................ 0.54% 0.25% 0.05% -- 0.84% -- 0.84% MFS(R) Value Portfolio....................... 0.70% 0.25% 0.03% -- 0.98% 0.13% 0.85% MSCI EAFE(R) Index Portfolio................. 0.30% 0.25% 0.11% 0.01% 0.67% 0.00% 0.67% Neuberger Berman Genesis Portfolio........... 0.82% 0.25% 0.04% -- 1.11% 0.01% 1.10% Russell 2000(R) Index Portfolio.............. 0.25% 0.25% 0.06% 0.01% 0.57% 0.00% 0.57% T. Rowe Price Large Cap Growth Portfolio..... 0.60% 0.25% 0.04% -- 0.89% 0.01% 0.88% T. Rowe Price Small Cap Growth Portfolio..... 0.49% 0.25% 0.06% -- 0.80% -- 0.80% Western Asset Management Strategic Bond Opportunities Portfolio.................... 0.61% 0.25% 0.06% -- 0.92% 0.04% 0.88% Western Asset Management U.S. Government Portfolio.................................. 0.47% 0.25% 0.02% -- 0.74% 0.01% 0.73% -------------------------
11 The Net Total Annual Operating Expenses shown in the table reflect contractual arrangements currently in effect under which the investment managers of certain Portfolios have agreed to waive fees and/or pay expenses of the Portfolios until at least April 30, 2013. In the table, "0.00%" in the Contractual Fee Waiver and/or Expense Reimbursement column indicates that there is a contractual arrangement in effect for that Portfolio, but the expenses of the Portfolio are below the level that would trigger the waiver or reimbursement. The Net Total Annual Operating Expenses shown do not reflect voluntary waiver or expense reimbursement arrangements or arrangements that terminate prior to April 30, 2013. The Portfolios provided the information on their expenses, and we have not independently verified the information. Certain Portfolios that have "Acquired Fund Fees and Expenses" are "fund of funds." Each "fund of funds" invests substantially all of its assets in other portfolios. Because the Portfolio invests in other underlying portfolios, the Portfolio will bear its pro rata portion of the operating expenses of the underlying portfolios in which it invests, including the management fee. See the Portfolio prospectus for more information. EXAMPLES These Examples are intended to help You compare the cost of investing in the Contract with the cost of investing in other variable annuity contracts. These costs include contract owner transaction expenses, Annual Contract Fees, if any, Separate Account charges, and underlying Portfolio fees and expenses. Examples 1 and 2 assume You purchased the Contract with optional benefits that resulted in the highest possible combination of charges. Examples 3 and 4 assume You purchased the Contract with no optional benefits that resulted in the least expensive combination of charges. Example 1. This example shows the dollar amount of expenses that You would bear directly or indirectly on a $ 10,000 investment for the time periods indicated. Your actual costs may be higher or lower. Assumptions: . your Account Balance is $16,000 (for purposes of determining the impact of the Annual Contract Fee); . there was no allocation to the Fixed Interest Account; . You bear the minimum or maximum fees and expenses of any of the Portfolios (without reimbursement and/or waiver of expenses); . You select the e Class; . the underlying Portfolio earns a 5% annual return; . You select the Annual Step-Up Death Benefit; and . You select the Lifetime Withdrawal Guarantee Benefit. You fully surrender your Contract, You elect to annuitize (select an income payment type under which You receive income payments over your lifetime) or You do not elect to annuitize (no Withdrawal Charges apply to the e Class).
1 3 5 10 YEAR YEARS YEARS YEARS --------------------------------------------------------------------------- Maximum........................................... $310 $956 $1,638 $3,514 Minimum........................................... $241 $746 $1,281 $2,767
Example 2. This example shows the dollar amount of expenses that You would bear directly or indirectly on a $10,000 investment for the time periods indicated. Your actual costs may be higher or lower. Assumptions: . your Account Balance is $16,000 (for purposes of determining the impact of the Annual Contract Fee); . there was no allocation to the Fixed Interest Account; . You bear the minimum or maximum fees and expenses of any of the Portfolios (without reimbursement and/or waiver of expenses); . You select the e Bonus Class; . the underlying Portfolio earns a 5% annual return; . You select the Annual Step-Up Death Benefit; and . You select the Lifetime Withdrawal Guarantee Benefit. 12 You fully surrender your Contract with applicable Withdrawal Charges deducted.
1 3 5 10 YEAR YEARS YEARS YEARS ---------------------------------------------------------------------------- Maximum........................................... $655 $1,360 $2,130 $3,803 Minimum........................................... $586 $1,151 $1,776 $3,071
You do not surrender your Contract or You elect to annuitize (elect a pay-out option with an income payment type under which You receive income payments over your lifetime) (no Withdrawal Charges will be deducted).
1 3 5 10 YEAR YEARS YEARS YEARS ---------------------------------------------------------------------------- Maximum........................................... $355 $1,090 $1,860 $3,803 Minimum........................................... $286 $881 $1,506 $3,071
Example 3. This example shows the dollar amount of expenses that You would bear directly or indirectly on a $10,000 investment for the time periods indicated. Your actual costs may be higher or lower. Assumptions: . your total Account Balance is $16,000 (for purposes of determining the impact of the Annual Contract Fee); . there was no allocation to the Fixed Interest Account; . You bear the minimum or maximum fees and expenses of any of the Portfolios (without reimbursement and/or waiver of expenses); . You select the e Class; and . the underlying Portfolio earns a 5% annual return. You fully surrender your Contract, You elect to annuitize (select on income payment type under which You receive payments over your lifetime) or You do not elect to annuitize (no Withdrawal Charges apply to the e Class).
1 3 5 10 YEAR YEARS YEARS YEARS --------------------------------------------------------------------------- Maximum........................................... $201 $617 $1,055 $2,256 Minimum........................................... $132 $404 $690 $1,467
Example 4. This example shows the dollar amount of expenses that You would bear directly or indirectly on a $10,000 investment for the time periods indicated. Your actual costs may be higher or lower. Assumptions: . your total Account Balance is $16,000 (for purposes of determining the impact of the Annual Contract Fee); . there was no allocation to the Fixed Interest Account; . You bear the minimum or maximum fees and expenses of any of the Portfolios (without reimbursement and/or waiver of expenses); . You select the e Bonus Class; and . the underlying Portfolio earns a 5% annual return. You surrender your Contract with applicable charges deducted.
1 3 5 10 YEAR YEARS YEARS YEARS ---------------------------------------------------------------------------- Maximum........................................... $545 $1,023 $1,553 $2,557 Minimum........................................... $477 $811 $1,191 $1,783
13 You do not surrender your Contract or You elect to annuitize (elect a pay-out option with an income payment type under which You receive income payments over your lifetime) (no Withdrawal Charges will be deducted).
1 3 5 10 YEAR YEARS YEARS YEARS --------------------------------------------------------------------------- Maximum........................................... $245 $753 $1,283 $2,557 Minimum........................................... $177 $541 $921 $1,783
ACCUMULATION UNIT VALUES FOR EACH INVESTMENT DIVISION See Appendix III 14 METLIFE Metropolitan Life Insurance Company ("MLIC" or the "Company") is a leading provider of insurance, annuities, and employee benefits programs with operations throughout the United States. The Company offers life insurance and annuities to individuals, as well as group insurance and retirement & savings products and many other services to corporations and other institutions. The Company was formed under the laws of New York in 1868. The Company's home office is located at 200 Park Avenue, New York, New York 10166-0188. The Company is a wholly-owned subsidiary of MetLife, Inc. MetLife, Inc. is a leading global provider of insurance, annuities and employee benefit programs, serving 90 million customers in over 50 countries. Through its subsidiaries and affiliates, MetLife, Inc. holds leading market positions in the United States, Japan, Latin America, Asia Pacific, Europe and the Middle East. METROPOLITAN LIFE SEPARATE ACCOUNT E We established Metropolitan Life Separate Account E on September 27, 1983. The purpose of the Separate Account is to hold the variable assets that underlie the MetLife Financial Freedom Select Variable Annuity Contracts and some other Variable Annuity contracts we issue. We have registered the Separate Account with the Securities and Exchange Commission as a unit investment trust under the Investment Company Act of 1940, as amended (the "1940 Act"). The Separate Account's assets are solely for the benefit of those who invest in the Separate Account and no one else, including our creditors. The assets of the Separate Account are held in our name on behalf of the Separate Account and legally belong to us. All the income, gains and losses (realized or unrealized) resulting from these assets are credited to or charged against the Contracts issued from this Separate Account without regard to our other business. We are obligated to pay all money we owe under the Contracts--such as death benefits and income payments--even if that amount exceeds the assets in the Separate Account. Any such amount that exceeds the assets in the Separate Account is paid from our general account. Any amount under any optional death benefit, optional Guaranteed Minimum Income Benefit, or optional Guaranteed Withdrawal Benefit that exceeds the assets in the Separate Account are also paid from our general account. Benefit amounts paid from the general account are subject to the financial strength and claims paying ability of the Company and our long term ability to make such payments, and are not guaranteed by any other party. We issue other annuity contracts and life insurance policies where we pay all money we owe under those contracts and policies from our general account. MetLife is regulated as an insurance company under state law, which includes, generally, limits on the amount and type of investments in its general account. However, there is no guarantee that we will be able to meet our claims paying obligations; there are risks to purchasing any insurance product. VARIABLE ANNUITIES This Prospectus describes a type of Variable Annuity, a Deferred Annuity. These annuities are "variable" because the value of your account or income payment varies based on the investment performance of the Investment Divisions You choose. In short, the value of your Deferred Annuity and your income payments under a variable pay-out option of your Deferred Annuity may go up or down. Since the investment performance is not guaranteed, your money is at risk. The degree of risk will depend on the Investment Divisions You select. The Accumulation Unit Value or Annuity Unit Value for each Investment Division rises or falls based on the investment performance (or "experience") of the Portfolio with the same name. MetLife and its affiliates also offer other annuities not described in this Prospectus. 15 The Deferred Annuities have a fixed interest rate option called the "Fixed Interest Account." The Fixed Interest Account is not available to all contract owners. The Fixed Interest Account offers an interest rate that is guaranteed by us. The minimum interest rate depends on the date your Contract is issued but will not be less than 1%. The Fixed Interest Account is not available with a Deferred Annuity issued in New York State with the optional Guaranteed Minimum Income Benefit. The variable pay-out options under the Deferred Annuities have a fixed payment option called the "Fixed Income Option." Under the Fixed Income Option, we guarantee the amount of your fixed income payments. These fixed options are not described in this Prospectus although we occasionally refer to them. REPLACEMENT OF ANNUITY CONTRACTS EXCHANGE PROGRAMS: From time to time we may offer programs under which certain fixed or Variable Annuity contracts previously issued by us may be exchanged for the Deferred Annuity offered by this Prospectus. Currently, with respect to exchanges from certain of our Variable Annuity contracts to this Deferred Annuity, an existing contract is eligible for exchange if a withdrawal from, or surrender of, the contract would not trigger a withdrawal charge. The Account Balance of this Deferred Annuity attributable to the exchanged assets will not be subject to any Withdrawal Charge. Any additional purchase payments contributed to the new Deferred Annuity will be subject to all fees and charges, including the Withdrawal Charge described in the current Prospectus for the new Deferred Annuity. You should carefully consider whether an exchange is appropriate for You by comparing the death benefits, living benefits, and other guarantees provided by the contract You currently own to the benefits and guarantees that would be provided by the new Contract offered by this Prospectus. Then, You should compare the fees and charges (E.G., the death benefit charges, the living benefit charges, and the separate account charge) of your current contract to the fees and charges of the new Contract, which may be higher than your current contract. These programs will be made available on terms and conditions determined by us, and any such programs will comply with applicable law. We believe the exchanges will be tax free for Federal income tax-purposes; however, You should consult your tax adviser before making any such exchange. OTHER EXCHANGES: Generally, You can change one variable annuity contract for another in a tax-free exchange under Section 1035 of the Internal Revenue Code. Before making an exchange, You should compare both annuities carefully. If You exchange another annuity for the one described in this Prospectus, unless the exchange occurs under one of our exchange programs described above, You might have to pay a surrender charge on your old annuity, and there will be a new surrender charge period for this Deferred Annuity Contract. Other charges may be higher (or lower) and the benefits may be different. Also, because we will not issue the Deferred Annuity Contract until we have received the initial purchase payment from your existing insurance company, the issuance of the Contract may be delayed. Generally, it is not advisable to purchase a Deferred Annuity Contract as a replacement for an existing variable annuity contract. Before You exchange another annuity for our Deferred Annuity Contract, ask your registered representative whether the exchange would be advantageous, given the Contract features, benefits and charges. THE DEFERRED ANNUITY You accumulate money in your account during the pay-in phase by making one or more purchase payments. MetLife will hold your money and credit investment returns as long as the money remains in your account. All TSA plans (ERISA and non-ERISA), IRAs (including SEPs and SIMPLE IRAs), 457(b) plans and 403(a) arrangements receive tax deferral under the Internal Revenue Code. There are no additional tax benefits from funding TSA ERISA or non-ERISA plans, IRAs (including SEPs and SIMPLE IRAs), 457(b) plans and 403(a) arrangements with a Deferred Annuity. Therefore, there should be reasons other than tax deferral for acquiring the Deferred Annuity, such as the availability of a guaranteed income for life, the death benefits or the other optional benefits available under this Deferred Annuity. Under the Internal Revenue Code ("Code"), spousal continuation and certain distribution options are available only to a person who is defined as a "spouse" under the Federal Defense of Marriage Act or other applicable Federal law. All 16 Contract provisions will be interpreted and administered in accordance with the requirements of the Code. Therefore, under current Federal law, a purchaser who has or is contemplating a civil union or same-sex marriage should note that the favorable tax treatment afforded under Federal law would not be available to such same-sex partner or same-sex spouse. Same-sex partners or spouses who own or are considering the purchase of annuity products that provide benefits based upon status as a spouse should consult a tax adviser. A Deferred Annuity consists of two phases: the accumulation or "pay-in" phase and the income or "pay-out" phase. The pay-out phase begins when You either take all of your money out of the account or elect income payments using the money in your account. The number and the amount of the income payments You receive will depend on such things as the type of pay-out option You choose, your investment choices, and the amount used to provide your income payments. Because Deferred Annuities offer the insurance benefit of income payment options, including our guarantee of income for your lifetime, they are "annuities." The Deferred Annuity is offered in this Prospectus in two variations, which we call "classes." Your employer, association or other group contract holder may limit the availability of certain classes. If available, only the e Class is available to the 457(b) Deferred Annuity issued to state and local governments in New York State. We also offer other classes of the Deferred Annuity. Each has its own Separate Account charge and applicable Withdrawal Charge (except e Class which has no Withdrawal Charge). The Deferred Annuity also offers You the opportunity to choose optional benefits ("riders"), each for a charge in addition to the Separate Account charge with the Standard Death Benefit for that class. If You purchase the optional death benefit You receive the optional benefit in place of the Standard Death Benefit. In deciding what class of the Deferred Annuity to purchase, You should consider the amount of Separate Account and Withdrawal Charges You are willing to bear relative to your needs. In deciding whether to purchase the optional benefits, You should consider the desirability of the benefit relative to its additional cost and to your needs. Unless You tell us otherwise, we will assume that You are purchasing the e Class Deferred Annuity with the Standard Death Benefit and no optional benefits. These optional benefits are: . an Annual Step-Up Death Benefit; . Guaranteed Minimum Income Benefit ("GMIB"); and . a Lifetime Withdrawal Guarantee Benefit ("LWG"). Each of these optional benefits is described in more detail later in this Prospectus. Optional benefits may not be available in all states. We may restrict the investment choices available to You if You select certain optional benefits. These restrictions are intended to reduce the risk of investment losses which could require the Company to use its general account assets to pay amounts due under the selected optional benefit. Certain withdrawals, depending on the amount and timing, may negatively impact the benefits and guarantees provided by your Contract. You should carefully consider whether a withdrawal under a particular circumstance will have any negative impact to your benefits or guarantees. The impact of withdrawals generally on your benefits and guarantees is discussed in the corresponding sections of the Prospectus describing such benefits and guarantees. We make available other classes of the Deferred Annuity based upon the characteristics of the group. Such characteristics include, but are not limited to, the nature of the group, size, aggregate amount of anticipated purchase payments or anticipated persistency. The availability of other classes to contract owners will be made in a reasonable manner and will not be unfairly discriminatory to the interests of any contract owner. 17 CLASSES OF THE DEFERRED ANNUITY E CLASS The e Class has a 0.50% annual Separate Account charge (0.75% in the case of each American Funds(R) Investment Division) and no Withdrawal Charge. If You choose the optional death benefit, the Separate Account charge would be 0.60%, or in the case of each American Funds(R) Investment Division, 0.85%. THE E BONUS CLASS You may purchase a Contract in the e Bonus Class before your 81st birthday. Under the e Bonus Class Deferred Annuity, we currently credit 3% to each of your purchase payments made during the first Contract Year, except for those purchase payments which consist of money from eligible rollover distributions or direct transfers from annuities and mutual funds that are products of MetLife or its affiliates. (For Deferred Annuities issued in Connecticut and certain other states, the credit also applies to purchase payments which consist of money from eligible rollover distributions or direct transfers from annuities or mutual funds that are products of MetLife or its affiliates.) You may only receive the 3% credit if You are less than 66 years old at date of issue. The Bonus will be applied on a pro-rata basis to the Fixed Interest Account, if available, and the Investment Divisions of the Separate Account based upon your allocation for your purchase payments at the time the purchase payment is credited. The e Bonus Class may not be available in all states. The e Bonus Class has a 0.95% annual Separate Account charge (1.20% in the case of each American Funds(R) Investment Division) and a seven year Withdrawal Charge on the amount withdrawn. The Separate Account charge with the Standard Death Benefit declines 0.45% to 0.50% (0.75% in the case of each American Funds(R) Investment Division) after You have held the Contract for seven years. If You choose the optional death benefit, the Separate Account charge would be 1.05% or, in the case of each American Funds(R) Investment Division, 1.30%. The Separate Account charge with the Annual Step-Up Death Benefit declines 0.45% to 0.60% (0.85% in the case of each American Funds(R) Investment Division) after You have held the Contract for seven years. Investment returns for the e Bonus Class Deferred Annuity may be lower than those for the e Class Deferred Annuity if Separate Account investment performance is not sufficiently high to offset increased Separate Account charges for the e Bonus Class Deferred Annuity. (If the Fixed Interest Account is available, Fixed Interest Account rates for the e Bonus Class may be lower than those declared for the other classes.) Therefore, the choice between the e Bonus Class and the e Class Deferred Annuity is a judgment as to whether a higher Separate Account charge with a 3% credit is more advantageous than a lower Separate Account charge without the 3% credit. There is no guarantee that the e Bonus Class Deferred Annuity will have higher returns than the e Class Deferred Annuity, the other classes of the Deferred Annuity, similar contracts without a bonus or any other investment. The Bonus will be credited only to purchase payments made during the first Contract Year, while the additional Separate Account charge of 0.45% for the Bonus will be assessed on all amounts in the Separate Account for the first seven years. The following table demonstrates contract values based upon hypothetical investment returns for a Deferred Annuity with the 3% credit (with and without the impact of a Withdrawal Charge) compared to a Contract without the Bonus. Both Deferred Annuities are assumed to have no optional benefits. The figures are based on: a) a $50,000 initial purchase payment with no other purchase payments; b) deduction of the Separate Account charge at a rate of 0.95% (0.50% in years 8-10) (e Bonus Class Deferred Annuity) and 0.50% (e Class Deferred Annuity); c) deduction of a Withdrawal Charge at a rate of 3% in years 1-7 with 10% of the Account Balance free of such charge in years 2 through 7 (none in years 8-10) (e Bonus Class Deferred Annuity) and none (e Class Deferred Annuity); and d) an assumed investment return for the investment choices before Separate Account charges of 7.30% for each of 10 years. 18
----------------------------------------------------------------------------------------------------------------------- e Bonus Class (0.95% Separate Account charge and 3% Withdrawal Charge for e Class (0.50% Separate e Bonus Class first 7 years with 10% of the Account Account charge and (0.95% Separate Account Balance free of such charge in years 2 no Withdrawal Charge Contract Year charge for first 7 years) through 7) all years) ----------------------------------------------------------------------------------------------------------------------- 1 $54,770 $53,127 $53,400 ----------------------------------------------------------------------------------------------------------------------- 2 $58,248 $56,675 $57,031 ----------------------------------------------------------------------------------------------------------------------- 3 $61,947 $60,274 $60,909 ----------------------------------------------------------------------------------------------------------------------- 4 $65,881 $64,102 $65,051 ----------------------------------------------------------------------------------------------------------------------- 5 $70,064 $68,172 $69,475 ----------------------------------------------------------------------------------------------------------------------- 6 $74,513 $72,501 $74,199 ----------------------------------------------------------------------------------------------------------------------- 7 $79,245 $77,105 $79,244 ----------------------------------------------------------------------------------------------------------------------- 8 $84,633 $84,633 $84,633 ----------------------------------------------------------------------------------------------------------------------- 9 $90,388 $90,388 $90,388 ----------------------------------------------------------------------------------------------------------------------- 10 $96,535 $96,535 $96,534 -----------------------------------------------------------------------------------------------------------------------
Generally, the higher the rate of return, the more advantageous the e Bonus Class is. The table above assumes no additional purchase payments are made after the first Contract Anniversary. If additional purchase payments were made to the Deferred Annuity, the rate of return would have to be higher in order to "break-even" by the end of the seventh year or the break-even point would otherwise occur sooner. The "break-even" point is when the Account Balance of an e Bonus Class Contract will equal the Account Balance of an e Class Contract, assuming equal initial purchase payments and a level rate of return, and thereafter, the Account Balance would be higher in the e Class Contract. The decision to elect the e Bonus Class is irrevocable. We may make a profit from the additional Separate Account charge and the Withdrawal Charge. The guaranteed annuity rates for the e Bonus Class are the same as those for the e Class of the Deferred Annuity. Current rates for the e Bonus Class may be lower than those for the e Class of the Deferred Annuity. For the TSA Deferred Annuity, any 3% credit does not become yours until after the "free look" period; we retrieve it if You exercise the "free look". Your exercise of the "free look" is the only circumstance under which the 3% credit will be retrieved (commonly called "recapture"). We then will refund either your purchase payments or Account Balance, depending upon your state law. In the case of a refund of Account Balance, the refunded amount will include any investment performance on amounts attributable to the 3% credit. If there have been any losses from the investment performance on the amounts attributable to the 3% credit, we will bear that loss. 19 YOUR INVESTMENT CHOICES The Metropolitan Fund, the Calvert Fund, the Met Investors Fund and the American Funds(R) and each of their Portfolios are more fully described in their respective prospectuses and SAIs. The SAIs are available upon your request. You should read these prospectuses carefully before making purchase payments to the Investment Divisions. Except for the Calvert Fund, all classes of shares available to the Deferred Annuities have a 12b-1 Plan fee. The investment choices are listed in alphabetical order below (based upon the Portfolios' legal names). (See Appendix IV Portfolio Legal and Marketing Names.) The Investment Divisions generally offer the opportunity for greater returns over the long term than our Fixed Interest Account. You should understand that each Portfolio incurs its own risk which will be dependent upon the investment decisions made by the respective Portfolio's investment manager. Furthermore, the name of a Portfolio may not be indicative of all the investments held by the Portfolio. The degree of investment risk You assume will depend on the Investment Divisions You choose. While the Investment Divisions and their comparably named Portfolios may have names, investment objectives and management which are identical or similar to publicly available mutual funds, these Investment Divisions and Portfolios are not those mutual funds. The Portfolios most likely will not have the same performance experience as any publicly available mutual fund. Since your Account Balance or income payments are subject to the risks associated with investing in stocks and bonds, your Account Balance or variable income payments based on amounts allocated to the Investment Divisions may go down as well as up. Each Portfolio has different investment objectives and risks. The Portfolio prospectuses contain more detailed information on each Portfolio's investment strategy, investment managers and its fees. You may obtain a Portfolio prospectus by calling 800-638-7732, or through your registered representative. We do not guarantee the investment results of the Portfolios. The current Portfolios are listed below, along with their investment manager and any sub-investment manager.
PORTFOLIO INVESTMENT OBJECTIVE --------- -------------------- AMERICAN FUNDS AMERICAN FUNDS BOND FUND SEEKS AS HIGH A LEVEL OF CURRENT INCOME AS IS CONSISTENT WITH THE PRESERVATION OF CAPITAL. AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION FUND SEEKS LONG-TERM GROWTH OF CAPITAL. AMERICAN FUNDS GROWTH FUND SEEKS GROWTH OF CAPITAL. AMERICAN FUNDS GROWTH-INCOME FUND SEEKS LONG-TERM GROWTH OF CAPITAL AND INCOME. CALVERT FUND CALVERT VP SRI BALANCED PORTFOLIO SEEKS TO ACHIEVE A COMPETITIVE TOTAL RETURN THROUGH AN ACTIVELY MANAGED PORTFOLIO OF STOCKS, BONDS AND MONEY MARKET INSTRUMENTS WHICH OFFER INCOME AND CAPITAL GROWTH OPPORTUNITY AND WHICH SATISFY THE INVESTMENT CRITERIA, INCLUDING FINANCIAL, SUSTAINABILITY AND SOCIAL RESPONSIBILITY FACTORS. MET INVESTORS FUND AMERICAN FUNDS(R) BALANCED ALLOCATION PORTFOLIO SEEKS A BALANCE BETWEEN A HIGH LEVEL OF CURRENT INCOME AND GROWTH OF CAPITAL, WITH A GREATER EMPHASIS ON GROWTH OF CAPITAL. AMERICAN FUNDS(R) GROWTH ALLOCATION PORTFOLIO SEEKS GROWTH OF CAPITAL. AMERICAN FUNDS(R) MODERATE ALLOCATION PORTFOLIO SEEKS A HIGH TOTAL RETURN IN THE FORM OF INCOME AND GROWTH OF CAPITAL, WITH A GREATER EMPHASIS ON INCOME. BLACKROCK LARGE CAP CORE PORTFOLIO SEEKS LONG-TERM CAPITAL GROWTH. CLARION GLOBAL REAL ESTATE PORTFOLIO SEEKS TOTAL RETURN THROUGH INVESTMENT IN REAL ESTATE SECURITIES, EMPHASIZING BOTH CAPITAL APPRECIATION AND CURRENT INCOME.
INVESTMENT MANAGER/ PORTFOLIO SUB-INVESTMENT MANAGER --------- ---------------------- AMERICAN FUNDS AMERICAN FUNDS BOND FUND CAPITAL RESEARCH AND MANAGEMENT COMPANY AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION FUND CAPITAL RESEARCH AND MANAGEMENT COMPANY AMERICAN FUNDS GROWTH FUND CAPITAL RESEARCH AND MANAGEMENT COMPANY AMERICAN FUNDS GROWTH-INCOME FUND CAPITAL RESEARCH AND MANAGEMENT COMPANY CALVERT FUND CALVERT VP SRI BALANCED PORTFOLIO CALVERT INVESTMENT MANAGEMENT, INC. SUB-INVESTMENT MANAGER: NEW AMSTERDAM PARTNERS LLC MET INVESTORS FUND AMERICAN FUNDS(R) BALANCED ALLOCATION PORTFOLIO METLIFE ADVISERS, LLC AMERICAN FUNDS(R) GROWTH ALLOCATION PORTFOLIO METLIFE ADVISERS, LLC AMERICAN FUNDS(R) MODERATE ALLOCATION PORTFOLIO METLIFE ADVISERS, LLC BLACKROCK LARGE CAP CORE PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: BLACKROCK ADVISORS, LLC CLARION GLOBAL REAL ESTATE PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: CBRE CLARION SECURITIES LLC
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PORTFOLIO INVESTMENT OBJECTIVE --------- -------------------- HARRIS OAKMARK INTERNATIONAL PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION. INVESCO SMALL CAP GROWTH PORTFOLIO SEEKS LONG-TERM GROWTH OF CAPITAL. JANUS FORTY PORTFOLIO SEEKS CAPITAL APPRECIATION. LAZARD MID CAP PORTFOLIO SEEKS LONG-TERM GROWTH OF CAPITAL. LORD ABBETT BOND DEBENTURE PORTFOLIO SEEKS HIGH CURRENT INCOME AND THE OPPORTUNITY FOR CAPITAL APPRECIATION TO PRODUCE A HIGH TOTAL RETURN. LORD ABBETT MID CAP VALUE PORTFOLIO SEEKS CAPITAL APPRECIATION THROUGH INVESTMENTS, PRIMARILY IN EQUITY SECURITIES, WHICH ARE BELIEVED TO BE UNDERVALUED IN THE MARKETPLACE. MET/FRANKLIN INCOME PORTFOLIO SEEKS TO MAXIMIZE INCOME WHILE MAINTAINING PROSPECTS FOR CAPITAL APPRECIATION. MET/FRANKLIN LOW DURATION TOTAL RETURN SEEKS A HIGH LEVEL OF CURRENT INCOME, WHILE PORTFOLIO SEEKING PRESERVATION OF SHAREHOLDERS' CAPITAL. MET/FRANKLIN MUTUAL SHARES PORTFOLIO SEEKS CAPITAL APPRECIATION, WHICH MAY OCCASIONALLY BE SHORT-TERM. THE PORTFOLIO'S SECONDARY INVESTMENT OBJECTIVE IS INCOME. MET/FRANKLIN TEMPLETON FOUNDING STRATEGY PRIMARILY SEEKS CAPITAL APPRECIATION AND PORTFOLIO SECONDARILY SEEKS INCOME. MET/TEMPLETON GROWTH PORTFOLIO SEEKS LONG-TERM CAPITAL GROWTH. METLIFE AGGRESSIVE STRATEGY PORTFOLIO SEEKS GROWTH OF CAPITAL. MFS(R) RESEARCH INTERNATIONAL PORTFOLIO SEEKS CAPITAL APPRECIATION. MORGAN STANLEY MID CAP GROWTH PORTFOLIO SEEKS CAPITAL APPRECIATION. PIMCO INFLATION PROTECTED BOND PORTFOLIO SEEKS MAXIMUM REAL RETURN, CONSISTENT WITH PRESERVATION OF CAPITAL AND PRUDENT INVESTMENT MANAGEMENT. PIMCO TOTAL RETURN PORTFOLIO SEEKS MAXIMUM TOTAL RETURN, CONSISTENT WITH THE PRESERVATION OF CAPITAL AND PRUDENT INVESTMENT MANAGEMENT. RCM TECHNOLOGY PORTFOLIO SEEKS CAPITAL APPRECIATION; NO CONSIDERATION IS GIVEN TO INCOME. SSGA GROWTH AND INCOME ETF PORTFOLIO SEEKS GROWTH OF CAPITAL AND INCOME. SSGA GROWTH ETF PORTFOLIO SEEKS GROWTH OF CAPITAL. T. ROWE PRICE MID CAP GROWTH PORTFOLIO SEEKS LONG-TERM GROWTH OF CAPITAL.
INVESTMENT MANAGER/ PORTFOLIO SUB-INVESTMENT MANAGER --------- ---------------------- HARRIS OAKMARK INTERNATIONAL PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: HARRIS ASSOCIATES L.P. INVESCO SMALL CAP GROWTH PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: INVESCO ADVISERS, INC. JANUS FORTY PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: JANUS CAPITAL MANAGEMENT LLC LAZARD MID CAP PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: LAZARD ASSET MANAGEMENT LLC LORD ABBETT BOND DEBENTURE PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: LORD, ABBETT & CO. LLC LORD ABBETT MID CAP VALUE PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: LORD, ABBETT & CO. LLC MET/FRANKLIN INCOME PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: FRANKLIN ADVISERS, INC. MET/FRANKLIN LOW DURATION TOTAL RETURN METLIFE ADVISERS, LLC PORTFOLIO SUB-INVESTMENT MANAGER: FRANKLIN ADVISERS, INC. MET/FRANKLIN MUTUAL SHARES PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: FRANKLIN MUTUAL ADVISERS, LLC MET/FRANKLIN TEMPLETON FOUNDING STRATEGY METLIFE ADVISERS, LLC PORTFOLIO MET/TEMPLETON GROWTH PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: TEMPLETON GLOBAL ADVISORS LIMITED METLIFE AGGRESSIVE STRATEGY PORTFOLIO METLIFE ADVISERS, LLC MFS(R) RESEARCH INTERNATIONAL PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: MASSACHUSETTS FINANCIAL SERVICES COMPANY MORGAN STANLEY MID CAP GROWTH PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: MORGAN STANLEY INVESTMENT MANAGEMENT INC. PIMCO INFLATION PROTECTED BOND PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: PACIFIC INVESTMENT MANAGEMENT COMPANY LLC PIMCO TOTAL RETURN PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: PACIFIC INVESTMENT MANAGEMENT COMPANY LLC RCM TECHNOLOGY PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: RCM CAPITAL MANAGEMENT LLC SSGA GROWTH AND INCOME ETF PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: SSGA FUNDS MANAGEMENT, INC. SSGA GROWTH ETF PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: SSGA FUNDS MANAGEMENT, INC. T. ROWE PRICE MID CAP GROWTH PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: T. ROWE PRICE ASSOCIATES, INC.
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INVESTMENT MANAGER/ SUB-INVESTMENT PORTFOLIO INVESTMENT OBJECTIVE MANAGER --------- -------------------- ------- THIRD AVENUE SMALL CAP VALUE PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION. METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: THIRD AVENUE MANAGEMENT LLC METROPOLITAN FUND BARCLAYS CAPITAL AGGREGATE BOND INDEX SEEKS TO TRACK THE PERFORMANCE OF THE METLIFE ADVISERS, LLC PORTFOLIO BARCLAYS U.S. AGGREGATE BOND INDEX. SUB-INVESTMENT MANAGER: METLIFE INVESTMENT ADVISORS COMPANY, LLC BLACKROCK BOND INCOME PORTFOLIO SEEKS A COMPETITIVE TOTAL RETURN METLIFE ADVISERS, LLC PRIMARILY FROM INVESTING IN SUB-INVESTMENT MANAGER: BLACKROCK FIXED-INCOME SECURITIES. ADVISORS, LLC BLACKROCK LARGE CAP VALUE PORTFOLIO SEEKS LONG-TERM GROWTH OF CAPITAL. METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: BLACKROCK ADVISORS, LLC BLACKROCK LEGACY LARGE CAP GROWTH SEEKS LONG-TERM GROWTH OF CAPITAL. METLIFE ADVISERS, LLC PORTFOLIO SUB-INVESTMENT MANAGER: BLACKROCK ADVISORS, LLC DAVIS VENTURE VALUE PORTFOLIO SEEKS GROWTH OF CAPITAL. METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: DAVIS SELECTED ADVISERS, L.P. FI VALUE LEADERS PORTFOLIO SEEKS LONG-TERM GROWTH OF CAPITAL. METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: PYRAMIS GLOBAL ADVISORS, LLC JENNISON GROWTH PORTFOLIO SEEKS LONG-TERM GROWTH OF CAPITAL. METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: JENNISON ASSOCIATES LLC LOOMIS SAYLES SMALL CAP CORE PORTFOLIO SEEKS LONG-TERM CAPITAL GROWTH FROM METLIFE ADVISERS, LLC INVESTMENTS IN COMMON STOCKS OR OTHER SUB-INVESTMENT MANAGER: LOOMIS, SAYLES EQUITY SECURITIES. & COMPANY, L.P. LOOMIS SAYLES SMALL CAP GROWTH PORTFOLIO SEEKS LONG-TERM CAPITAL GROWTH. METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: LOOMIS, SAYLES & COMPANY, L.P. MET/ARTISAN MID CAP VALUE PORTFOLIO SEEKS LONG-TERM CAPITAL GROWTH. METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: ARTISAN PARTNERS LIMITED PARTNERSHIP METLIFE CONSERVATIVE ALLOCATION SEEKS A HIGH LEVEL OF CURRENT INCOME, METLIFE ADVISERS, LLC PORTFOLIO WITH GROWTH OF CAPITAL AS A SECONDARY OBJECTIVE. METLIFE CONSERVATIVE TO MODERATE SEEKS HIGH TOTAL RETURN IN THE FORM OF METLIFE ADVISERS, LLC ALLOCATION PORTFOLIO INCOME AND GROWTH OF CAPITAL, WITH A GREATER EMPHASIS ON INCOME. METLIFE MID CAP STOCK INDEX PORTFOLIO SEEKS TO TRACK THE PERFORMANCE OF THE METLIFE ADVISERS, LLC STANDARD & POOR'S MIDCAP 400(R) SUB-INVESTMENT MANAGER: METLIFE COMPOSITE STOCK PRICE INDEX. INVESTMENT ADVISORS COMPANY, LLC METLIFE MODERATE ALLOCATION PORTFOLIO SEEKS A BALANCE BETWEEN A HIGH LEVEL OF METLIFE ADVISERS, LLC CURRENT INCOME AND GROWTH OF CAPITAL, WITH A GREATER EMPHASIS ON GROWTH OF CAPITAL. METLIFE MODERATE TO AGGRESSIVE SEEKS GROWTH OF CAPITAL. METLIFE ADVISERS, LLC ALLOCATION PORTFOLIO METLIFE STOCK INDEX PORTFOLIO SEEKS TO TRACK THE PERFORMANCE OF THE METLIFE ADVISERS, LLC STANDARD & POOR'S 500(R) COMPOSITE SUB-INVESTMENT MANAGER: METLIFE STOCK PRICE INDEX. INVESTMENT ADVISORS COMPANY, LLC MFS(R) TOTAL RETURN PORTFOLIO SEEKS A FAVORABLE TOTAL RETURN THROUGH METLIFE ADVISERS, LLC INVESTMENT IN A DIVERSIFIED PORTFOLIO. SUB-INVESTMENT MANAGER: MASSACHUSETTS FINANCIAL SERVICES COMPANY MFS(R) VALUE PORTFOLIO SEEKS CAPITAL APPRECIATION. METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: MASSACHUSETTS FINANCIAL SERVICES COMPANY
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PORTFOLIO INVESTMENT OBJECTIVE --------- -------------------- MSCI EAFE(R) INDEX PORTFOLIO SEEKS TO TRACK THE PERFORMANCE OF THE MSCI EAFE(R) INDEX. NEUBERGER BERMAN GENESIS PORTFOLIO SEEKS HIGH TOTAL RETURN, CONSISTING PRINCIPALLY OF CAPITAL APPRECIATION. RUSSELL 2000(R) INDEX PORTFOLIO SEEKS TO TRACK THE PERFORMANCE OF THE RUSSELL 2000(R) INDEX. T. ROWE PRICE LARGE CAP GROWTH PORTFOLIO SEEKS LONG-TERM GROWTH OF CAPITAL AND, SECONDARILY, DIVIDEND INCOME. T. ROWE PRICE SMALL CAP GROWTH PORTFOLIO SEEKS LONG-TERM CAPITAL GROWTH. WESTERN ASSET MANAGEMENT STRATEGIC BOND SEEKS TO MAXIMIZE TOTAL RETURN CONSISTENT OPPORTUNITIES PORTFOLIO WITH PRESERVATION OF CAPITAL. WESTERN ASSET MANAGEMENT U.S. GOVERNMENT SEEKS TO MAXIMIZE TOTAL RETURN CONSISTENT PORTFOLIO WITH PRESERVATION OF CAPITAL AND MAINTENANCE OF LIQUIDITY.
INVESTMENT MANAGER/ PORTFOLIO SUB-INVESTMENT MANAGER --------- ---------------------- MSCI EAFE(R) INDEX PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: METLIFE INVESTMENT ADVISORS COMPANY, LLC NEUBERGER BERMAN GENESIS PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: NEUBERGER BERMAN MANAGEMENT LLC RUSSELL 2000(R) INDEX PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: METLIFE INVESTMENT ADVISORS COMPANY, LLC T. ROWE PRICE LARGE CAP GROWTH PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: T. ROWE PRICE ASSOCIATES, INC. T. ROWE PRICE SMALL CAP GROWTH PORTFOLIO METLIFE ADVISERS, LLC SUB-INVESTMENT MANAGER: T. ROWE PRICE ASSOCIATES, INC. WESTERN ASSET MANAGEMENT STRATEGIC BOND METLIFE ADVISERS, LLC OPPORTUNITIES PORTFOLIO SUB-INVESTMENT MANAGER: WESTERN ASSET MANAGEMENT COMPANY WESTERN ASSET MANAGEMENT U.S. GOVERNMENT METLIFE ADVISERS, LLC PORTFOLIO SUB-INVESTMENT MANAGER: WESTERN ASSET MANAGEMENT COMPANY
METROPOLITAN FUND ASSET ALLOCATION PORTFOLIOS The MetLife Conservative Allocation Portfolio, the MetLife Conservative to Moderate Allocation Portfolio, the MetLife Moderate Allocation Portfolio and the MetLife Moderate to Aggressive Allocation Portfolio, also known as the "asset allocation portfolios", are "fund of funds" Portfolios that invest substantially all of their assets in other Portfolios of the Metropolitan Fund or the Met Investors Fund. Therefore, each of these asset allocation portfolios will bear its pro-rata share of the fees and expenses incurred by the underlying Portfolios in which it invests in addition to its own management fees and expenses. This will reduce the investment return of each of the asset allocation portfolios. The expense levels will vary over time, depending on the mix of underlying Portfolios in which the asset allocation portfolio invests. Contract owners may be able to realize lower aggregate expenses by investing directly in the underlying Portfolios instead of investing in the asset allocation portfolios. A contract owner who chooses to invest directly in the underlying Portfolios would not, however, receive asset allocation services provided by MetLife Advisers, LLC. MET INVESTORS FUND ASSET ALLOCATION PORTFOLIOS The American Funds(R) Balanced Allocation Portfolio, the American Funds(R) Growth Allocation Portfolio and the American Funds(R) Moderate Allocation Portfolio, also known as "asset allocation portfolios", are "funds of funds" Portfolios that invest substantially all of their assets in portfolios of the American Funds Insurance Series(R). Therefore, each of these asset allocation portfolios will bear its pro-rata share of the fees and expenses incurred by the underlying portfolio in which it invests in addition to its own management fees and expenses. This will reduce the investment return of each of the asset allocation portfolios. The expense levels will vary over time, depending on the mix of underlying portfolios in which the asset allocation portfolio invests. Underlying portfolios consist of American Funds(R) portfolios that are currently available for investment directly under the Contract and other underlying American Funds(R) portfolios which are not made available directly under the Contract. The MetLife Aggressive Strategy Portfolio, also known as an "asset allocation portfolio", is a "fund of funds" Portfolio that invests substantially all of its assets in other Portfolios of the Metropolitan Fund or the Met Investors Fund. Therefore, this asset allocation portfolio will bear its pro-rata share of the fees and expenses incurred by the underlying Portfolio in which it invests in addition to its own management fees and expenses. This will reduce the investment return of the Portfolio. 23 The expense level will vary over time, depending on the mix of underlying Portfolios in which the MetLife Aggressive Strategy Portfolio invests. Contract owners may be able to realize lower aggregate expenses by investing directly in the underlying Portfolios instead of investing in this asset allocation portfolio. A contract owner who chooses to invest directly in the underlying Portfolios would not however receive asset allocation services provided by MetLife Advisers, LLC. MET/FRANKLIN TEMPLETON FOUNDING STRATEGY PORTFOLIO The Met/Franklin Templeton Founding Strategy Portfolio is a "funds of funds" Portfolio that invests equally in three other portfolios of the Met Investors Fund: the Met/Franklin Income Portfolio, the Met/Franklin Mutual Shares Portfolio and the Met/Templeton Growth Portfolio. Because the Portfolio invests in other underlying Portfolios, the Portfolio will bear its pro rata portion of the operating expenses of the underlying Portfolios in which it invests, including the management fee. EXCHANGE-TRADED FUNDS PORTFOLIOS The SSgA Growth ETF Portfolio and the SSgA Growth and Income ETF Portfolio are asset allocation portfolios and "funds of funds" which invest substantially all of their assets in other investment companies known as exchange-traded funds ("Underlying ETFs"). As an investor in an Underlying ETF or other investment company, each Portfolio also will bear its pro-rata portion of the fees and expenses incurred by the Underlying ETF or other investment company in which it invests in addition to its own management fees and expenses. This will reduce the investment return of each of the Portfolios. The expense levels will vary over time depending on the mix of Underlying ETFs in which these Portfolios invest. ADDITIONAL INFORMATION ABOUT THE PORTFOLIOS Some of the investment choices may not be available under the terms of your Deferred Annuity. Your Contract or other correspondence we provide You will indicate the Investment Divisions that are available to You. Your investment choices may be limited because: . Your employer, association or other group contract holder limits the available Investment Divisions. . We have restricted the available Investment Divisions. The Investment Divisions buy and sell shares of corresponding mutual fund Portfolios. These Portfolios, which are part of either the Metropolitan Fund, the Calvert Fund, the Met Investors Fund or the American Funds(R) invest in stocks, bonds and other investments. All dividends declared by the Portfolios are earned by the Separate Account and are reinvested. Therefore, no dividends are distributed to You under the Deferred Annuities. You pay no transaction expenses (I.E., front-end or back-end sales load charges) as a result of the Separate Account's purchase or sale of these mutual fund shares. The Portfolios of the Metropolitan Fund and the Met Investors Fund are available by purchasing annuities and life insurance policies from MetLife or certain of its affiliated insurance companies and are never sold directly to the public. The Calvert Fund and American Funds(R) Portfolios are made available by the Calvert Fund and the American Funds(R) only through various insurance company annuities and life insurance policies. The Metropolitan Fund, the Calvert Fund, the Met Investors Fund and the American Funds(R) are each "series" type funds registered with the Securities and Exchange Commission as an "open-end management investment company" under the 1940 Act. A "series" fund means that each Portfolio is one of several available through the fund. The Portfolios of the Metropolitan Fund and Met Investors Fund pay MetLife Advisers, LLC, a MetLife affiliate, a monthly fee for its services as their investment manager. The Portfolio of the Calvert Fund pays Calvert Asset Management Company, Inc. a monthly fee for its services as its investment manager. The Portfolios of the American Funds(R) pay Capital Research and Management Company a monthly fee for its services as their investment manager. These fees, as well as the operating expenses paid by each Portfolio, are described in the applicable prospectus and SAI for the Metropolitan Fund, the Calvert Fund, the Met Investors Fund and the American Funds(R). 24 In addition, the Metropolitan Fund and the Met Investors Fund prospectuses each discuss other separate accounts of MetLife and its affiliated insurance companies and certain qualified retirement plans that invest in the Metropolitan Fund or the Met Investors Fund. The risks of these arrangements are discussed in each Fund's prospectus. Certain Payments We Receive with Regard to the Portfolios. An investment manager (other than our affiliate MetLife Advisers, LLC) or sub-investment manager of a Portfolio, or its affiliates, may make payments to us and/or certain of our affiliates. These payments may be used for a variety of purposes, including payment of expenses for certain administrative, marketing, and support services with respect to the Deferred Annuities and, in the Company's role as an intermediary, with respect to the Portfolios. The Company and its affiliates may profit from these payments. These payments may be derived, in whole or in part, from the advisory fee deducted from Portfolio assets. Contract owners, through their indirect investment in the Portfolios, bear the costs of these advisory fees (see the Portfolios' prospectuses for more information). The amount of the payments we receive is based on a percentage of assets of the Portfolios attributable to the Deferred Annuities and certain other variable insurance products that we and our affiliates issue. These percentages differ and some investment managers or sub-investment managers (or other affiliates) may pay us more than others. These percentages currently range up to 0.50%. Additionally, an investment manager or sub-investment manager of a Portfolio or its affiliates may provide us with wholesaling services that assist in the distribution of the Contracts and may pay us and/or certain of our affiliates amounts to participate in sales meetings. These amounts may be significant and may provide the adviser or sub-investment manager (or their affiliate) with increased access to persons involved in the distribution of the Contracts. We and/or certain of our affiliated insurance companies have a joint ownership interest in our affiliated investment manager MetLife Advisers, LLC, which is formed as a "limited liability company". Our ownership interest in MetLife Advisers, LLC entitles us to profit distributions if the adviser makes a profit with respect to the advisory fees it receives from the Portfolios. We will benefit accordingly from assets allocated to the Portfolios to the extent they result in profits to the investment manager. (See the Table of Expenses for information on the investment management fees paid by the Portfolios.) Certain Portfolios have adopted a Distribution Plan under Rule 12b-1 of the 1940 Act. A Portfolio's 12b-1 Plan, if any, is described in more detail in the prospectuses for the Portfolios. (See the Table of Expenses and "Who Sells the Deferred Annuities".) Any payments we receive pursuant to those 12b-1 Plans are paid to us or our distributor. Payments under a Portfolio's 12b-1 Plan decrease the Portfolios' investment returns. Portfolio Selection. We select the Portfolios offered through this Contract based on a number of criteria, including asset class coverage, the strength of the investment manager's or sub-investment manager's reputation and tenure, brand recognition, performance, and the capability and qualification of each investment firm. Another factor we consider during the selection process is whether the Portfolios' investment manager or sub-investment manager is one of our affiliates or whether the Portfolio, its investment manager, its sub-investment manager(s), or an affiliate will make payments to us or our affiliates. In this regard, the profit distributions we receive from our affiliated investment manager are a component of the total revenue that we consider in configuring the features and investment choices available in the variable insurance products that we and our affiliated insurance companies issue. Since we and our affiliated insurance companies may benefit more from the allocation of assets to Portfolios advised by our affiliates than those that are not, we may be more inclined to offer Portfolios advised by our affiliates in the variable insurance products we issue. We review the Portfolios periodically and may remove a Portfolio or limit its availability to new purchase payments and/or transfers of contract value if we determine that the Portfolio no longer meets one or more of the selection criteria, and/or if the Portfolio has not attracted significant allocations from Contract owners. In some cases, we have included Portfolios based on recommendations made by selling firms. These selling firms may receive payments from the Portfolios they recommend and may benefit accordingly from the allocation of contract value to such Portfolios. 25 WE DO NOT PROVIDE ANY INVESTMENT ADVICE AND DO NOT RECOMMEND OR ENDORSE ANY PARTICULAR PORTFOLIO. YOU BEAR THE RISK OF ANY DECLINE IN THE CONTRACT VALUE OF YOUR DEFERRED ANNUITY RESULTING FROM THE PERFORMANCE OF THE PORTFOLIO YOU HAVE CHOSEN. We make certain payments to American Funds Distributors, Inc., principal underwriter for the American Funds Insurance Series(R). (See "Who Sells The Deferred Annuities".) DEFERRED ANNUITIES This Prospectus describes the following Deferred Annuities under which You can accumulate money: . TSA (Tax Sheltered Annuities) . TSA ERISA (Tax Sheltered Annuities subject to ERISA) . SEPs (Simplified Employee Pensions) . SIMPLE IRAs (Savings Incentive Match Plan for Employees Individual Retirement Annuities) . 457(b)s (Section 457(b) Eligible Deferred Compensation Arrangements) . 403(a) Arrangements A form of the Deferred Annuity may be issued to a bank that does nothing but hold them as a contract holder. THE DEFERRED ANNUITY AND YOUR RETIREMENT PLAN These Deferred Annuities may be issued either to You as an individual or to a group. You are then a participant under the group's Deferred Annuity. If You participate through a retirement plan or other group arrangement, the Deferred Annuity may provide that all or some of your rights or choices as described in this Prospectus are subject to the plan's terms. For example, limitations on your rights may apply to investment choices, automated investments strategies, purchase payments, withdrawals, transfers, loans, the death benefit and pay-out options. The Deferred Annuity may provide that a plan administrative fee will be paid by making a withdrawal from your Account Balance. We may rely on your employer's or plan administrator's statements to us as to the terms of the plan or your entitlement to any amounts. We are not a party to your employer's retirement plan. We will not be responsible for determining what your plan says. You should consult the Deferred Annuity Contract and plan document to see how You may be affected. If You are a Texas Optional Retirement Program participant, please see Appendix II for specific information which applies to You. 403(B) PLAN TERMINATIONS Upon a 403(b) plan termination, your employer is required to distribute your plan benefits under the Contract to You. Your employer may permit You to receive your distribution of your 403(b) plan benefit in cash or in the form of the Contract. If You elect to receive your distributions in cash, the distribution is a withdrawal under the Contract and any amounts withdrawn are subject to applicable Withdrawal Charges. Outstanding loans will be satisfied (paid) from your cash benefit prior to its distribution to You. In addition, your cash distributions are subject to withholding, ordinary income tax and 26 applicable Federal income tax penalties. (See "Income Taxes".) Contract Withdrawal Charges will be waived if the net distribution is made under the exceptions listed in the "When No Withdrawal Charge Applies" section of the Prospectus. However, if your employer chooses to distribute cash as the default option, your employer may not give You the opportunity to instruct MetLife to make, at a minimum, a direct transfer to another funding vehicle or annuity contract issued by us or one of our affiliates, which may avoid a Withdrawal Charge. In that case, You will receive the net cash distribution, less any applicable Withdrawal Charge and withholding. In addition, You would forfeit any accrued benefit under a GMIB or LWG rider or guaranteed death benefit. If You receive the distribution in form of the Contract, we will continue to administer the Contract according to its terms. However in that case, You may not make any additional purchase payments or take any loans. In addition MetLife will rely on You to provide certain information that would otherwise be provided to MetLife by the employer or plan administrator. The employer may choose distribution of the Contract as the default option. The employer may not choose distribution of a Contract as a default option when that Contract is an investment vehicle for a TSA ERISA plan. AUTOMATED INVESTMENT STRATEGIES There are four automated investment strategies available to You. We created these investment strategies to help You manage your money. You decide if one is appropriate for You, based upon your risk tolerance and savings goals. The Index Selector is not available with a Deferred Annuity with the optional LWG. These are available to You without any additional charges. As with any investment program, none of them can guarantee a gain -- You can lose money. We may modify or terminate any of the strategies at any time. You may have only one strategy in effect at a time. You may not have a strategy in effect while You also have an outstanding loan. Your employer, association or other group contract holder may limit the availability of any investment strategy. The Equity Generator(R): An amount equal to the interest earned in the Fixed Interest Account is transferred monthly to any one Investment Division based on your selection. If your Fixed Interest Account Balance at the time of a scheduled transfer is zero, this strategy is automatically discontinued. The Rebalancer(R): You select a specific asset allocation for your entire Account Balance from among the Investment Divisions and the Fixed Interest Account, if available. Each quarter we transfer amounts among these options to bring the percentage of your Account Balance in each option back to your original allocation. In the future, we may permit You to allocate less than 100% of your Account Balance to this strategy. The Index Selector(R): You may select one of five asset allocation models (the Conservative Model, the Conservative to Moderate Model, the Moderate Model, the Moderate to Aggressive Model and the Aggressive Model) which are designed to correlate to various risk tolerance levels. Based on the model You choose, your entire Account Balance is divided among the Barclays Capital Aggregate Bond Index, MetLife Stock Index, Morgan Stanley EAFE(R) Index, Russell 2000(R) Index and MetLife Mid Cap Stock Index Investment Divisions and the Fixed Interest Account. Each quarter the percentage in each of these Investment Divisions and the Fixed Interest Account is brought back to the selected model percentage by transferring amounts among the Investment Divisions and the Fixed Interest Account. In the future, we may permit You to allocate less than 100% of your Account Balance to this strategy. We will continue to implement the Index Selector strategy using the percentage allocations of the mode that were in effect when You elected the Index Selector strategy. You should consider whether it is appropriate for You to continue this strategy over time if your risk tolerance, time horizon or financial situation changes. This strategy may experience more volatility than our other strategies. We provide the elements to formulate the models. We may rely on a third party for its expertise in creating appropriate allocations. 27 The asset allocation models used in the Index Selector strategy may change from time to time. If You are interested in an updated model please contact your sales representative. You may choose another Index Selector strategy or terminate your Index Selector strategy at any time. If You choose another Index Selector strategy, You must select from the asset allocation models available at that time. After termination, if You then wish to again select the Index Selector strategy, You must select from the asset allocation models available at that time. The Allocator/SM/: Each month a dollar amount You choose is transferred from the Fixed Interest Account to any of the Investment Divisions You choose. You select the day of the month and the number of months over which the transfers will occur. A minimum periodic transfer of $50 is required. Once your Fixed Interest Account Balance is exhausted, this strategy is automatically discontinued. The Allocator and the Equity Generator are dollar cost averaging strategies. Dollar cost averaging involves investing at regular intervals of time. Since this involves continuously investing regardless of fluctuating prices, You should consider whether You wish to continue the strategy through periods of fluctuating prices. We will terminate all transactions under any automated investment strategy upon notification of your death. PURCHASE PAYMENTS There is no minimum purchase payment. You may continue to make purchase payments while You receive Systematic Withdrawal Program payments, as described later in this Prospectus, unless your purchase payments are made through payroll deduction. We will not issue the Deferred Annuity to You if You are age 80 or older or younger than age 18 for the TSA Deferred Annuity described in the Prospectus. For SEPs and SIMPLE IRAs Deferred Annuities, the minimum issue age is 21. You will not receive the 3% credit associated with the e Bonus Class (generally not available for purchase payments which consist of money from eligible rollover distributions or direct transfers from mutual funds that are products of MetLife or its affiliates), unless You are less than 66 years old at date of issue. We will not accept your purchase payments if You are age 90 or older. PURCHASE PAYMENTS--SECTION 403(B) PLANS The Internal Revenue Service announced new regulations affecting Section 403(b) plans and arrangements, which were generally effective January 1, 2009. As part of these regulations, employers need to meet certain requirements in order for their employees' annuity contracts that fund these programs to retain a tax deferred status under Section 403(b). Prior to the new rules, transfers of one annuity contract to another would not result in a loss of tax deferred status under 403(b) under certain conditions (so-called "90-24 transfers"). The new regulations have the following effect regarding transfers: (1) a newly issued contract funded by a transfer which is completed AFTER September 24, 2007, is subject to the employer requirements referred to above; (2) additional purchase payments made AFTER September 24, 2007, to a contract that was funded by a 90-24 transfer ON OR BEFORE September 24, 2007, MAY subject the contract to this new employer requirement. In consideration of these regulations, we have determined to only make available the Contract for purchase (including transfers) where your employer currently permits salary reduction contributions to be made to the Contract. If your Contract was issued previously as a result of a 90-24 transfer completed on or before September 24, 2007, and You have never made salary reduction contributions into your Contract, we urge You to consult with your tax adviser prior to making additional purchase payments. 28 ALLOCATION OF PURCHASE PAYMENTS You decide how your money is allocated among the Fixed Interest Account, if available, and the Investment Divisions. You can change your allocations for future purchase payments. We will make allocation changes when we receive your request for a change. You may also specify an effective date for the change as long as it is within 30 days after we receive the request. LIMITS ON PURCHASE PAYMENTS Your ability to make purchase payments may be limited by: . Federal tax laws or regulatory requirements; . Our right to limit the total of your purchase payments to $1,000,000; . Our right to restrict purchase payments to the Fixed Interest Account if (1) the interest rate we credit in the Fixed Interest Account is equal to the guaranteed minimum rate as stated in your Deferred Annuity; or (2) your Fixed Interest Account Balance is equal to or exceeds our maximum for a Fixed Interest Account allocation (e.g., $1,000,000); . Participation in the Systematic Withdrawal Program (as described later); and . Leaving your job. THE VALUE OF YOUR INVESTMENT Accumulation Units are credited to You when You make purchase payments or transfers into an Investment Division. When You withdraw or transfer money from an Investment Division (as well as when we apply the Annual Contract Fee and the GMIB or LWG charge, if chosen as an optional benefit), accumulation units are liquidated. We determine the number of accumulation units by dividing the amount of your purchase payment, transfer or withdrawal by the Accumulation Unit Value on the date of the transaction. This is how we calculate the Accumulation Unit Value for each Investment Division: . First, we determine the change in investment performance (including any investment-related charge) for the underlying Portfolio from the previous trading day to the current trading day; . Next, we subtract the daily equivalent of the Separate Account charge (for the class of the Deferred Annuity You have chosen, including any optional benefits) for each day since the last Accumulation Unit Value was calculated; and . Finally, we multiply the previous Accumulation Unit Value by this result. Examples Calculating the Number of Accumulation Units Assume You make a purchase payment of $500 into one Investment Division and that Investment Division's Accumulation Unit Value is currently $10.00. You would be credited with 50 accumulation units. $500 = 50 accumulation units --- $10 Calculating the Accumulation Unit Value Assume yesterday's Accumulation Unit Value was $10.00 and the number we calculate for today's investment experience (minus charges) for an underlying Portfolio is 1.05. Today's Accumulation Unit Value is $10.50. The value of your $500 investment is then $525 (50 x $10.50 = $525). $10.00 x 1.05 = $10.50 is the new Accumulation Unit Value However, assume that today's investment experience (minus charges) is .95 instead of 1.05. Today's Accumulation Unit Value is $9.50. The value of your $500 investment is then $475 (50 x $9.50 = $475). $10.00 x .95 = $9.50 is the new Accumulation Unit Value 29 TRANSFER PRIVILEGE You may make tax-free transfers among Investment Divisions or between the Investment Divisions and the Fixed Interest Account, if available. For us to process a transfer, You must tell us: . The percentage or dollar amount of the transfer; . The Investment Divisions (or Fixed Interest Account) from which You want the money to be transferred; . The Investment Divisions (or Fixed Interest Account) to which You want the money to be transferred; and . Whether You intend to start, stop, modify or continue unchanged an automated investment strategy by making the transfer. We reserve the right to restrict transfers to the Fixed Interest Account if (1) the interest rate we credit in the Fixed Interest Account is equal to the guaranteed minimum rate as stated in your Deferred Annuity; or (2) your Fixed Interest Account Balance is equal to or exceeds our maximum for Fixed Interest Account allocations (e.g., $1,000,000). Your transfer request must be in Good Order and completed prior to the close of the Exchange on a business day, if You want the transaction to take place on that day. All other transfer requests in Good Order will be processed on our next business day. We may require You to use our original forms and maintain a minimum Account Balance (if the transfer is in connection with an automated investment strategy or if there is an outstanding loan from the Fixed Interest Account). "MARKET TIMING" POLICIES AND PROCEDURES The following is a discussion of our market timing policies and procedures. They apply both to the "pay-in" and "pay-out" phase of your Deferred Annuity. Frequent requests from contract owners to make transfers/reallocations may dilute the value of a Portfolio's shares if the frequent transfers/reallocations involve an attempt to take advantage of pricing inefficiencies created by a lag between a change in the value of the securities held by the Portfolio and the reflection of that change in the Portfolio's share price ("arbitrage trading"). Regardless of the existence of pricing inefficiencies, frequent transfers/reallocations may also increase brokerage and administrative costs of the underlying Portfolios and may disrupt Portfolio management strategy, requiring a Portfolio to maintain a high cash position and possibly resulting in lost investment opportunities and forced liquidations ("disruptive trading"). Accordingly, arbitrage trading and disruptive trading activities (referred to collectively as "market timing") may adversely affect the long-term performance of the Portfolios, which may in turn adversely affect contract owners and other persons who may have an interest in the Contracts (e.g., Annuitants and Beneficiaries). We have policies and procedures that attempt to detect and deter frequent transfers/reallocations in situations where we determine there is a potential for arbitrage trading. Currently, we believe that such situations may be presented in the international, small-cap, and high-yield Portfolios (I.E., American Funds Global Small Capitalization, Clarion Global Real Estate, Harris Oakmark International, Invesco Small Cap Growth, Loomis Sayles Small Cap Core, Loomis Sayles Small Cap Growth, Lord Abbett Bond Debenture, MFS(R) Research International, Met/Templeton Growth, MSCI EAFE(R) Index, Neuberger Berman Genesis, Russell 2000(R) Index, T. Rowe Price Small Cap Growth, Third Avenue Small Cap Value, and Western Asset Management Strategic Bond Opportunities--the "Monitored Portfolios") and we monitor transfer/reallocation activity in those Monitored Portfolios. In addition, as described below, we intend to treat all American Funds Insurance Series(R) Portfolios ("American Funds portfolios") as Monitored Portfolios. We employ various means to monitor transfer/reallocation activity, such as examining the frequency and size of transfers/reallocations into and out of the Monitored Portfolios within given periods of time. For example, we currently monitor transfer/reallocation activity to 30 determine if, for each category of international, small-cap, and high-yield Portfolios, in a 12-month period there were, (1) six or more transfers/reallocations involving the given category; (2) cumulative gross transfers/reallocations involving the given category that exceed the current Account Balance; and (3) two or more "round-trips" involving any Monitored Portfolio in the given category. A round-trip generally is defined as a transfer/reallocation in followed by a transfer/reallocation out within the next seven calendar days or a transfer/reallocation out followed by a transfer/reallocation in within the next seven calendar days, in either case subject to certain other criteria. We do not believe that other Portfolios present a significant opportunity to engage in arbitrage trading and therefore do not monitor transfer/reallocation activity in those Portfolios. We may change the Monitored Portfolios at any time without notice in our sole discretion. In addition to monitoring transfer/reallocation activity in certain Portfolios, we rely on the underlying Portfolios to bring any potential disruptive transfer/reallocation activity they identify to our attention for investigation on a case-by-case basis. We will also investigate other harmful transfer/reallocation activity that we identify from time to time. We may revise these policies and procedures in our sole discretion at any time without prior notice. As a condition to making their portfolios available in our products, American Funds(R) requires us to treat all American Funds Portfolios as Monitored Portfolios under our current market timing and excessive trading policies and procedures. Further, American Funds(R) requires us to impose additional specified monitoring criteria for all American Funds Portfolios available under the Contract, regardless of the potential for arbitrage trading. We are required to monitor transfer/reallocation activity in American Funds Portfolios to determine if there were two or more transfers/reallocations in followed by transfers/reallocations out, in each case of a certain dollar amount or greater, in any 30 day period. A first violation of the American Funds(R) monitoring policy will result in a written notice of violation; each additional violation will result in the imposition of a six-month restriction, during which period we will require all transfer/reallocation requests to or from an American Funds Portfolio to be submitted with an original signature. Further, as Monitored Portfolios, all American Funds Portfolios also will be subject to our current market timing and excessive trading policies, procedures and restrictions (described below) and transfer/reallocation restrictions may be imposed upon a violation of either monitoring policy. Our policies and procedures may result in transfer/reallocation restrictions being applied to deter market timing. Currently, when we detect transfer/reallocation activity in the Monitored Portfolios that exceeds our current transfer/reallocation limits, or other transfer/reallocation activity that we believe may be harmful to other contract owners or other persons who have an interest in the Contracts, we require all future requests to or from any Monitored Portfolios or other identified Portfolios under that Contract to be submitted with an original signature. Transfers made under a dollar cost averaging program or, if applicable, any asset allocation program described in this prospectus are not treated as transfers when we evaluate patterns for market timing. The detection and deterrence of harmful transfer/reallocation activity involves judgments that are inherently subjective, such as the decision to monitor only those Portfolios we believe are susceptible to arbitrage trading or the determination of the transfer/reallocation limits. Our ability to detect and/or restrict such transfer/reallocation activity may be limited by operational and technological systems, as well as our ability to predict strategies employed by contract owners to avoid such detection. Our ability to restrict such transfer/reallocation activity also may be limited by provisions of the Contract. Accordingly, there is no assurance that we will prevent all transfer/reallocation activity that may adversely affect contract owners and other persons with interests in the Contracts. We do not accommodate market timing in any Portfolios and there are no arrangements in place to permit any contract owner to engage in market timing; we apply our policies and procedures without exception, waiver, or special arrangement. The Portfolios may have adopted their own policies and procedures with respect to market timing transactions in their respective shares, and we reserve the right to enforce these policies and procedures. For example, Portfolios may assess a 31 redemption fee (which we reserve the right to collect) for shares held for a relatively short period. The prospectuses for the Portfolios describe any such policies and procedures, which may be more or less restrictive than the policies and procedures we have adopted. Although we may not have the contractual authority or operational capacity to apply the market timing policies and procedures of the Portfolios, we have entered in a written agreement, as required by SEC regulation, with each Portfolio or its principal underwriter that obligates us to provide to the Portfolio promptly upon request certain information about the trading activity of individual contract owners, and to execute instructions from the Portfolio to restrict or prohibit further purchases or transfers/reallocations by specific contract owners who violate the frequent trading policies established by the Portfolio. In addition, contract owners and other persons with interests in the Contracts should be aware that the purchase and redemption orders received by the Portfolios generally are "omnibus" orders from intermediaries, such as retirement plans or separate accounts funding variable insurance contracts. The omnibus orders reflect the aggregation and netting of multiple orders from individual contract owners of variable insurance contracts and/or individual retirement plan participants. The omnibus nature of these orders may limit the Portfolios in their ability to apply their market timing policies and procedures. In addition, the other insurance companies and/or retirement plans may have different policies and procedures or may not have any such policies and procedures because of contractual limitations. For these reasons we cannot guarantee that the Portfolios (and thus contract owners) will not be harmed by transfer/reallocation activity relating to the other insurance companies and/or retirement plans that may invest in the Portfolios. If a Portfolio believes that an omnibus order reflects one or more transfer/reallocation requests from contract owners engaged in disruptive trading activity, the Portfolio may reject the entire omnibus order. In accordance with applicable law, we reserve the right to modify or terminate the transfer/reallocation privilege at any time. We also reserve the right to defer or restrict the transfer/reallocation privilege at any time that we are unable to purchase or redeem shares of any of the Portfolios, including any refusal or restriction on purchases or redemptions of their shares as a result of their own policies and procedures on market timing and disruptive trading activities (even if an entire omnibus order is rejected due to the market timing or disruptive trading activity of a single contract owner). You should read the Portfolio prospectuses for more details. ACCESS TO YOUR MONEY You may withdraw either all or part of your Account Balance from the Deferred Annuity. Other than those made through the Systematic Withdrawal Program, withdrawals must be at least $500 or the Account Balance, if less. If any withdrawal would decrease your Account Balance below $2,000, we may consider this a request for a full withdrawal. To process your request, we need the following information: . The percentage or dollar amount of the withdrawal; and . The investment divisions (or Fixed Interest Account) from which You want the money to be withdrawn. Your withdrawal may be subject to Withdrawal Charges. We may withhold payment of withdrawal proceeds if any portion of those proceeds would be derived from your check that has not yet cleared (I.E., that could still be dishonored by your banking institution). We may use telephone, fax, Internet or other means of communication to verify that payment from your check has been or will be collected. We will not delay payment longer than necessary for us to verify that payment has been or will be collected. You may avoid the possibility of delay in the disbursement of proceeds coming from a check that has not yet cleared by providing us with a certified check. Generally, if You request, we will make payments directly to other investments on a tax-free basis. You may only do so if all applicable tax and state regulatory requirements are met and we receive all information necessary for us to make the payment. We may require You to use our original forms. 32 SYSTEMATIC WITHDRAWAL PROGRAM If we agree and if approved in your state, You may choose to automatically withdraw a specific dollar amount or a percentage of your Account Balance each Contract Year. This program is not available under the 457(b) Deferred Annuity issued to tax-exempt organizations. This amount is then paid in equal portions throughout the Contract Year according to the time frame You select, e.g., monthly, quarterly, semi-annually or annually. Once the Systematic Withdrawal Program is initiated, the payments will automatically renew each Contract Year. Income taxes, tax penalties and Withdrawal Charges may apply to your withdrawals. Program payment amounts are subject to our required minimums and administrative restrictions. Your Account Balance will be reduced by the amount of your Systematic Withdrawal Program payments and applicable Withdrawal Charges. Payments under this program are not the same as income payments You would receive from a Deferred Annuity pay-out option. The Systematic Withdrawal Program is not available to the e Bonus Class of the Deferred Annuities until the second Contract Year. The Systematic Withdrawal Program is not available in conjunction with any automated investment strategy. If You elect to withdraw a dollar amount, we will pay You the same dollar amount each Contract Year. If You elect to withdraw a percentage of your Account Balance, each Contract Year we recalculate the amount You will receive based on your new Account Balance. Calculating Your Payment Based on a Percentage Election for the First Contract Year You Elect the Systematic Withdrawal Program: If You choose to receive a percentage of your Account Balance, we will determine the amount payable on the date these payments begin. When You first elect the program, we will pay this amount over the remainder of the Contract Year. For example, if You select to receive payments on a monthly basis with the percentage of your Account Balance You request equaling $12,000, and there are six months left in the Contract Year, we will pay You $2,000 a month. Calculating Your Payment for Subsequent Contract Years of the Systematic Withdrawal Program: For each subsequent year that your Systematic Withdrawal Program remains in effect, we will deduct from your Deferred Annuity and pay You over the Contract Year either the amount that You chose or an amount equal to the percentage of your Account Balance You chose. For example, if You select to receive payments on a monthly basis, ask for a percentage and that percentage of your Account Balance equals $12,000 at the start of a Contract Year, we will pay You $1,000 a month. If You do not provide us with your desired allocation, or there are insufficient amounts in the Investment Divisions or the Fixed Interest Account that You selected, the payments will be taken out pro rata from the Fixed Interest Account and any Investment Divisions in which You then have money. Selecting a Payment Date: You select a payment date which becomes the date we make the withdrawal. (If You would like to receive your Systematic Withdrawal Program payment on or about the first of the month, You should request the payment by the 20th of the month). We must receive your request in Good Order at least 10 days prior to the selected payment date. If we do not receive your request in time, we will make the payment the following month on the date You selected. If You do not select a payment date, we will automatically begin systematic withdrawals within 30 days after we receive your request. Changes in the dollar amount, percentage or timing of the payments can be made once a year at the beginning of any Contract Year and one other time during the Contract Year. If You make any of these changes, we will treat your request as though You were starting a new Systematic Withdrawal Program. You may request to stop your Systematic Withdrawal Program at any time. We must receive any request in Good Order at least 30 days in advance. Although we need your written authorization to begin this program, You may cancel this program at any time by telephone or by writing to us at your MetLife Administrative Office. We will also terminate your participation in the program upon notification of your death. 33 Systematic Withdrawal Program payments may be subject to a Withdrawal Charge unless an exception to this charge applies. For purposes of determining how much of the annual payment amount is exempt from this charge under the free withdrawal provision (discussed later), all payments from a Systematic Withdrawal Program in a Contract Year are characterized as a single lump sum withdrawal as of your first payment date in that Contract Year. When You first elect the program, we will calculate the percentage of your Account Balance your Systematic Withdrawal Program payment represents based on your Account Balance on the first Systematic Withdrawal Program payment date. For all subsequent Contract Years, we will calculate the percentage of your Account Balance your Systematic Withdrawal Program payment represents based on your Account Balance on the first Systematic Withdrawal Program payment date of that Contract Year. We will determine separately the Withdrawal Charge and any relevant factors (such as applicable exceptions) for each Systematic Withdrawal Program payment as of the date it is withdrawn from your Deferred Annuity. See "Lifetime Withdrawal Guarantee Benefit -- Annual Benefit Payment -- Systematic Withdrawal Program" for more information concerning utilizing the Systematic Withdrawal Program in conjunction with the Lifetime Guaranteed Withdrawal Benefit. Participation in the Systematic Withdrawal Program is subject to our administrative procedures. MINIMUM DISTRIBUTION In order for You to comply with certain tax law provisions, You may be required to take money out of your Deferred Annuity. Rather than receiving your minimum required distribution in one annual lump-sum payment, You may request that we pay it to You in installments throughout the calendar year. However, we may require that You maintain a certain Account Balance at the time You request these payments. You may not have a Systematic Withdrawal Program in effect if we pay your minimum required distribution in installments. We will terminate your participation in the program upon notification of your death. CHARGES There are two types of charges You pay while You have money in an Investment Division: . Separate Account charge, and . Investment-related charge. We describe these charges below. The amount of the charge may not necessarily correspond to costs associated with providing the services or benefits indicated by the designation of the charge or associated with the Deferred Annuity. For example, the Withdrawal Charge may not fully cover all of the sales and distribution expenses actually incurred by us and proceeds from other charges, including the Separate Account charge, may be used in part to cover such expenses. We can profit from certain Deferred Annuity charges. SEPARATE ACCOUNT CHARGE Each class of the Deferred Annuity has a different annual Separate Account charge that is expressed as a percentage of average account value. A portion of the annual Separate Account charge is paid us daily based upon the value of the amount You have in the Separate Account on the day the charge is assessed. You pay an annual Separate Account charge that, during the pay-in phase, for the Standard Death Benefit will not exceed 0.50% for the e Class and 0.95% for the e Bonus Class of the average value of the amounts in the Investment Divisions, or, in the case of each American Funds(R) Investment Division, 0.75% for the e Class and 1.20% for the e Bonus Class. This charge pays us for the risk that You may live longer than we estimated. Then, we could be obligated to pay You more in payments from a pay-out option than we anticipated. Also, we bear the risk that the guaranteed death benefit we would 34 pay should You die during your pay-in phase is larger than your Account Balance. This charge also includes the risk that our expenses in administering the Deferred Annuity may be greater than we estimated. The Separate Account charge also pays us for distribution costs to both our licensed salespersons and other broker-dealers. The Separate Account charges You pay will not reduce the number of accumulation units credited to You. Instead, we deduct the charges as part of the calculation of the Accumulation Unit Value. We guarantee that the Separate Account insurance-related charge will not increase while You have the Deferred Annuity. The chart below summarizes the maximum Separate Account charge for each class of the Deferred Annuity with each death benefit prior to entering the pay-out phase of the Contract. SEPARATE ACCOUNT CHARGES*
e Bonus e Class Class ------- ------- StandardDeath Benefit 0.50% 0.95% ----------------------------------------------------- OptionalAnnual Step-Up Death Benefit 0.60% 1.05% -----------------------------------------------------
* We currently charge an additional Separate Account charge of 0.25% of average daily net assets in the American Funds Growth-Income, American Funds Growth, American Funds Bond and American Funds Global Small Capitalization Investment Divisions. We reserve the right to impose an additional Separate Account charge on Investment Divisions that we add to the Contract in the future. The additional amount will not exceed the annual rate of 0.25% of average daily net assets in any such Investment Divisions. INVESTMENT-RELATED CHARGE This charge has two components. The first pays the investment managers for managing money in the Portfolios. The second consists of Portfolio operating expenses and 12b-1 Plan fees. The percentage You pay for the investment-related charge depends on which Investment Divisions You select. Each class of shares available to the Deferred Annuities, except for the Calvert Fund, has a 12b-1 Plan fee, which pays for distribution expenses. Class B shares available in the Metropolitan Fund and the Met Investors Fund have a 0.25% 12b-1 Plan fee. Class C shares available in the Met Investors Fund have a 0.55% 12b-1 Plan fee, Class 2 shares available in the American Funds(R) have a 0.25% 12b-1 Plan fee. The Calvert Fund shares which are available have no 12b-1 Plan fee. Amounts for each Investment Division for the previous year are listed in the Table of Expenses. ANNUAL CONTRACT FEE There is a $30 Annual Contract Fee which is deducted on a pro-rata basis from the Investment Divisions on the last business day prior to the Contract Anniversary. This fee is waived if your Account Balance is at least $50,000 on the day the fee is to be deducted. This fee will also be waived if You are on medical leave approved by your employer or called to active armed service duty at the time the fee is to be deducted and your employer has informed us of your status. The fee will be deducted at the time of a total withdrawal of your Account Balance on a pro-rata basis (determined based upon the number of complete months that have elapsed since the prior Contract Anniversary). This fee pays us for our miscellaneous administrative costs. These costs which we incur include financial, actuarial, accounting and legal expenses. We reserve the right to waive the Annual Contract Fee for specific groups based upon the nature of the group, size, aggregate amount of anticipated purchase payments or anticipated persistency. The waiver will be implemented in a reasonable manner and will not be unfairly discriminatory to the interests of any contract holder. 35 OPTIONAL GMIB The optional GMIB is available for an additional charge of 0.70% of the guaranteed minimum income base (as defined later in this Prospectus), deducted at the end of each Contract Year by withdrawing amounts on a pro-rata basis from your Fixed Interest Account Balance (net of any outstanding loans) and Separate Account Balance. (We take amounts from the Separate Account by canceling accumulation units from your Separate Account Balance). If You make a total withdrawal of your Account Balance or elect to receive income payments under your Contract, a pro-rata portion of the annual optional benefit charge will be assessed based on the number of months from the last Contract Anniversary to the date of the withdrawal or the beginning of income payments. Prior to May 4, 2009, the charge for the optional GMIB is 0.35% of the guaranteed minimum income base. (For employer groups with TSA ERISA, 457(b) and 403(a) Deferred Annuities that were established on or before May 1, 2009, which elected to make available the GMIB under their group Contract, participants, who submit an application after May 1, 2009, will receive the lower charge of 0.35%.) OPTIONAL LWG The LWG is available for an additional charge of 0.95% of the Total Guaranteed Withdrawal Amount (as defined later in this Prospectus), deducted at the end of each Contract Year, after applying any 5% Compounding Income Amount and prior to taking into account any Automatic Annual Step-Up occurring on the Contract Anniversary by withdrawing amounts on a pro-rata basis from your Fixed Interest Account Balance and Separate Account Balance. We take amounts from the Separate Account by canceling accumulation units from your Separate Account Balance. If an Automatic Annual Step-Up occurs under a LWG, we may increase the LWG charge to the then current charge for the same optional benefit, but no more than a maximum of 0.95%. If the LWG is in effect, the charge will continue even if your Remaining Guaranteed Withdrawal Amount equals zero. Prior to May 4, 2009, the charge for the optional LWG prior to any Automatic Step-Up is 0.50% of the Total Guaranteed Withdrawal Amount and the maximum charge upon an Automatic Annual Step-Up is 0.95%. PREMIUM AND OTHER TAXES Some jurisdictions tax what are called "annuity considerations." These may apply to purchase payments, Account Balances and death benefits. In most jurisdictions, we currently do not deduct any money from purchase payments, Account Balances or death benefits to pay these taxes. Generally, our practice is to deduct money to pay premium taxes (also known as "annuity" taxes) only when You exercise a pay-out option. In certain jurisdictions, we may deduct money to pay premium taxes on lump sum withdrawals or when You exercise a pay-out option. We may deduct an amount to pay premium taxes some time in the future since the laws and the interpretation of the laws relating to annuities are subject to change. Premium taxes, if applicable, depend on the Deferred Annuity You purchase and your home state or jurisdiction. The chart in Appendix I shows the jurisdictions where premium taxes are charged and the amount of these taxes. We also reserve the right to deduct from purchase payments, Account Balances, withdrawals or income payments, any taxes (including, but not limited to, premium taxes) paid by us to any government entity relating to the Contracts. Examples of these taxes include, but are not limited to, generation skipping transfer tax or a similar excise tax under Federal or state tax law which is imposed on payments we make to certain persons and income tax withholdings on withdrawals and income payments to the extent required by law. We will, at our sole discretion, determine when taxes relate to the Contracts. We may, at our sole discretion, pay taxes when due and deduct that amount from the Account Balance at a later date. Payment at an earlier date does not waive any right we may have to deduct amounts at a later date. 36 WITHDRAWAL CHARGES A Withdrawal Charge may apply if You make a withdrawal from your e Bonus Class Deferred Annuity. There are no Withdrawal Charges for the e Class or in certain situations or upon the occurrence of certain events (see "When No Withdrawal Charges Applies"). A Withdrawal Charge may be assessed if amounts are withdrawn pursuant to divorce or a separation instrument, if permissible under tax law. The Withdrawal Charge will be determined separately for each Investment Division from which a withdrawal is made. The Withdrawal Charge is assessed against the amount withdrawn. For a full withdrawal, we multiply the amount to which the Withdrawal Charge applies by the percentage shown, keep the result as a Withdrawal Charge and pay You the rest. For partial withdrawals, we multiply the amount to which the Withdrawal Charge applies by the percentage shown, keep the result as a Withdrawal Charge and pay You the rest. We will treat your request as a request for a full withdrawal if your Account Balance is not sufficient to pay both the requested withdrawal and the Withdrawal Charge, or if the withdrawal leaves an Account Balance that is less than the minimum required. The Withdrawal Charge on the amount withdrawn for each class is as follows:
IF WITHDRAWN DURING CONTRACT YEAR E CLASS E BONUS CLASS --------------------------------- ------- ------------- 1...................... None 3% 2...................... 3% 3...................... 3% 4...................... 3% 5...................... 3% 6...................... 3% 7...................... 3% Thereafter............. 0%
The Withdrawal Charge reimburses us for our costs in selling the Deferred Annuities. We may use our profits (if any) from the Separate Account charge to pay for our costs to sell the Deferred Annuities which exceed the amount of Withdrawal Charges we collect. WHEN NO WITHDRAWAL CHARGE APPLIES TO THE E BONUS CLASS In some cases, we will not charge You the Withdrawal Charge when You make a withdrawal. We may, however, ask You to prove that You meet any of the conditions listed below. You do not pay a Withdrawal Charge: . On transfers You make within your Deferred Annuity among Investment Divisions and transfers to or from the Fixed Interest Account. . On the amount surrendered after seven Contract Years. . If You choose payments over one or more lifetimes, except, in certain cases, under the GMIB. . If You die during the pay-in phase. Your Beneficiary will receive the full death benefit without deduction. . After the first Contract Year, if You withdraw up to 10% of your total Account Balance, per Contract Year. This 10% total withdrawal may be taken in an unlimited number of partial withdrawals during that Contract Year. These withdrawals are made on a non-cumulative basis. 37 . If the withdrawal is to avoid required Federal income tax penalties or to satisfy Federal income tax rules concerning minimum distribution requirements that apply to your Deferred Annuity. For purposes of this exception, we assume that the Deferred Annuity is the only Contract or funding vehicle from which distributions are required to be taken and we will ignore all other account balances. This exception does not apply if the withdrawal is to satisfy Section 72(t) requirements under the Internal Revenue Code. . The Waiver of Withdrawal Charge for Nursing Home or Hospital Confinement Rider and Waiver of Withdrawal Charge for Terminal Illness Rider are only available if You are less than 80 years old on the Contract issue date. For the TSA, SEP and SIMPLE Deferred Annuities, after the first Contract Year, except in Massachusetts, and your Contract provides for these riders to withdrawals to which a Withdrawal Charge would otherwise apply, if You as owner or participant under a Contract: . have been a resident of certain nursing home facilities or a hospital for a minimum of 90 consecutive days or for a minimum total of 90 days where there is no more than a 6 month break in that residency and the residencies are for related causes, where You have exercised this right no later than 90 days of exiting the nursing home facility or hospital; or . are diagnosed with a terminal illness and not expected to live more than 12 months. . This Contract feature is only available if You are less than 65 years old on the date You became disabled and if the disability commences subsequent to the first Contract Anniversary. After the first Contract Year, if approved in your state, and your Contract provides for this, if You are disabled as defined in the Federal Social Security Act and if You have been the participant continuously since the issue of the Contract. . If You have transferred money which is not subject to a withdrawal charge (because you have satisfied contractual provisions for a withdrawal without the imposition of a contract withdrawal charge) from certain eligible MetLife contracts or certain eligible contracts of MetLife affiliates into the Deferred Annuity, and the withdrawal is of these transferred amounts and we agree. Any purchase payments made after the transfer are subject to the usual Withdrawal Charge schedule. . If You make a direct transfer to other investment vehicles we have pre-approved. . If your plan or group of which You are a participant or member permits account reduction loans, You take an account reduction loan and the withdrawal consists of these account reduction loan amounts. . If approved in your state, and if You elect the LWG and take your Annual Benefit Payment through the Systematic Withdrawal Program and only withdraw your Annual Benefit Payment. . Subject to availability in your state, if the early Withdrawal Charge that would apply if not for this provision (1) would constitute less than 0.50% of your Account Balance and (2) You transfer your total Account Balance to certain eligible contracts issued by MetLife or its affiliated companies and we agree. . If approved in your state, and after the first Contract Year, if You elect the LWG and only make withdrawals each Contract Year that do not exceed on a cumulative basis your Annual Benefit Payment. . If permitted in your state, for TSA, TSA ERISA, 457(b) and 403(a) Deferred Annuities, if You make a direct transfer to another funding vehicle or annuity contract issued by us or by one of our affiliates and we agree. FREE LOOK You may cancel your TSA Deferred Annuity within a certain time period. This is known as a "free look." Not all Contracts issued are subject to free look provisions under state law. We must receive your request to cancel in writing by the appropriate day in your state, which varies from state to state. The time period may also vary depending on your age and whether You purchased your Deferred Annuity from us directly, through the mail or with money from another annuity or life insurance policy. Depending on state law, we may refund all of your purchase payments or your Account Balance as of the date your refund request is received at your Administrative Office in Good Order. 38 For the TSA Deferred Annuity, any 3% credit from purchase payments does not become yours until after the "free look" period; we retrieve it if You exercise the "free look". Your exercise of any "free look" is the only circumstance under which the 3% credit will be retrieved (commonly called "recapture"). If your state requires us to refund your Account Balance, the refunded amount will include any investment performance attributable to the 3% credit. If there are any losses from investment performance attributable to the 3% credit, we will bear that loss. DEATH BENEFIT--GENERALLY One of the insurance guarantees we provide You under your Deferred Annuity is that your Beneficiaries will be protected during the "pay-in" phase against market downturns. You name your Beneficiary(ies). If You intend to purchase the Deferred Annuity for use with a SEP or SIMPLE IRA, please refer to the discussion concerning IRAs in the Tax Section of this Prospectus. The standard death benefit is described below. An additional optional death benefit is described in the "Optimal Benefits" section. Check your Contract and riders for the specific provisions applicable to You. The additional optional death benefit may not be available in your state (check with your registered representative regarding availability). The death benefit is determined as of the end of the business day on which we receive both due proof of death and an election for the payment method. If we are notified of your death before any requested transaction is completed (including transactions under automated investment strategies, the minimum distribution program and the Systematic Withdrawal Program), we will cancel the request. As described above, the death benefit will be determined when we receive due proof of death and an election for the payment method. Where there are multiple Beneficiaries, the death benefit will only be determined as of the time the first Beneficiary submits the necessary documentation in Good Order. If the death benefit payable is an amount that exceeds the Account Balance on the day it is determined, we will apply to the Contract an amount equal to the difference between the death benefit payable and the Account Balance, in accordance with the current allocation of the Account Balance. This death benefit amount remains in the Investment Divisions until each of the other Beneficiaries submits the necessary documentation in Good Order to claim his/her death benefit. Any death benefit amounts held in the Investment Divisions on behalf of the remaining Beneficiaries are subject to investment risk. There is no additional death benefit guarantee. Your Beneficiary has the option to apply the death benefit less any applicable premium taxes to a pay-out option offered under your Deferred Annuity. Your Beneficiary may, however, decide to take payment in one sum, including either by check, by placing the amount in an account that earns interest, or by any other method of payment that provides the Beneficiary with immediate and full access to the proceeds, or under other settlement options that we may make available. TOTAL CONTROL ACCOUNT The Beneficiary may elect to have the Contract's death proceeds paid through a settlement option called the Total Control Account. The Total Control Account is an interest-bearing account through which the Beneficiary has immediate and full access to the proceeds, with unlimited draft writing privileges. We credit interest to the account at a rate that will not be less than a guaranteed minimum annual effective rate. Assets backing the Total Control Accounts are maintained in our general account and are subject to the claims of our creditors. We will bear the investment experience of such assets; however, regardless of the investment experience of such assets, the interest credited to the Total Control Account will never fall below the applicable guaranteed minimum annual effective rate. Because we bear the investment experience of the assets backing the Total Control Accounts, we may receive a profit from these assets. The Total Control Account is not insured by the FDIC or any other governmental agency. 39 STANDARD DEATH BENEFIT If You die during the pay-in phase and You have not chosen the optional death benefit, the death benefit the Beneficiary receives will be equal to the greatest of: 1. Your Account Balance, less any outstanding loans or 2. Total purchase payments reduced proportionately by the percentage reduction in Account Balance attributable to each partial withdrawal, less any outstanding loans (including any applicable Withdrawal Charge). EXAMPLE
---------------------------------------------------------------------------------------------------- Date Amount ------------------------------ ----------------------- A Initial Purchase Payment 10/1/2012 $100,000 ---------------------------------------------------------------------------------------------------- B Account Balance 10/1/2013 $104,000 (First Contract Anniversary) ---------------------------------------------------------------------------------------------------- C Death Benefit As of 10/1/2013 $104,000 (= greater of A and B) ---------------------------------------------------------------------------------------------------- D Account Balance 10/1/2014 $90,000 (Second Contract Anniversary) ---------------------------------------------------------------------------------------------------- E Death Benefit 10/1/2014 $100,000 (= greater of A and D) ---------------------------------------------------------------------------------------------------- F Withdrawal 10/2/2014 $9,000 ---------------------------------------------------------------------------------------------------- G Percentage Reduction in Account Balance 10/2/2014 10% (= F/D) ---------------------------------------------------------------------------------------------------- H Account Balance after Withdrawal 10/2/2014 $81,000 (= D-F) ---------------------------------------------------------------------------------------------------- I Purchase Payments reduced for Withdrawal As of 10/2/2014 $90,000 [= A-(A X G)] ---------------------------------------------------------------------------------------------------- J Death Benefit 10/2/2014 $90,000 (= greater of H and I) ----------------------------------------------------------------------------------------------------
Notes to Example: Any Withdrawal Charge withdrawn from the Account Balance is included when determining the percentage of Account Balance withdrawn. Account Balances on 10/1/13 and 10/2/13 are assumed to be equal prior to the withdrawal. There are no loans. OPTIONAL DEATH BENEFIT Please note that the decision to purchase the optional death benefit is made at the time of application and is irrevocable. The optional death benefit is available subject to state approval. Your employer, association or other group contract holder may limit the availability of any optional benefit. (An account reduction loan will decrease the value of any optional benefit purchased with this Contract. See your employer for more information about the availability and features of account reduction loans.) 40 ANNUAL STEP-UP DEATH BENEFIT The Annual Step-Up Death Benefit is designed to provide protection against adverse investment experience. In general, it guarantees that the death benefit will not be less than the greater of (1) your Account Balance; or (2) your "Highest Anniversary Value" (as described below) as of each Contract Anniversary. You may purchase at application a death benefit that provides that the death benefit amount is equal to the greater of: 1. The Account Balance, less any outstanding loans; or 2. Total purchase payments, reduced proportionately for withdrawals and any outstanding loans (including any applicable Withdrawal Charge); or 3. "Highest Anniversary Value" as of each Contract Anniversary, determined as follows: . At issue, the Highest Anniversary Value is your initial purchase payment; . Increase the Highest Anniversary Value by each subsequent purchase payment; . Reduce the Highest Anniversary Value proportionately by the percentage reduction in Account Balance attributable to each subsequent partial withdrawal, less any outstanding loans (including any applicable Withdrawal Charge); . On each Contract Anniversary before your 81st birthday, compare the (1) then Highest Anniversary Value to the (2) current Account Balance and set the Highest Anniversary Value equal to the greater of the two. . After the Contract Anniversary immediately preceding your 81st birthday, adjust the highest Account Balance only to: . Increase the Highest Anniversary Value by each subsequent purchase payment or . Reduce the Highest Anniversary Value proportionately by the percentage reduction in Account Balance attributable to each subsequent partial withdrawal, less any outstanding loans (including any applicable Withdrawal Charge). For purposes of determining the Highest Anniversary Value as of the applicable Contract Anniversary, purchase payments increase the Highest Anniversary Value on a dollar for dollar basis. Partial withdrawals, however, reduce the Highest Anniversary Value proportionately, that is, the percentage reduction is equal to the dollar amount of the withdrawal (plus applicable Withdrawal Charges) divided by the Account Balance immediately before the withdrawal. The Annual Step-Up Death Benefit is available for a charge, in addition to the Standard Death Benefit charge, of 0.10% annually of the average daily value of the amount You have in the Separate Account. 41 EXAMPLE:
----------------------------------------------------------------------------------------------------- Date Amount ------------------------------ ----------------------- A Initial Purchase Payment 10/1/2012 $100,000 ----------------------------------------------------------------------------------------------------- B Account Balance 10/1/2013 $104,000 (First Contract Anniversary) ----------------------------------------------------------------------------------------------------- C Death Benefit (Highest Anniversary Value) As of 10/1/2013 $104,000 (= greater of A and B) ----------------------------------------------------------------------------------------------------- D Account Balance 10/1/2014 $90,000 (Second Contract Anniversary) ----------------------------------------------------------------------------------------------------- E Death Benefit (Highest Contract Year 10/1/2014 $104,000 Anniversary) (= greater of C and D) ----------------------------------------------------------------------------------------------------- F Withdrawal 10/2/2014 $9,000 ----------------------------------------------------------------------------------------------------- G Percentage Reduction in Account Balance 10/2/2014 10% (= F/D) ----------------------------------------------------------------------------------------------------- H Account Balance after Withdrawal 10/2/2014 $81,000 (= D-F) ----------------------------------------------------------------------------------------------------- I Highest Anniversary Value reduced for As of 10/2/2014 $93,600 Withdrawal (= E - (E X G)) ----------------------------------------------------------------------------------------------------- J Death Benefit 10/2/2014 $93,600 (= greater of H and I) -----------------------------------------------------------------------------------------------------
Notes to Example: Any Withdrawal Charge withdrawn from the Account Balance is included when determining the percentage of Account Balance withdrawn. The Account Balances on 10/1/13 and 10/2/13 are assumed to be equal prior to the withdrawal. The purchaser is age 60 at issue. There are no loans. LIVING BENEFITS GMIB--(MAY ALSO BE KNOWN AS THE "PREDICTOR" IN OUR SALES LITERATURE AND ADVERTISING) We offer the GMIB that, for an additional charge, offers protection against market risk (the risk that your investments may decline in value or underperform your expectations). Our guaranteed income benefit, called GMIB, is designed to allow You to invest your Account Balance in the market while at the same time assuring a specified guaranteed level of minimum fixed income payments if You elect to receive income payments ("annuitize"). The fixed annuity payment amount is guaranteed regardless of investment performance or the actual Account Balance at the time You elect income payments. Prior to exercising this optional benefit and annuitizing your Contract, You may make withdrawals up to a maximum level and still maintain the optional benefit amount. This optional benefit must be elected at Contract issue. This optional benefit is designed to guarantee a predictable, minimum level of fixed income payments, regardless of investment performance of your Account Value during the pay-in phase. HOWEVER, IF APPLYING YOUR ACTUAL ACCOUNT BALANCE AT THE TIME YOU ANNUITIZE THE CONTRACT TO THEN CURRENT ANNUITY PURCHASE RATES (OUTSIDE OF THE OPTIONAL BENEFIT) PRODUCES HIGHER INCOME PAYMENTS, YOU WILL RECEIVE THE HIGHER PAYMENTS, AND THUS YOU WILL HAVE PAID FOR THE OPTIONAL BENEFIT EVEN THOUGH IT WAS NOT USED. Also, prior to exercising the optional benefit, You may make specified 42 withdrawals that reduce your income base (as explained below) during the pay-in phase and still leave the optional benefit guarantees intact, provided the conditions of the optional benefit are met. Your registered representative can provide You an illustration of the amounts You would receive, with or without withdrawals, if You exercised the optional benefit. The GMIB is available in all states except New York. In the states of Montana, Utah and West Virginia, GMIB is only available for elective TSA (non-ERISA) and SEP/SIMPLE Deferred Annuities. In Oregon, GMIB is only available for TSA ERISA, 403(a) and 457(b) Deferred Annuities. Once elected, the optional benefit cannot be terminated except as discussed below. GMIB AND QUALIFIED CONTRACTS THE GMIB MAY HAVE LIMITED USEFULNESS IN CONNECTION WITH A QUALIFIED CONTRACT, SUCH AS TSA, TSA ERISA, IRA, 403(A) OR 457(B), IN CIRCUMSTANCES WHERE, DUE TO THE TEN YEAR WAITING PERIOD AFTER PURCHASE, THE OWNER IS UNABLE TO EXERCISE THE BENEFIT UNTIL AFTER THE REQUIRED BEGINNING DATE OF REQUIRED MINIMUM DISTRIBUTIONS UNDER THE CONTRACT. In such event, required minimum distributions received from the Contract during the ten year waiting period will have the effect of reducing the income base either on a proportionate or dollar for dollar basis, as the case may be. THIS MAY HAVE THE EFFECT OF REDUCING OR ELIMINATING THE VALUE OF ANNUITY PAYMENTS UNDER THE GMIB. YOU SHOULD CONSULT YOUR TAX ADVISER PRIOR TO ELECTING A GMIB. If You take a full withdrawal of your Account Balance, your Contract is terminated by us due to its small Account Balance and inactivity (see "When We Can Cancel Your Contract"), your Contract lapses for any reason, or, in those instances where your employer has the ability to do so, your employer terminates the Contract, and there remains any income base, You forfeit your income base and any further rights to the GMIB. FACTS ABOUT THE GUARANTEED INCOME BENEFIT INCOME BASE AND GMIB INCOME PAYMENTS. We calculate an "income base" (as described below) that determines, in part, the minimum amount You receive as an income payment upon exercising the GMIB and annuitizing the Contract. IT IS IMPORTANT TO RECOGNIZE THAT THIS INCOME BASE IS NOT AVAILABLE FOR CASH WITHDRAWALS AND DOES NOT ESTABLISH OR GUARANTEE YOUR ACCOUNT BALANCE OR A MINIMUM RETURN FOR ANY INVESTMENT DIVISION. After a minimum 10-year waiting period, and not more than 30 days after the Contract Anniversary following your 85th birthday, You may exercise the benefit. We then will apply the income base calculated at the time of exercise to the GMIB Annuity Table (as described below) specified in the rider in order to determine your minimum guaranteed lifetime fixed monthly income payments. Your actual payment may be higher than this minimum if, as discussed above, the base Contract under its terms would provide a higher payment). If your employer, association or other group contract holder has instituted account reduction loans for its plan or arrangement, You have taken a loan and You have also purchased the GMIB, we will not treat amounts withdrawn from your Account Balance on account of a loan as a withdrawal from the Contract for purposes of determining the income base. In addition, we will not treat the repayment of loan amounts as a purchase payment to the Contract for the purposes of determining the income base. THE GMIB ANNUITY TABLE. The GMIB Annuity Table is specified in the rider. This table is calculated based on the Annuity 2000 Mortality Table with a 7-year age set back with interest of 2.5% per year. As with other pay-out types, the amount You receive as an income payment also depends on the income type You select, your age, and your sex (where permitted by state law). THE ANNUITY RATES IN THE GMIB ANNUITY TABLE ARE CONSERVATIVE AND A WITHDRAWAL CHARGE MAY BE APPLICABLE, SO THE AMOUNT OF GUARANTEED MINIMUM LIFETIME INCOME THAT THE GMIB PRODUCES MAY BE LESS THAN THE AMOUNT OF ANNUITY INCOME THAT WOULD BE PROVIDED BY APPLYING YOUR ACCOUNT BALANCE ON YOUR ANNUITY DATE TO THEN-CURRENT ANNUITY PURCHASE RATES. 43 If You exercise the GMIB, your income payments will be the greater of: . the income payment determined by applying the amount of the income base to the GMIB Annuity Table, or . the income payment determined for the same income type in accordance with the base Contract. (See "Pay-Out Options (or Income Options)".) If You choose not to receive income payments as guaranteed under the GMIB, You may elect any of the income options available under the Contract. IF THE AMOUNT OF THE GUARANTEED MINIMUM LIFETIME INCOME THAT THE GMIB PRODUCES IS LESS THAN THE AMOUNT OF ANNUITY INCOME THAT WOULD BE PROVIDED BY APPLYING YOUR ACCOUNT BALANCE ON THE ANNUITY DATE TO THE THEN-CURRENT ANNUITY PURCHASE RATES, THEN YOU WOULD HAVE PAID FOR AN OPTIONAL BENEFIT YOU DID NOT USE. DESCRIPTION OF THE GMIB In states where approved, the GMIB is available only up to but not including age 76 and You can only elect the GMIB at the time You purchase the Contract. THE GMIB MAY BE EXERCISED AFTER A 10-YEAR WAITING PERIOD AND THEN ONLY WITHIN 30 DAYS FOLLOWING A CONTRACT ANNIVERSARY, PROVIDED THAT THE EXERCISE MUST OCCUR NO LATER THAN THE 30-DAY PERIOD FOLLOWING THE CONTRACT ANNIVERSARY FOLLOWING YOUR 85TH BIRTHDAY. INCOME BASE The income base is equal to the greater of (a) or (b) below: (a) Highest Anniversary Value: On the issue date, the "Highest Anniversary Value" is equal to your initial purchase payment. Thereafter, the Highest Anniversary Value will be increased by subsequent purchase payments and reduced proportionately by the percentage reduction in Account Balance attributable to each subsequent withdrawal (including any applicable Withdrawal Charge). On each Contract Anniversary prior to the your 81st birthday, the Highest Anniversary Value will be recalculated and set equal to the greater of the Highest Anniversary Value before the recalculation or the Account Balance on the date of the recalculation. The Highest Anniversary Value does not change after the Contract Anniversary immediately preceding your 81st birthday, except that it is increased for each subsequent purchase payment and reduced proportionally by the percentage reduction in Account Balance attributable to each subsequent withdrawal (including any applicable Withdrawal Charge). (b) Annual Increase Amount: On the date we issue your Contract, the "Annual Increase Amount" is equal to your initial purchase payment. Thereafter, the Annual Increase Amount is equal to (i) less (ii), where: (i) is purchase payments accumulated at the Annual Increase Rate of 6% (as defined below); and (ii)is withdrawal adjustments (as defined below) accumulated at the Annual Increase Rate. The Highest Anniversary Value and Annual Increase Amount are calculated independently of each other. When the Highest Anniversary Value is recalculated and set equal to the Account Balance, the Annual Increase Amount is not set equal to the Account Balance. ANNUAL INCREASE RATE. As noted above we calculate an income base under the GMIB that helps determine the minimum amount You receive as an income payment upon exercising the benefit. One of the factors used in calculating the income base is called the "annual increase rate." Through the Contract Anniversary immediately prior to the your 81st birthday, the Annual Increase Rate is 6%. During the 30 day period following the Contract Anniversary immediately prior to the your 81st birthday, the annual increase rate is 0%. 44 WITHDRAWAL ADJUSTMENTS. Withdrawal adjustments in a Contract Year are determined according to (a) or (b): (a) The withdrawal adjustment for each withdrawal in a Contract Year is the value of the Annual Increase Amount immediately prior to the withdrawal multiplied by the percentage reduction in Account Balance attributable to the withdrawal (including any applicable Withdrawal Charge); or (b) If total withdrawals in a Contract Year are not greater than the Annual Increase Rate multiplied by the Annual Increase Amount at the beginning of the Contract Year, and if these withdrawals are paid to You, the total withdrawal adjustments for that Contract Year will be set equal to the dollar amount of total withdrawals (including any applicable Withdrawal Charge) in that Contract Year. These withdrawal adjustments will replace the withdrawal adjustments defined in (a) immediately above and be treated as though the corresponding withdrawals occurred at the end of that Contract Year. As described in (a) above, if in any Contract Year You take cumulative withdrawals that exceed the Annual Increase Rate multiplied by the Annual Increase Amount at the beginning of the Contract Year, the Annual Increase Amount will be reduced in the same proportion that the entire withdrawal (including any applicable Withdrawal Charge) reduced the Account Balance. This reduction may be significant, particularly when the Account Balance is lower than the Annual Increase Amount, and could have the effect of reducing or eliminating the value of income payments under the GMIB optional benefit. Limiting your cumulative withdrawals during a Contract Year to not more than the Annual Increase Rate multiplied by the Annual Increase Amount at the beginning of the Contract Year, will result in dollar-for-dollar treatment of the withdrawals as described in (b) immediately above. Partial annuitizations are not permitted. No change in owner of the Contract or participant is permitted. In determining GMIB income payments, an amount equal to the Withdrawal Charge that would apply upon a complete withdrawal and the amount of any premium and other taxes that may apply will be deducted from the income base. For purposes of calculating the income base, purchase payment credits (I.E., bonus payments) are not included. EXERCISING THE GMIB. The only income types available with the purchase of this benefit are a Lifetime Income Annuity with a 10 Year Guarantee Period or a Lifetime Income Annuity for Two with a 10 Year Guarantee Period. If You decide to receive income payments under a Lifetime Income Annuity with a 10 year Guarantee Period after age 79, the 10 year guarantee is reduced as follows: ----------------------------------------------------- Age at Pay-Out Guarantee ----------------------------------------------------- 80 9 years ----------------------------------------------------- 81 8 years ----------------------------------------------------- 82 7 years ----------------------------------------------------- 83 6 years ----------------------------------------------------- 84 and 85 5 years ----------------------------------------------------- Lifetime Income Annuity for Two is available if the ages of the joint Annuitants are 10 years apart or less (or as permissible under our then current underwriting requirements, if more favorable). EFFECT OF OUTSTANDING LOANS ON THE GMIB. YOU MAY NOT EXERCISE THIS BENEFIT IF YOU HAVE AN OUTSTANDING LOAN BALANCE. YOU MAY EXERCISE THIS BENEFIT IF YOU REPAY YOUR OUTSTANDING LOAN BALANCE. IF YOU DESIRE TO EXERCISE THIS BENEFIT AND HAVE AN OUTSTANDING LOAN BALANCE AND REPAY THE LOAN BY MAKING A PARTIAL WITHDRAWAL, YOUR INCOME BASE WILL BE REDUCED TO ADJUST FOR THE REPAYMENT OF THE LOAN, ACCORDING TO THE FORMULA DESCRIBED ABOVE. 45 TERMINATING THE GMIB. This benefit will terminate upon the earliest of: 1. The 30th day following the Contract Anniversary following Your 85th birthday; 2. The date You make a total withdrawal of your Account Balance (a pro-rata portion of the annual benefit charge for the GMIB will be assessed); 3. You elect to receive income payments under the Contract and You do not elect to receive income payments under the GMIB (a pro-rata portion of the annual benefit charge for the GMIB will be assessed); 4. On the day there are insufficient amounts to deduct the charge for the GMIB from Your Account Balance; or 5. If You die. For more information on when we may or may not terminate your Contract, see "When We Can Cancel Your Deferred Annuity". CHARGES. The GMIB is available in Deferred Annuities for an additional charge of 0.70% (except for the states of Texas and Virginia for TSA ERISA, 403(a) and 457(b) Deferred Annuities, where the charge is 0.35%) of the income base, deducted at the end of each Contract Year on the Contract Anniversary, by withdrawing amounts on a pro-rata basis from your Fixed Interest Account Balance (net of any outstanding loans) and Separate Account Balance. We take amounts from the Separate Account by canceling accumulation units from your Separate Account Balance. If You make a total withdrawal of your Account Balance or elect to receive income payments under your Contract, a pro-rata portion of the annual optional benefit charge will be assessed based on the number of months from the last Contract Anniversary to the date of the withdrawal or the beginning of income payments. Prior to May 4, 2009, the charge for the optional GMIB is 0.35% of the income base. (For employer groups with TSA ERISA, 457(b) and 403(a) Deferred Annuities that were established on or before May 1, 2009 which elected at issue to make available the GMIB under their group Contract, participants who submit an application after May 1, 2009, will receive the lower charge of 0.35%.) GRAPHIC. The purpose of the following graphic is to illustrate the operation of the GMIB. The investment results shown are hypothetical and are not representative of past or future performance. Actual investment results may be more or less than those shown and will depend upon a number of factors, including investment allocations and the investment experience of the Investment Divisions chosen. THE GRAPHIC DOES NOT REFLECT THE DEDUCTION OF FEES AND CHARGES, WITHDRAWAL CHARGES OR INCOME TAXES OR PENALTIES. (1)THE 6% ANNUAL INCREASE AMOUNT OF THE INCOME BASE Determining a value upon which future income payments will be based Prior to annuitization, your Account Balance fluctuates above and below your initial purchase payment depending on the investment performance of the Investment Divisions You selected. Your purchase payments accumulate at the annual increase rate of 6%, until the Contract Anniversary on or immediately after the contract owner's 81st birthday. Your purchase payments are also adjusted for any withdrawals (including any applicable Withdrawal Charge) made during this period. The line (your purchase payments accumulated at 6% a year adjusted for withdrawals and charges "the 6% Annual Increase Amount of the Income Base") is the value upon which future income payments can be based. [6% Annual Income Base Chart] 46 Determining your guaranteed lifetime income stream Assume that You decide to annuitize your Contract and begin taking annuity payments after 30 years. In this example, your 6% Annual Increase Amount of the Income Base is higher than the Highest Anniversary Value and will produce a higher income benefit. Accordingly, the 6% Annual Increase Amount of the Income Base will be applied to the annuity pay-out rates in the GMIB Annuity Table to determine your lifetime annuity payments. THE INCOME BASE IS NOT AVAILABLE FOR CASH WITHDRAWALS AND IS ONLY USED FOR PURPOSES OF CALCULATING THE GMIB BENEFIT PAYMENT AND THE CHARGE FOR THE BENEFIT. [10 Year Waiting Period with 6% Annual Income Base and Annuity for life CHART] (2)THE "HIGHEST ANNIVERSARY VALUE" ("HAV") Determining a value upon which future income payments will be based Prior to annuitization, the Highest Anniversary Value at each Contract Anniversary begins to lock in growth. The Highest Anniversary Value is adjusted upward each Contract Anniversary if the Account Balance at that time is greater than the amount of the current Highest Anniversary Value. Upward adjustments will continue until the Contract Anniversary immediately prior to the contract owner's 81st birthday. The Highest Anniversary Value also is adjusted for any withdrawals taken (including any applicable Withdrawal Charge) or any additional payments made. The Highest Anniversary Value line is the value upon which future income payments can be based. [Highest Account Balance Income Base Chart] 47 Determining your guaranteed lifetime income stream Assume that You decide to annuitize your Contract and begin taking annuity payments after 20 years. In this example, the Highest Anniversary Value is higher than the Account Balance. Accordingly, the Highest Anniversary Value will be applied to the annuity pay-out rates in the GMIB Annuity Table to determine your lifetime annuity payments. THE INCOME BASE IS NOT AVAILABLE FOR CASH WITHDRAWALS AND IS ONLY USED FOR PURPOSES OF CALCULATING THE GMIB PAYMENT AND THE CHARGE FOR THE BENEFIT. [10 Year Waiting Period with Highest Account Balance Income Base and Annuity for Life Chart] (3)PUTTING IT ALL TOGETHER Prior to annuitization, the two components of the income base (the 6% Annual Increase Amount of the Income Base and the Highest Anniversary Value) work together to protect your future income. Upon annuitization of the Contract, You will receive income payments for life and the income base and the Account Balance will cease to exist. Also, the GMIB may only be exercised no later than the Contract Anniversary on or following the contract owner's 80th birthday, after a 10 year waiting period, and then only within a 30 day period following the Contract Anniversary. [10 Year Waiting Period with Highest Account Balance Income Base and 6% Annual Income Base Chart] With the GMIB, the income base is applied to special, conservative GMIB annuity purchase factors, which are guaranteed at the time the Contract is issued. However, if then-current annuity purchase factors applied to the Account Balance would produce a greater amount of income, then You will receive the greater amount. In other words, when You annuitize your Contract You will receive whatever amount produces the greatest income payment. THEREFORE, IF YOUR ACCOUNT BALANCE WOULD PROVIDE GREATER INCOME THAN WOULD THE AMOUNT PROVIDED UNDER THE GMIB, YOU WILL HAVE PAID FOR THE GMIB ALTHOUGH IT WAS NEVER USED. [10 Year Waiting Period with Highest Account Balance Income Base and 6% Annual Income Base with Income Annuity for Life Chart] 48 EXAMPLE: (This calculation ignores the impact of Highest Anniversary Value which could further increase the guaranteed minimum income base.) Age 55 at issue Purchase Payment = $100,000. No additional purchase payments or partial withdrawals. Guaranteed minimum income base at age 65 = $100,000 X 1.06/10/ = $179,085 where 10 equals the number of years the purchase payment accumulates for purposes of calculating this benefit. Guaranteed minimum income floor = guaranteed minimum income base applied to the GMIB annuity table. GMIB annuity factor, unisex, age 65 = $4.21 per month per $1,000 applied for lifetime income with 10 years guaranteed. $179,085 X $4.21 = $754 per month. $1,000
------------------------------------------------------------------------------------- Issue Age Age at Pay-Out Guaranteed Minimum Income Floor ------------------------------------------------------------------------------------- 55 65 $754 ------------------------------------------------------------------------------------- 70 $1,131 ------------------------------------------------------------------------------------- 75 $1,725 -------------------------------------------------------------------------------------
The above chart ignores the impact of premium and other taxes. LWG In states where approved, we offer the LWG for elective TSA (non-ERISA), SEP and SIMPLE IRA Deferred Annuities. If You elect the LWG, Roth TSA purchase payments may be permitted. THE LWG DOES NOT ESTABLISH OR GUARANTEE AN ACCOUNT BALANCE OR MINIMUM RETURN FOR ANY INVESTMENT DIVISION. THE REMAINING GUARANTEED WITHDRAWAL AMOUNT AND TOTAL GUARANTEED WITHDRAWAL AMOUNT ARE NOT AVAILABLE FOR WITHDRAWAL AS A LUMP SUM. WITHDRAWALS ARE SUBJECT TO APPLICABLE CONTRACT WITHDRAWAL CHARGES UNLESS YOU TAKE THE NECESSARY STEPS TO ELECT TO TAKE YOUR ANNUAL BENEFIT PAYMENT UNDER A SYSTEMATIC WITHDRAWAL PROGRAM. Ordinary income taxes apply to withdrawals under this benefit and an additional 10% penalty tax may apply if You are under age 59 1/2. Consult your own tax adviser to determine if an exception to the 10% penalty tax applies. You may not have this benefit and the GMIB in effect at the same time. You should carefully consider if the LWG is best for You. Here are some of the key features of the LWG. . Guaranteed Payments for Life. So long as You make your first withdrawal on or after the date You reach age 59 1/2, the LWG guarantees that we will make payments to You over your lifetime, even if your Remaining Guaranteed Withdrawal Amount and/or Account Balance decline to zero. . Automatic Annual Step-Ups. The LWG provides automatic step-ups on each Contract Anniversary prior to the owner's 86th birthday (and offers the owner the ability to opt out of the step-ups if the charge for this optional benefit should increase). Each of the Automatic Step-Ups will occur only prior to the owner's 86th birthday. . Withdrawal Rates. The LWG uses a 5% withdrawal rate to determine the Annual Benefit Payment. . Cancellation. The LWG provides the ability to cancel the rider every five Contract Years for the first fifteen Contract Years and annually thereafter within 30 days following the eligible Contract Anniversary. . Allocation Restrictions. If You elect the LWG, You are limited to allocating your purchase payments and Account Balance among the Fixed Interest Account and certain Investment Divisions (as described below). 49 . TAX TREATMENT. THE TAX TREATMENT OF WITHDRAWALS UNDER THE LWG RIDER IS UNCERTAIN. IT IS CONCEIVABLE THAT THE AMOUNT OF POTENTIAL GAIN COULD BE DETERMINED BASED ON THE REMAINING GUARANTEED WITHDRAWAL AMOUNT AT THE TIME OF THE WITHDRAWAL, IF THE REMAINING GUARANTEED WITHDRAWAL AMOUNT IS GREATER THAN THE ACCOUNT BALANCE (PRIOR TO WITHDRAWAL CHARGES, IF APPLICABLE). THIS COULD RESULT IN A GREATER AMOUNT OF TAXABLE INCOME REPORTED UNDER A WITHDRAWAL AND CONCEIVABLY A LIMITED ABILITY TO RECOVER ANY REMAINING BASIS IF THERE IS A LOSS ON SURRENDER OF THE CONTRACT. CONSULT YOUR TAX ADVISER PRIOR TO PURCHASE. . Rider Charges. We will continue to assess the LWG rider charge even in the case where your Remaining Guaranteed Withdrawal Amount, as described below, equals zero. . Qualified Plans. If your plan determines to terminate the Contract at a time when You have elected LWG, You forfeit any income base and any other rights to the LWG You have accrued under the LWG upon termination of the Contract. In considering whether to purchase the LWG, You must consider your desire for protection and the cost of the benefit with the possibility that had You not purchased the benefit, your Account Balance may be higher. In considering the benefit of the lifetime withdrawals, You should consider the impact of inflation. Even relatively low levels of inflation may have significant effect on purchasing power. The Automatic Annual Step-Up, as described below, may provide protection against inflation, if and when there are strong investment returns. As with any guaranteed withdrawal benefit, the LWG, however, does not assure that You will receive strong, let alone any, return on your investments. The LWG must be elected at Contract issue; You must be age 80 or younger at time of purchase. TOTAL GUARANTEED WITHDRAWAL AMOUNT. The Total Guaranteed Withdrawal Amount may be referred to as the "income base" in marketing or other materials. The Total Guaranteed Withdrawal Amount is the minimum amount that You are guaranteed to receive over time while the LWG is in effect. We assess the LWG charge as a percentage of the Total Guaranteed Withdrawal Amount. The initial Total Guaranteed Withdrawal Amount is equal to your initial purchase payment, without taking into account any purchase payment credits (i.e., credit or bonus payments). The Total Guaranteed Withdrawal Amount is increased by each additional purchase payments (up to a maximum benefit amount of $5,000,000). If, however, a withdrawal results in cumulative withdrawals for the current Contract Year that exceed the Annual Benefit Payment, the Total Guaranteed Withdrawal Amount will be reduced by an amount equal to the difference between the Total Guaranteed Withdrawal Amount after the withdrawal and the Account Balance after the withdrawal (if such Account Balance is lower than the Total Guaranteed Withdrawal Amount). THIS REDUCTION MAY BE SIGNIFICANT. Cumulative withdrawals in a given Contract Year will not decrease the Total Guaranteed Withdrawal Amount if such withdrawals do not exceed the Annual Benefit Payment in that Contract Year. REMAINING GUARANTEED WITHDRAWAL AMOUNT. The Remaining Guaranteed Withdrawal Amount is the remaining amount guaranteed to be received over time. The initial Remaining Guaranteed Withdrawal Amount is equal to the initial Total Guaranteed Withdrawal Amount. We increase the Remaining Guaranteed Withdrawal Amount (up to a maximum of $5,000,000) by each additional purchase payment without taking into account any purchase payment credits (i.e., credit or bonus payments). The Remaining Guaranteed Withdrawal Amount is also increased by the 5% Compounding Income Amount, as described below. All withdrawals (including applicable Withdrawal Charges) reduce the Remaining Guaranteed Withdrawal Amount, not just withdrawals that exceed the Annual Benefit Payment (as with the Total Guaranteed Withdrawal Amount). If the withdrawal exceeds the Annual Benefit Payment, then we will additionally reduce the Remaining Guaranteed Withdrawal Amount to equal the difference between the Remaining Guaranteed Withdrawal Amount after the withdrawal and the Account Balance after the withdrawal (if lower). THIS REDUCTION MAY BE SIGNIFICANT. The Remaining Guaranteed Withdrawal Amount is also used to calculate an alternative death benefit available under the LWG. (See "Additional Information" below.) 5% COMPOUNDING INCOME AMOUNT. On each Contract Anniversary until the earlier of: (a) the date of the first withdrawal from the Contract or (b) the tenth Contract Anniversary, the Total Guaranteed Withdrawal Amount and the Remaining Guaranteed Withdrawal Amount are increased by an amount equal to 5% multiplied by the Total Guaranteed 50 Withdrawal Amount and the Remaining Guaranteed Withdrawal Amount before such increase (up to a maximum benefit amount of $5,000,000). We take the Total Guaranteed Withdrawal Amount and the Remaining Guaranteed Withdrawal Amount as of the last day of the Contract Year to determine the amount subject to the increase. The Total Guaranteed Withdrawal Amount and the Remaining Guaranteed Withdrawal Amount may also be increased by the Automatic Annual Step-Up, if that would result in a higher Total Guaranteed Withdrawal Amount and Remaining Guaranteed Withdrawal Amount. AUTOMATIC ANNUAL STEP-UP. On each Contract Anniversary prior to the owner's 86th birthday, an Automatic Annual Step-Up will occur, provided that the Account Balance exceeds the Total Guaranteed Withdrawal Amount immediately before the Step-Up (and provided that You have not chosen to decline the Step-Up as described below). The Automatic Annual Step-Up will: . reset the Total Guaranteed Withdrawal Amount and the Remaining Guaranteed Withdrawal Amount to the Account Balance on the date of the Step-Up, up to a maximum of $5,000,000, regardless of whether or not You have taken any withdrawals; . reset the Annual Benefit Payment equal to 5% of the Total Guaranteed Withdrawal Amount after the Step-Up; and . may reset the LWG charge to the then current charge, up to a maximum of 0.95% for the same optional benefit. In the event that the charge applicable to Contract purchases at the time of the Step-Up is higher than your current LWG charge, and we elect to increase the benefit charge in connection with the Step-Up we will notify You in writing a minimum of 30 days in advance of the applicable Contract Anniversary and inform You that You may choose to decline the Automatic Annual Step-Up. If You choose to decline the Automatic Annual Step-Up, You must notify us in accordance with our administrative procedures (currently we require You to submit your request in writing at our Administrative Office no less than seven calendar days prior to the applicable Contract Anniversary). Once You notify us of your decision to decline the Automatic Annual Step-Up, You will no longer be eligible for future Automatic Annual Step-Ups until You notify us in writing at our Administrative Office that You wish to reinstate the Step-Ups. This reinstatement will take effect at the next Contract Anniversary after we receive your request for reinstatement. Please note that the Automatic Annual Step-Up may be of limited benefit if You intend to make purchase payments that would cause your Account Balance to approach $5,000,000 because the Total Guaranteed Withdrawal Amount and Remaining Guaranteed Withdrawal Amount cannot exceed $5,000,000. ANNUAL BENEFIT PAYMENT. The initial Annual Benefit Payment is equal to the initial Total Guaranteed Withdrawal Amount multiplied by the 5% withdrawal rate. The Annual Benefit Payment may be referred to as "annual income amount" in marketing or other materials. If the Total Guaranteed Withdrawal Amount is later recalculated (for example, because of additional purchase payments, the 5% compounding amount, the Automatic Annual Step-Up, or Withdrawals greater than the Annual Benefit Payment), the Annual Benefit Payment is reset equal to the new Total Guaranteed Withdrawal Amount multiplied by the 5% withdrawal rate. IMPORTANT TO NOTE. . If You take your first withdrawal before the date You reach age 59 1/2, we will continue to pay the Annual Benefit Payment each year until the Remaining Guaranteed Withdrawal Amount is depleted, even if your Account Balance declines to zero. This means if your Account Balance is depleted due to withdrawals not greater than the Annual Benefit Payment or the deduction of the benefit charge, and your Remaining Guaranteed Withdrawal Amount is greater than zero, we will pay You the remaining Annual Benefit Payment, if any, not yet withdrawn during the Contract Year that the Account Balance was depleted, and beginning in the following Contract Year, we will continue paying the Annual Benefit Payment to You each year until your Remaining Guaranteed Withdrawal Amount is 51 depleted. This guarantees that You will receive your purchase payments even if your Account Balance declines to zero DUE TO MARKET PERFORMANCE so long as You do not take withdrawals greater than the Annual Benefit Payment; however, You will not be guaranteed income for the rest of your life. . If You take your first withdrawal on or after the date You reach age 59 1/2, we will continue to pay the Annual Benefit Payment each year for the rest of your life, even if your Remaining Guaranteed Withdrawal Amount and/or Account Balance declines to zero. This means if your Remaining Guaranteed Withdrawal Amount and/or your Account Balance is depleted due to withdrawals not greater than the Annual Benefit Payment or the deduction of the benefit charge, we will pay to You the remaining Annual Benefit Payment, if any, not yet withdrawn during that Contract Year that the Account Balance was depleted, and beginning in the following Contract Year, we will continue paying the Annual Benefit Payment to You each year for the rest of your life. Therefore, You will be guaranteed income for life. YOU SHOULD CAREFULLY CONSIDER WHEN TO BEGIN TAKING WITHDRAWALS IF YOU HAVE ELECTED THE LWG. IF YOU BEGIN WITHDRAWALS TOO SOON, YOUR TOTAL GUARANTEED WITHDRAWAL AMOUNT AND REMAINING GUARANTEED WITHDRAWAL AMOUNT ARE NO LONGER INCREASED BY THE 5% ANNUAL COMPOUNDING INCREASE. ON THE OTHER HAND, IF YOU DELAY TAKING WITHDRAWALS FOR TOO LONG, YOU MAY LIMIT THE NUMBER OF YEARS AVAILABLE FOR YOU TO TAKE WITHDRAWALS IN THE FUTURE (DUE TO LIFE EXPECTANCY), AND YOU MAY BE PAYING FOR A BENEFIT YOU ARE NOT USING. You have the option of receiving withdrawals under the LWG or receiving payments under a pay-out option. You should consult with your registered representative when deciding how to receive income under this Contract. In making this decision, You should consider many factors, including the relative amount of current income provided by the two options, the potential ability to receive higher future payments through potential increases to the value of the LWG, your potential need to make additional withdrawals in the future, and the relative values to You of the death benefits available prior to and after annuitization. At any time during the pay-in phase, You can elect to annuitize under current annuity rates in lieu of continuing the LWG. This may provide higher income amounts and/or different tax treatment than the payments received under the LWG. EFFECT OF OUTSTANDING LOANS ON THE TOTAL GUARANTEED WITHDRAWAL AMOUNT AND REMAINING GUARANTEED WITHDRAWAL AMOUNT. If there is an outstanding loan balance (including loans in default which we cannot offset or collect due to tax restrictions), any additional withdrawals will be treated as withdrawals in excess of the Annual Benefit Payment. In that event, the Total Guaranteed Withdrawal Amount will be reduced. The reduction will be equal to the difference between the Total Guaranteed Withdrawal Amount after the withdrawal and the Account Balance after the withdrawal. If the Account Balance after the withdrawal and minus any loan in default is higher than the Total Guaranteed Withdrawal Amount, no reduction will be made. In the event an outstanding loan balance is in default and we can withdraw the defaulted amount from your Account Balance, if the amount of the default does not exceed the Annual Benefit Payment, then the Total Guaranteed Withdrawal Amount will not be decreased. If the amount of the default exceeds the Annual Benefit Payment, the Total Guaranteed Withdrawal Amount will be reduced. The reduction will be equal to the difference between the Total Guaranteed Withdrawal Amount after the withdrawal and the Account Balance after the withdrawal. If the Account Balance after the withdrawal and minus any loan in default is higher than the Total Guaranteed Withdrawal Amount, no reduction will be made. Also, an additional reduction will be made to the Remaining Guaranteed Withdrawal Amount. This additional reduction will be equal to the difference between the Remaining Guaranteed Withdrawal Amount after the withdrawal and the Account Balance after the withdrawal. If the Account Balance after the withdrawal and minus any loan in default is higher than the Remaining Guaranteed Withdrawal Amount, no reduction will be made. 52 MANAGING YOUR WITHDRAWALS. It is important that You carefully manage your annual withdrawals. To retain the full guarantees of this benefit, your annual withdrawals cannot exceed the Annual Benefit Payment each Contract Year. If a Withdrawal Charge does apply, the charge is not included in the amount withdrawn for the purpose of calculating whether annual withdrawals during a Contract Year exceed the Annual Benefit Payment. IF A WITHDRAWAL FROM YOUR CONTRACT DOES RESULT IN ANNUAL WITHDRAWALS DURING A CONTRACT YEAR EXCEEDING THE ANNUAL BENEFIT PAYMENT, THE TOTAL GUARANTEED WITHDRAWAL AMOUNT WILL BE RECALCULATED AND THE ANNUAL BENEFIT PAYMENT WILL BE REDUCED TO THE NEW TOTAL GUARANTEED WITHDRAWAL AMOUNT MULTIPLIED BY THE 5% WITHDRAWAL RATE. IN ADDITION, AS NOTED ABOVE, IF A WITHDRAWAL RESULTS IN CUMULATIVE WITHDRAWALS FOR THE CURRENT CONTRACT YEAR EXCEEDING THE ANNUAL BENEFIT PAYMENT, THE REMAINING GUARANTEED WITHDRAWAL AMOUNT WILL ALSO BE REDUCED BY AN ADDITIONAL AMOUNT EQUAL TO THE DIFFERENCE BETWEEN THE REMAINING GUARANTEED WITHDRAWAL AMOUNT AFTER THE WITHDRAWAL AND THE ACCOUNT BALANCE AFTER THE WITHDRAWAL (IF SUCH ACCOUNT BALANCE IS LOWER THAN THE REMAINING GUARANTEED WITHDRAWAL AMOUNT). THESE REDUCTIONS IN THE TOTAL GUARANTEED WITHDRAWAL AMOUNT, ANNUAL BENEFIT PAYMENT, AND REMAINING GUARANTEED WITHDRAWAL AMOUNT MAY BE SIGNIFICANT. You are still eligible to receive either lifetime payments or the remainder of the Remaining Guaranteed Withdrawal Amount so long as the withdrawal that exceeded the Annual Benefit Payment did not cause your Account Balance to decline to zero. A WITHDRAWAL THAT RESULTS IN CUMULATIVE WITHDRAWALS IN THE CURRENT CONTRACT YEAR EXCEEDING THE ANNUAL BENEFIT PAYMENT THAT REDUCES THE ACCOUNT BALANCE TO ZERO WILL TERMINATE THE CONTRACT. You can always take annual withdrawals less than the Annual Benefit Payment. However, if You choose to receive only a part of your Annual Benefit Payment in any given Contract Year, your Annual Benefit Payment is not cumulative and your Remaining Guaranteed Withdrawal Amount and Annual Benefit Payment will not increase. For example, since your Annual Benefit Payment is 5% of your Remaining Guaranteed Withdrawal Amount, You cannot withdraw 3% in one year and then withdraw 7% the next year without exceeding your Annual Benefit Payment in the second year. SYSTEMATIC WITHDRAWAL PROGRAM. If available in your state, You may choose to take your Annual Benefit Payment under the Systematic Withdrawal Program, including the first Contract Year. If You do so, any Withdrawal Charges that would otherwise apply to such withdrawals will be waived. Your Systematic Withdrawal Program withdrawal amount will be adjusted on each Contract Anniversary for any changes in the Annual Benefit Payment as a result of Automatic Annual Step-Ups, additional purchase payments or transfers received during the Contract Year. Any withdrawals taken outside of the Systematic Withdrawal Program will cause the Systematic Withdrawal Program to terminate. If the commencement of the Systematic Withdrawal Program does not coincide with a Contract Anniversary, the initial Systematic Withdrawal Program period will be adjusted to end on a Contract Anniversary. REQUIRED MINIMUM DISTRIBUTIONS. You may be required to take withdrawals to fulfill minimum distribution requirements generally beginning at age 70 1/2. These required distributions may be larger than your Annual Benefit Payment. AFTER THE FIRST CONTRACT YEAR, we will increase your Annual Benefit Payment to equal your required minimum distribution amount for that year, if such amounts are greater than your Annual Benefit Payment. YOU MUST BE ENROLLED IN THE AUTOMATED REQUIRED MINIMUM DISTRIBUTION SERVICE TO QUALIFY FOR THIS INCREASE IN THE ANNUAL BENEFIT PAYMENT. THE FREQUENCY OF YOUR WITHDRAWALS MUST BE ANNUAL. THE AUTOMATED REQUIRED MINIMUM DISTRIBUTION SERVICE IS BASED ON INFORMATION RELATING TO THIS CONTRACT ONLY. To enroll in the automated required minimum distribution service, please contact your Administrative Office. INVESTMENT ALLOCATION RESTRICTIONS. If You elect the LWG, You are limited to allocating your purchase payments and Account Balance among the Fixed Interest Account and the following Investment Divisions: 1. MetLife Conservative Allocation Investment Division 2. MetLife Conservative to Moderate Allocation Investment Division 3. MetLife Moderate Allocation Investment Division 4. MetLife Moderate to Aggressive Allocation Investment Division 53 CANCELLATION. You may elect to cancel the LWG every fifth Contract Anniversary for the first fifteen Contract Years and annually thereafter. We must receive your cancellation request within 30 days following the eligible Contract Anniversary in writing at our Administrative Office. The cancellation will take effect on the day we receive your request. If cancelled, the LWG will terminate, we will no longer deduct the LWG charge, and the allocation restrictions described above will no longer apply. The Contract, however, will continue. TERMINATION. The LWG will terminate upon the earliest of: 1. The date of a full withdrawal of the Account Balance (A pro rata portion of the annual charge will be assessed; You are still eligible to receive either the Remaining Guaranteed Withdrawal Amount or lifetime payments provided the withdrawal did not exceed the Annual Benefit Payment and the provisions and conditions of this optional benefit have been met); 2. The date the Account Balance is applied to a pay-out option (A pro-rata portion of the annual charge for this rider will be assessed); 3. The date there are insufficient funds to deduct the charge from your Account Balance and your Contract is thereby terminated (whatever Account Balance is available to pay the annual charge for the benefit will be applied; You are still eligible to receive either the Remaining Guaranteed Withdrawal Amount or lifetime payments, provided the provisions and conditions of this optional benefit have been met; however, You will have no other benefits under the Contract); 4. The date a defaulted loan balance, once offset, causes the Account Balance to reduce to zero; 5. The contract owner dies; 6. There is a change in contract owner, for any reason, unless we agree otherwise (A pro-rata portion of the annual charge for this rider will be assessed); 7. The Contract is terminated (A pro-rata portion of the annual charge for this rider will be assessed except for termination because of death of the owner, then no charge will be assessed based on the period from the most recent Contract Anniversary to the date of termination takes effect); or 8. The effective date of cancellation of this benefit. ADDITIONAL INFORMATION. The LWG may affect the death benefit available under your Contract. If the owner should die while the LWG is in effect, an alternative death benefit amount will be calculated under the LWG that can be taken in a lump sum. The LWG death benefit amount that may be taken as a lump sum will be equal to total purchase payments less any partial withdrawals and any outstanding loan balance. If this death benefit amount is greater than the death benefit provided by your Contract, and if withdrawals in each Contract Year did not exceed the Annual Benefit Payment, then this death benefit amount will be paid instead of the death benefit provided by the Contract. All other provisions of your Contract's death benefit will apply. Alternatively, the Beneficiary may elect to receive the Remaining Guaranteed Withdrawal Amount as a death benefit, in which case we will pay the Remaining Guaranteed Withdrawal Amount on a monthly basis (or any mutually agreed upon frequency, but no less frequently than annually) until the Remaining Guaranteed Withdrawal Amount is exhausted. This death benefit will be paid instead of the applicable contractual death benefit (the basic death benefit, the additional death benefit amount calculated under the LWG as described above, or the Annual Step-Up Death Benefit, if that benefit had been purchased by the owner). Otherwise, the provisions of those contractual death benefits will determine the amount of the death benefit. Except as may be required by the Internal Revenue Code, an annual payment will not exceed the Annual Benefit Payment. If your Beneficiary dies while such payments are made, we will continue making the payments to the Beneficiary's estate unless we have agreed to another payee in writing. Federal income tax law generally requires that such 54 payments be substantially equal and begin over a period no longer than the Beneficiary's remaining life expectancy with payments beginning no later than the end of the calendar year immediately following the year of your death. We reserve the right to accelerate any payment that is less than $500 or to comply with requirements under the Internal Revenue Code (including minimum distribution requirement). If You terminate the LWG because (1) You make a total withdrawal of your Account Balance; (2) your Account Balance is insufficient to pay the LWG charge; or (3) the contract owner dies, You may not make additional purchase payments under the Contract. LWG CHARGE. The LWG is available in Deferred Annuities for an additional charge of 0.95% of the Total Guaranteed Withdrawal Amount, deducted at the end of each Contract Year by withdrawing amounts on a pro-rata basis from your Fixed Interest Account Balance and Separate Account Balance, after applying any 5% Compounding Income Amount and prior to taking into account any Automatic Annual Step-Up occurring on the Contract Anniversary. We take amounts from the Separate Account by canceling accumulation units from your Separate Account Balance. If an Automatic Annual Step-Up occurs under a LWG, we may reset the LWG charge to the then current charge for the same optional benefit, but no more than a maximum of 0.95%. If, at the time the Contract was issued, the current charge for the benefit was equal to the maximum charge, than the charge for the benefit will not increase upon an Automatic Annual Step Up. IF THE LWG IS IN EFFECT, THE CHARGE WILL CONTINUE EVEN IF YOUR REMAINING GUARANTEED WITHDRAWAL AMOUNT EQUALS ZERO. EXAMPLES The purpose of these examples is to illustrate the operation of the LWG. The investment results shown are hypothetical and are not representative of past or future performance. Actual investment results may be more or less than those shown and will depend upon a number of factors, including investment allocations and the investment experience of the Investment Divisions chosen. The examples do not reflect the deduction of fees and charges, Withdrawal Charges and applicable income taxes and penalties. For purposes of the examples, it is assumed that no loans have been taken. LWG 1. When Withdrawals Do Not Exceed the Annual Benefit Payment Assume that a Contract had an initial purchase payment of $100,000. The initial Account Balance would be $100,000, the Total Guaranteed Withdrawal Amount would be $100,000, the initial Remaining Guaranteed Withdrawal Amount would be $100,000 and the initial Annual Benefit Payment would be $5,000 ($100,000 x 5%). Assume that $5,000 is withdrawn each year, beginning before the contract owner attains age 59 1/2. The Remaining Guaranteed Withdrawal Amount is reduced by $5,000 each year as withdrawals are taken (the Guaranteed Total Withdrawal Amount is not reduced by these withdrawals). The Annual Benefit Payment of $5,000 is guaranteed to be received until the Remaining Guaranteed Withdrawal Amount is depleted, even if the Account Balance is reduced to zero. If the first withdrawal is taken after age 59 1/2, then the Annual Benefit Payment of $5,000 is guaranteed to be received for the owner's lifetime, even if the Remaining Guaranteed Withdrawal Amount and the Account Balance are reduced to zero. 55 [CHART] Annual Benefit Cumulative Account Payment Withdrawals Balance -------------- ----------- ----------- 1 $5,000 $ 5,000 $100,000.00 2 5,000 10,000 90,250.00 3 5,000 15,000 80,987.50 4 5,000 20,000 72,188.13 5 5,000 25,000 63,828.72 6 5,000 30,000 55,887.28 7 5,000 35,000 48,342.92 8 5,000 40,000 41,175.77 9 5,000 45,000 34,366.98 10 5,000 50,000 27,898.63 11 5,000 55,000 21,753.70 12 5,000 60,000 15,916.02 13 5,000 65,000 10,370.22 14 5,000 70,000 5,101.71 15 5,000 75,000 96.62 16 5,000 80,000 0 17 5,000 85,000 0 18 5,000 90,000 -13,466.53 19 5,000 95,000 0 20 5,000 100,000 0 2. When Withdrawals Do Exceed the Annual Benefit Payment Assume that a Contract had an initial purchase payment of $100,000. The initial Account Balance would be $100,000, the Total Guaranteed Withdrawal Amount would be $100,000, the initial Remaining Guaranteed Withdrawal Amount would be $100,000 and the initial Annual Benefit Payment would be $5,000 ($100,000 X 5%). Assume that the Remaining Guaranteed Withdrawal Amount is reduced to $95,000 due to a withdrawal of $5,000 in the first year. Assume the Account Balance was further reduced to $75,000 at year two due to poor market performance. If You withdrew $10,000 at this time, your Account Balance would be reduced to $75,000 - $10,000 = $65,000. Your Remaining Guaranteed Withdrawal Amount would be reduced to $95,000 - $10,000 = $85,000. Since the withdrawal of $10,000 exceeded the Annual Benefit Payment of $5,000 and the resulting Remaining Guaranteed Withdrawal Amount would be greater than the resulting Account Balance, there would be an additional reduction to the Remaining Guaranteed Withdrawal Amount. The Remaining Guaranteed Withdrawal Amount after the withdrawal would be set equal to the Account Balance after the withdrawal ($65,000). This new Remaining Guaranteed Withdrawal Amount of $65,000 would now be the amount guaranteed to be available to be withdrawn over time. The Total Guaranteed Withdrawal Amount would also be reduced to $65,000. The Annual Benefit Payment would be set equal to 5% X $65,000 = $3,250. B. LWG -- 5% Compounding Amount Assume that a Contract had an initial purchase payment of $100,000. The initial Remaining Guaranteed Withdrawal Amount would be $100,000, the Total Guaranteed Withdrawal Amount would be $100,000, and the Annual Benefit Payment would be $5,000 ($100,000 X 5%). The Total Guaranteed Withdrawal Amount will increase by 5% of the Total Guaranteed Withdrawal Amount until the earlier of the first withdrawal or the 10th Contract Anniversary. The Annual Benefit Payment will be recalculated as 5% of the new Total Guaranteed Withdrawal Amount. If the first withdrawal is taken in the first Contract Year then there would be no increase: the Total Guaranteed Withdrawal Amount would remain at $100,000 and the Annual Benefit Payment will remain at $5,000 ($100,000 X 5%). 56 If the first withdrawal is taken in the second Contract Year then the Total Guaranteed Withdrawal Amount would increase to $105,000 ($100,000 x 105%), and the Annual Benefit Payment would increase to $5,250 ($105,000 x 5%). If the first withdrawal is taken in the third Contract Year then the Total Guaranteed Withdrawal Amount would increase to $110,250 ($105,000 x 105%), and the Annual Benefit Payment would increase to $5,513 ($110,250 x 5%). If the first withdrawal is taken after the 10th Contract Year then the Total Guaranteed Withdrawal Amount would increase to $162,890 (the initial $100,000, increased by 5% per year, compounded annually for 10 years), and the Annual Benefit Payment would increase to $8,144 ($162,890 x 5%). [CHART] Delay taking withdrawals and receive higher guaranteed payments Year of First Withdrawal 1 2 3 4 5 6 7 8 9 10 11 ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- 5,000 5,250 5,513 5,788 6,078 6,381 6,700 7,036 7,387 7,757 8,144 C. LWG -- Automatic Annual Step-Ups and 5% Compounding Amount (No Withdrawals or loans) Assume that a Contract had an initial purchase payment of $100,000. Assume that no withdrawals or loans are taken. At the first Contract Anniversary, provided that no withdrawals or loans are taken, the Total Guaranteed Withdrawal Amount is increased to $105,000 ($100,000 increased by 5%, compounded annually). Assume the Account Balance has increased to $110,000 at the first Contract Anniversary due to good market performance. The Automatic Annual Step-Up will increase the Total Guaranteed Withdrawal Amount from $105,000 to $110,000 and reset the Annual Benefit Payment to $5,500 ($110,000 x 5%). At the second Contract Anniversary, provided that no withdrawals or loans are taken, the Total Guaranteed Withdrawal Amount is increased to $115,500 ($110,000 increased by 5%, compounded annually). Assume the Account Balance has increased to $120,000 at the second Contract Anniversary due to good market performance. The Automatic Annual Step-Up will increase the Total Guaranteed Withdrawal Amount from $115,500 to $120,000 and reset the Annual Benefit Payment to $6,000 ($120,000 x 5%). Provided that no withdrawals or loans are taken, each year the Total Guaranteed Withdrawal Amount would increase by 5%, compounded annually, from the second Contract Anniversary through the ninth Contract Anniversary, and at that 57 point would be equal to $168,852. Assume that during these Contract Years the Account Balance does not exceed the Total Guaranteed Withdrawal Amount due to poor market performance. Assume the Account Balance at the ninth Contract Anniversary has increased to $180,000 due to good market performance. The Automatic Annual Step-Up will increase the Total Guaranteed Withdrawal Amount from $168,852 to $180,000 and reset the Annual Benefit Payment to $9,000 ($180,000 x 5%). At the 10th Contract Anniversary, provided that no withdrawals or loans are taken, the Total Guaranteed Withdrawal Amount is increased to $189,000 ($180,000 increased by 5%, compounded annually). Assume the Account Balance is less than $189,000. There is no Automatic Annual Step-Up since the Account Balance is below the Total Guaranteed Withdrawal Amount; however, due to the 5% increase in the Total Guaranteed Withdrawal Amount, the Annual Benefit Payment is increased to $9,450 ($189,000 x 5%). LWG--AUTOMATIC ANNUAL STEP-UPS AND 5% COMPOUNDING AMOUNT (NO WITHDRAWALS OR LOANS) [CHART] PAY-OUT OPTIONS (OR INCOME OPTIONS) You may convert your Deferred Annuity into a regular stream of income after your "pay-in" or "accumulation" phase. The pay-out phase is often referred to as either "annuitizing" your Contract or taking an income annuity. When You select your pay-out option, You will be able to choose from the range of options we then have available. You have the flexibility to select a stream of income to meet your needs. If You decide You want a pay-out option, we withdraw some or all of your Account Balance (less any premium taxes, applicable Contract fees and any outstanding loans), then we apply the net amount to the option. See " Income Taxes" for a discussion of partial annuitizations. You are not required to hold your Deferred Annuity for any minimum time period before You may annuitize. However, You may not be older than 95 years old to select a pay-out option (90 in New York State). (These requirements may be changed by us.) Although guaranteed annuity rates for the e Bonus Class are the same as those for the e Class of the Deferred Annuity, current rates for the e Bonus Class may be lower than the e Class of the Deferred Annuity. You must convert at least $5,000 of your Account Balance to receive income payments. PLEASE BE AWARE THAT ONCE YOUR CONTRACT IS ANNUITIZED YOU ARE INELIGIBLE TO RECEIVE THE DEATH BENEFIT YOU HAVE SELECTED. ADDITIONALLY, IF YOU HAVE SELECTED THE GMIB OR LWG, ANNUITIZING YOUR CONTRACT TERMINATES THE RIDER AND ANY DEATH BENEFIT PROVIDED BY THE RIDER. When considering a pay-out option, You should think about whether You want: . Payments guaranteed by us for the rest of your life (or for the rest of two lives) or the rest of your life (or for the rest of two lives) with a guaranteed period; and . A fixed dollar payment or a variable payment. 58 Your income option provides You with a regular stream of payments for either your lifetime or your lifetime with a guaranteed period. Your income payment amount will depend upon your choices. For lifetime options, the age of the measuring lives (Annuitants) will also be considered. For example, if You select a pay-out option guaranteeing payments for your lifetime and your spouse's lifetime, your payments will typically be lower than if You select a pay-out option with payments over only your lifetime. Income payment types that guarantee that payments will be made for a certain number of years regardless of whether the Annuitant or joint Annuitant is alive (such as Lifetime Income Annuity with a Guarantee Period and Lifetime Income Annuity for Two with a Guarantee Period, as defined below) result in income payments that are smaller than with income payment types without such a guarantee (such as Lifetime Income Annuity and Lifetime Income Annuity for Two, as defined below). In addition, to the extent the income payment type has a guarantee period, choosing a shorter guarantee period will result in each income payment being larger. We do not guarantee that your variable payments will be a specific amount of money. You may choose to have a portion of the payment fixed and guaranteed under the Fixed Income Option. If You do not tell us otherwise, your Fixed Interest Account Balance will be used to provide a Fixed Income Option and your Separate Account Balance will be used to provide a variable pay-out option. INCOME PAYMENT TYPES Currently, we provide You with a wide variety of income payment types to suit a range of personal preferences. You decide the income payment type when You decide to take a pay-out option. Your decision is irrevocable. There are three people who are involved in payments under your pay-out option: . Contract owner: the person or entity which has all rights including the right to direct who receives payment. . Annuitant: the natural person whose life is the measure for determining the duration and the dollar amount of payments. . Beneficiary: the person who receives continuing payments or a lump sum payment, if any, if the contract owner dies. Many times the contract owner and the Annuitant are the same person. When deciding how to receive income, consider: . The amount of income You need; . The amount You expect to receive from other sources; . The growth potential of other investments; and . How long You would like your income to be guaranteed. The following income payment types are currently available. We may make available other income payment types if You so request and we agree. Where required by state law or under a qualified retirement plan, the Annuitant's sex will not be taken into account in calculating income payments. Annuity rates will not be less than the rates guaranteed in the 59 Contract at the time of purchase for the AIR and income payment type elected. Due to underwriting, administrative or Internal Revenue Code considerations the choice of the percentage reduction and/or the duration of the guarantee period may be limited. Lifetime Income Annuity: A variable income that is paid as long as the Annuitant is living. Lifetime Income Annuity with a Guarantee Period: A variable income that continues as long as the Annuitant is living but is guaranteed to be paid for a number of years. If the Annuitant dies before all of the guaranteed payments have been made, payments are made to the contract owner of the annuity (or the Beneficiary, if the contract owner dies during the guarantee period) until the end of the guarantee period. No payments are made once the guarantee period has expired and the Annuitant is no longer living. Lifetime Income Annuity for Two: A variable income that is paid as long as either of the two Annuitants is living. After one Annuitant dies, payments continue to be made as long as the other Annuitant is living. In that event, payments may be the same as those made while both Annuitants were living or may be a smaller percentage that is selected when the annuity is first converted to an income stream. No payments are made once both Annuitants are no longer living. Lifetime Income Annuity for Two with a Guarantee Period: A variable income that continues as long as either of the two Annuitants is living but is guaranteed to be paid (unreduced by any percentage selected) for a number of years. If both Annuitants die before all of the guaranteed payments have been made, payments are made to the contract owner of the annuity (or the Beneficiary, if the contract owner dies during the guarantee period) until the end of the guaranteed period. If one Annuitant dies after the guarantee period has expired, payments continue to be made as long as the other Annuitant is living. In that event, payments may be the same as those made while both Annuitants were living or may be a smaller percentage that is selected when the annuity is first converted to an income stream. No payments are made once the guarantee period has expired and both Annuitants are no longer living. ALLOCATION You decide how your money is allocated among the Fixed Income Option and the Investment Divisions. MINIMUM SIZE OF YOUR INCOME PAYMENT Your initial income payment must be at least $100. If You live in Massachusetts, the initial income payment must be at least $20. This means that the amount used from a Deferred Annuity to provide a pay-out option must be large enough to produce this minimum initial income payment. THE VALUE OF YOUR INCOME PAYMENTS AMOUNT OF INCOME PAYMENTS Variable income payments from an Investment Division will depend upon the number of annuity units held in that Investment Division (described below) and the Annuity Unit Value (described later) as of the 10th day prior to a payment date. This initial variable income payment is computed based on the amount of the purchase payment applied to the specific Investment Division (net any applicable premium tax owed or Contract charge), the AIR, the age of the measuring lives and the income payment type selected. The initial payment amount is then divided by the Annuity Unit Value for the Investment Division to determine the number of annuity units held in that Investment Division. The number of annuity units held remains the same for the duration of the Contract if no reallocations are made. 60 The dollar amount of subsequent variable income payments will vary with the amount by which investment performance is greater or less than the AIR. Each Deferred Annuity provides that, when a pay-out option is chosen, the payment to the Annuitant will not be less than the payment produced by the then current Fixed Income Option purchase rates for that contract class. The purpose of this provision is to assure the Annuitant that, at retirement, if the Fixed Income Option purchase rates for new Contracts are significantly more favorable than the rates guaranteed by a Deferred Annuity of the same class, the Annuitant will be given the benefit of the higher rates. Although guaranteed annuity rates for the eBonus Class are the same as for the other classes of the Deferred Annuity, current rates for the eBonus Class may be lower than the other classes of the Deferred Annuity and may be less than currently issued single payment immediate annuity contract rates. ANNUITY UNITS Annuity units are credited to You when You first convert your Deferred Annuity into an income stream or make a reallocation of your income payment into an Investment Division during the pay-out phase. Before we determine the number of annuity units to credit to You, we reduce your Account Balance by any premium taxes and the Annual Contract Fee, if applicable. (The premium taxes and the Annual Contract Fee are not applied against reallocations.) We then compute an initial income payment amount using the AIR, your income payment type and the age of the measuring lives. We then divide the initial income payment (allocated to an Investment Division) by the Annuity Unit Value on the date of the transaction. The result is the number of annuity units credited for that Investment Division. The initial variable income payment is a hypothetical payment which is calculated based on the AIR. This initial variable income payment is used to establish the number of annuity units. It is not the amount of your actual first variable income payment unless your first income payment happens to be within 10 days after the date You convert your Deferred Annuity into an income stream. When You reallocate an income payment from an Investment Division, annuity units supporting that portion of your income payment in that Investment Division are liquidated. AIR Your income payments are determined by using the AIR to benchmark the investment experience of the Investment Divisions You select. We currently offer an AIR of 3% or 4%. The higher your AIR, the higher your initial variable income payment will be. Your next variable income payment will increase approximately in proportion to the amount by which the investment experience (for the time period between the payments) for the underlying Portfolio minus the Standard Death Benefit Separate Account charge (the resulting number is the net investment return) exceeds the AIR (for the time period between the payments). Likewise, your next variable income payment will decrease to the approximate extent the investment experience (for the time period between the payments) for the underlying Portfolio minus the Standard Death Benefit Separate Account charge (the net investment return) is less than the AIR (for the time period between the payments). A lower AIR will result in a lower initial variable income payment, but subsequent variable income payments will increase more rapidly or decline more slowly than if You had elected a higher AIR as changes occur in the investment experience of the Investment Divisions. The amount of each variable income payment is determined 10 days prior to your income payment date. If your first income payment is scheduled to be paid less than 10 days after You convert your Deferred Annuity to an income stream, then the amount of that payment will be determined on the date You convert your Deferred Annuity to a pay-out option. VALUATION This is how we calculate the Annuity Unit Value for each Investment Division: . First, we determine the change in investment experience (which reflects the deduction for any investment-related charge) for the underlying Portfolio from the previous trading day to the current trading day; 61 . Next, we subtract the daily equivalent of the Standard Death Benefit Separate Account charge for each day since the last day the Annuity Unit Value was calculated; the resulting number is the net investment return; . Then, we multiply by an adjustment based on your AIR for each day since the last Annuity Unit Value was calculated; and . Finally, we multiply the previous Annuity Unit Value by this result. REALLOCATION PRIVILEGE During the pay-out phase of the Deferred Annuity, You may make reallocations among Investment Divisions or from the Investment Divisions to the Fixed Income Option. Once You reallocate your income payment money into the Fixed Income Option, You may not later reallocate it into an Investment Division. There is no Withdrawal Charge to make a reallocation. For us to process a reallocation, You must tell us: . The percentage of the income payment to be reallocated; . The Investment Divisions (or Fixed Income Option) to which You want to reallocate your income payment; and . The Investment Divisions from which You want to reallocate your income payment. Reallocations will be made at the end of the business day, at the close of the Exchange, if received in Good Order prior to the close of the Exchange, on that business day. All other reallocation requests will be processed on the next business day. When You request a reallocation from an Investment Division to the Fixed Income Option, the payment amount will be adjusted at the time of reallocation. Your payment may either increase or decrease due to this adjustment. The adjusted payment will be calculated in the following manner. . First, we update the income payment amount to be reallocated from the Investment Division based upon the applicable Annuity Unit Value at the time of the reallocation; . Second, we use the AIR to calculate an updated annuity purchase rate based upon your age, if applicable, and expected future income payments at the time of the reallocation; . Third, we calculate another updated annuity purchase rate using our current annuity purchase rates for the Fixed Income Option on the date of your reallocation; . Finally, we determine the adjusted payment amount by multiplying the updated income amount determined in the first step by the ratio of the annuity purchase rate determined in the second step divided by the annuity purchase rate determined in the third step. When You request a reallocation from one Investment Division to another, annuity units in one Investment Division are liquidated and annuity units in the other Investment Division are credited to You. There is no adjustment to the income payment amount. Future income payment amounts will be determined based on the Annuity Unit Value for the Investment Division to which You have reallocated. You generally may make a reallocation on any day the Exchange is open. At a future date we may limit the number of reallocations You may make, but never to fewer than one a month. If we do so, we will give You advance written notice. We may limit a Beneficiary's ability to make a reallocation. Here are examples of the effect of a reallocation on the income payment: . Suppose You choose to reallocate 40% of your income payment supported by Investment Division A to the Fixed Income Option and the recalculated income payment supported by Investment Division A is $100. Assume that the updated annuity purchase rate based on the AIR is $125, while the updated annuity purchase rate based on fixed 62 income annuity pricing is $100. In that case, your income payment from the Fixed Income Option will be increased by $40 x ($125/$100) or $50, and your income payment supported by Investment Division A will be decreased by $40. (The number of annuity units in Investment Division A will be decreased as well.) . Suppose You choose to reallocate 40% of your income payment supported by Investment Division A to Investment Division B and the recalculated income payment supported by Investment Division A is $100. Then, your income payment supported by Investment Division B will be increased by $40 and your income payment supported by Investment Division A will be decreased by $40. (Changes will also be made to the number of annuity units in both Investment Divisions as well.) We may require that You use our original forms to make reallocations. Please see the "Transfer Privilege" section regarding our market timing policies and procedures. CHARGES You pay the Standard Death Benefit Separate Account charge for your Contract class during the pay-out phase of the Deferred Annuity. In addition, You pay the applicable investment-related charge during the pay-out phase of your Deferred Annuity. During the pay-out phase, we reserve the right to deduct the Annual Contract Fee. If we do so, it will be deducted pro-rata from each income payment. The Separate Account charges You pay will not reduce the number of annuity units credited to You. Instead, we deduct the charges as part of the calculation of the Annuity Unit Value. 63 GENERAL INFORMATION ADMINISTRATION All transactions will be processed in the manner described below. PURCHASE PAYMENTS Purchase payments may be sent, by cashier's check or certified check made payable to "MetLife," to the Administrative Office, or MetLife sales office, if that office has been designated for this purpose. (We reserve the right to receive purchase payments by other means acceptable to us.) We do not accept cash, money orders or travelers checks. We will provide You with all necessary forms. We must have all documents in Good Order to credit your purchase payments. If You send your purchase payments or transaction requests to an address other than the one we have designated for receipt of such purchase payments or requests, we may return the purchase payment to You, or there may be delay in applying the purchase payment or transaction to your Contract. We reserve the right to refuse purchase payments made via a personal check in excess of $100,000. Purchase payments over $100,000 may be accepted in other forms, including but not limited to, EFT/wire transfers, certified checks, corporate checks, and checks written on financial institutions. The form in which we receive a purchase payment may determine how soon subsequent disbursement requests may be fulfilled. (See "Access To Your Money.") Purchase payments (including any portion of your Account Balance under a Deferred Annuity which You apply to a pay-out option) are effective and valued as of the close of the Exchange on the day we receive them in Good Order at your Administrative Office, except when they are received: . On a day when the Accumulation Unit Value/Annuity Unit Value is not calculated, or . After the close of the Exchange. In those cases, the purchase payments will be effective the next day the Accumulation Unit Value or Annuity Unit Value, as applicable, is calculated. We reserve the right to credit your initial purchase payment to You within two days after its receipt at your Administrative Office or MetLife sales office, as applicable. However, if You fill out our forms incorrectly or incompletely or other documentation is not completed properly or otherwise not in Good Order, we have up to five business days to credit the payment. If the problem cannot be resolved by the fifth business day, we will notify You and give You the reasons for the delay. At that time, You will be asked whether You agree to let us keep your money until the problem is resolved. If You do not agree or we cannot reach You by the fifth business day, your money will be returned. Under the Deferred Annuities, your employer or the group in which You are a participant or member must identify You on its reports to us and tell us how your money should be allocated among the Investment Divisions and the Fixed Interest Account, if available. CONFIRMING TRANSACTIONS You will receive a written statement confirming that a transaction was recently completed. Certain transactions made on a periodic basis, such as Systematic Withdrawal Program payments, and automated investment strategy transfers, may be confirmed quarterly. Salary reduction or deduction purchase payments under the TSA and TSA ERISA Deferred Annuity are confirmed quarterly. Unless You inform us of any errors within 60 days of receipt, we will consider these communications to be accurate and complete. 64 PROCESSING TRANSACTIONS We permit You to request transactions by mail and telephone. We make Internet access available to You. We may suspend or eliminate telephone or Internet privileges at any time, without prior notice. We reserve the right not to accept requests for transactions by facsimile. If mandated by applicable law, including, but not limited to, Federal anti-money laundering laws, we may be required to reject a purchase payment. We may also be required to block a contract owner's account and, consequently, refuse to implement requests for transfers, withdrawals, surrenders or death benefits, until instructions are received from the appropriate governmental authority. BY TELEPHONE OR INTERNET You may initiate a variety of transactions and obtain information by telephone or the Internet virtually 24 hours a day, 7 days a week, unless prohibited by state law or your employer. Some of the information and transactions accessible to You include: . Account Balance . Unit Values . Current rates for the Fixed Interest Account . Transfers . Changes to investment strategies . Changes in the allocation of future purchase payments. Your transaction must be in Good Order and completed prior to the close of the Exchange on one of our business days if You want the transaction to be valued and effective on that day. Transactions will not be valued and effective on a day when the Accumulation or Annuity Unit Value is not calculated or after the close of the Exchange. We will value and make effective these transactions on our next business day. We have put into place reasonable security procedures to insure that instructions communicated by telephone or Internet are genuine. For example, all telephone calls are recorded. Also, You will be asked to provide some personal data prior to giving your instructions over the telephone or through the Internet. When someone contacts us by telephone or Internet and follows our security procedures, we will assume that You are authorizing us to act upon those instructions. Neither the Separate Account nor MetLife will be liable for any loss, expense or cost arising out of any requests that we or the Separate Account reasonably believe to be authentic. In the unlikely event that You have trouble reaching us, requests should be made in writing to your Administrative Office. Response times for the telephone or Internet may vary due to a variety of factors, including volumes, market conditions and performance of the systems. We are not responsible or liable for: . any inaccuracy, error, or delay in or omission of any information You transmit or deliver to us; or . any loss or damage You may incur because of such inaccuracy, error, delay or omission; non-performance; or any interruption of information beyond our control. AFTER YOUR DEATH If we are notified of your death before any requested transaction is completed (including transactions under automated investment strategies, minimum distribution program and Systematic Withdrawal Program), we will cancel the request. 65 As described above, the death benefit will be determined when we receive due proof of death and an election for the payment method. If You are receiving income payments, we will cancel the request and continue making payments to your Beneficiary if your income type so provides. Or, depending on the income type, we may continue making payments to a joint Annuitant. MISSTATEMENT We may require proof of age of the owner, Beneficiary or Annuitant before making any payments under this Deferred Annuity that are measured by the owner's, Beneficiary's or Annuitant's life. If the age of the measuring life has been misstated, the amount payable will be the amount that would have been provided at the correct age. Once income payments have begun, any underpayments will be made up in one sum with the next income payment in a manner agreed to by us. Any overpayments will be deducted first from future income payments. In certain states, we are required to pay interest on any underpayments. THIRD PARTY REQUESTS Generally, we only accept requests for transactions or information from You. We reserve the right not to accept or to process transactions requested on your behalf by third parties. This includes processing transactions by an agent You designate, through a power of attorney or other authorization, who has the ability to control the amount and timing of transfers/reallocations for a number of other contract owners and who simultaneously makes the same request or series of requests on behalf of other contract owners. VALUATION -- SUSPENSION OF PAYMENTS We separately determine the Accumulation Unit Value and Annuity Unit Value, as applicable, for each Investment Division once each day when the Exchange is open for trading. If permitted by law, we may change the period between calculations but we will give You 30 days notice. When You request a transaction, we will process the transaction on the basis of the Accumulation Unit Value or Annuity Unit Value next determined after receipt of the request. Subject to our procedure, we will make withdrawals and transfers/reallocations at a later date, if You request. If your withdrawal request is to elect a variable pay-out option under your Deferred Annuity, we base the number of annuity units You receive on the next available Annuity Unit Value. We reserve the right to suspend or postpone payment for a withdrawal or transfer/reallocation when: . rules of the Securities and Exchange Commission so permit (trading on the Exchange is restricted, the Exchange is closed other than for customary weekend or holiday closings or an emergency exists which makes pricing or sale of securities not practicable); or . during any other period when the Securities and Exchange Commission by order so permits. ADVERTISING PERFORMANCE We periodically advertise the performance of the Investment Divisions. You may get performance information from a variety of sources including your quarterly statements, your MetLife representative, the Internet, annual reports and semiannual reports. All performance numbers are based upon historical earnings. These numbers are not intended to indicate future results. We may state performance in terms of "yield," "change in Accumulation Unit Value/Annuity Unit Value," "average annual total return" or some combination of these terms. 66 YIELD is the net income generated by an investment in a particular Investment Division for 30 days or a month. These figures are expressed as percentages. This percentage yield is compounded semiannually. For the money market Investment Division, we state yield for a seven day period. CHANGE IN ACCUMULATION/ANNUITY UNIT VALUE ("Non-Standard Performance") is calculated by determining the percentage change in the value of an accumulation (or annuity) unit for a certain period. These numbers may also be annualized. Change in Accumulation/Annuity Unit Value may be used to demonstrate performance for a hypothetical investment (such as $10,000) over a specified period. These performance numbers reflect the deduction of the Separate Account charges (with the Standard Death Benefit), the additional Separate Account charge for the American Funds Bond, American Funds Growth, American Funds Growth-Income and American Funds Global Small Capitalization Investment Divisions and the Annual Contract Fee; however, yield and change in Accumulation/Annuity Unit Value performance do not reflect the possible imposition of Withdrawal Charges, the charge for the GMIB and the charge for the LWG. Withdrawal Charges would reduce performance experience. AVERAGE ANNUAL TOTAL RETURN ("Standard Performance") calculations reflect the Separate Account charge (with the Standard Death Benefit), the additional Separate Account charge for the American Funds Growth, American Funds Growth-Income, American Funds Bond and American Funds Global Small Capitalization Investment Divisions and the Annual Contract Fee and applicable Withdrawal Charges since the Investment Division inception date, which is the date the corresponding Portfolio or predecessor Portfolio was first offered under the Separate Account that funds the Deferred Annuity. These figures also assume a steady annual rate of return. They assume that combination of optional benefits (including the Annual Step Up Death Benefit) that would produce the greatest total Separate Account charge. Performance figures will vary among the various classes of the Deferred Annuities and the Investment Divisions as a result of different Separate Account charges and Withdrawal Charges. We may calculate performance for certain investment strategies including Equity Generator and each asset allocation model of the Index Selector. We calculate the performance as a percentage by presuming a certain dollar value at the beginning of a period and comparing this dollar value with the dollar value based on historical performance at the end of that period. We assume that the Separate Account charge reflects the Standard Death Benefit. The information does not assume the charge for the GMIB or LWG. This percentage return assumes that there have been no withdrawals or other unrelated transactions. For purposes of presentation of Non-Standard Performance, we may assume that the Deferred Annuities were in existence prior to the inception date of the Investment Divisions in the Separate Account that funds the Deferred Annuity. In these cases, we calculate performance based on the historical performance of the underlying Metropolitan Fund, Calvert Fund, Met Investors Fund and American Funds(R) Portfolios since the Portfolio inception date. We use the actual accumulation unit or annuity unit data after the inception date. Any performance data that includes all or a portion of the time between the Portfolio inception date and the Investment Division inception date is hypothetical. Hypothetical returns indicate what the performance data would have been if the Deferred Annuity had been introduced as of the Portfolio inception date. We may also present average annual total return calculations which reflect all Separate Account charges and applicable Withdrawal Charges since the Portfolio inception date. We use the actual accumulation unit or annuity unit data after the inception date. Any performance data that includes all or a portion of the time between the Portfolio inception date and the Investment Division inception date is hypothetical. Hypothetical returns indicate what the performance data would have been if the Deferred Annuity had been introduced as of the Portfolio inception date. Past performance is no guarantee of future results. 67 We may demonstrate hypothetical future values of Account Balances over a specified period based on assumed rates of return (which will not exceed 12% and which will include an assumption of 0% as well) for the Portfolios. These presentations reflect the deduction of the Separate Account charge, the Annual Contract Fee, if any, and the weighted average of investment-related charges for all Portfolios to depict investment-related charges. We may demonstrate hypothetical future values of Account Balances for a specific Portfolio based upon the assumed rates of return previously described, the deduction of the Separate Account charge and the Annual Contract Fee, if any, and the investment-related charges for the specific Portfolio to depict investment-related charges. We may demonstrate the hypothetical historical value of each optional benefit for a specified period based on historical net asset values of the Portfolios and the annuity purchase rate, if applicable, either for an individual for whom the illustration is to be produced or based upon certain assumed factors (e.g., unisex, age 65). These presentations reflect the deduction of the Separate Account charge and the Annual Contract Fee, if any, the investment-related charge and the charge for the optional benefit being illustrated. We may demonstrate hypothetical future values of each optional benefit over a specified period based on assumed rates of return (which will not exceed 12% and which will include an assumption of 0% as well) for the Portfolios, the annuity purchase rate, if applicable, either for an individual for whom the illustration is to be produced or based upon certain assumed factors (e.g., unisex, age 65). These presentations reflect the deduction of the Separate Account charge and the Annual Contract Fee, if any, the weighted average of investment-related charges for all Portfolios to depict investment-related charges and the charge for the optional benefit being illustrated. We may demonstrate hypothetical values of income payments over a specified period based on historical net asset values of the Portfolios and the applicable annuity purchase rate, either for an individual for whom the illustration is to be produced or based upon certain assumed factors (e.g., unisex, age 65). These presentations reflect the deduction of the Separate Account charge, the investment-related charge and the Annual Contract Fee, if any. We may demonstrate hypothetical future values of income payments over a specified period based on assumed rates of return (which will not exceed 12% and which will include an assumption of 0% as well) for the Portfolios, the applicable annuity purchase rate, either for an individual for whom the illustration is to be produced or based upon certain assumed factors (e.g., unisex, age 65). These presentations reflect the deduction of the Separate Account charge, the Annual Contract Fee, if any, and the weighted average of investment-related charges for all Portfolios to depict investment-related charges. Any illustration should not be relied on as a guarantee of future results. CHANGES TO YOUR DEFERRED ANNUITY We have the right to make certain changes to your Deferred Annuity, but only as permitted by law. We make changes when we think they would best serve the interest of annuity owners or would be appropriate in carrying out the purposes of the Deferred Annuity. If the law requires, we will also get your approval and the approval of any appropriate regulatory authorities. Examples of the changes we may make include: . To operate the Separate Account in any form permitted by law. . To take any action necessary to comply with or obtain and continue any exemptions under the law (including favorable treatment under the Federal income tax laws, including limiting the number, frequency or types of transfers/reallocations permitted). . To transfer any assets in an Investment Division to another Investment Division, or to one or more separate accounts, or to our general account, or to add, combine or remove Investment Divisions in the Separate Account. 68 . To substitute for the Portfolio shares in any Investment Division, the shares of another class of the Metropolitan Fund, the Calvert Fund, the Met Investors Fund or the shares of another investment company or any other investment permitted by law. . To make any necessary technical changes in the Deferred Annuities in order to conform with any of the above-described actions. If any changes result in a material change in the underlying investments of an Investment Division in which You have a balance or an allocation, we will notify You of the change. You may then make a new choice of Investment Divisions. For Deferred Annuities issued in Pennsylvania, we will ask your approval before making any technical changes. VOTING RIGHTS Based on our current view of applicable law, You have voting interests under your Deferred Annuity concerning Metropolitan Fund, Calvert Fund, Met Investors Fund or American Funds(R) proposals that are subject to a shareholder vote. Therefore, You are entitled to give us instructions for the number of shares which are deemed attributable to your Deferred Annuity. We will vote the shares of each of the underlying Portfolios held by the Separate Account based on instructions we receive from those having a voting interest in the corresponding Investment Divisions. However, if the law or the interpretation of the law changes, we may decide to exercise the right to vote the Portfolio's shares based on our own judgment. You are entitled to give instructions regarding the votes attributable to your Deferred Annuity in your sole discretion. There are certain circumstances under which we may disregard voting instructions. However, in this event, a summary of our action and the reasons for such action will appear in the next semiannual report. If we do not receive your voting instructions, we will vote your interest in the same proportion as represented by the votes we receive from other investors. The effect of this proportional voting is that a small number of contract owners may control the outcome of a vote. Shares of the Metropolitan Fund, the Calvert Fund, the Met Investors Fund or the American Funds(R) that are owned by our general account or by any of our unregistered separate accounts will be voted in the same proportion as the aggregate of: . The shares for which voting instructions are received, and . The shares that are voted in proportion to such voting instructions. However, if the law or the interpretation of the law changes, we may decide to exercise the right to vote the Portfolio's shares based on our judgment. WHO SELLS THE DEFERRED ANNUITIES MetLife Investors Distribution Company ("MLIDC") is the principal underwriter and distributor of the securities offered through this Prospectus. MLIDC, which is our affiliate, also acts as the principal underwriter and distributor of some of the other Variable Annuity contracts and variable life insurance policies we and our affiliated companies issue. We reimburse MLIDC for expenses MLIDC incurs in distributing the Deferred Annuities (e.g., commissions payable to the retail broker-dealers who sell the Deferred Annuities, including our affiliated broker-dealers). MLIDC does not retain any fees under the Deferred Annuities. MLIDC's principal executive offices are located at 5 Park Plaza, Suite 1900, Irvine, California 92614. MLIDC is registered as a broker-dealer with the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934, as well as the securities commissions in the states in which it operates, and is a member of the Financial Industry Regulatory Authority ("FINRA"). FINRA provides background information about broker-dealers and their registered representatives 69 through FINRA BrokerCheck. You may contact the FINRA BrokerCheck Hotline at 1-800-289-9999, or log on to www.finra.org. An investor brochure that includes information describing FINRA BrokerCheck is available through the Hotline or on-line. Deferred Annuities are sold through our licensed sales representatives who are associated with MetLife Securities, Inc. ("MSI"), our affiliate and a broker-dealer, which is paid compensation for the promotion and sale of the Deferred Annuities. Previously, Metropolitan Life Insurance Company was the broker-dealer through which MetLife sales representatives sold the Deferred Annuities. The Deferred Annuities are also sold through the registered representatives of our other affiliated broker-dealers. MSI and our affiliated broker-dealers are registered with the SEC as broker-dealers under the Securities Exchange Act of 1934 and are also members of FINRA. The Deferred Annuities may also be sold through other registered broker-dealers. Deferred Annuities may also be sold through the mail and over the Internet. There is no front-end sales load deducted from purchase payments to pay sales commissions. Distribution costs are recovered through the Separate Account charge. Our sales representatives in our MetLife Resources division must meet a minimum level of sales production in order to maintain employment with us. MetLife sales representatives who are not in our MetLife Resources division ("non-MetLife Resources MetLife sales representatives") must meet a minimum level of sales of proprietary products in order to maintain employment with us. Non-MetLife Resources MetLife sales representatives and MetLife Resources sales representatives receive cash payments for the products they sell and service based upon a 'gross dealer concession' model. With respect to the Deferred Annuities, the gross dealer concession ranges from 0.75% to 9% (depending on the class purchased) of each purchase payment each year the Contract is in force and, starting in the second Contract Year, ranges from 0.25% to 1.00% (depending on the class purchased) of the Account Balance each year that the Contract is in force for servicing the Deferred Annuity. Gross dealer concession may also be paid when the Contract is annuitized. The amount of this gross dealer concession payable upon annuitization depends on several factors, including the number of years the Deferred Annuity has been in force. Compensation to the sales representative is all or part of the gross dealer concession. Compensation to sales representatives in the MetLife Resources division is based upon premiums and purchase payments applied to all products sold and serviced by the representative. Compensation to non-MetLife Resources MetLife sales representatives is determined based upon a formula that recognizes premiums and purchase payments applied to proprietary products sold and serviced by the representative as well as certain premiums and purchase payments applied to non-proprietary products sold by the representative. Proprietary products are those issued by us or our affiliates. Because one of the factors determining the percentage of gross dealer concession that applies to a non-MetLife Resources MetLife sales representative's compensation is sales of proprietary products, these sales representatives have an incentive to favor the sale of proprietary products. Because non-MetLife Resources MetLife sales managers' compensation is based upon the sales made by the representatives they supervise, these sales managers also have an incentive to favor the sale of proprietary products. Non-MetLife Resources MetLife sales representatives and MetLife Resources sales representatives and their managers and the sales representatives and managers of our affiliates may be eligible for additional cash compensation, such as bonuses, equity awards (such as stock options), training allowances, supplemental salary, financial arrangements, marketing support, medical and other insurance benefits, and retirement benefits and other benefits based primarily on the amount of proprietary products sold. Because additional cash compensation paid to non-MetLife Resources MetLife sales representatives and MetLife Resources sales representatives and their managers and the sales representatives and their managers of our affiliates is based primarily on the sale of proprietary products, non-MetLife Resources MetLife sales representatives and MetLife Resources sales representatives and their managers and the sales representatives and their managers of our affiliates have an incentive to favor the sale of proprietary products. 70 Sales representatives who meet certain productivity, persistency, and length of service standards and/or their managers may be eligible for additional cash compensation. Moreover, managers may be eligible for additional cash compensation based on the sales production of the sales representatives that the manager supervises. Our sales representatives and their managers may be eligible for non-cash compensation incentives, such as conferences, trips, prizes and awards. Other non-cash compensation payments may be made for other services that are not directly related to the sale of products. These payments may include support services in the form of recruitment and training of personnel, production of promotional services and other support services. Other incentives and additional cash compensation provide sales representatives and their managers with an incentive to favor the sale of proprietary products. The business unit responsible for the operation of our distribution system is also paid. MLIDC also pays compensation for the sale of the Deferred Annuities by affiliated broker-dealers. The compensation paid to affiliated broker-dealers for sales of the Deferred Annuities is generally not expected to exceed, on a present value basis, the aggregate amount of total compensation that is paid with respect to sales made through MetLife representatives. (The total compensation includes payments that we make to our business unit that is responsible for the operation of the distribution systems through which the Deferred Annuities are sold.) These firms pay their sales representatives all or a portion of the commissions received for their sales of Deferred Annuities; some firms may retain a portion of commissions. The amount that selling firms pass on to their sales representatives is determined in accordance with their internal compensation programs. Those programs may also include other types of cash and non-cash compensation and other benefits. Sales representatives of affiliated broker-dealers and their managers may be eligible for various cash benefits and non-cash compensation (as described above) that we may provide jointly with affiliated broker-dealers. Because of the receipt of this cash and non-cash compensation, sales representatives and their managers of our affiliated broker-dealers have an incentive to favor the sale of proprietary products. MLIDC may also enter into preferred distribution arrangements with certain affiliated broker-dealer firms such as New England Securities Corporation, Walnut Street Securities, Inc. and Tower Square Securities, Inc. These arrangements are sometimes called "shelf space" arrangements. Under these arrangements, MLIDC may pay separate, additional compensation to the broker-dealer firm for services the broker-dealer firm provides in connection with the distribution of the Contracts. These services may include providing us with access to the distribution network of the broker-dealer firm, the hiring and training of the broker-dealer firm's sales personnel, the sponsoring of conferences and seminars by the broker-dealer firm, or general marketing services performed by the broker-dealer firm. The broker-dealer firm may also provide other services or incur other costs in connection with distributing the Contracts. MLIDC also pays compensation for the sale of Contracts by unaffiliated broker-dealers. The compensation paid to unaffiliated broker-dealers for sales of the Deferred Annuities is generally not expected to exceed, on a present value basis, the aggregate amount of total compensation that is paid with respect to sales made through MetLife representatives. (The total compensation includes payments that we make to our business unit that is responsible for the operation of the distribution systems through which the Deferred annuities are sold.) Broker-dealers pay their sales representatives all or a portion of the commissions received for their sales of the Contracts. Some firms may retain a portion of commissions. The amount that the broker-dealer passes on to its sales representatives is determined in accordance with its internal compensation programs. Those programs may also include other types of cash and non-cash compensation and other benefits. We and our affiliates may also provide sales support in the form of training, sponsoring conferences, defraying expenses at vendor meetings, providing promotional literature and similar services. An unaffiliated broker-dealer or sales representative of an unaffiliated broker-dealer may receive different compensation for selling one product over another and/or may be inclined to favor one product provider over another product provider due to differing compensation rates. Ask your sales representative further information about what your sales representative and the broker-dealer for which he or she works may receive in connection with your purchase of a Contract. 71 We or our affiliates pay American Funds Distributors, Inc., the principal underwriter for the American Funds(R), a percentage of all purchase payments allocated to the following Portfolios for the services it provides in marketing the Portfolios' shares in connection with the Deferred Annuity: the American Funds Growth Portfolio, the American Funds Growth-Income Portfolio, the American Funds Bond Portfolio, the American Funds Global Small Capitalization Portfolio, the American Funds Balanced Allocation Portfolio, the American Funds Growth Allocation Portfolio and the American Funds Moderate Allocation Portfolio. From time to time , MetLife pays organizations, associations and non-profit organizations fees to sponsor MetLife's Variable Annuity Contracts. We may also obtain access to an organization's members to market our Variable Annuity Contracts. These organizations are compensated for their sponsorship of our Variable Annuity Contracts in various ways. Primarily, they receive a flat fee from MetLife. We also compensate these organizations by our funding of their programs, scholarships, events or awards, such as a principal of the year award. We may also lease their office space or pay fees for display space at their events, purchase advertisements in their publications or reimburse or defray their expenses. In some cases, we hire the organizations to perform administrative services for us, for which they are paid a fee based upon a percentage of the Account Balances their members hold in the Contract. We also may retain finders and consultants to introduce MetLife to potential clients and for establishing and maintaining relationships between MetLife and various organizations. The finders and consultants are primarily paid flat fees and may be reimbursed for their expenses. We or our affiliates may also pay duly licensed individuals associated with these organizations cash compensation for the sales of the Contracts. FINANCIAL STATEMENTS Our financial statements and the financial statements of the Separate Account have been included in the SAI. YOUR SPOUSE'S RIGHTS If You received your Contract through a qualified retirement plan and your plan is subject to ERISA (the Employee Retirement Income Security Act of 1974) and You are married, the income payments, withdrawal and loan provisions, and methods of payment of the death benefit under your Deferred Annuity may be subject to your spouse's rights. If your benefit is worth $5,000 or less, your plan may provide for distribution of your entire interest in a lump sum without your spouse's consent. For details or advice on how the law applies to your circumstances, consult your tax adviser or attorney. WHEN WE CAN CANCEL YOUR DEFERRED ANNUITY We may cancel your Deferred Annuity only if we do not receive any purchase payments from You for 24 consecutive months (36 consecutive months in New York State) and your Account Balance is less than $2,000. Accordingly, no Deferred Annuity will be terminated due solely to negative investment performance. We will only do so to the extent allowed by law. If we do so, we will return the full Account Balance, less any outstanding loans. Federal tax law may impose additional restrictions on our right to cancel your SEP and SIMPLE IRA Deferred Annuity. The tax law may also restrict payment of surrender proceeds to participants under certain employer retirement plans prior to reaching certain permissible triggering events. We will not terminate the Contract where we keep records of your account if it includes an LWG rider. In addition, we will not terminate any Contract where we keep records of your account that includes a GMIB rider or a guaranteed death benefit if at the time the termination would otherwise occur the income/benefit base of the rider, or the guaranteed amount under any death benefit, is greater than the Account Balance. For all other Contracts, we reserve the right to exercise this termination provision, subject to obtaining any required regulatory approvals. We will not exercise this provision under Contracts issued in New York. However, if your plan determines to terminate the Contract at a time when You have an income/benefit base of the rider or a guaranteed amount under any death benefit that is greater than the Account Balance, You forfeit any income/benefit base of the rider or any guaranteed amount under any death benefit You have accrued upon termination of the Contract. 72 INCOME TAXES The following information on taxes is a general discussion of the subject. It is not intended as tax advice. The Internal Revenue Code (Code) is complex and subject to change regularly. Failure to comply with the tax law may result in significant adverse tax consequences and tax penalties. Consult your own tax adviser about your circumstances, any recent tax developments, and the impact of state income taxation. For purposes of this section, we address Deferred Annuities and income payments under Deferred Annuities together. You should read the general provisions and any sections relating to your type of annuity to familiarize yourself with some of the tax rules for your particular Contract. You are responsible for determining whether your purchase of a Deferred Annuity, withdrawals, income payments and any other transactions under your Deferred Annuity satisfy applicable tax law. We are not responsible for determining if your employer's plan or arrangement satisfies the requirements of the Code and/or the Employee Retirement Income Security Act of 1974 (ERISA). Where otherwise permitted under the Deferred Annuity, the transfer of ownership of a Deferred Annuity, the designation or change in designation of an Annuitant, payee or other Beneficiary who is not also a contract owner, the selection of certain maturity dates, the exchange of a Deferred Annuity, or the receipt of a Deferred Annuity in an exchange, may result in income tax and other tax consequences, including additional withholding, estate tax, gift tax and generation skipping transfer tax, that are not discussed in this Prospectus. The SAI may contain additional information. Please consult your tax adviser. PUERTO RICO TAX CONSIDERATIONS The amount of income on annuity distributions (payable over your lifetime) is calculated differently under the Puerto Rico Internal Revenue Code of 2011 (the "2011 PR Code"). Since the U.S. source income generated by a Puerto Rico bona fide resident is subject to U.S. income tax and the Internal Revenue Service issued guidance in 2004 which indicated that the income from an annuity contract issued by a U.S. life insurer would be considered U.S. source income, the timing of recognition of income from an annuity contract could vary between the two jurisdictions. Although the 2011 PR Code provides a credit against the Puerto Rico income tax for U.S. income taxes paid, an individual may not get full credit because of the timing differences. You should consult with a personal tax adviser regarding the tax consequences of purchasing an annuity Contract and/or any proposed distribution, particularly a partial distribution or election to annuitize. ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS Purchasers that are not U.S. citizens or residents will generally be subject to U.S. Federal withholding tax on taxable distributions from annuity contracts at a 30% rate, unless a lower treaty rate applies. In addition, purchasers may be subject to state and/or municipal taxes and taxes that may be imposed by the purchaser's country of citizenship or residence. Prospective purchasers are advised to consult with a qualified tax adviser regarding U.S. state and foreign taxation with respect to purchasing an annuity Contract. MetLife does not expect to incur Federal, state or local income taxes on the earnings or realized capital gains attributable to the Separate Account. However, if we do incur such taxes in the future, we reserve the right to charge amounts allocated to the Separate Account for these taxes. To the extent permitted under Federal tax law, we may claim the benefit of the corporate dividends received deduction and of certain foreign tax credits attributable to taxes paid by certain of the Portfolios to foreign jurisdictions. 73 GENERAL Deferred annuities are a means of setting aside money for future needs- usually retirement. Congress recognizes how important saving for retirement is and has provided special rules in the Code. All TSAs (ERISA and non-ERISA), 457(b), 403(a) and IRAs (including SEPs and SIMPLEs) receive tax deferral under the Code. Although there are no additional tax benefits by funding such retirement arrangements with an annuity, doing so offers You additional insurance benefits such as the availability of a guaranteed income for life. Under current Federal income tax law, the taxable portion of distributions and withdrawals from variable annuity contracts (including TSAs, 457(b), 403(a) and IRAs) are subject to ordinary income tax and are not eligible for the lower tax rates that apply to long term capital gains and qualifying dividends. WITHDRAWALS When money is withdrawn from your Contract (whether by You or your Beneficiary), the amount treated as taxable income and taxed as ordinary income differs depending on the type of annuity You purchase (e.g., IRA or TSA) and payment method or income payment type You elect. If You meet certain requirements, your designated Roth earnings are free from Federal income taxes. We will withhold a portion of the amount of your withdrawal for income taxes, unless You are eligible to and elect otherwise. The amount we withhold is determined by the Code. WITHDRAWALS BEFORE AGE 59 1/2 Because these Contracts are intended for retirement, if You make a taxable withdrawal before age 59 1/2, You may incur a 10% tax penalty, in addition to ordinary income taxes. Also, please see the section below titled "Separate Account Charges" for further information regarding withdrawals. As indicated in the chart below, some taxable distributions prior to age 59 1/2 are exempt from the penalty. Some of these exceptions include amounts received:
Type of Contract ---------------------------------- TSA and TSA SIMPLE ERISA IRA/1/ SEP 457(b)/3/ 403(a) ------- ------ --- -------- ------ In a series of substantially equal payments made annually (or more frequently) for life or life expectancy (SEPP) x/2/ x x x/2/ x/2/ After You die x x x x x After You become totally disabled (as defined in the Code) x x x x x To pay deductible medical expenses x x x x x After separation from service if You are over 55 at time of separation/2/ x x x After December 31, 1999 for IRS levies x x x x x To pay medical insurance premiums if You are unemployed x x For qualified higher education expenses x x For qualified first time home purchases up to $10,000 x x Pursuant to qualified domestic relations orders x x x
/1/ For SIMPLE IRAs the 10% tax penalty for early withdrawals is generally increased to 25% for withdrawals within the first two years of your participation in the SIMPLE IRA. /2/ You must be separated from service at the time payments begin. /3/ Distributions from 457(b) plans are generally not subject to the 10% penalty; however, the 10% penalty does apply to distributions from the 457(b) plans of state or local government employers to the extent that the distribution is attributable to rollovers accepted from other types of eligible retirement plans. 74 SYSTEMATIC WITHDRAWAL PROGRAM FOR SUBSTANTIALLY EQUAL PERIODIC PAYMENTS (SEPP) AND INCOME OPTIONS If You are considering using the Systematic Withdrawal Program or selecting an income option for the purpose of meeting the SEPP exception to the 10% tax penalty, consult with your tax adviser. It is not clear whether certain withdrawals or income payments under a Variable Annuity will satisfy the SEPP exception. If You receive systematic payments that You intend to qualify for the SEPP exception, any modifications (except due to death or disability) to your payment before age 59 1/2 or within five years after beginning SEPP payments, whichever is later, will result in the retroactive imposition of the 10% penalty with interest. Such modifications may include additional purchase payments or withdrawals (including tax-free transfers or rollovers of income payments) from the Deferred Annuity. SEPARATE ACCOUNT CHARGES It is conceivable that the charges for certain benefits such as any of the guaranteed death benefits (Annual Step Up Death Benefit) and certain living benefits (e.g., the GMIB and LWG) could be considered to be taxable each year as deemed distributions from the Contract to pay for non-annuity benefits. We currently treat these charges as an intrinsic part of the annuity Contract and do not tax report these as taxable income. However, it is possible that this may change in the future if we determine that this is required by the IRS. If so, the charge could also be subject to a 10% penalty tax if the taxpayer is under age 59 1/2. INCIDENTAL BENEFITS Certain death benefits may be considered incidental benefits under a tax qualified plan, which are limited under the Code. Failure to satisfy these limitations may have adverse tax consequences to the plan and to the participant. Where otherwise permitted to be offered under annuity contracts issued in connection with qualified plans, the amount of life insurance is limited under the incidental death benefit rules. You should consult your own tax adviser prior to purchase of the Contract under any type of IRA, 403(b) arrangement or qualified plan as a violation of these requirements could result in adverse tax consequences to the plan and to the participant including current taxation of amounts under the Contract. GUARANTEED WITHDRAWAL BENEFITS If You have purchased the LWG, where otherwise made available, note the following: In the event that the Account Balance goes to zero, and either the Remaining Guaranteed Withdrawal Amount is paid out in fixed installments or the Annual Benefit Payment is paid for life, we will treat such payments as income annuity payments under the tax law and allow recovery of any remaining basis ratably over the expected number of payments. In determining your required minimum distribution each year, the actuarial value of this benefit as of the prior December 31st must be taken into account in addition to the Account Balance of the Contract. PURCHASE PAYMENTS Generally, all purchase payments will be contributed on a "before-tax" basis. This means that the purchase payments entitle You to a tax deduction or are not subject to current income tax. Under some circumstances "after-tax" purchase payments can be made to certain annuities. These purchase payments do not reduce your taxable income or give You a tax deduction. There are different annual purchase payments limits for the annuities offered in this Prospectus. Purchase payments in excess of the limits may result in adverse tax consequences. 75 Your Contract may accept certain direct transfers and rollovers from other qualified plan accounts and contracts; such transfers and rollovers are generally not subject to annual limitations on purchase payments. WITHDRAWALS, TRANSFERS AND INCOME PAYMENTS Because your purchase payments are generally on a before-tax basis, You generally pay income taxes on the full amount of money You withdraw as well as income earned under the Contract. Withdrawals and income payments attributable to any after-tax contributions are not subject to income tax (except for the portion of the withdrawal or payment allocable to earnings). If certain requirements are met, You may be able to transfer amounts in your Contract to another eligible retirement plan or IRA. For 457(b) plans maintained by non-governmental employers, if certain conditions are met, amounts may be transferred into another 457(b) plan maintained by a non-governmental employer. Your Deferred Annuity is not forfeitable (e.g., not subject to claims of your creditors) and You may not transfer it to someone else. For certain qualified employer plans, an important exception is that your account may be transferred pursuant to a qualified domestic relations order (QDRO). Please consult the specific section for the type of annuity You purchased to determine if there are restrictions on withdrawals, transfers or income payments. Minimum distribution requirements also apply to the Deferred Annuities. These are described separately later in this section. Certain mandatory distributions made to participants in an amount in excess of $1,000 (but less than $5,000) must be automatically rolled over to an IRA designated by the plan, unless the participant elects to receive it in cash or roll it over to a different IRA or eligible retirement plan. ELIGIBLE ROLLOVER DISTRIBUTIONS AND 20% MANDATORY WITHHOLDING For certain qualified employer plans, we are required to withhold 20% of the taxable portion of your withdrawal that constitutes an eligible rollover distribution for Federal income taxes. We are not required to withhold this money if You direct us, the trustee or the custodian of the plan, to directly rollover your eligible rollover distribution to a traditional IRA or another eligible retirement plan. Generally, an "eligible rollover distribution" is any taxable amount You receive from your Contract. (In certain cases, after-tax amounts may also be considered eligible rollover distributions). However, it does not include taxable distributions such as: . Withdrawals made to satisfy minimum distribution requirements; or . Certain withdrawals on account of financial hardship. Other exceptions to the definition of eligible rollover distribution may exist. For taxable withdrawals that are not "eligible rollover distributions", the Code requires different withholding rules. The withholding amounts are determined at the time of payment. In certain instances, You may elect out of these withholding requirements. You may be subject to the 10% penalty tax if You withdraw taxable money before You turn age 59 1/2. MINIMUM DISTRIBUTION REQUIREMENTS Generally, You must begin receiving retirement plan withdrawals by April 1 of the latter of: . the calendar year following the year in which You reach age 70 1/2 or 76 . the calendar year following the calendar year You retire provided You do not own 5% or more of your employer. For IRAs (including SEPs and SIMPLE IRAs), You must begin receiving withdrawals by April 1 of the calendar year following the calendar year in which You reach age 70 1/2 even if You have not retired. For after-death required minimum distributions, the five year rule is applied without regard to calendar year 2009 due to the 2009 required minimum distribution waiver. For instance, for a Contract owner who died in 2007, the five year period would end in 2013 instead of 2012. The required minimum distribution rules are complex, so consult with your tax adviser because the application of these rules to your particular circumstances may have been impaired by the 2009 required minimum distribution waiver. In general the amount of required minimum distribution (including death benefit distributions discussed below) must be calculated separately with respect to each 403(b) arrangement, but then the aggregate amount of the required distribution may be taken under the tax law from any one or more of the participant's several 403(b) arrangements. Otherwise, You may not satisfy minimum distributions for an employer's qualified plan (ie, 401(a)/403(a), 457(b)) with distributions from another qualified plan of the same or a different employer. Complex rules apply to the calculation of these withdrawals. A tax penalty of 50% applies to withdrawals which should have been taken but were not. It is not clear whether income payments under a Variable Annuity will satisfy these rules. Consult your tax adviser prior to choosing a pay-out option. In general, the amount of required minimum distribution (including death benefit distributions discussed below) must be calculated separately with respect to each IRA or SEP IRA and each SIMPLE IRA, but then the aggregate amount of the required distribution may be generally taken under the tax law for the IRAs/SEP IRAs from any one or more of the taxpayer's IRAs/SEP IRAs. For SIMPLE IRAs, the aggregate amount of the required distribution may be taken from any one or more of the taxpayer's SIMPLE IRAs. Otherwise, You may not satisfy minimum distributions for one type of qualified plan or IRA with distributions from an account or annuity contract under another type of IRA or qualified plan (e.g., IRA and 403(b)). In general, income tax regulations permit income payments to increase based not only with respect to the investment experience of the underlying funds but also with respect to actuarial gains. Additionally, these regulations permit payments under income annuities to increase due to a full withdrawal or to a partial withdrawal under certain circumstances. Where made available, it is not clear whether the purchase or exercise of a withdrawal option after the first two years under a life contingent income annuity with a guarantee period where only the remaining guaranteed payments are reduced due to the withdrawal will satisfy minimum distribution requirements. Consult your tax adviser prior to purchase. The regulations also require that the value of all benefits under a deferred annuity, including certain death benefits in excess of cash value, must be added to the amount credited to your account in computing the amount required to be distributed over the applicable period. You should consult your own tax adviser as to how these rules affect your own Contract. We will provide You with additional information regarding the amount that is subject to minimum distribution under this rule. If You intend to receive your minimum distributions which are payable over the joint lives of You and a Beneficiary who is not your spouse (or over a period not exceeding the joint life expectancy of You and your non-spousal Beneficiary), be advised that Federal tax rules may require that payments be made over a shorter period or may require that payments to the Beneficiary be reduced after your death to meet the minimum distribution incidental benefit rules and avoid the 50% excise tax. Consult your tax adviser. 77 DEATH BENEFITS The death benefit is taxable to the recipient in the same manner as if paid to the contract owner (under the rules for withdrawals or income payments, whichever is applicable). Generally, if You die before required minimum distribution withdrawals have begun, we must make payment of your entire interest by December 31st of the year that is the fifth anniversary of your death or begin making payments over a period and in a manner allowed by the Code to your Beneficiary by December 31st of the year after your death. Consult your tax adviser because the application of these rules to your particular circumstances may have been impacted by the 2009 required minimum distribution waiver. (See "Minimum Distribution Requirements" for additional information.) If your spouse is your Beneficiary, and your Contract permits, your spouse may delay the start of these payments until December 31 of the year in which You would have reached age 70 1/2. Alternatively, if your spouse is your sole Beneficiary and the Contract is an IRA, he or she may elect to rollover the death proceeds into his or her own IRA (or, if You meet certain requirements, a Roth IRA and pay tax on the taxable portion of the death proceeds in the year of the rollover) and treat the IRA (or Roth IRA) as his or her own. If your spouse is your Beneficiary, your spouse may also be able to rollover the death proceeds into another eligible retirement plan in which he or she participates, if permitted under the receiving plan. Under Federal tax rules, a same-sex spouse is treated as a non-spouse Beneficiary. If your spouse is not your Beneficiary and your Contract permits, your Beneficiary may also be able to rollover the death proceeds via a direct trustee-to-trustee transfer into an inherited IRA. However, such Beneficiary may not treat the inherited IRA as his or her own IRA. Certain employer plans (i.e., 401(a), 403(a), 403(b), and governmental 457 plans) are required to permit a non-spouse direct trustee-to-trustee rollover. If You die after required minimum distributions begin, payments of your entire balance must be made in a manner and over a period as provided under the Code (and any applicable regulations). If an IRA Contract is issued in your name after your death for the benefit of your designated Beneficiary with a purchase payment which is directly transferred to the Contract from another IRA or eligible retirement plan, the death benefit must continue to be distributed to your Beneficiary's Beneficiary in a manner at least as rapidly as the method of distribution in effect at the time of your Beneficiary's death. TAX-SHELTERED ANNUITIES (ERISA AND NON-ERISA) GENERAL Tax-sheltered annuities fall under Section 403(b) of the Code ("403(b) arrangements"), which provides certain tax benefits to eligible employees of public school systems and organizations that are tax exempt under Section 501(c)(3) of the Code. In general, contributions to Section 403(b) arrangements are subject to contribution limitations under Section 415(c) of the Code (the lesser of 100% of includable compensation or the applicable limit for the year). On July 26, 2007, final 403(b) regulations were issued by the U. S. Treasury which impact how we administer your 403(b) Contract. In order to satisfy the 403(b) final regulations and prevent your Contract from being subject to adverse tax consequences including potential penalties, Contract exchanges after September 24, 2007 must, at a minimum, meet the following requirements: (1) the plan must allow the exchange, (2) the exchange must not result in a reduction in the participant or beneficiary's accumulated benefit, (3) the receiving contract includes distribution restrictions that are no less stringent than those imposed on the contract being exchanged, and (4) the employer enters into an agreement with 78 the issuer of the receiving contract to provide information to enable the contract provider to comply with Code requirements. Such information would include details concerning severance from employment, hardship withdrawals, loans and tax basis. You should consult your tax or legal counsel for any advice relating to Contract exchanges or any other matter relating to these regulations. WITHDRAWALS AND INCOME PAYMENTS If You are under 59 1/2, You generally cannot withdraw money from your TSA Contract unless the withdrawal: . Relates to purchase payments made prior to 1989 (and pre-1989 earnings on those purchase payments). . Is directly transferred to another permissible investment under Section 403(b) arrangements; . Relates to amounts that are not salary reduction elective deferrals if your plan allows it; . Occurs after You die, have a severance from employment or become disabled (as defined by the Code); . Is for financial hardship (but only to the extent of purchase payments) if your plan allows it; . Distributions attributable to certain TSA plan terminations if the conditions of the new income tax regulations are met; . Relates to rollover or after-tax contributions; or . Is for the purchase of permissive service credit under a governmental defined benefit plan. Recent income tax regulations also provide certain new restrictions on withdrawals of amounts from tax sheltered annuities that are not attributable to salary reduction contributions. Under these regulations, a Section 403(b) contract is permitted to distribute retirement benefits attributable to pre-tax contributions other than elective deferrals to the participant no earlier than upon the earlier of the participant's severance from employment or upon the prior occurrence of some event, such as after a fixed number of years, the attainment of a stated age, or disability. DESIGNATED ROTH ACCOUNT FOR 403(B) PLANS Employers that established and maintain a 403(b) plan ("the Plan") may also establish a Qualified Roth Contribution Program under Section 402A of the Code ("Designated Roth Accounts") to accept after-tax contributions as part of the TSA plan. In accordance with our administrative procedures, we may permit these contributions to be made as purchase payments to a Section 403(b) Contract under the following conditions: . The employer maintaining the plan has demonstrated to our satisfaction that Designated Roth accounts are permitted under the Plan. . In accordance with our administrative procedures, the amount of elective salary reduction contributions has been irrevocably designated as an after-tax contribution to the Designated Roth account. . All state regulatory approvals have been obtained to permit the Contract to accept such after-tax elective deferral contributions (and, where permitted under the Qualified Roth Contribution Program and Contract, rollovers and trustee-to trustee transfers from other Designated Roth Accounts). . In accordance with our procedures and in a form satisfactory to us, we may accept rollovers from other funding vehicles under any Qualified Roth Contribution Program of the same type in which the employee participates as well as trustee-to-trustee transfers from other funding vehicles under the same Qualified Roth Contribution Program for which the participant is making elective deferral contributions to the Contract. . Recently enacted legislation allows (but does not require) 403(b) plans that offer designated Roth accounts to permit participants to roll their non-Roth account assets into a designated Roth account under the same plan, provided the non-Roth assets are distributable under the plan and otherwise eligible for rollover. 79 . No other contribution types (including employer contributions, matching contributions, etc.) will be allowed as designated Roth contributions, unless they become permitted under the Code. . If permitted under the Federal tax law, we may permit both pre-tax contributions under a 403(b) plan as well as after-tax contributions under that plan's Qualified Roth Contribution Program to be made under the same Contract as well as rollover contributions and contributions by trustee-to-trustee transfers. In such cases, we will account separately for the designated Roth contributions and the earnings thereon from the contributions and earnings made under the pre-tax TSA plan (whether made as elective deferrals, rollover contributions or trustee-to-trustee transfers). As between the pre-tax or traditional plan and the designated Roth account, we will allocate any living benefits or death benefits provided under the Contract on a reasonable basis, as permitted under the tax law. . We may refuse to accept contributions made as rollovers and trustee-to-trustee transfers, unless we are furnished with a breakdown as between participant contributions and earnings at the time of the contribution. You and your employer should consult their own tax and legal advisers prior to making or permitting contributions to be made to a Qualified Roth Contribution Program. . The IRS was given authority in the final Roth account regulations to issue additional guidance addressing the potential for improper transfers of value to Roth accounts due to the allocation of contract income, expenses, gains and losses. The IRS has not issued the additional guidance and, as a result, there is uncertainty regarding the status of Roth accounts and particularly Roth accounts under annuity contracts that allocate charges for guarantees. You should consult your tax or legal counsel for advice regarding Roth accounts and other matters relating to the final Roth account regulations. LOANS If your employer's plan and TSA Contract permit loans, such loans will be made only from any Fixed Interest Account Balance and only up to certain limits. In that case, we credit your Fixed Interest Account Balance up to the amount of the outstanding loan balance with a rate of interest that is less than the interest rate we charge for the loan. The Code and applicable income tax regulations limit the amount that may be borrowed from your Contract and all your employer plans in the aggregate and also require that loans be repaid, at a minimum, in scheduled level payments over a prescribed term. Your employer's plan and Contract will indicate whether loans are permitted. The terms of the loan are governed by the Contract and loan agreement. Failure to satisfy loan limits under the Code or to make any scheduled payments according to the terms of your loan agreement and Federal tax law could have adverse tax consequences. Consult a tax adviser and read your loan agreement and Contract prior to taking any loan. INDIVIDUAL RETIREMENT ANNUITIES IRAS: TRADITIONAL IRA, ROTH IRA, SIMPLE IRA AND SEPS The sale of a Contract for use with an IRA may be subject to special disclosure requirements of the IRS. Purchasers of a Contract for use with IRAs will be provided with supplemental information required by the IRS or other appropriate agency. A Contract issued in connection with an IRA may be amended as necessary to conform to the requirements of the Code. IRA contracts may not invest in life insurance. The Deferred Annuity offers death benefits and optional benefits that in some cases may exceed the greater of the purchase payments or the Account Balance which could conceivably be characterized as life insurance. 80 The Roth IRA tax endorsement is based on the IRS model form 5305-RB (rev 0302). The Deferred Annuity (and optional death benefits and appropriate IRA tax endorsements) has not yet been submitted to the IRS for review and approval as to form. Disqualification of the Deferred Annuity as an IRA could result in the immediate taxation of amounts held in the Contract and other adverse tax consequences. Generally, except for Roth IRAs, IRAs can accept deductible (or pre-tax) purchase payments. Deductible or pre-tax purchase payments will be taxed when distributed from the Contract. You must be both the contract owner and the Annuitant under the Contract. Your IRA annuity is not forfeitable and You may not transfer, assign or pledge it to someone else. You are not permitted to borrow from the Contract. You can transfer your IRA proceeds to a similar IRA, certain eligible retirement plans of an employer (or a SIMPLE IRA to a Traditional IRA or eligible retirement plan after two years of participation in your employer's SIMPLE IRA plan) without incurring Federal income taxes if certain conditions are satisfied. Consult your tax adviser prior to the purchase of the Contract as a Traditional IRA, Roth IRA, SIMPLE IRA or SEP. TRADITIONAL IRA ANNUITIES PURCHASE PAYMENTS Purchase payments (except for permissible rollovers and direct transfers) are generally not permitted after the calendar year in which You attain age 69 1/2. Except for permissible rollovers and direct transfers, purchase payments to Traditional and Roth IRAs for individuals under age 50 are limited in the aggregate to the lesser of 100% of compensation or the deductible amount established each year under the Code. A purchase payment up to the deductible amount can also be made for a non-working spouse provided the couple's compensation is at least equal to their aggregate contributions. Also, see IRS Publication 590 available at www.irs.gov. . Individuals age 50 or older can make an additional "catch-up" purchase payment (assuming the individual has sufficient compensation). . If You or your spouse are an active participant in a retirement plan of an employer, your deductible contributions may be limited. . Purchase payments in excess of these amounts may be subject to a penalty tax. . If contributions are being made under a SEP or a SAR-SEP plan of your employer, additional amounts may be contributed as permitted by the Code and the terms of the employer's plan. . These age and dollar limits do not apply to tax-free rollovers or transfers from other IRAs or other eligible retirement plans. . If certain conditions are met, You can change your Traditional IRA purchase payment to a Roth IRA before You file your income tax return (including filing extensions). WITHDRAWALS AND INCOME PAYMENTS Withdrawals (other than tax free transfers or rollovers to other individual retirement arrangements or eligible retirement plans) and income payments are included in income except for the portion that represents a return of non- deductible purchase payments. This portion is generally determined based on a ratio of all non-deductible purchase payments to the total values of all your Traditional IRAs. We will withhold a portion of the amount of your withdrawal for income taxes, unless You elect otherwise. The amount we withhold is determined by the Code. Also see general section titled "Withdrawals" above. 81 DEATH BENEFITS The death benefit is taxable to the recipient in the same manner as if paid to the contract owner (under the rules for withdrawals or income payments, whichever is applicable). Generally, if You die before required minimum distribution withdrawals have begun, we must make payment of your entire interest by December 31st of the year that is the fifth anniversary of your death or begin making payments over a period and in a manner allowed by the Code to your Beneficiary by December 31st of the year after your death. Consult your tax adviser because the application of these rules to your particular circumstances may have been impacted by the 2009 required minimum distribution waiver. (See "Minimum Distribution Requirements" for additional information.) If your spouse is your Beneficiary, and your Contract permits, your spouse may delay the start of these payments until December 31 of the year in which You would have reached age 70 1/2. Alternatively, if your spouse is your Beneficiary, he or she may elect to continue as "contract owner" of the Contract. Naming a non-natural person, such as a trust or estate, as a Beneficiary under the Contract will generally eliminate the Beneficiary's ability to stretch or a spousal Beneficiary's ability to continue the Contract and the living and/or death benefits. If You die after required distributions begin, payments of your entire remaining interest must be made in a manner and over a period as provided under the Code (and any applicable regulations). If the Contract is issued in your name after your death for the benefit of your designated Beneficiary with a purchase payment which is directly transferred to the Contract from another IRA account or IRA annuity You owned, the death benefit must continue to be distributed to your Beneficiary's Beneficiary in a manner at least as rapidly as the method of distribution in effect at the time of your Beneficiary's death. SIMPLE IRAS AND SEPS ANNUITIES PURCHASE PAYMENTS TO SEPS If contributions are being made under a SEP plan of your employer, additional amounts may be contributed as permitted by the Code and the terms of the employer's plan. Except for permissible contributions under the Code made in accordance with the employer's SEP plan, permissible rollovers and direct transfers, purchase payments to SEPs for individuals under age 50 are limited to the lesser of 100% of compensation or the deductible amount each year. This deductible amount is $5,000 in 2008 (adjusted for inflation thereafter). Participants age 50 or older can make an additional "catch-up" purchase payment of $1,000 a year (assuming the individual has sufficient compensation). Purchase payments in excess of this amount may be subject to a penalty tax. Purchase payments (except for permissible rollovers and direct transfers) are generally not permitted after the calendar year in which You attain age 69 1/2. These age and dollar limits do not apply to tax-free rollovers or transfers. PURCHASE PAYMENTS TO SIMPLE IRAS The Code allows contributions up to certain limits to be made under a valid salary reduction agreement to a SIMPLE IRA and also allows for employer contributions up to certain applicable limits under the Code. The Code allows "catch up" contributions for participants age 50 and older in excess of these limits ($2,500 in 2008 and years thereafter unless adjusted for inflation). 82 Transfers and rollovers from other SIMPLE IRA funding vehicles may also be accepted under your SIMPLE IRA Deferred Annuity. Purchase payments (except for permissible rollovers and direct transfers) are generally not permitted after the calendar year in which You attain age 69 1/2. These age and dollar limits do not apply to tax-free rollovers or transfers. WITHDRAWALS AND INCOME PAYMENTS Withdrawals and income payments are included in income except for the portion that represents a return of non-deductible purchase payments. This portion is generally determined based on a ratio of all non-deductible purchase payments to the total values of all your Traditional IRAs (including SIMPLE and SEP IRAs). DEATH BENEFITS The death benefit is taxable to the recipient in the same manner as if paid to the owner (under the rules for withdrawals or income payments, whichever is applicable). Generally, if You die before required minimum distribution withdrawals have begun, we must make payment of your entire interest by December 31st of the year that is fifth anniversary of your death or begin making payments over a period and in a manner allowed by the Code to your Beneficiary by December 31st of the year after your death. Consult your tax adviser because the application of these rules to your particular circumstances may have been impacted by the 2009 required minimum distribution waiver. (See "Minimum Distribution Requirements" for additional information.) If your spouse is your Beneficiary, your spouse may delay the start of these payments until December 31 of the year in which You would have reached age 70 1/2. Alternatively, if your spouse is your Beneficiary, he or she may elect to continue as owner of the Contract and treat it as his/her own Traditional IRA (in the case of SEPs) or his/her own SIMPLE IRA (if so eligible, in the case of SIMPLE IRA). Under Federal tax rules, a same-sex spouse is treated as a non-spouse Beneficiary. If You die after required distributions begin, payments of your entire remaining interest must be made in a manner and over a period as provided under the Code (and any applicable regulations). If the Contract is issued in your name after your death for the benefit of your designated Beneficiary with a purchase payment which is directly transferred to the Contract from another IRA account or IRA annuity You owned, the death benefit must continue to be distributed to your Beneficiary's Beneficiary in a manner at least as rapidly as the method of distribution in effect at the time of your Beneficiary's death. 457(B) PLANS GENERAL 457(b) plans are available to state or local governments and certain tax-exempt organizations as described in Section 457(b) and 457(e)(1) of the Code. The plans are not available for churches and qualified church-controlled organizations. 457(b) annuities maintained by a state or local government are for the exclusive benefit of plan participants and their Beneficiaries. 457(b) annuities other than those maintained by state or local governments are solely the property of the employer and are subject to the claims of the employer's general creditors until they are "made available" to You. Recently enacted legislation allows (but does not require) governmental 457(b) plans to permit participants to make designated Roth contributions to a designated Roth account under the plan. This new legislation also allows (but does not 83 require) such plans to permit participants to roll their non-Roth account assets into a designated Roth account under the same plan, provided the non-Roth assets are distributable under the plan and otherwise eligible for rollover. WITHDRAWALS Generally, because contributions are on a before-tax basis, withdrawals from your annuity are subject to income tax. Generally, monies in your Contract can not be "made available" to You until You reach age 70 1/2, leave your job (or your employer changes) or have an unforeseen emergency (as defined by the Code). SPECIAL RULES Special rules apply to certain non-governmental 457(b) plans deferring compensation from taxable years beginning before January 1, 1987 (or beginning later but based on an agreement in writing on August 16, 1986). LOANS In the case of a 457(b) plan maintained by a state or local government, the plan may permit loans. The Code and applicable income tax regulations limit the amount that may be borrowed from your 457(b) plan and all employer plans in the aggregate and also require that loans be repaid, at minimum, in scheduled level payments over a certain term. Your 457(b) plan will indicate whether plan loans are permitted. The terms of the loan are governed by your loan agreement with the plan. Failure to satisfy loan limits under the Code or to make any scheduled payments according to the terms of your loan agreement and Federal tax law could have adverse tax consequences. Consult a tax adviser and read your loan agreement and Contract prior to taking any loan. 403(A) GENERAL The employer adopts a 403(a) plan as a qualified retirement plan to provide benefits to participating employees. The plan generally works in a similar manner to a corporate qualified retirement plan except that the 403(a) plan does not have a trust or a trustee. See the "General" headings under "Income Taxes" for a brief description of the tax rules that apply to 403(a) annuities. 84 LEGAL PROCEEDINGS In the ordinary course of business, MetLife, similar to other life insurance companies, is involved in lawsuits (including class action lawsuits), arbitrations and other legal proceedings. Also, from time to time, state and Federal regulators or other officials conduct formal and informal examinations or undertake other actions dealing with various aspects of the financial services and insurance industries. In some legal proceedings involving insurers, substantial damages have been sought and/or material settlement payments have been made. It is not possible to predict with certainty the ultimate outcome of any pending legal proceeding or regulatory action. However, MetLife does not believe any such action or proceeding will have a material adverse effect upon the Separate Account or upon the ability of MLIDC to perform its contract with the Separate Account or of MetLife to meet its obligations under the Contracts. 85 TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION
PAGE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.................................................. 2 PRINCIPAL UNDERWRITER.......................................................................... 2 DISTRIBUTION AND PRINCIPAL UNDERWRITER AGREEMENT............................................... 2 EXPERIENCE FACTOR.............................................................................. 3 VARIABLE INCOME PAYMENTS....................................................................... 3 CALCULATING THE ANNUITY UNIT VALUE............................................................. 5 ADVERTISEMENT OF THE SEPARATE ACCOUNT.......................................................... 6 VOTING RIGHTS.................................................................................. 9 ERISA.......................................................................................... 10 TAXES.......................................................................................... 11 WITHDRAWALS.................................................................................... 12 ACCUMULATION UNIT VALUES TABLES................................................................ 13 FINANCIAL STATEMENTS OF THE SEPARATE ACCOUNT................................................... 1 FINANCIAL STATEMENTS OF METLIFE................................................................ F-1
86 APPENDIX I PREMIUM TAX TABLE If You are a resident of one of the following jurisdictions, the percentage amount listed by that jurisdiction is the premium tax rate applicable to your annuity.
TSA and TSA ERISA IRA and SEP 457(b) 403(a) Annuities Annuities Annuities Annuities California........ 0.5% 0.5% 2.35% 0.5% Florida(1)........ 1.0% 1.0% 1.0% 1.0% Maine............. -- -- 2.00% -- Nevada............ -- -- 3.50% -- Puerto Rico(2).... 1.0% 1.0% 1.0% 1.0% South Dakota(3)... -- -- 1.25% -- Wyoming........... -- -- 1.00% -- West Virginia..... 1.0% 1.0% 1.0% 1.0%
--- /1/Annuity premiums are exempt from taxation provided the tax savings are passed back to the contract holders. Otherwise, they are taxable at 1%. [MetLife passes the tax savings back to contract holders and, therefore, annuity premiums are exempt from taxation.] /2/We will not deduct premium taxes paid by us to Puerto Rico from purchase payments, account balances, withdrawals, death benefits or income payments. /3/Special rate applies for large case annuity policies. Rate is 8/100 of 1% for that portion of the annuity considerations received on a contract exceeding $500,000 annually. Special rate on large case policies is not subject to retaliation. 87 APPENDIX II WHAT YOU NEED TO KNOW IF YOU ARE A TEXAS OPTIONAL RETIREMENT PROGRAM PARTICIPANT If You are a participant in the Texas Optional Retirement Program, Texas law permits us to make withdrawals on your behalf only if You die, retire or terminate employment in all Texas institutions of higher education, as defined under Texas law. Any withdrawal You ask for requires a written statement from the appropriate Texas institution of higher education verifying your vesting status and (if applicable) termination of employment. Also, we require a written statement from You that You are not transferring employment to another Texas institution of higher education. If You retire or terminate employment in all Texas institutions of higher education or die before being vested, amounts provided by the state's matching contribution will be refunded to the appropriate Texas institution. We may change these restrictions or add others without your consent to the extent necessary to maintain compliance with the law. 88 APPENDIX III ACCUMULATION UNIT VALUES FOR EACH INVESTMENT DIVISION These tables show fluctuations in the Accumulation Unit Values for two of the possible mixes offered within the Deferred Annuity for each Investment Division from year end to year end. The information in these tables has been derived from the Separate Account's full financial statements or other reports (such as the annual report). The first table shows the Deferred Annuity mix that bears the total highest charge, and the second table shows the Deferred Annuity mix that bears the total lowest charge. The mix with the total highest charge has these features: e Bonus Class, the Annual Step-Up Death Benefit and the LWG. (In terms of the calculation for this mix, the LWB charge is made by canceling accumulation units and, therefore, the charge is not reflected in the Accumulation Unit Value. However, purchasing this option with these other contract features will result in the highest overall charge.) Lower charges for the GMIB and the LWG were in effect prior to May 4, 2009. The mix with the total lowest charge has these features: e Class and no optional benefit. All other possible mixes for each Investment Division within the Deferred Annuity appear in the SAI, which is available upon request without charge by calling 1-800-638-7732. METLIFE FINANCIAL FREEDOM SELECT HIGHEST POSSIBLE MIX 1.05 SEPARATE ACCOUNT CHARGE
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ American Funds(R) Balanced Allocation Investment Division (Class C)/(i)/........................................................ 2008 $10.00 $ 7.03 0.00 2009 7.03 8.99 0.00 2010 8.99 9.98 0.00 2011 9.98 9.67 0.00 American Funds Bond Investment Division (Class 2)/(f)(j)/........ 2006 14.95 15.71 0.00 2007 15.71 16.02 0.00 2008 16.02 14.33 0.00 2009 14.33 15.93 0.00 2010 15.93 16.74 0.00 2011 16.74 17.53 0.00 American Funds Global Small Capitalization Investment Division (Class 2)/(a)(j)/.............................................. 2002 12.21 10.86 0.00 2003 10.86 16.46 0.00 2004 16.46 19.64 0.00 2005 19.64 24.31 0.00 2006 24.31 29.77 0.00 2007 29.77 35.68 0.00 2008 35.68 16.36 0.00 2009 16.36 26.06 0.00 2010 26.06 31.49 0.00 2011 31.49 25.13 0.00 American Funds(R) Growth Allocation Investment Division (Class C)/(i)/........................................................ 2008 9.99 6.37 0.00 2009 6.37 8.46 0.00 2010 8.46 9.50 0.00 2011 9.50 8.95 0.00
89
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ American Funds Growth Investment Division (Class 2)/(a)(j)/...... 2002 $ 90.18 $ 87.17 0.00 2003 87.17 117.72 0.00 2004 117.72 130.72 0.00 2005 130.72 149.93 0.00 2006 149.93 163.12 0.00 2007 163.12 180.88 0.00 2008 180.88 100.03 0.00 2009 100.03 137.65 0.00 2010 137.65 161.26 0.00 2011 161.26 152.37 0.00 American Funds Growth-Income Investment Division (Class 2)/(a)(j)/..................................................... 2002 74.60 70.08 0.00 2003 70.08 91.61 0.00 2004 91.61 99.81 0.00 2005 99.81 104.27 0.00 2006 104.27 118.57 0.00 2007 118.57 122.93 0.00 2008 122.93 75.41 0.00 2009 75.41 97.70 0.00 2010 97.70 107.45 0.00 2011 107.45 104.13 0.00 American Funds(R) Moderate Allocation Investment Division (Class C)/(i)/........................................................ 2008 10.01 7.70 0.00 2009 7.70 9.41 0.00 2010 9.41 10.23 0.00 2011 10.23 10.14 0.00 Barclays Capital Aggregate Bond Index Investment Division/(a)/... 2002 11.86 12.41 0.00 2003 12.41 12.70 0.00 2004 12.70 13.05 0.00 2005 13.05 13.15 0.00 2006 13.15 13.51 0.00 2007 13.51 14.26 0.00 2008 14.26 14.91 0.00 2009 14.91 15.48 0.00 2010 15.48 16.20 0.00 2011 16.20 17.19 0.00 BlackRock Bond Income Investment Division/(a)/................... 2002 43.17 44.88 0.00 2003 44.88 46.89 0.00 2004 46.89 48.33 0.00 2005 48.33 48.86 0.00 2006 48.86 50.35 0.00 2007 50.35 52.82 0.00 2008 52.82 50.36 0.00 2009 50.36 54.41 0.00 2010 54.41 58.18 0.00 2011 58.18 61.21 0.00 BlackRock Large Cap Core Investment Division*/(g)/............... 2007 84.90 85.83 0.00 2008 85.83 53.24 0.00 2009 53.24 62.80 0.00 2010 62.80 69.89 0.00 2011 69.89 69.33 0.00
90
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ BlackRock Large Cap Investment Division/(a)(g)/.................. 2002 $53.00 $50.32 0.00 2003 50.32 64.69 0.00 2004 64.69 70.80 0.00 2005 70.80 72.38 0.00 2006 72.38 81.54 0.00 2007 81.54 85.61 0.00 BlackRock Large Cap Value Investment Division/(a)/............... 2002 8.61 7.92 0.00 2003 7.92 10.62 0.00 2004 10.62 11.90 0.00 2005 11.90 12.43 0.00 2006 12.43 14.66 0.00 2007 14.66 14.96 0.00 2008 14.96 9.60 0.00 2009 9.60 10.55 0.00 2010 10.55 11.37 0.00 2011 11.37 11.49 0.00 BlackRock Legacy Large Cap Growth Investment Division/(a)/....... 2002 20.93 18.31 0.00 2003 18.31 24.51 0.00 2004 24.51 26.33 0.00 2005 26.33 27.82 0.00 2006 27.82 28.60 0.00 2007 28.60 33.51 0.00 2008 33.51 20.99 0.00 2009 20.99 28.36 0.00 2010 28.36 33.53 0.00 2011 33.53 30.14 0.00 BlackRock Legacy Large Cap Growth Investment Division (formerly FI Large Cap Investment Division)/(k)/............... 2006 17.67 17.92 0.00 2007 17.92 18.39 0.00 2008 18.39 10.02 0.00 2009 10.02 10.45 0.00 BlackRock Money Market Investment Division/(b)/.................. 2003 23.75 23.66 0.00 2004 23.66 23.59 0.00 2005 23.59 23.96 0.00 2006 23.96 24.79 0.00 2007 24.79 25.71 0.00 2008 25.71 26.10 0.00 2009 26.10 25.89 0.00 2010 25.89 25.62 0.00 2011 25.62 25.35 0.00 Calvert VP SRI Balanced Investment Division/(a)/................. 2002 17.89 17.57 0.00 2003 17.57 20.75 0.00 2004 20.75 22.23 0.00 2005 22.23 23.24 0.00 2006 23.24 25.02 0.00 2007 25.02 25.44 0.00 2008 25.44 17.28 0.00 2009 17.28 21.43 0.00 2010 21.43 23.77 0.00 2011 23.77 24.60 0.00
91
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ Clarion Global Real Estate Investment Division/(d)/.............. 2004 $ 9.99 $12.86 0.00 2005 12.86 14.42 0.00 2006 14.42 19.63 0.00 2007 19.63 16.51 0.00 2008 16.51 9.53 0.00 2009 9.53 12.70 0.00 2010 12.70 14.59 0.00 2011 14.59 13.63 0.00 Davis Venture Value Investment Division/(a)/..................... 2002 22.80 22.23 0.00 2003 22.23 28.76 0.00 2004 28.76 31.86 0.00 2005 31.86 34.68 0.00 2006 34.68 39.23 0.00 2007 39.23 40.51 0.00 2008 40.51 24.24 0.00 2009 24.24 31.58 0.00 2010 31.58 34.91 0.00 2011 34.91 33.07 0.00 FI Value Leaders Investment Division/(a)/........................ 2002 20.15 19.17 0.00 2003 19.17 24.06 0.00 2004 24.06 27.04 0.00 2005 27.04 29.55 0.00 2006 29.55 32.65 0.00 2007 32.65 33.58 0.00 2008 33.58 20.23 0.00 2009 20.23 24.32 0.00 2010 24.32 27.51 0.00 2011 27.51 25.48 0.00 Harris Oakmark International Investment Division/(a)/............ 2002 9.91 8.86 0.00 2003 8.86 11.84 0.00 2004 11.84 14.12 0.00 2005 14.12 15.97 0.00 2006 15.97 20.36 0.00 2007 20.36 19.92 0.00 2008 19.92 11.65 0.00 2009 11.65 17.88 0.00 2010 17.88 20.60 0.00 2011 20.60 17.48 0.00 Invesco Small Cap Growth Investment Division/(a)/................ 2002 8.93 8.50 0.00 2003 8.50 11.69 0.00 2004 11.69 12.31 0.00 2005 12.31 13.19 0.00 2006 13.19 14.90 0.00 2007 14.90 16.38 0.00 2008 16.38 9.93 0.00 2009 9.93 13.15 0.00 2010 13.15 16.42 0.00 2011 16.42 16.07 0.00
92
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ Janus Forty Investment Division/(h)/............................. 2007 $159.23 $195.80 0.00 2008 195.80 112.38 0.00 2009 112.38 158.86 0.00 2010 158.86 171.98 0.00 2011 171.98 157.34 0.00 Lazard Mid Cap Investment Division/(a)/.......................... 2002 10.01 9.70 0.00 2003 9.70 12.12 0.00 2004 12.12 13.72 0.00 2005 13.72 14.67 0.00 2006 14.67 16.65 0.00 2007 16.65 16.02 0.00 2008 16.02 9.78 0.00 2009 9.78 13.24 0.00 2010 13.24 16.10 0.00 2011 16.10 15.09 0.00 Loomis Sayles Small Cap Core Investment Division/(a)/............ 2002 19.40 17.73 0.00 2003 17.73 23.94 0.00 2004 23.94 27.54 0.00 2005 27.54 29.07 0.00 2006 29.07 33.49 0.00 2007 33.49 36.99 0.00 2008 36.99 23.40 0.00 2009 23.40 30.09 0.00 2010 30.09 37.88 0.00 2011 37.88 37.61 0.00 Loomis Sayles Small Cap Growth Investment Division/(a)/.......... 2002 6.76 6.27 0.00 2003 6.27 8.98 0.00 2004 8.98 9.88 0.00 2005 9.88 10.20 0.00 2006 10.20 11.08 0.00 2007 11.08 11.44 0.00 2008 11.44 6.64 0.00 2009 6.64 8.52 0.00 2010 8.52 11.08 0.00 2011 11.08 11.26 0.00 Lord Abbett Bond Debenture Investment Division/(a)/.............. 2002 13.55 13.88 0.00 2003 13.88 16.36 0.00 2004 16.36 17.52 0.00 2005 17.52 17.59 0.00 2006 17.59 19.00 0.00 2007 19.00 20.03 0.00 2008 20.03 16.14 0.00 2009 16.14 21.84 0.00 2010 21.84 24.41 0.00 2011 24.41 25.24 0.00
93
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ Met/Artisan Mid Cap Value Investment Division/(a)/..................... 2002 $23.25 $23.96 0.00 2003 23.96 31.38 0.00 2004 31.38 34.05 0.00 2005 34.05 36.96 0.00 2006 36.96 41.03 0.00 2007 41.03 37.73 0.00 2008 37.73 20.11 0.00 2009 20.11 28.10 0.00 2010 28.10 31.91 0.00 2011 31.91 33.62 0.00 Met/Franklin Income Investment Division/(i)/........................... 2008 9.99 8.00 0.00 2009 8.00 10.12 0.00 2010 10.12 11.20 0.00 2011 11.20 11.32 0.00 Met/Franklin Low Duration Total Return Investment Division/(n)/........ 2011 9.98 9.79 0.00 Met/Franklin Mutual Shares Investment Division/(i)/.................... 2008 9.99 6.61 0.00 2009 6.61 8.17 0.00 2010 8.17 8.98 0.00 2011 8.98 8.84 0.00 Met/Franklin Templeton Founding Strategy Investment Division/(i)/...... 2008 9.99 7.05 0.00 2009 7.05 8.96 0.00 2010 8.96 9.76 0.00 2011 9.76 9.49 0.00 Met/Templeton Growth Investment Division/(i)/.......................... 2008 9.99 6.58 0.00 2009 6.58 8.64 0.00 2010 8.64 9.20 0.00 2011 9.20 8.48 0.00 MetLife Aggressive Strategy Investment Division........................ 2011 12.41 10.66 0.00 MetLife Aggressive Strategy Investment Division (formerly MetLife Aggressive Allocation Investment Division)/(e)(m)/. 2005 9.99 11.17 0.00 2006 11.17 12.79 0.00 2007 12.79 13.07 0.00 2008 13.07 7.70 0.00 2009 7.70 10.02 0.00 2010 10.02 11.47 0.00 2011 11.47 12.45 0.00 MetLife Conservative Allocation Investment Division/(e)/............... 2005 9.99 10.32 0.00 2006 10.32 10.92 0.00 2007 10.92 11.40 0.00 2008 11.40 9.66 0.00 2009 9.66 11.52 0.00 2010 11.52 12.55 0.00 2011 12.55 12.82 0.00 MetLife Conservative to Moderate Allocation Investment Division/(e)/... 2005 9.99 10.54 0.00 2006 10.54 11.41 0.00 2007 11.41 11.83 0.00 2008 11.83 9.18 0.00 2009 9.18 11.24 0.00 2010 11.24 12.40 0.00 2011 12.40 12.40 0.00
94
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ MetLife Mid Cap Stock Index Investment Division/(a)/............. 2002 $ 9.01 $ 8.69 0.00 2003 8.69 11.57 0.00 2004 11.57 13.25 0.00 2005 13.25 14.69 0.00 2006 14.69 15.97 0.00 2007 15.97 16.99 0.00 2008 16.99 10.69 0.00 2009 10.69 14.48 0.00 2010 14.48 18.05 0.00 2011 18.05 17.47 0.00 MetLife Moderate Allocation Investment Division/(e)/............. 2005 9.99 10.77 0.00 2006 10.77 11.92 0.00 2007 11.92 12.31 0.00 2008 12.31 8.69 0.00 2009 8.69 10.88 0.00 2010 10.88 12.19 0.00 2011 12.19 11.89 0.00 MetLife Moderate to Aggressive Allocation Investment Division/(e)/.................................................. 2005 9.99 11.00 0.00 2006 11.00 12.43 0.00 2007 12.43 12.77 0.00 2008 12.77 8.20 0.00 2009 8.20 10.47 0.00 2010 10.47 11.89 0.00 2011 11.89 11.32 0.00 MetLife Stock Index Investment Division/(a)/..................... 2002 29.30 28.01 0.00 2003 28.01 35.44 0.00 2004 35.44 38.68 0.00 2005 38.68 39.95 0.00 2006 39.95 45.54 0.00 2007 45.54 47.30 0.00 2008 47.30 29.37 0.00 2009 29.37 36.59 0.00 2010 36.59 41.46 0.00 2011 41.46 41.70 0.00 MFS(R) Research International Investment Division/(a)/........... 2002 7.83 7.33 0.00 2003 7.33 9.58 0.00 2004 9.58 11.34 0.00 2005 11.34 13.06 0.00 2006 13.06 16.36 0.00 2007 16.36 18.34 0.00 2008 18.34 10.46 0.00 2009 10.46 13.62 0.00 2010 13.62 15.01 0.00 2011 15.01 13.27 0.00
95
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ MFS(R) Total Return Investment Division/(a)/...................... 2002 $33.72 $33.52 0.00 2003 33.52 38.72 0.00 2004 38.72 42.52 0.00 2005 42.52 43.28 0.00 2006 43.28 47.94 0.00 2007 47.94 49.39 0.00 2008 49.39 37.95 0.00 2009 37.95 44.43 0.00 2010 44.43 48.27 0.00 2011 48.27 48.80 0.00 MFS(R) Value Investment Division/(a)/............................. 2002 10.13 9.81 0.00 2003 9.81 12.16 0.00 2004 12.16 13.37 0.00 2005 13.37 13.02 0.00 2006 13.02 15.18 0.00 2007 15.18 14.42 0.00 2008 14.42 9.46 0.00 2009 9.46 11.28 0.00 2010 11.28 12.41 0.00 2011 12.41 12.36 0.00 Morgan Stanley EAFE(R) Index Investment Division/(a)/............. 2002 7.97 7.09 0.00 2003 7.09 9.62 0.00 2004 9.62 11.36 0.00 2005 11.36 12.69 0.00 2006 12.69 15.76 0.00 2007 15.76 17.24 0.00 2008 17.24 9.86 0.00 2009 9.86 12.51 0.00 2010 12.51 13.36 0.00 2011 13.36 11.55 0.00 Morgan Stanley Mid Cap Growth Investment Division/(l)/............ 2010 13.48 15.69 0.00 2011 15.69 14.45 0.00 Morgan Stanley Mid Cap Growth Investment Division (formerly FI Mid Cap Opportunities Investment Division)/(a)(c)/. 2002 11.43 11.03 0.00 2003 11.03 14.66 0.00 2004 14.66 16.95 0.00 2005 16.95 17.89 0.00 2006 17.89 19.75 0.00 2007 19.75 21.13 0.00 2008 21.13 9.32 0.00 2009 9.32 12.31 0.00 2010 12.31 13.34 0.00 Neuberger Berman Genesis Investment Division/(a)/................. 2002 12.83 10.91 0.00 2003 10.91 16.17 0.00 2004 16.17 18.41 0.00 2005 18.41 18.93 0.00 2006 18.93 21.81 0.00 2007 21.81 20.79 0.00 2008 20.79 12.64 0.00 2009 12.64 14.11 0.00 2010 14.11 16.94 0.00 2011 16.94 17.69 0.00
96
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ Neuberger Berman Mid Cap Value Investment Division/(a)/.......... 2002 $14.15 $13.52 0.00 2003 13.52 18.22 0.00 2004 18.22 22.12 0.00 2005 22.12 24.50 0.00 2006 24.50 26.96 0.00 2007 26.96 27.53 0.00 2008 27.53 14.30 0.00 2009 14.30 20.91 0.00 2010 20.91 26.09 0.00 2011 26.09 24.09 0.00 Oppenheimer Capital Appreciation Investment Division/(a)/........ 2002 6.57 6.32 0.00 2003 6.32 8.04 0.00 2004 8.04 8.47 0.00 2005 8.47 8.77 0.00 2006 8.77 9.34 0.00 2007 9.34 10.57 0.00 2008 10.57 5.65 0.00 2009 5.65 8.04 0.00 2010 8.04 8.70 0.00 2011 8.70 8.49 0.00 PIMCO Inflation Protected Bond Investment Division/(f)/.......... 2006 11.11 11.24 0.00 2007 11.24 12.32 0.00 2008 12.32 11.36 0.00 2009 11.36 13.27 0.00 2010 13.27 14.15 0.00 2011 14.15 15.56 0.00 PIMCO Total Return Investment Division/(a)/...................... 2002 10.96 11.43 0.00 2003 11.43 11.79 0.00 2004 11.79 12.25 0.00 2005 12.25 12.40 0.00 2006 12.40 12.82 0.00 2007 12.82 13.65 0.00 2008 13.65 13.56 0.00 2009 13.56 15.84 0.00 2010 15.84 16.95 0.00 2011 16.95 17.31 0.00 RCM Technology Investment Division/(a)/.......................... 2002 3.69 2.98 0.00 2003 2.98 4.64 0.00 2004 4.64 4.39 0.00 2005 4.39 4.83 0.00 2006 4.83 5.03 0.00 2007 5.03 6.55 0.00 2008 6.55 3.60 0.00 2009 3.60 5.67 0.00 2010 5.67 7.16 0.00 2011 7.16 6.38 0.00
97
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ Russell 2000(R) Index Investment Division/(a)/................... 2002 $10.13 $ 9.40 0.00 2003 9.40 13.56 0.00 2004 13.56 15.75 0.00 2005 15.75 16.26 0.00 2006 16.26 18.92 0.00 2007 18.92 18.40 0.00 2008 18.40 12.08 0.00 2009 12.08 15.02 0.00 2010 15.02 18.81 0.00 2011 18.81 17.82 0.00 SSgA Growth ETF Investment Division/(f)/......................... 2006 10.72 11.46 0.00 2007 11.46 11.98 0.00 2008 11.98 7.94 0.00 2009 7.94 10.15 0.00 2010 10.15 11.46 0.00 2011 11.46 11.10 0.00 SSgA Growth and Income ETF Investment Division/(f)/.............. 2006 10.53 11.20 0.00 2007 11.20 11.69 0.00 2008 11.69 8.66 0.00 2009 8.66 10.71 0.00 2010 10.71 11.89 0.00 2011 11.89 11.90 0.00 T. Rowe Price Large Cap Growth Investment Division/(a)/.......... 2002 9.01 8.80 0.00 2003 8.80 11.38 0.00 2004 11.38 12.36 0.00 2005 12.36 13.00 0.00 2006 13.00 14.53 0.00 2007 14.53 15.69 0.00 2008 15.69 9.00 0.00 2009 9.00 12.74 0.00 2010 12.74 14.72 0.00 2011 14.72 14.38 0.00 T. Rowe Price Mid Cap Growth Investment Division/(a)/............ 2002 4.85 4.57 0.00 2003 4.57 6.18 0.00 2004 6.18 7.21 0.00 2005 7.21 8.18 0.00 2006 8.18 8.59 0.00 2007 8.59 10.00 0.00 2008 10.00 5.96 0.00 2009 5.96 8.58 0.00 2010 8.58 10.85 0.00 2011 10.85 10.56 0.00 T. Rowe Price Small Cap Growth Investment Division/(a)/.......... 2002 9.03 8.85 0.00 2003 8.85 12.35 0.00 2004 12.35 13.56 0.00 2005 13.56 14.86 0.00 2006 14.86 15.24 0.00 2007 15.24 16.52 0.00 2008 16.52 10.41 0.00 2009 10.41 14.28 0.00 2010 14.28 19.03 0.00 2011 19.03 19.10 0.00
98
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ Third Avenue Small Cap Value Investment Division/(a)/............ 2002 $ 9.03 $ 8.25 0.00 2003 8.25 11.54 0.00 2004 11.54 14.45 0.00 2005 14.45 16.51 0.00 2006 16.51 18.49 0.00 2007 18.49 17.74 0.00 2008 17.74 12.32 0.00 2009 12.32 15.42 0.00 2010 15.42 18.29 0.00 2011 18.29 16.47 0.00 Western Asset Management Strategic Bond Opportunities Investment Division/(a)/.................................................. 2002 16.49 17.48 0.00 2003 17.48 19.48 0.00 2004 19.48 20.49 0.00 2005 20.49 20.80 0.00 2006 20.80 21.57 0.00 2007 21.57 22.14 0.00 2008 22.14 18.57 0.00 2009 18.57 24.24 0.00 2010 24.24 26.97 0.00 2011 26.97 28.25 0.00 Western Asset Management U.S. Government Investment Division/(a)/ 2002 15.51 16.00 0.00 2003 16.00 16.10 0.00 2004 16.10 16.36 0.00 2005 16.36 16.41 0.00 2006 16.41 16.88 0.00 2007 16.88 17.37 0.00 2008 17.37 17.10 0.00 2009 17.10 17.61 0.00 2010 17.61 18.38 0.00 2011 18.38 19.15 0.00
99 METLIFE FINANCIAL FREEDOM SELECT LOWEST POSSIBLE MIX 0.50 SEPARATE ACCOUNT CHARGE
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ American Funds(R) Balanced Allocation Investment Division (Class C)/(i)/.......................................................... 2008 $ 10.00 $ 7.05 24,750.54 2009 7.05 9.08 81,951.16 2010 9.08 10.13 103,758.85 2011 10.13 9.87 93,925.98 American Funds Bond Investment Division (Class 2)/(f)(j)/.......... 2006 15.71 16.57 38.30 2007 16.57 16.99 214.16 2008 16.99 15.29 660.66 2009 15.29 17.08 1,336.34 2010 17.08 18.05 2,534.47 2011 18.05 19.01 5,136.86 American Funds Global Small Capitalization Investment Division (Class 2)/(a)(j)/................................................ 2002 12.49 11.14 0.00 2003 11.14 16.98 0.00 2004 16.98 20.38 0.00 2005 20.38 25.36 0.00 2006 25.36 31.22 113.76 2007 31.22 37.63 856.44 2008 37.63 17.35 3,133.92 2009 17.35 27.79 4,838.18 2010 27.79 33.76 6,471.12 2011 33.76 27.09 9,057.64 American Funds(R) Growth Allocation Investment Division (Class C)/(i)/.......................................................... 2008 9.99 6.40 446.85 2009 6.40 8.53 49,924.20 2010 8.53 9.64 102,918.27 2011 9.64 9.14 129,322.32 American Funds Growth Investment Division (Class 2)/(a)(j)/........ 2002 99.81 96.73 0.00 2003 96.73 131.34 0.00 2004 131.34 146.65 0.00 2005 146.65 169.12 0.00 2006 169.12 185.01 36.25 2007 185.01 206.30 223.84 2008 206.30 114.72 1,187.81 2009 114.72 158.74 2,868.42 2010 158.74 186.99 4,369.26 2011 186.99 177.65 5,699.90 American Funds Growth-Income Investment Division (Class 2)/(a)(j)/. 2002 82.55 77.76 0.00 2003 77.76 102.21 0.00 2004 102.21 111.97 0.00 2005 111.97 117.61 0.00 2006 117.61 134.49 77.04 2007 134.49 140.21 682.51 2008 140.21 86.49 544.54 2009 86.49 112.66 942.49 2010 112.66 124.59 1,374.08 2011 124.59 121.40 1,816.06
100
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ American Funds(R) Moderate Allocation Investment Division (Class C)/(i)/.......................................................... 2008 $10.01 $ 7.73 114.62 2009 7.73 9.49 12,910.53 2010 9.49 10.38 17,709.05 2011 10.38 10.35 25,149.76 Barclays Capital Aggregate Bond Index Investment Division/(a)/..... 2002 12.11 12.70 0.00 2003 12.70 13.06 260.70 2004 13.06 13.50 254.09 2005 13.50 13.68 358.49 2006 13.68 14.13 475.65 2007 14.13 15.00 1,416.18 2008 15.00 15.76 1,859.57 2009 15.76 16.46 8,539.73 2010 16.46 17.31 16,262.67 2011 17.31 18.48 27,706.18 BlackRock Bond Income Investment Division/(a)/..................... 2002 47.90 49.92 0.00 2003 49.92 52.44 0.00 2004 52.44 54.36 0.00 2005 54.36 55.25 0.00 2006 55.25 57.25 16.39 2007 57.25 60.40 82.28 2008 60.40 57.89 93.94 2009 57.89 62.90 250.42 2010 62.90 67.63 393.97 2011 67.63 71.54 503.16 BlackRock Large Cap Core Investment Division*/(g)/................. 2007 96.80 98.23 0.00 2008 98.23 61.27 1.72 2009 61.27 72.67 133.27 2010 72.67 81.31 216.26 2011 81.31 81.12 490.85 BlackRock Large Cap Investment Division/(a)(g)/.................... 2002 58.86 56.03 0.00 2003 56.03 72.42 0.00 2004 72.42 79.70 0.00 2005 79.70 81.93 0.00 2006 81.93 92.80 0.00 2007 92.80 97.61 0.00 BlackRock Large Cap Value Investment Division/(a)/................. 2002 8.62 7.95 0.00 2003 7.95 10.72 0.00 2004 10.72 12.08 0.00 2005 12.08 12.68 0.00 2006 12.68 15.04 64.07 2007 15.04 15.43 650.02 2008 15.43 9.96 504.26 2009 9.96 11.01 2,835.37 2010 11.01 11.93 4,494.17 2011 11.93 12.11 8,973.05
101
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ BlackRock Legacy Large Cap Growth Investment Division/(a)/......... 2002 $21.83 $19.16 0.00 2003 19.16 25.78 0.00 2004 25.78 27.85 0.00 2005 27.85 29.58 0.00 2006 29.58 30.58 0.00 2007 30.58 36.03 0.00 2008 36.03 22.70 10.28 2009 22.70 30.83 146.49 2010 30.83 36.65 207.78 2011 36.65 33.13 255.76 BlackRock Legacy Large Cap Growth Investment Division (formerly FI Large Cap Investment Division)/(k)/.............................. 2006 18.64 18.97 0.00 2007 18.97 19.58 0.00 2008 19.58 10.72 11.38 2009 10.72 11.20 0.00 BlackRock Money Market Investment Division/(b)/.................... 2003 26.47 26.47 0.00 2004 26.47 26.53 0.00 2005 26.53 27.09 0.00 2006 27.09 28.18 0.00 2007 28.18 29.39 0.00 2008 29.39 30.01 0.00 2009 30.01 29.93 0.00 2010 29.93 29.78 0.00 2011 29.78 29.63 0.00 Calvert VP SRI Balanced Investment Division/(a)/................... 2002 18.87 18.58 0.00 2003 18.58 22.06 125.17 2004 22.06 23.77 142.95 2005 23.77 24.98 167.71 2006 24.98 27.04 186.60 2007 27.04 27.65 276.01 2008 27.65 18.89 3,248.79 2009 18.89 23.55 4,571.12 2010 23.55 26.27 4,883.94 2011 26.27 27.33 5,355.98 Clarion Global Real Estate Investment Division/(d)/................ 2004 9.99 12.91 0.00 2005 12.91 14.55 0.00 2006 14.55 19.92 201.14 2007 19.92 16.84 862.39 2008 16.84 9.77 1,061.77 2009 9.77 13.10 1,455.60 2010 13.10 15.14 2,152.91 2011 15.14 14.22 3,310.42 Davis Venture Value Investment Division/(a)/....................... 2002 23.79 23.25 0.00 2003 23.25 30.25 0.00 2004 30.25 33.69 0.00 2005 33.69 36.88 0.00 2006 36.88 41.95 113.38 2007 41.95 43.55 617.57 2008 43.55 26.21 1,471.02 2009 26.21 34.33 3,218.67 2010 34.33 38.16 4,953.31 2011 38.16 36.35 6,489.31
102
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ FI Value Leaders Investment Division/(a)/.......................... 2002 $ 21.19 $ 20.22 0.00 2003 20.22 25.52 0.00 2004 25.52 28.83 0.00 2005 28.83 31.68 0.00 2006 31.68 35.20 13.46 2007 35.20 36.40 15.04 2008 36.40 22.05 20.38 2009 22.05 26.66 23.32 2010 26.66 30.32 26.54 2011 30.32 28.24 721.16 Harris Oakmark International Investment Division/(a)/.............. 2002 9.96 8.92 0.00 2003 8.92 11.99 0.00 2004 11.99 14.38 0.00 2005 14.38 16.34 0.00 2006 16.34 20.95 261.51 2007 20.95 20.61 1,759.63 2008 20.61 12.12 1,774.01 2009 12.12 18.71 3,111.81 2010 18.71 21.67 4,186.27 2011 21.67 18.49 6,890.84 Invesco Small Cap Growth Investment Division/(a)/.................. 2002 8.97 8.56 0.00 2003 8.56 11.83 0.00 2004 11.83 12.53 0.00 2005 12.53 13.50 0.00 2006 13.50 15.34 0.00 2007 15.34 16.95 0.67 2008 16.95 10.33 79.92 2009 10.33 13.76 291.68 2010 13.76 17.28 450.75 2011 17.28 17.01 545.88 Janus Forty Investment Division/(h)/............................... 2007 182.83 225.65 9.12 2008 225.65 130.23 95.77 2009 130.23 185.11 270.55 2010 185.11 201.50 408.87 2011 201.50 185.37 514.77 Lazard Mid Cap Investment Division/(a)/............................ 2002 10.05 9.77 0.00 2003 9.77 12.26 0.00 2004 12.26 13.96 0.00 2005 13.96 15.01 0.00 2006 15.01 17.13 0.00 2007 17.13 16.58 0.00 2008 16.58 10.18 322.27 2009 10.18 13.85 342.85 2010 13.85 16.93 469.62 2011 16.93 15.96 601.19
103
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ Loomis Sayles Small Cap Core Investment Division/(a)/.............. 2002 $20.29 $18.60 0.00 2003 18.60 25.25 0.00 2004 25.25 29.21 0.00 2005 29.21 31.00 0.00 2006 31.00 35.91 13.33 2007 35.91 39.88 14.86 2008 39.88 25.37 334.43 2009 25.37 32.80 1,971.39 2010 32.80 41.52 3,210.23 2011 41.52 41.45 4,318.44 Loomis Sayles Small Cap Growth Investment Division/(a)/............ 2002 6.80 6.33 0.00 2003 6.33 9.11 0.00 2004 9.11 10.08 0.00 2005 10.08 10.47 0.00 2006 10.47 11.43 0.00 2007 11.43 11.86 2.52 2008 11.86 6.93 256.59 2009 6.93 8.94 944.01 2010 8.94 11.68 1,360.10 2011 11.68 11.94 1,605.12 Lord Abbett Bond Debenture Investment Division/(a)/................ 2002 14.02 14.40 0.00 2003 14.40 17.07 0.00 2004 17.07 18.37 0.00 2005 18.37 18.55 0.00 2006 18.55 20.15 62.94 2007 20.15 21.36 332.67 2008 21.36 17.30 986.45 2009 17.30 23.55 1,214.61 2010 23.55 26.47 1,526.64 2011 26.47 27.51 2,353.49 Met/Artisan Mid Cap Value Investment Division/(a)/................. 2002 24.46 25.27 0.00 2003 25.27 33.27 0.00 2004 33.27 36.30 0.00 2005 36.30 39.63 0.00 2006 39.63 44.23 32.33 2007 44.23 40.90 141.45 2008 40.90 21.92 305.54 2009 21.92 30.80 199.66 2010 30.80 35.17 249.81 2011 35.17 37.26 677.72 Met/Franklin Income Investment Division/(i)/....................... 2008 9.99 8.03 0.00 2009 8.03 10.22 3,879.54 2010 10.22 11.37 4,602.93 2011 11.37 11.55 5,982.31 Met/Franklin Low Duration Total Return Investment Division/(n)/.... 2011 9.98 9.82 0.00 Met/Franklin Mutual Shares Investment Division/(i)/................ 2008 9.99 6.64 23.17 2009 6.64 8.25 2,623.80 2010 8.25 9.11 3,197.54 2011 9.11 9.02 5,793.87
104
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ Met/Franklin Templeton Founding Strategy Investment Division/(i)/.. 2008 $ 9.99 $ 7.07 0.00 2009 7.07 9.05 165.36 2010 9.05 9.91 1,321.99 2011 9.91 9.68 2,087.89 Met/Templeton Growth Investment Division/(i)/...................... 2008 9.99 6.61 172.60 2009 6.61 8.72 1,106.76 2010 8.72 9.34 791.20 2011 9.34 8.65 3,423.91 MetLife Aggressive Strategy Investment Division.................... 2011 12.83 11.05 31,669.41 MetLife Aggressive Strategy Investment Division (formerly MetLife Aggressive Allocation Investment Division)/(e)(m)/............... 2005 9.99 11.21 0.00 2006 11.21 12.91 34.40 2007 12.91 13.26 848.35 2008 13.26 7.86 4,744.66 2009 7.86 10.28 20,892.52 2010 10.28 11.83 28,283.98 2011 11.83 12.87 0.00 MetLife Conservative Allocation Investment Division/(e)/........... 2005 9.99 10.36 0.00 2006 10.36 11.02 103.46 2007 11.02 11.57 2,023.63 2008 11.57 9.86 3,573.68 2009 9.86 11.82 5,183.58 2010 11.82 12.95 6,266.53 2011 12.95 13.30 18,551.74 MetLife Conservative to Moderate Allocation Investment Division/(e)/.................................................... 2005 9.99 10.58 0.00 2006 10.58 11.52 47.17 2007 11.52 12.01 7,382.99 2008 12.01 9.37 16,140.47 2009 9.37 11.53 31,977.17 2010 11.53 12.79 41,906.67 2011 12.79 12.86 56,982.64 MetLife Mid Cap Stock Index Investment Division/(a)/............... 2002 9.11 8.81 0.00 2003 8.81 11.80 0.00 2004 11.80 13.59 0.00 2005 13.59 15.14 0.00 2006 15.14 16.55 127.01 2007 16.55 17.70 1,029.80 2008 17.70 11.21 2,089.70 2009 11.21 15.25 6,709.45 2010 15.25 19.12 10,163.07 2011 19.12 18.61 14,422.97 MetLife Moderate Allocation Investment Division/(e)/............... 2005 9.99 10.81 0.00 2006 10.81 12.03 607.21 2007 12.03 12.49 16,503.39 2008 12.49 8.87 89,441.25 2009 8.87 11.16 160,538.96 2010 11.16 12.57 237,902.02 2011 12.57 12.34 309,922.15
105
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ MetLife Moderate to Aggressive Allocation Investment Division/(e)/. 2005 $ 9.99 $11.04 0.00 2006 11.04 12.54 1,036.87 2007 12.54 12.96 30,136.44 2008 12.96 8.37 101,740.66 2009 8.37 10.75 193,138.01 2010 10.75 12.27 244,089.93 2011 12.27 11.74 320,244.68 MetLife Stock Index Investment Division/(a)/....................... 2002 31.34 30.03 0.00 2003 30.03 38.21 74.89 2004 38.21 41.93 22.11 2005 41.93 43.55 99.88 2006 43.55 49.91 143.00 2007 49.91 52.13 539.70 2008 52.13 32.54 2,312.11 2009 32.54 40.77 8,761.00 2010 40.77 46.45 13,430.18 2011 46.45 46.98 20,212.37 MFS(R) Research International Investment Division/(a)/............. 2002 7.89 7.41 0.00 2003 7.41 9.74 0.00 2004 9.74 11.58 0.00 2005 11.58 13.42 0.00 2006 13.42 16.90 28.31 2007 16.90 19.05 329.75 2008 19.05 10.92 2,545.89 2009 10.92 14.30 11,760.04 2010 14.30 15.85 17,500.23 2011 15.85 14.08 22,168.96 MFS(R) Total Return Investment Division/(a)/....................... 2002 36.66 36.54 0.00 2003 36.54 42.44 0.00 2004 42.44 46.87 0.00 2005 46.87 47.96 0.00 2006 47.96 53.42 8.99 2007 53.42 55.34 276.68 2008 55.34 42.76 1,080.59 2009 42.76 50.33 1,905.01 2010 50.33 54.99 2,596.09 2011 54.99 55.90 2,494.56 MFS(R) Value Investment Division/(a)/.............................. 2002 10.34 10.03 0.00 2003 10.03 12.51 0.00 2004 12.51 13.83 0.00 2005 13.83 13.54 0.00 2006 13.54 15.87 9.90 2007 15.87 15.16 182.05 2008 15.16 10.00 1,028.33 2009 10.00 12.00 18,675.17 2010 12.00 13.27 30,167.11 2011 13.27 13.29 40,555.23
106
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ Morgan Stanley EAFE(R) Index Investment Division/(a)/.............. 2002 $ 8.13 $ 7.25 0.00 2003 7.25 9.90 284.28 2004 9.90 11.75 246.95 2005 11.75 13.20 365.33 2006 13.20 16.48 428.95 2007 16.48 18.13 1,056.06 2008 18.13 10.42 3,777.69 2009 10.42 13.31 8,912.46 2010 13.31 14.29 16,315.16 2011 14.29 12.42 27,977.26 Morgan Stanley Mid Cap Growth Investment Division/(l)/............. 2010 14.49 16.93 333.35 2011 16.93 15.68 2,349.56 Morgan Stanley Mid Cap Growth Investment Division (formerly FI Mid Cap Opportunities Investment Division)/(a)(c)/................... 2002 11.78 11.39 0.00 2003 11.39 15.23 0.00 2004 15.23 17.70 0.00 2005 17.70 18.78 0.00 2006 18.78 20.85 0.00 2007 20.85 22.43 0.00 2008 22.43 9.94 123.50 2009 9.94 13.21 277.77 2010 13.21 14.34 0.00 Neuberger Berman Genesis Investment Division/(a)/.................. 2002 12.98 11.06 0.00 2003 11.06 16.48 0.00 2004 16.48 18.87 0.00 2005 18.87 19.51 0.00 2006 19.51 22.60 24.26 2007 22.60 21.66 118.09 2008 21.66 13.24 254.30 2009 13.24 14.87 545.06 2010 14.87 17.95 6,552.91 2011 17.95 18.84 808.97 Neuberger Berman Mid Cap Value Investment Division/(a)/............ 2002 14.43 13.83 0.00 2003 13.83 18.74 0.00 2004 18.74 22.88 0.00 2005 22.88 25.48 79.45 2006 25.48 28.19 394.23 2007 28.19 28.95 621.91 2008 28.95 15.13 1,531.52 2009 15.13 22.24 4,224.04 2010 22.24 27.89 6,283.29 2011 27.89 25.90 8,060.45 Oppenheimer Capital Appreciation Investment Division/(a)/.......... 2002 6.62 6.39 0.00 2003 6.39 8.17 0.00 2004 8.17 8.65 0.00 2005 8.65 9.01 0.00 2006 9.01 9.65 0.00 2007 9.65 10.98 407.76 2008 10.98 5.90 2,455.08 2009 5.90 8.44 3,635.62 2010 8.44 9.19 4,575.46 2011 9.19 9.02 4,882.16
107
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ PIMCO Inflation Protected Bond Investment Division/(f)/............ 2006 $11.29 $11.47 0.00 2007 11.47 12.65 0.00 2008 12.65 11.72 3,057.42 2009 11.72 13.76 11,295.13 2010 13.76 14.76 24,345.63 2011 14.76 16.32 30,676.09 PIMCO Total Return Investment Division/(a)/........................ 2002 11.05 11.55 0.00 2003 11.55 11.98 269.10 2004 11.98 12.52 264.13 2005 12.52 12.73 683.14 2006 12.73 13.24 1,825.44 2007 13.24 14.17 2,700.88 2008 14.17 14.16 6,189.85 2009 14.16 16.63 13,972.23 2010 16.63 17.90 21,017.74 2011 17.90 18.38 31,450.38 RCM Technology Investment Division/(a)/............................ 2002 3.72 3.01 0.00 2003 3.01 4.72 0.00 2004 4.72 4.49 10.00 2005 4.49 4.96 0.00 2006 4.96 5.20 84.02 2007 5.20 6.81 906.70 2008 6.81 3.76 2,186.31 2009 3.76 5.95 4,893.23 2010 5.95 7.56 4,922.19 2011 7.56 6.78 7,453.31 Russell 2000(R) Index Investment Division/(a)/..................... 2002 10.34 9.62 0.00 2003 9.62 13.95 198.40 2004 13.95 16.30 213.35 2005 16.30 16.91 257.65 2006 16.91 19.79 305.88 2007 19.79 19.35 672.23 2008 19.35 12.77 721.11 2009 12.77 15.97 2,960.20 2010 15.97 20.11 5,629.08 2011 20.11 19.16 9,516.51 SSgA Growth ETF Investment Division/(f)/........................... 2006 10.76 11.54 0.00 2007 11.54 12.13 127.20 2008 12.13 8.09 407.42 2009 8.09 10.39 864.60 2010 10.39 11.80 987.73 2011 11.80 11.49 1,516.66 SSgA Growth and Income ETF Investment Division/(f)/................ 2006 10.56 11.28 0.00 2007 11.28 11.83 131.14 2008 11.83 8.82 281.44 2009 8.82 10.96 379.11 2010 10.96 12.24 2,282.16 2011 12.24 12.31 2,487.59
108
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ T. Rowe Price Large Cap Growth Investment Division/(a)/............ 2002 $ 9.19 $ 9.00 0.00 2003 9.00 11.71 0.00 2004 11.71 12.78 0.00 2005 12.78 13.53 0.00 2006 13.53 15.19 0.00 2007 15.19 16.50 3.77 2008 16.50 9.52 642.35 2009 9.52 13.55 1,826.57 2010 13.55 15.74 3,103.08 2011 15.74 15.45 5,083.91 T. Rowe Price Mid Cap Growth Investment Division/(a)/.............. 2002 4.89 4.62 0.00 2003 4.62 6.28 0.00 2004 6.28 7.36 0.00 2005 7.36 8.40 241.09 2006 8.40 8.87 1,122.22 2007 8.87 10.39 2,065.48 2008 10.39 6.23 4,714.53 2009 6.23 9.01 9,445.39 2010 9.01 11.45 12,663.77 2011 11.45 11.21 14,666.75 T. Rowe Price Small Cap Growth Investment Division/(a)/............ 2002 9.30 9.14 0.00 2003 9.14 12.82 0.00 2004 12.82 14.16 0.00 2005 14.16 15.60 0.00 2006 15.60 16.09 3.61 2007 16.09 17.53 281.92 2008 17.53 11.11 145.52 2009 11.11 15.32 1,365.08 2010 15.32 20.53 1,346.56 2011 20.53 20.73 3,791.61 Third Avenue Small Cap Value Investment Division/(a)/.............. 2002 9.04 8.28 0.00 2003 8.28 11.65 0.00 2004 11.65 14.66 0.00 2005 14.66 16.85 0.00 2006 16.85 18.97 41.20 2007 18.97 18.30 130.75 2008 18.30 12.78 912.24 2009 12.78 16.08 2,966.51 2010 16.08 19.19 3,511.63 2011 19.19 17.37 4,639.68 Western Asset Management Strategic Bond Opportunities Investment Division/(a)/.................................................... 2002 17.21 18.29 0.00 2003 18.29 20.49 0.00 2004 20.49 21.67 0.32 2005 21.67 22.12 0.00 2006 22.12 23.07 158.89 2007 23.07 23.80 591.13 2008 23.80 20.08 1,051.67 2009 20.08 26.35 1,433.95 2010 26.35 29.48 1,920.49 2011 29.48 31.05 1,218.28
109
Beginning of Number of Year End of Year Accumulation Accumulation Accumulation Units End of Investment Division Year Unit Value Unit Value Year ------------------- ---- ------------ ------------ ------------ Western Asset Management U.S. Government Investment Division/(a)/.. 2002 $16.18 $16.74 0.00 2003 16.74 16.93 200.32 2004 16.93 17.30 223.79 2005 17.30 17.45 276.73 2006 17.45 18.04 306.37 2007 18.04 18.68 359.83 2008 18.68 18.49 602.55 2009 18.49 19.14 125.48 2010 19.14 20.10 309.10 2011 20.10 21.05 483.84
----------- (a)The inception date for the Deferred Annuities was July 12, 2002. (b)Inception Date: May 1, 2003. (c)The Investment Division with the name FI Mid Cap Opportunities was merged into the Janus Mid Cap Investment Division prior to the opening of business May 3, 2004, and was renamed FI Mid Cap Opportunities. The Investment Division with the name FI Mid Cap Opportunities on April 30, 2004 ceased to exist. The Accumulation Unit Values history prior to May 1, 2004 is of the Investment Division which no longer exists. (d)Inception Date: May 1, 2004. (e)Inception Date: May 1, 2005. (f)Inception Date: May 1, 2006. (g)The assets of BlackRock Large Cap Investment Division (formerly BlackRock Investment Trust Investment Division) of the Metropolitan Fund were merged into the BlackRock Large Cap Core Investment Division of the Met Investors Fund on April 30, 2007. Accumulation Unit Values prior to April 30, 2007 are those of the BlackRock Large Cap Investment Division. (h)Inception date: April 30, 2007. (i)Inception date: April 28, 2008. (j)The Accumulation Unit Values for American Funds Bond, American Funds Growth-Income, American Funds Growth and American Funds Global Capitalization Investment Divisions are calculated with an additional .25% separate account charge as indicated in the Separate Account Charge section of the Table of Expenses. (k)The assets of FI Large Cap Investment Division of the Metropolitan Fund were merged into the BlackRock Legacy Large Cap Growth Investment Division of the Metropolitan Fund on May 1, 2009. Accumulation Unit Values prior to May 1, 2009 are those of the FI Large Cap Investment Division. (l)The assets of FI Mid Cap Opportunities Investment Division were merged into this Investment Division on May 3, 2010. Accumulation Unit Values prior to May 3, 2010 are those of FI Mid Cap Opportunities Investment Division. (m)The assets of MetLife Aggressive Allocation Investment Division of the Metropolitan Fund were merged into the MetLife Aggressive Strategy Investment Division of the Met Investors Trust on May 2, 2011. Accumulation Unit Values prior to May 2, 2011 are those of the MetLife Aggressive Allocation Investment Division. (n)Inception Date: May 2, 2011. * We are waiving a portion of the Separate Account charge for the Investment Division investing in the BlackRock Large Cap Core Portfolio. Please see the Table of Expenses for more information. 110 APPENDIX IV PORTFOLIO LEGAL AND MARKETING NAMES
SERIES FUND/TRUST LEGAL NAME OF PORTFOLIO SERIES MARKETING NAME American Funds Bond Fund American Funds Bond Fund Insurance Series(R) American Funds Global Small Capitalization Fund American Funds Global Small Capitalization Fund Insurance Series(R) American Funds Growth - Income Fund American Funds Growth-Income Fund Insurance Series(R) American Funds Growth Fund American Funds Growth Fund Insurance Series(R)
111 APPENDIX V ADDITIONAL INFORMATION REGARDING THE PORTFOLIOS The Portfolios below were subject to a merger or name change. The chart identifies the former name and new name of each of these Portfolios. PORTFOLIO MERGERS
FORMER PORTFOLIO NEW PORTFOLIO MET INVESTORS FUND METROPOLITAN FUND Oppenheimer Jennison Growth Portfolio Capital Appreciation Portfolio METROPOLITAN FUND MET INVESTORS FUND Lord Abbett Mid Lord Abbett Mid Cap Value Portfolio Cap Value Portfolio
PORTFOLIO NAME CHANGES
FORMER PORTFOLIO NEW PORTFOLIO METROPOLITAN FUND METROPOLITAN FUND Neuberger Lord Abbett Mid Cap Value Portfolio Berman Mid Cap MSCI EAFE(R) Index Portfolio Value Portfolio Morgan Stanley EAFE(R) Index Portfolio
112 Request For a Statement of Additional Information/Change of Address If You would like any of the following Statements of Additional Information, or have changed your address, please check the appropriate box below and return to the address below. [_] Metropolitan Life Separate Account E [_] Metropolitan Series Fund [_] Met Investors Series Trust [_] American Funds Insurance Series(R) [_] Calvert VP SRI Balanced Portfolio [_] I have changed my address. My current address is: _________________ Name ___ (Contract Number) Address _________________ _ (Signature) zip Metropolitan Life Insurance Company P.O. Box 10342 Des Moines, IA 50306-0342 113 METROPOLITAN LIFE INSURANCE COMPANY METROPOLITAN LIFE SEPARATE ACCOUNT E METLIFE FINANCIAL FREEDOM SELECT(R) VARIABLE ANNUITY CONTRACTS STATEMENT OF ADDITIONAL INFORMATION FORM N-4 PART B April 30, 2012 This Statement of Additional Information is not a prospectus but contains information in addition to and more detailed than that set forth in the Prospectus for MetLife Financial Freedom Select Annuity Contracts dated April 30, 2012 and should be read in conjunction with the Prospectus. Copies of the Prospectus may be obtained from Metropolitan Life Insurance Company, P.O. Box 10342, Des Moines, IA 50306-0342. A Statement of Additional Information for the Metropolitan Series Fund (Metropolitan Fund), the Met Investors Series Trust (Met Investors Fund), the Calvert Social Balanced Portfolio and the American Funds Insurance Series(R) (American Funds(R)) are attached at the end of this Statement of Additional Information. Unless otherwise indicated, the Statement of Additional Information continues the use of certain terms as set forth in the section entitled Important Terms You Should Know of the Prospectus for MetLife Financial Freedom Select Variable Annuity Contracts dated April 30, 2012. TABLE OF CONTENTS
PAGE ---- Independent Registered Public Accounting Firm............................................. 2 Principal Underwriter..................................................................... 2 Distribution and Principal Underwriting Agreement......................................... 2 Experience Factor......................................................................... 3 Variable Income Payments.................................................................. 3 Calculating the Annuity Unit Value........................................................ 5 Advertisement of the Separate Account..................................................... 6 Voting Rights............................................................................. 9 ERISA..................................................................................... 10 Taxes..................................................................................... 11 Withdrawals............................................................................... 12 Accumulation Unit Value Tables............................................................ 13 Financial Statements of Separate Account.................................................. 1 Financial Statements of MetLife........................................................... F-1
1 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The financial statements and financial highlights comprising each of the Investment Divisions of Metropolitan Life Separate Account E included in this Statement of Additional Information, have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein. Such financial statements and financial highlights have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The consolidated financial statements of Metropolitan Life Insurance Company and subsidiaries (the "Company"), included in this Statement of Additional Information, have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein (which report expresses an unqualified opinion on the consolidated financial statements and includes an explanatory paragraph referring to changes in the Company's method of accounting for the recognition and presentation of other-than-temporary impairment losses for certain investments as required by accounting guidance adopted on April 1, 2009). Such financial statements have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The principal business address of Deloitte & Touche LLP is Two World Financial Center, New York, New York 10281-1414. PRINCIPAL UNDERWRITER MetLife Investors Distribution Company ("MLIDC") serves as principal underwriter for the Separate Account and the Contracts. The offering is continuous. MLIDC's principal executive offices are located at 5 Park Plaza, Suite 1900, Irvine, CA 92614. MLIDC is affiliated with the Company and the Separate Account. DISTRIBUTION AND PRINCIPAL UNDERWRITING AGREEMENT Information about the distribution of the Contracts is contained in the Prospectus (see "Who Sells the Deferred Annuities"). Additional information is provided below. Under the terms of the Distribution and Principal Underwriting Agreement among the Separate Account, MLIDC and the Company, MLIDC acts as agent for the distribution of the Contracts and as principal underwriter for the Contracts. The Company reimburses MLIDC for certain sales and overhead expenses connected with sales functions. The following table shows the amount of commissions paid to and the amount of commissions retained by the Distributor and Principal Underwriter over the past three years. UNDERWRITING COMMISSIONS
UNDERWRITING COMMISSIONS PAID AMOUNT OF UNDERWRITING TO THE DISTRIBUTOR BY THE COMMISSIONS RETAINED BY THE YEAR COMPANY DISTRIBUTOR ---- ----------------------------- --------------------------- 2011................ $222,177,300 $0 2010................ $173,815,499 $0 2009................ $132,751,280 $0
2 EXPERIENCE FACTOR We use the term "experience factor" to describe the investment performance for an Investment Division. We calculate Accumulation Unit Values once a day on every day the New York Stock Exchange is open for trading. We call the time between two consecutive Accumulation Unit Value calculations the "Valuation Period". We have the right to change the basis for the Valuation Period, on 30 days' notice, as long as it is consistent with law. All purchase payments and transfers are valued as of the end of the Valuation Period during which the transaction occurred. The experience factor changes from Valuation Period to Valuation Period to reflect the upward or downward performance of the assets in the underlying Portfolios. The experience factor is calculated as of the end of each Valuation Period using the net asset value per share of the underlying Portfolio. The net asset value includes the per share amount of any dividend or capital gain distribution paid by the Portfolio during the current Valuation Period, and subtracts any per share charges for taxes and reserve for taxes. We then divide that amount by the net asset value per share as of the end of the last Valuation Period to obtain a factor that reflects investment performance. We then subtract a charge for each day in the valuation period which is the daily equivalent of the Separate Account charge. This charge varies, depending on the class of the Deferred Annuity. Below is a chart of the daily factors for each class of the Deferred Annuity and the various death benefits. Separate Account charges for all Investment Divisions except the American Funds Growth-Income, the American Funds Growth and the American Funds Global Small Capitalization (Daily Factor)
EBONUS CLASS B CLASS C CLASS L CLASS E CLASS (YEARS 1-7)* ---------- ---------- ---------- ---------- ------------ Standard Death Benefit.................. .000031507 .000039726 .000035616 .000013699 .000026027 Annual Step-Up Death Benefit............ .000034247 .000042466 .000038356 .000016438 .000028767
Separate Account charges for the American Funds Growth-Income, American Funds Growth and American Funds Global Small Capitalization Investment Divisions (Daily Factor)
BONUS CLASS B CLASS C CLASS L CLASS E CLASS (YEARS 1-7)* ---------- ---------- ---------- ---------- ------------ Standard Death Benefit.................. .000038356 .000046575 .000042466 .000020548 .000032877 Annual Step-Up Benefit.................. .000041096 .000049315 .000045205 .000023288 .000035616
-------- * Applies only for the first seven years; Separate Account charges are reduced after seven years to those of e Class. VARIABLE INCOME PAYMENTS ASSUMED INVESTMENT RETURN (AIR) The following discussion concerning the amount of variable income payments is based on an Assumed Investment Return of 4% per year. It should not be inferred that such rates will bear any relationship to the actual net investment experience of the Separate Account. AMOUNT OF INCOME PAYMENTS The cash You receive periodically from an Investment Division (after your first payment if paid within 10 days of the issue date) will depend upon the number of annuity units held in that Investment Division (described below) and the Annuity Unit Value (described later) as of the 10th day prior to a payment date. 3 The Deferred Annuity specifies the dollar amount of the initial variable income payment for each Investment Division (this equals the first payment amount if paid within 10 days of the issue date). This initial variable income payment is computed based on the amount of the purchase payment applied to the specific Investment Division (net any applicable premium tax owed or Contract charge), the AIR, the age of the measuring lives and the income payment type selected. The initial payment amount is then divided by the Annuity Unit Value for the Investment Division to determine the number of annuity units held in that Investment Division. The number of annuity units held remains fixed for the duration of the Contract if no reallocations are made. The dollar amount of subsequent variable income payments will vary with the amount by which investment performance is greater or less than the AIR and Separate Account charges. Each Deferred Annuity provides that, when a pay-out option is chosen, the payment will not be less than the payment produced by the then current Fixed Income Option purchase rates for that Contract class, which will not be less than the rates used for a currently issued single payment immediate annuity contract. The purpose of this provision is to assure that, at retirement, if the Fixed Income Option purchase rates for Contracts are significantly more favorable than the rates guaranteed by a Deferred Annuity of the same class, the Annuitant will be given the benefit of the higher rates. Although guaranteed annuity rates for the eBonus Class are the same as for the other classes of the Deferred Annuity, current rates for the eBonus Class may be lower than the other classes of the Deferred Annuity and may be less than currently issued Contract rates. ANNUITY UNIT VALUE The Annuity Unit Value is calculated at the same time that the Accumulation Unit Value for Deferred Annuities is calculated and is based on the same change in investment performance in the Separate Account. (See The Value of Your Income Payments in the Prospectus.) REALLOCATION PRIVILEGE When You request a reallocation from an Investment Division to the Fixed Income Option, the payment amount will be adjusted at the time of reallocation. Your payment may either increase or decrease due to this adjustment. The adjusted payment will be calculated in the following manner. . First, we update the income payment amount to be reallocated from the Investment Division based upon the applicable Annuity Unit Value at the time of the reallocation; . Second, we use the AIR to calculate an updated annuity purchase rate based upon your age, if applicable, and expected future income payments at the time of the reallocation; . Third, we calculate another updated annuity purchase rate using our current annuity purchase rates for the Fixed Income Option on the date of your reallocation; . Finally, we determine the adjusted payment amount by multiplying the updated income amount determined in the first step by the ratio of the annuity purchase rate determined in the second step divided by the annuity purchase rate determined in the third step. When You request a reallocation from one Investment Division to another, annuity units in one Investment Division are liquidated and annuity units in the other Investment Division are credited to You. There is no adjustment to the income payment amount. Future income payment amounts will be determined based on the Annuity Unit Value for the Investment Division to which You have reallocated. You generally may make a reallocation on any day the Exchange is open. At a future date we may limit the number of reallocations You may make, but never to fewer than one a month. If we do so, we will give You advance written notice. We may limit a Beneficiary's ability to make a reallocation. 4 Here are examples of the effect of a reallocation on the income payment: . Suppose You choose to reallocate 40% of your income payment supported by Investment Division A to the Fixed Income Option and the recalculated income payment supported by Investment Division A is $100. Assume that the updated annuity purchase rate based on the AIR is $125, while the updated annuity purchase rate based on fixed income annuity pricing is $100. In that case, your income payment from the Fixed Income Option will be increased by $40 x ($125 / $100) or $50, and your income payment supported by Investment Division A will be decreased by $40. (The number of annuity units in Investment Division A will be decreased as well.) . Suppose You choose to reallocate 40% of your income payment supported by Investment Division A to Investment Division B and the recalculated income payment supported by Investment Division A is $100. Then, your income payment supported by Investment Division B will be increased by $40 and your income payment supported by Investment Division A will be decreased by $40. (Changes will also be made to the number of annuity units in both Investment Divisions as well.) CALCULATING THE ANNUITY UNIT VALUE We calculate Annuity Unit Values once a day on every day the New York Stock Exchange is open for trading. We call the time between two consecutive Annuity Unit Value calculations the Valuation Period. We have the right to change the basis for the Valuation Period, on 30 days' notice, as long as it is consistent with the law. All purchase payments and reallocations are valued as of the end of the Valuation Period during which the transaction occurred. The Annuity Unit Values can increase or decrease, based on the investment performance of the corresponding underlying Portfolios. If the investment performance is positive, after payment of Separate Account charges and the deduction for the AIR, Annuity Unit Values will go up. Conversely, if the investment performance is negative, after payment of Separate Account charges and the deduction for the AIR, Annuity Unit Values will go down. To calculate an Annuity Unit Value, we first multiply the experience factor for the period by a factor based on the AIR and the number of days in the Valuation Period. For an AIR of 4% and a one day Valuation Period, the factor is .99989255, which is the daily discount factor for an effective annual rate of 4%. (The AIR may be in the range of 3% to 6%, as defined in your Deferred Annuity and the laws in your state.) The resulting number is then multiplied by the last previously calculated Annuity Unit Value to produce the new Annuity Unit Value. The following illustrations show, by use of hypothetical examples, the method of determining the Annuity Unit Value and the amount of variable income payments upon annuitization. ILLUSTRATION OF CALCULATION OF ANNUITY UNIT VALUE 1. Annuity Unit Value, beginning of period........ $ 10.20000 2. Experience factor for period................... 1.023558 3. Daily adjustment for 4% of Assumed Investment Return.......................................... .99989255 4. (2) X (3)...................................... 1.023448 5. Annuity Unit Value, end of period (1) X (4).... $ 10.43917
5 ILLUSTRATION OF ANNUITY PAYMENTS (ASSUMES THE FIRST MONTHLY PAYMENT IS MADE WITHIN 10 DAYS OF THE ISSUE DATE OF THE PAYOUT) ANNUITANT AGE 65, LIFE ANNUITY WITH 120 PAYMENTS GUARANTEED 1. Number of Accumulation Units as of Annuity Date 1,500.00 2. Accumulation Unit Value........................ $ 11.80000 3. Accumulation Unit Value of the Deferred Annuity (1) X (2)............................... $17,700.00 4. First monthly income payment per $1,000 of Accumulation Value.............................. $ 5.63 5. First monthly income payment (3) X (4) / 1,000. $ 99.65 6. Annuity Unit Value as of Annuity Date equal to. $ 10.80000 7. Number of Annuity Units (5) / (6).............. 9.2269 8. Assume Annuity Unit Value for the second month equal to (10 days prior to payment)............. $ 10.97000 9. Second monthly Annuity Payment (7) X (8)....... $ 101.22 10. Assume Annuity Unit Value for third month equal to........................................ $ 10.52684 11. Next monthly Annuity Payment (7) X (10)....... $ 97.13
DETERMINING THE VARIABLE INCOME PAYMENT Variable income payments can go up or down based upon the investment performance of the Investment Divisions in the Separate Account. AIR is the rate used to determine the first variable income payment and serves as a benchmark against which the investment performance of the Investment Divisions is compared. The higher the AIR, the higher the first variable income payment will be. Subsequent variable income payments increase only to the extent that the investment performance of the Investment Divisions exceeds the AIR (and Separate Account charges). Variable income payments will decline if the investment performance of the Separate Account does not exceed the AIR (and Separate Account charges). A lower AIR will result in a lower first variable income payment, but variable income payments will increase more rapidly or decline more slowly due to investment performance of the Investment Divisions. ADVERTISEMENT OF THE SEPARATE ACCOUNT From time to time we advertise the performance of various Separate Account Investment Divisions. For the Investment Divisions, this performance will be stated in terms of either "yield", "change in Accumulation Unit Value", "change in Annuity Unit Value" or "average annual total return" or some combination of the foregoing. Yield, change in Accumulation Unit Value, change in Annuity Unit Value and average annual total return figures are based on historical earnings and are not intended to indicate future performance. Yield figures quoted in advertisements state the net income generated by an investment in a particular Investment Division for a thirty-day period or month, which is specified in the advertisement, and then expressed as a percentage yield of that investment. Yield is calculated by dividing the net investment income per share earned during the period by the maximum offering price per share on the last day of the period, according to this formula 2[(a-b/cd+ 1)/6/-1], where "a" represents dividends and interest earned during the period; "b" represents expenses accrued for the period (net of reimbursements); "c" represents the average daily number of shares outstanding during the period that were entitled to receive dividends; and "d" represents the maximum offering price per share on the last day of the period. This percentage yield is then compounded semiannually. We also quote yield on a seven day basis for the money market division. Change in Accumulation Unit Value or Annuity Unit Value ("Non-Standard Performance") refers to the comparison between values of accumulation units or annuity units over specified periods in which an Investment Division has been in operation, expressed as a percentages and may also be expressed as an annualized figure. In addition, change in Accumulation Unit Value or Annuity Unit Value may be used to illustrate performance for a hypothetical investment (such as $10,000) over the time period specified. Change in Accumulation Unit Value is expressed by this formula [UV\1\,/UV\0\)/(annualization factor)/]-1, where UV, represents the current unit value and UV\0\ represents the prior unit value. The annualization factor 6 can be either (1/number of years) or (365/number of days). Yield and change in Accumulation Unit Value figures do not reflect the possible imposition of a Withdrawal Charge for the Deferred Annuities, of up to 9% (generally) of the amount withdrawn attributable to a purchase payment, which may result in a lower figure being experienced by the investor. Average annual total return differs from the change in Accumulation Unit Value and Annuity Unit Value because it assumes a steady rate of return and reflects all expenses and applicable Withdrawal Charges. Average annual total return is calculated by finding the average annual compounded rates of return over the 1-, 5-, and 10-year periods that would equate the initial amount invested to the ending redeemable value, according to this formula P(1 + T)/n/ = ERV, where "P" represents a hypothetical initial payment of $1,000; "T" represents average annual total return; "n" represents number of years; and "ERV" represents ending redeemable value of a hypothetical $1,000 payment made at the beginning of the 1-, 5-, or 10-year periods at the end of the 1-, 5-, or 10-year period (or fractional portion). Performance figures will vary among the various Deferred Annuities as a result of different Separate Account charges and Withdrawal Charges. Average Annual total return ("Standard Performance") calculations reflect the Separate Account charge with the Standard Death Benefit, the additional Separate Account charge for the American Funds Investment Divisions and the Annual Contract Fee and applicable Withdrawal Charges since the Investment Division inception date, which is the date the corresponding Portfolio or Predecessor Portfolio was first offered under the Separate Account that funds the Deferred Annuity. Performance may be calculated based upon historical performance of the underlying Portfolios of the Metropolitan Fund, Met Investors Fund, the Calvert Fund and American Funds and may assume that the Deferred Annuities were in existence prior to their inception date. After the Investment Division inception date, actual accumulation unit or annuity unit data is used. Advertisements regarding the Separate Account may contain comparisons of hypothetical after-tax returns of currently taxable investments versus returns of tax deferred investments. From time to time, the Separate Account may compare the performance of its Investment Divisions with the performance of common stocks, long-term government bonds, long-term corporate bonds, intermediate-term government bonds, Treasury Bills, certificates of deposit and savings accounts. The Separate Account may use the Consumer Price Index in its advertisements as a measure of inflation for comparison purposes. From time to time, the Separate Account may advertise its performance ranking among similar investments or compare its performance to averages as compiled by independent organizations, such as Lipper Analytical Services, Inc., Morningstar, Inc., VARDS(R) and The Wall Street Journal. The Separate Account may also advertise its performance in comparison to appropriate indices, such as the Standard & Poor's 500 Composite Stock Price Index, the Standard & Poor's Mid Cap 400 Index, the Standard & Poor's North American Technology Sector Index, the Standard & Poor's North American Natural Resources Sector Index, the S&P/LSTA Leveraged Loan Index, the Russell 3000 Growth Index, the Russell 3000 Value Index, the Russell 2000(R) Index, the Russell MidCap Index, the Russell MidCap Growth Index, the Russell MidCap Value Index, the Russell 2000(R) Growth Index, the Russell 2000(R) Value Index, the Russell 1000 Index, the Russell 1000 Growth Index, the Russell 1000 Value Index, the NASDAQ Composite Index, the MSCI World Index, the MSCI All Country World Index, the MSCI All Country World ex-U.S. Index, the MSCI World ex-U.S. Small Cap Index, the MSCI All Country World Small Cap Index, the MSCI U.S. Small Cap Growth Index, the MSCI Emerging Markets Index, the MSCI EAFE(R) Index, the Lipper Intermediate Investment Grade Debt Funds Average, the Lipper Global Small-Cap Funds Average, the Lipper Capital Appreciation Funds Index, the Lipper Growth Funds Index, the Lipper Growth & Income Funds Index, the Dow Jones Moderate Index, the Dow Jones Moderately Aggressive Index, the Dow Jones Moderately Conservative Index, the Dow Jones Aggressive Index, the Dow Jones Conservative Index, the Dow Jones U.S. Small-Cap Total Stock Market Index, the Citigroup World Government Bond Index, the Citigroup World Government Bond Index (WGBI) ex-U.S., the Barclays U.S. Aggregate Bond Index, the Barclays U.S. Credit Index, the Barclays U.S. Government/Credit 1-3 Year Index, the Barclays U.S. TIPS Index, the Barclays U.S. Universal Index, the Barclays U.S. Government Bond Index, the Barclays U.S. Intermediate Government Bond Index, the Bank of America Merrill Lynch High Yield Master II Constrained Index and Hybrid Index and the Bank of America Merrill Lynch 3-Month U.S. Treasury Bill Index. 7 Performance may be shown for certain investment strategies that are made available under the Deferred Annuities. The first is the "Equity Generator." Under the "Equity Generator," an amount equal to the interest earned during a specified interval (i.e., monthly, quarterly) in the Fixed Interest Account is transferred to an Investment Division. The second strategy is the "Index Selector/SM/". Under this strategy, once during a specified period (i.e., quarterly, annually) transfers are made among the Lehman Brothers(R) Aggregate Bond Index, MetLife Stock Index, MSCI EAFE(R) Index, Russell 2000(R) Index and MetLife Mid Cap Stock Index Divisions and the Fixed Interest Account (or, if the models are available where the Fixed Interest Account is not made available, the BlackRock Money Market Division) in order to bring the percentage of the total Account Balance in each of these Investment Divisions and Fixed Interest Account back to the current allocation of your choice of one of several asset allocation models. The elements which form the basis of the models are provided by MetLife which may rely on a third party for its expertise in creating appropriate allocations. The models are designed to correlate to various risk tolerance levels associated with investing and are subject to change from time to time. An Equity Generator Return or Index Selector Return for a model will be calculated by presuming a certain dollar value at the beginning of a period and comparing this dollar value with the dollar value, based on historical performance, at the end of the period, expressed as a percentage. The Return in each case will assume that no withdrawals or other unrelated transactions have occurred. We assume the Separate Account charge reflects the Standard Death Benefit. The information does not assume the charges for the Guaranteed Minimum Income Benefit. We may also show Index Selector investment strategies using other Investment Divisions for which these strategies are made available in the future. If we do so, performance will be calculated in the same manner as described above, using the appropriate account and/or Investment Divisions. For purposes of presentation of Non-Standard Performance, we may assume the Deferred Annuities were in existence prior to the inception date of the Investment Divisions in the Separate Account that funds the Deferred Annuity. In these cases, we calculate performance based on the historical performance of the underlying Metropolitan Fund, Met Investors Fund, the Calvert Fund and American Funds Portfolios since the Portfolio inception date. We use the actual accumulation unit or annuity unit data after the inception date. Any performance data that includes all or a portion of the time between the Portfolio inception date and that Investment Division inception date is hypothetical. Hypothetical returns indicate what the performance data would have been if the Deferred Annuities had been introduced as of the Portfolio inception date. We may also present average annual total return calculations which reflect all Separate Account charges and applicable Withdrawal Charges since the Portfolio inception date. We use the actual accumulation unit or annuity unit data after the inception date. Any performance data that includes all or a portion of the terms between the Portfolio inception date and the Investment Division inception date is hypothetical. Hypothetical returns indicate what the performance data would have been if the Deferred Annuity had been introduced as of the Portfolio inception date. Past performance is no guarantee of future results. We may demonstrate hypothetical future values of Account Balances over a specified period based on assumed rates of return (which will not exceed 12% and which will include an assumption of 0% as well) for the Portfolios. These presentations reflect the deduction of the Separate Account charge, the Annual Contract Fee, if any, and the weighted average of investment-related charges for all Portfolios to depict investment-related charges. We may demonstrate hypothetical future values of Account Balances for a specific Portfolio based upon the assumed rates of return previously described, the deduction of the Separate Account charge and the Annual Contract Fee, if any, and the investment-related charges for the specific Portfolio to depict investment-related charges. We may demonstrate the hypothetical historical value of each optional benefit for a specified period based on historical net asset values of the Portfolios and the annuity purchase rate, if applicable, either for an individual for whom the illustration is to be produced or based upon certain assumed factors (e.g., male, age 65). These 8 presentations reflect the deduction of the Separate Account charge and the Annual Contract Fee, if any, the investment-related charge and the charge for the optional benefit being illustrated. We may demonstrate hypothetical future values of each optional benefit over a specified period based on assumed rates of return (which will not exceed 12% and which will include an assumption of 0% as well) for the Portfolios, the annuity purchase rate, if applicable, either for an individual for whom the illustration is to be produced or based upon certain assumed factors (e.g., male, age 65). These presentations reflect the deduction of the Separate Account charge and the Annual Contract Fee, if any, the weighted average of investment-related charges for all Portfolios to depict investment-related charges and the charge for the optional benefit being illustrated. We may demonstrate hypothetical values of income payments over a specified period based on historical net asset values of the Portfolios and the applicable annuity purchase rate, either for an individual for whom the illustration is to be produced or based upon certain assumed factors (e.g., male, age 65). These presentations reflect the deduction of the Separate Account charge, the investment-related charge and the Annual Contract Fee, if any. We may demonstrate hypothetical future values of income payments over a specified period based on assumed rates of return (which will not exceed 12% and which will include an assumption of 0% as well) for the Portfolios, the applicable annuity purchase rate, either for an individual for whom the illustration is to be produced or based upon certain assumed factors (e.g., male, age 65). These presentations reflect the deduction of the Separate Account charge, the Annual Contract Fee, if any, and the weighted average of investment-related charges for all Portfolios to depict investment-related charges and the charge for the optional benefit being illustrated. Any illustration should not be relied on as a guarantee of future results. VOTING RIGHTS In accordance with our view of the present applicable law, we will vote the shares of each of the Portfolios held by the Separate Account (which are deemed attributable to all the Deferred Annuities described in the Prospectus) at regular and special meetings of the shareholders of the Portfolio based on instructions received from those having voting interests in corresponding Investment Divisions of the Separate Account. However, if the 1940 Act or any rules thereunder should be amended or if the present interpretation thereof should change, and, as a result, we determine that we are permitted to vote the shares of the Portfolios in our own right, we may elect to do so. Accordingly, You have voting interests under all the Deferred Annuities described in the Prospectus. The number of shares held in each Separate Account Investment Division deemed attributable to You is determined by dividing the value of accumulation or annuity units attributable to You in that Investment Division, if any, by the net asset value of one share in the Portfolio in which the assets in that Separate Account Investment Division are invested. Fractional votes will be counted. The number of shares for which You have the right to give instructions will be determined as of the record date for the meeting. Portfolio shares held in each registered separate account of MetLife or any affiliate that are or are not attributable to life insurance policies or deferred annuities (including all the Deferred Annuities described in the Prospectus) and for which no timely instructions are received will be voted in the same proportion as the shares for which voting instruction are received by that separate account. Portfolio shares held in the general accounts or unregistered separate accounts of MetLife or its affiliates will be voted in the same proportion as the aggregate of (i) the shares for which voting instructions are received and (ii) the shares that are voted in proportion to such voting instructions. However, if we or an affiliate determine that we are permitted to vote any such shares, in our own right, we may elect to do so subject to the then current interpretation of the 1940 Act or any rules thereunder. Qualified retirement plans which invest directly in the Portfolio do not have voting interests through life insurance or annuity contracts and do not vote these interests based upon the number of shares held in the 9 Separate Account Investment Division deemed attributable to those qualified retirement plans. Shares are held by the plans themselves and are voted directly; the instruction process does not apply. You will be entitled to give instructions regarding the votes attributable to your Deferred Annuity, in your sole discretion. You may give instructions regarding, among other things, the election of the board of directors, ratification of the election of an independent registered public accounting firm, and the approval of investment and sub-investment managers. DISREGARDING VOTING INSTRUCTIONS MetLife may disregard voting instructions under the following circumstances (1) to make or refrain from making any change in the investments or investment policies for any Portfolio if required by any insurance regulatory authority; (2) to refrain from making any change in the investment policies for any investment manager or principal underwriter or any Portfolio which may be initiated by those having voting interests or the Metropolitan Fund's, Met Investors Fund's, the Calvert Fund's or American Funds'(R) boards of directors, provided MetLife's disapproval of the change is reasonable and, in the case of a change in investment policies or investment manager, based on a good faith determination that such change would be contrary to state law or otherwise inappropriate in light of the Portfolio's objective and purposes; or (3) to enter into or refrain from entering into any advisory agreement or underwriting contract, if required by any insurance regulatory authority. In the event that MetLife does disregard voting instructions, a summary of the action and the reasons for such action will be included in the next semiannual report. ERISA If your plan is subject to ERISA (the Employee Retirement Income Security Act of 1974) and You are married, the income payments, withdrawal provisions, and methods of payment of the death benefit under your Deferred Annuity may be subject to your spouse's rights as described below. Generally, the spouse must give qualified consent whenever You elect to: a. choose income payments other than on a qualified joint and survivor annuity basis ("QJSA") (one under which we make payments to You during your lifetime and then make payments reduced by no more than 50% to your spouse for his or her remaining life, if any); or choose to waive the qualified pre-retirement survivor annuity benefit ("QPSA") (the benefit payable to the surviving spouse of a participant who dies with a vested interest in an accrued retirement benefit under the plan before payment of the benefit has begun); b. make certain withdrawals under plans for which a qualified consent is required; c. name someone other than the spouse as your Beneficiary; d. use your accrued benefit as security for a loan exceeding $5,000. Generally, there is no limit to the number of your elections as long as a qualified consent is given each time. The consent to waive the QJSA must meet certain requirements, including that it be in writing, that it acknowledges the identity of the designated Beneficiary and the form of benefit selected, dated, signed by your spouse, witnessed by a notary public or plan representative, and that it be in a form satisfactory to us. The waiver of a QJSA generally must be executed during the 180-day period (90-day period for certain loans) ending on the date on which income payments are to commence, or the withdrawal or the loan is to be made, as the case may be. If You die before benefits commence, your surviving spouse will be your Beneficiary unless he or she has 10 given a qualified consent otherwise. The qualified consent to waive the QPSA benefit and the Beneficiary designation must be made in writing that acknowledges the designated Beneficiary, dated, signed by your spouse, witnessed by a notary public or plan representative and in a form satisfactory to us. Generally, there is no limit to the number of Beneficiary designations as long as a qualified consent accompanies each designation. The waiver of and the qualified consent for the QPSA benefit generally may not be given until the plan year in which You attain age 35. The waiver period for the QPSA ends on the date of your death. If the present value of your benefit is worth $5,000 or less, your plan generally may provide for distribution of your entire interest in a lump sum without spousal consent. TAXES 403(B) In general, contributions to Section 403(b) arrangements are subject to limitations under Section 415(c) of the Code (the lesser of 100% of includable compensation or the applicable limit for the year). These contributions (as well as any other salary reduction contributions to qualified plans of an employer), are also subject to the aggregate annual limitation under section 402 (g) of the Internal Revenue Code as shown below:
FOR TAXABLE YEARS BEGINNING IN CALENDAR YEAR APPLICABLE DOLLAR LIMIT -------------------------------------------- ----------------------- 2012...................... $17,000
The Applicable Dollar Limit under Section 402(g) is increased for eligible participants in the amount of the permissible age 50 and above catch up contributions for the year, which is $5,500 for 2012, regardless of the number of plans in which the employee participates. 403(A) If your benefit under the 403(a) plan is worth more than $5,000, the Code requires that your annuity protect your spouse if You die before You receive any payments under the annuity or if You die while payments are being made. You may waive these requirements with the written consent of your spouse. Designating a Beneficiary other than your spouse is considered a waiver. Waiving these requirements may cause your monthly benefit to increase during your lifetime. Special rules apply to the withdrawal of excess contributions. SIMPLE IRAS ELIGIBILITY AND CONTRIBUTIONS To be eligible to establish a SIMPLE IRA plan, your employer must have no more than 100 employees and the SIMPLE IRA plan must be the only tax qualified retirement plan maintained by your employer. Many of the same tax rules that apply to Traditional IRAs also apply to SIMPLE IRAs. However, the contribution limits, premature distribution rules, and rules applicable to eligible rollovers and transfers differ as explained below. If You are participating in a SIMPLE IRA plan You may generally make contributions which are excluded from your gross income under a qualified salary reduction arrangement on a pre-tax basis of the lesser of 100% of includable compensation or the limits in the table shown below:
CONTRIBUTION LIMIT FOR "CATCH-UP" FOR TAXPAYERS FOR TAX YEARS BEGINNING IN TAXPAYERS UNDER AGE 50 AGE 50 AND OLDER -------------------------- ---------------------- ------------------------ 2012............. $11,500 $2,500
Note: the Contribution limit above will be adjusted for inflation. 11 These contributions (as well as any other salary reduction contributions to qualified plans of an employer), are also subject to the aggregate annual limitation under section 402 (g) of the Internal Revenue Code as shown below:
FOR TAXABLE YEARS BEGINNING IN CALENDAR YEAR APPLICABLE DOLLAR LIMIT -------------------------------------------- ----------------------- 2012...................... $17,000
You may also make rollovers and direct transfers into your SIMPLE IRA annuity Contract from another SIMPLE IRA annuity contract or account. No other contributions, rollovers or transfers can be made to your SIMPLE IRA. You may not make Traditional IRA contributions or Roth IRA contributions to your SIMPLE IRA. You may not make eligible rollover contributions from other types of qualified retirement plans. ROLLOVERS Tax-free rollovers and direct transfers from a SIMPLE IRA can only be made to another SIMPLE IRA annuity or account during the first two years that You participate in the SIMPLE IRA plan. After this two year period, tax-free rollovers and transfers may be made from your SIMPLE IRA into a Traditional IRA annuity or account, a qualified employer plan, a section 403(a) plan, 403(b) annuity, or a 457(b) plan maintained by a government employer, as well as into another SIMPLE IRA or eligible retirement plan. In order to be a tax-free rollover from your SIMPLE IRA, the money must generally be transferred into the new SIMPLE IRA (or after two years into a Traditional IRA or eligible retirement plan) within 60 days of the distribution. If contributions are being made under a SEP plan of your employer, additional amounts may be contributed as permitted by the Code and the terms of the employer's plan. SIMPLIFIED EMPLOYEE PENSION ("SEP") Rules applicable to Traditional IRA annuities (including purchase payments, rollovers, minimum distributions, penalty taxes and after death distributions) apply to your SEP/IRA annuity. 457(B) ANNUITY The compensation amounts that may be deferred under a 457(b) plan may not exceed certain deferral limits established under the Federal tax law. 457(b) plans maintained by State or local governmental employers are considered eligible retirement plans for purposes of the rollover rules and may also accept certain rollover contributions if permitted under the plan. Participants in 457(b) plans of state and local governments (but not participants in section 457(b) plans of Tax--Exempt employers) who attain age 50 prior to the end of the taxable year are also eligible to make catch-up contributions under the same limitations as apply for participants in Section 403(b) plans. Special one-time contribution limitation catch-up elections may also be available to participants in Section 457 (b) plans of both governmental and tax--exempt employers. Participants in governmental plans may not use both the age 50+ catch-up and the special one-time catch up in the same taxable year. In general, contribution limits with respect to elective deferrals and to age 50+ catch-up contributions (under governmental 457 (b) plans) are not aggregated with contributions under the other types of qualified plans for purposes of determining the limitations applicable to participants. WITHDRAWALS We will normally pay withdrawal proceeds within seven days after receipt of a request for a withdrawal at your Administrative Office, but we may delay payment as permitted by law, under certain circumstances. (See " Valuation--Suspension of Payments" in the Prospectus). We reserve the right to defer payment for a partial withdrawal, withdrawal or transfer from the Fixed Interest Account for the period permitted by law, but for not more than six months. 12 ACCUMULATION UNIT VALUE TABLES These tables show fluctuations in the Accumulation Unit Values for the possible mixes offered in the Deferred Annuity for each Investment Division from year end to year-end (except the highest possible and lowest possible mix which are in the prospectus). The information in these tables has been derived from the Separate Account's full financial statements or other reports ( such as the annual report). The Guaranteed Minimum Income Benefit and Lifetime Withdrawal Guarantee Benefit charges are made by canceling accumulation units and, therefore, this charge is not reflected in the Accumulation Unit Value. However, purchasing this option will result in a higher charge. Lower charges for the Guaranteed Minimum Income Benefit and the Lifetime Withdrawal Guarantee Benefit were in effect prior to May 4, 2009. METLIFE FINANCIAL FREEDOM SELECT 1.45 SEPARATE ACCOUNT CHARGE
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ American Funds(R) Balanced Allocation Investment Division (Class C)/(i)/............................................ 2008 $10.00 $ 7.01 508.18 2009 7.01 8.93 8,668.15 2010 8.93 9.88 11,541.53 2011 9.88 9.53 36,248.96 American Funds Bond Investment Division (Class 2)/(f)(j)/... 2006 14.43 15.11 287.93 2007 15.11 15.35 8,944.09 2008 15.35 13.68 11,572.04 2009 13.68 15.15 10,941.23 2010 15.15 15.85 11,794.58 2011 15.85 16.53 11,832.68 American Funds Global Small Capitalization Investment Division (Class 2)/(a)(j)/................................ 2002 12.00 10.66 5.73 2003 10.66 16.09 1,265.00 2004 16.09 19.13 1,886.38 2005 19.13 23.57 2,642.31 2006 23.57 28.75 4,656.61 2007 28.75 34.32 7,848.07 2008 34.32 15.68 9,770.12 2009 15.68 24.87 9,504.55 2010 24.87 29.93 10,300.21 2011 29.93 23.79 11,459.71 American Funds(R) Growth Allocation Investment Division (Class C)/(i)/............................................ 2008 9.99 6.36 2,823.55 2009 6.36 8.40 3,506.31 2010 8.40 9.39 7,171.39 2011 9.39 8.82 28,152.13
13
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ American Funds Growth Investment Division (Class 2)/(a)(j)/....................................... 2002 $ 83.77 $ 80.82 0.88 2003 80.82 108.71 566.83 2004 108.71 120.23 983.74 2005 120.23 137.35 1,729.74 2006 137.35 148.84 3,179.70 2007 148.84 164.39 5,620.39 2008 164.39 90.54 6,380.64 2009 90.54 124.10 6,929.14 2010 124.10 144.80 7,667.71 2011 144.80 136.28 8,593.03 American Funds Growth-Income Investment Division (Class 2)/(a)(j)/....................................... 2002 69.29 64.98 62.06 2003 64.98 84.60 381.25 2004 84.60 91.80 818.54 2005 91.80 95.52 1,945.95 2006 95.52 108.19 3,512.10 2007 108.19 111.72 5,426.65 2008 111.72 68.26 5,958.99 2009 68.26 88.08 6,910.79 2010 88.08 96.49 8,008.38 2011 96.49 93.13 8,851.73 American Funds(R) Moderate Allocation Investment Division (Class C)/(i)/.......................................... 2008 10.01 7.68 3,595.98 2009 7.68 9.34 27,879.49 2010 9.34 10.12 19,645.81 2011 10.12 10.00 18,210.93 Barclays Capital Aggregate Bond Index Investment Division/(a)/................................ 2002 11.69 12.21 2.43 2003 12.21 12.44 3,559.54 2004 12.44 12.73 15,666.74 2005 12.73 12.78 32,769.63 2006 12.78 13.08 44,972.08 2007 13.08 13.75 50,442.61 2008 13.75 14.31 54,029.59 2009 14.31 14.81 64,282.95 2010 14.81 15.43 66,975.02 2011 15.43 16.31 65,564.43 BlackRock Bond Income Investment Division/(a)/............ 2002 40.03 41.53 1.00 2003 41.53 43.22 960.63 2004 43.22 44.37 1,213.90 2005 44.37 44.68 2,842.84 2006 44.68 45.86 3,408.53 2007 45.86 47.92 3,586.78 2008 47.92 45.50 3,744.65 2009 45.50 48.96 3,643.94 2010 48.96 52.15 3,206.55 2011 52.15 54.64 4,049.82
14
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ BlackRock Large Cap Core Investment Division*/(g)/..... 2007 $77.17 $77.81 848.24 2008 77.81 48.07 771.02 2009 48.07 56.48 1,112.42 2010 56.48 62.60 1,346.11 2011 62.60 61.85 1,376.69 BlackRock Large Cap Investment Division/(a)(g)/........ 2002 49.11 46.54 0.00 2003 46.54 59.59 1.84 2004 59.59 64.96 300.12 2005 64.96 66.15 591.46 2006 66.15 74.22 983.36 2007 74.22 77.82 0.00 BlackRock Large Cap Value Investment Division/(a)/..... 2002 8.60 7.90 0.00 2003 7.90 10.55 7.80 2004 10.55 11.77 168.62 2005 11.77 12.25 376.12 2006 12.25 14.38 2,087.06 2007 14.38 14.62 9,865.81 2008 14.62 9.35 9,584.17 2009 9.35 10.23 16,217.58 2010 10.23 10.99 17,122.09 2011 10.99 11.05 19,398.59 BlackRock Legacy Large Cap Growth Investment Division/(a)/............................. 2002 20.29 17.73 0.00 2003 17.73 23.63 29.08 2004 23.63 25.28 85.96 2005 25.28 26.60 336.05 2006 26.60 27.24 658.32 2007 27.24 31.79 715.01 2008 31.79 19.83 812.55 2009 19.83 26.69 915.46 2010 26.69 31.43 1,029.15 2011 31.43 28.14 1,931.20 BlackRock Legacy Large Cap Growth Investment Division (formerly FI Large Cap Investment Division)/(k)/....................................... 2006 17.00 17.20 0.00 2007 17.20 17.58 1.23 2008 17.58 9.53 166.87 2009 9.53 9.93 0.00 BlackRock Money Market Investment Division/(b)/........ 2003 21.95 21.81 0.00 2004 21.81 21.65 0.00 2005 21.65 21.91 0.00 2006 21.91 22.57 0.00 2007 22.57 23.32 0.00 2008 23.32 23.58 0.00 2009 23.58 23.30 0.00 2010 23.30 22.96 0.00 2011 22.96 22.63 0.00
15
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Calvert VP SRI Balanced Investment Division/(a)/............ 2002 $17.21 $16.88 0.00 2003 16.88 19.85 107.19 2004 19.85 21.18 344.88 2005 21.18 22.05 570.10 2006 22.05 23.64 1,083.33 2007 23.64 23.94 2,037.87 2008 23.94 16.20 2,612.58 2009 16.20 20.01 2,559.69 2010 20.01 22.11 3,031.03 2011 22.11 22.79 5,281.28 Clarion Global Real Estate Investment Division/(d)/......... 2004 9.99 12.82 156.41 2005 12.82 14.32 2,090.52 2006 14.32 19.42 5,568.38 2007 19.42 16.27 9,986.87 2008 16.27 9.35 11,358.61 2009 9.35 12.42 11,384.24 2010 12.42 14.21 11,318.98 2011 14.21 13.22 14,544.26 Davis Venture Value Investment Division/(a)/................ 2002 22.11 21.51 0.92 2003 21.51 27.72 316.39 2004 27.72 30.59 957.99 2005 30.59 33.16 2,198.14 2006 33.16 37.37 4,690.25 2007 37.37 38.43 9,401.84 2008 38.43 22.90 11,408.70 2009 22.90 29.72 12,008.61 2010 29.72 32.72 13,287.58 2011 32.72 30.88 16,644.27 FI Value Leaders Investment Division/(a)/................... 2002 19.42 18.44 0.00 2003 18.44 23.06 94.75 2004 23.06 25.80 191.49 2005 25.80 28.08 549.01 2006 28.08 30.91 730.98 2007 30.91 31.66 877.75 2008 31.66 19.00 1,104.38 2009 19.00 22.75 1,308.39 2010 22.75 25.63 1,107.41 2011 25.63 23.65 1,473.64 Harris Oakmark International Investment Division/(a)/....... 2002 9.88 8.82 1.12 2003 8.82 11.74 136.41 2004 11.74 13.94 3,721.58 2005 13.94 15.70 4,996.10 2006 15.70 19.94 10,988.71 2007 19.94 19.43 20,546.61 2008 19.43 11.32 18,790.19 2009 11.32 17.30 20,309.68 2010 17.30 19.85 25,618.84 2011 19.85 16.78 28,514.56
16
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Invesco Small Cap Growth Investment Division/(a)/........... 2002 $ 8.91 $ 8.46 0.00 2003 8.46 11.58 4.72 2004 11.58 12.15 186.97 2005 12.15 12.97 306.64 2006 12.97 14.60 452.84 2007 14.60 15.98 889.96 2008 15.98 9.65 1,374.04 2009 9.65 12.72 2,169.46 2010 12.72 15.83 2,198.64 2011 15.83 15.43 1,211.69 Janus Forty Investment Division/(h)/........................ 2007 144.01 176.60 26.63 2008 176.60 100.95 593.98 2009 100.95 142.14 1,061.21 2010 142.14 153.26 1,334.40 2011 153.26 139.66 1,343.16 Lazard Mid Cap Investment Division/(a)/..................... 2002 9.98 9.65 0.00 2003 9.65 12.01 549.58 2004 12.01 13.54 1,021.69 2005 13.54 14.42 1,448.25 2006 14.42 16.30 1,010.15 2007 16.30 15.63 1,696.77 2008 15.63 9.50 1,923.22 2009 9.50 12.81 1,944.73 2010 12.81 15.51 2,118.61 2011 15.51 14.48 1,694.51 Loomis Sayles Small Cap Core Investment Division/(a)/....... 2002 18.77 17.13 0.00 2003 17.13 23.04 20.81 2004 23.04 26.39 100.06 2005 26.39 27.75 155.00 2006 27.75 31.83 436.20 2007 31.83 35.02 962.11 2008 35.02 22.07 1,736.22 2009 22.07 28.26 2,019.62 2010 28.26 35.43 2,159.64 2011 35.43 35.04 2,282.33 Loomis Sayles Small Cap Growth Investment Division/(a)/..... 2002 6.73 6.23 0.00 2003 6.23 8.88 361.42 2004 8.88 9.73 688.78 2005 9.73 10.01 995.07 2006 10.01 10.83 2,541.58 2007 10.83 11.13 4,155.52 2008 11.13 6.44 5,677.52 2009 6.44 8.23 6,400.09 2010 8.23 10.66 5,666.64 2011 10.66 10.79 8,304.82
17
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Lord Abbett Bond Debenture Investment Division/(a)/.... 2002 $13.22 $13.51 0.00 2003 13.51 15.87 1,323.54 2004 15.87 16.92 2,050.17 2005 16.92 16.92 3,620.71 2006 16.92 18.21 4,445.21 2007 18.21 19.12 5,184.85 2008 19.12 15.34 5,748.51 2009 15.34 20.68 5,319.95 2010 20.68 23.02 6,162.55 2011 23.02 23.70 8,093.33 Met/Artisan Mid Cap Value Investment Division/(a)/..... 2002 22.41 23.05 136.67 2003 23.05 30.06 1,004.28 2004 30.06 32.49 1,645.00 2005 32.49 35.13 2,964.48 2006 35.13 38.85 4,220.68 2007 38.85 35.57 4,709.45 2008 35.57 18.88 3,191.87 2009 18.88 26.28 3,293.85 2010 26.28 29.73 4,514.55 2011 29.73 31.20 4,616.39 Met/Franklin Income Investment Division/(i)/........... 2008 9.99 7.98 122.59 2009 7.98 10.05 1,923.25 2010 10.05 11.08 6,003.79 2011 11.08 11.15 6,407.64 Met/Franklin Low Duration Total Return Investment Division/(n)/........................................ 2011 9.98 9.76 52.27 Met/Franklin Mutual Shares Investment Division/(i)/.... 2008 9.99 6.59 725.28 2009 6.59 8.12 2,742.12 2010 8.12 8.88 4,303.56 2011 8.88 8.71 5,839.83 Met/Franklin Templeton Founding Strategy Investment Division/(i)/........................................ 2008 9.99 7.03 235.28 2009 7.03 8.90 4,152.60 2010 8.90 9.66 7,654.75 2011 9.66 9.35 10,598.27 Met/Templeton Growth Investment Division/(i)/.......... 2008 9.99 6.56 149.02 2009 6.56 8.58 1,287.06 2010 8.58 9.10 2,054.52 2011 9.10 8.35 3,173.83 MetLife Aggressive Strategy Investment Division........ 2011 12.12 10.38 8,962.01
18
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ MetLife Aggressive Strategy Investment Division (formerly MetLife Aggressive Allocation Investment Division)/(e)(m)/......................... 2005 $ 9.99 $11.14 0.00 2006 11.14 12.70 1,825.47 2007 12.70 12.93 3,704.54 2008 12.93 7.59 6,714.55 2009 7.59 9.83 9,312.79 2010 9.83 11.21 7,345.30 2011 11.21 12.16 0.00 MetLife Conservative Allocation Investment Division/(e)/........................................ 2005 9.99 10.29 3,226.13 2006 10.29 10.84 3,287.56 2007 10.84 11.28 5,471.32 2008 11.28 9.52 6,221.96 2009 9.52 11.31 15,090.28 2010 11.31 12.27 15,413.36 2011 12.27 12.48 23,719.11 MetLife Conservative to Moderate Allocation Investment Division/(e)/........................................ 2005 9.99 10.51 0.00 2006 10.51 11.33 4,260.41 2007 11.33 11.71 16,422.84 2008 11.71 9.05 30,225.29 2009 9.05 11.03 33,612.22 2010 11.03 12.12 40,408.63 2011 12.12 12.07 56,536.50 MetLife Mid Cap Stock Index Investment Division/(a)/... 2002 8.94 8.61 3.48 2003 8.61 11.41 2,349.55 2004 11.41 13.02 3,485.46 2005 13.02 14.37 6,363.90 2006 14.37 15.56 8,808.86 2007 15.56 16.49 10,732.14 2008 16.49 10.34 12,611.56 2009 10.34 13.94 12,156.30 2010 13.94 17.31 12,552.30 2011 17.31 16.68 15,986.81 MetLife Moderate Allocation Investment Division/(e)/... 2005 9.99 10.74 833.85 2006 10.74 11.84 17,559.67 2007 11.84 12.18 25,465.29 2008 12.18 8.56 39,832.61 2009 8.56 10.68 55,977.91 2010 10.68 11.91 63,008.80 2011 11.91 11.58 67,284.64
19
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ MetLife Moderate to Aggressive Allocation Investment Division/(e)/............................................. 2005 $ 9.99 $10.97 331.12 2006 10.97 12.35 8,864.31 2007 12.35 12.64 19,896.20 2008 12.64 8.08 28,589.44 2009 8.08 10.28 41,884.53 2010 10.28 11.62 59,164.68 2011 11.62 11.02 80,854.30 MetLife Stock Index Investment Division/(a)/................ 2002 27.91 26.63 2.96 2003 26.63 33.56 2,815.01 2004 33.56 36.47 7,580.95 2005 36.47 37.52 13,758.23 2006 37.52 42.60 18,457.29 2007 42.60 44.07 23,472.30 2008 44.07 27.25 34,153.83 2009 27.25 33.82 30,647.68 2010 33.82 38.17 32,389.24 2011 38.17 38.23 36,551.24 MFS(R) Research International Investment Division/(a)/...... 2002 7.79 7.28 2.88 2003 7.28 9.47 2,924.17 2004 9.47 11.16 3,434.16 2005 11.16 12.81 3,797.02 2006 12.81 15.98 6,565.99 2007 15.98 17.85 10,263.62 2008 17.85 10.13 13,628.81 2009 10.13 13.14 14,363.44 2010 13.14 14.43 15,263.03 2011 14.43 12.70 14,503.53 MFS(R) Total Return Investment Division/(a)/................ 2002 31.73 31.48 0.00 2003 31.48 36.22 162.46 2004 36.22 39.62 1,233.12 2005 39.62 40.16 1,329.60 2006 40.16 44.31 1,857.25 2007 44.31 45.47 2,885.95 2008 45.47 34.80 2,363.74 2009 34.80 40.57 2,619.61 2010 40.57 43.91 2,883.67 2011 43.91 44.21 3,416.60 MFS(R) Value Investment Division/(a)/....................... 2002 9.99 9.65 316.59 2003 9.65 11.91 1,436.68 2004 11.91 13.05 3,152.03 2005 13.05 12.65 5,072.08 2006 12.65 14.69 6,962.96 2007 14.69 13.90 14,487.72 2008 13.90 9.08 13,473.62 2009 9.08 10.79 16,367.12 2010 10.79 11.82 17,416.17 2011 11.82 11.73 18,775.13
20
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Morgan Stanley EAFE(R) Index Investment Division/(a)/....... 2002 $ 7.85 $ 6.97 550.11 2003 6.97 9.43 3,873.08 2004 9.43 11.08 6,433.44 2005 11.08 12.34 9,089.56 2006 12.34 15.26 12,602.42 2007 15.26 16.62 17,463.95 2008 16.62 9.46 26,278.41 2009 9.46 11.97 23,952.13 2010 11.97 12.73 26,615.65 2011 12.73 10.96 33,240.27 Morgan Stanley Mid Cap Growth Investment Division/(l)/...... 2010 12.78 14.84 7,388.96 2011 14.84 13.62 2,124.70 Morgan Stanley Mid Cap Growth Investment Division (formerly FI Mid Cap Opportunities Investment Division)/(a)(c)/..... 2002 11.19 10.78 0.00 2003 10.78 14.27 0.00 2004 14.27 16.43 1,844.29 2005 16.43 17.27 3,246.37 2006 17.27 18.99 3,696.05 2007 18.99 20.24 4,101.03 2008 20.24 8.89 2,163.24 2009 8.89 11.70 1,942.04 2010 11.70 12.66 0.00 Neuberger Berman Genesis Investment Division/(a)/........... 2002 12.73 10.80 99.16 2003 10.80 15.94 1,442.05 2004 15.94 18.08 4,733.00 2005 18.08 18.52 6,393.47 2006 18.52 21.25 5,338.90 2007 21.25 20.17 6,204.84 2008 20.17 12.21 7,230.09 2009 12.21 13.58 7,532.78 2010 13.58 16.25 7,904.93 2011 16.25 16.89 7,164.14 Neuberger Berman Mid Cap Value Investment Division/(a)/..... 2002 13.94 13.30 1.50 2003 13.30 17.85 302.01 2004 17.85 21.58 928.34 2005 21.58 23.81 2,277.33 2006 23.81 26.09 4,695.92 2007 26.09 26.54 6,721.00 2008 26.54 13.73 7,931.23 2009 13.73 20.00 6,302.86 2010 20.00 24.85 7,269.79 2011 24.85 22.86 7,793.68
21
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Oppenheimer Capital Appreciation Investment Division/(a)/... 2002 $ 6.53 $ 6.27 0.00 2003 6.27 7.95 444.53 2004 7.95 8.34 2,849.59 2005 8.34 8.60 2,217.38 2006 8.60 9.13 3,178.86 2007 9.13 10.28 4,013.04 2008 10.28 5.47 4,251.11 2009 5.47 7.76 5,949.42 2010 7.76 8.36 9,161.87 2011 8.36 8.13 9,535.19 PIMCO Inflation Protected Bond Investment Division/(f)/..... 2006 10.97 11.08 330.84 2007 11.08 12.10 462.98 2008 12.10 11.10 14,191.03 2009 11.10 12.92 16,559.51 2010 12.92 13.72 19,682.28 2011 13.72 15.03 31,407.74 PIMCO Total Return Investment Division/(a)/................. 2002 10.90 11.34 333.34 2003 11.34 11.66 6,229.03 2004 11.66 12.06 10,445.98 2005 12.06 12.16 14,727.33 2006 12.16 12.52 23,460.30 2007 12.52 13.28 29,497.35 2008 13.28 13.14 28,115.73 2009 13.14 15.29 44,252.80 2010 15.29 16.30 54,854.40 2011 16.30 16.57 63,509.21 RCM Technology Investment Division/(a)/..................... 2002 3.67 2.95 0.00 2003 2.95 4.59 80.88 2004 4.59 4.33 507.30 2005 4.33 4.74 954.08 2006 4.74 4.92 2,828.72 2007 4.92 6.37 6,050.28 2008 6.37 3.49 6,262.36 2009 3.49 5.47 8,358.97 2010 5.47 6.88 14,540.38 2011 6.88 6.11 10,587.94 Russell 2000(R) Index Investment Division/(a)/.............. 2002 9.98 9.25 0.39 2003 9.25 13.28 856.01 2004 13.28 15.37 1,554.63 2005 15.37 15.80 2,943.50 2006 15.80 18.31 4,984.93 2007 18.31 17.74 5,735.40 2008 17.74 11.60 7,192.80 2009 11.60 14.36 8,539.44 2010 14.36 17.92 10,099.65 2011 17.92 16.90 13,315.72
22
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ SSgA Growth ETF Investment Division/(f)/.................... 2006 $10.70 $11.40 0.00 2007 11.40 11.87 145.98 2008 11.87 7.84 145.72 2009 7.84 9.98 1,196.30 2010 9.98 11.23 398.44 2011 11.23 10.83 3,078.24 SSgA Growth and Income ETF Investment Division/(f)/......... 2006 10.51 11.15 0.00 2007 11.15 11.58 0.00 2008 11.58 8.55 0.00 2009 8.55 10.53 2,112.77 2010 10.53 11.65 6,609.65 2011 11.65 11.60 22,019.03 T. Rowe Price Large Cap Growth Investment Division/(a)/..... 2002 8.88 8.65 0.00 2003 8.65 11.15 385.28 2004 11.15 12.06 2,168.53 2005 12.06 12.64 3,914.84 2006 12.64 14.06 4,416.96 2007 14.06 15.13 7,105.52 2008 15.13 8.64 7,772.58 2009 8.64 12.19 8,865.60 2010 12.19 14.03 9,325.77 2011 14.03 13.64 13,011.67 T. Rowe Price Mid Cap Growth Investment Division/(a)/....... 2002 4.82 4.54 0.00 2003 4.54 6.11 59.54 2004 6.11 7.10 1,526.35 2005 7.10 8.02 3,928.80 2006 8.02 8.39 8,034.99 2007 8.39 9.73 17,262.47 2008 9.73 5.78 17,527.00 2009 5.78 8.28 23,619.52 2010 8.28 10.43 25,178.14 2011 10.43 10.11 28,147.13 T. Rowe Price Small Cap Growth Investment Division/(a)/..... 2002 8.84 8.65 116.27 2003 8.65 12.02 1,333.24 2004 12.02 13.14 2,047.11 2005 13.14 14.34 1,363.39 2006 14.34 14.65 2,309.31 2007 14.65 15.82 3,961.01 2008 15.82 9.92 3,030.69 2009 9.92 13.56 4,399.13 2010 13.56 18.00 6,124.80 2011 18.00 18.00 8,464.56
23
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Third Avenue Small Cap Value Investment Division/(a)/.. 2002 $ 9.02 $ 8.22 0.00 2003 8.22 11.47 9.53 2004 11.47 14.30 214.83 2005 14.30 16.27 904.15 2006 16.27 18.15 3,365.95 2007 18.15 17.34 6,471.22 2008 17.34 11.99 7,501.72 2009 11.99 14.95 8,198.18 2010 14.95 17.67 8,085.96 2011 17.67 15.85 8,978.18 Western Asset Management Strategic Bond Opportunities Investment Division/(a)/............................. 2002 15.99 16.92 0.00 2003 16.92 18.78 160.51 2004 18.78 19.67 549.20 2005 19.67 19.89 539.74 2006 19.89 20.55 2,715.67 2007 20.55 21.00 4,187.52 2008 21.00 17.55 4,981.54 2009 17.55 22.81 5,140.05 2010 22.81 25.28 6,140.11 2011 25.28 26.38 8,276.43 Western Asset Management U.S. Government Investment Division/(a)/........................................ 2002 15.04 15.49 0.00 2003 15.49 15.52 861.10 2004 15.52 15.70 2,184.14 2005 15.70 15.69 4,277.89 2006 15.69 16.07 4,543.14 2007 16.07 16.48 5,623.40 2008 16.48 16.16 5,606.75 2009 16.16 16.57 5,995.14 2010 16.57 17.23 7,078.01 2011 17.23 17.88 12,858.13
24 METLIFE FINANCIAL FREEDOM SELECT 1.40 SEPARATE ACCOUNT CHARGE
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ American Funds(R) Balanced Allocation Investment Division (Class C)/(i)/.............................. 2008 $ 10.00 $ 7.01 0.00 2009 7.01 8.94 3,205.95 2010 8.94 9.89 15,113.42 2011 9.89 9.55 18,919.93 American Funds Bond Investment Division (Class 2)/(f)(j)/.................................... 2006 14.49 15.19 90.17 2007 15.19 15.43 2,717.93 2008 15.43 13.76 1,228.37 2009 13.76 15.24 1,411.93 2010 15.24 15.96 4,082.63 2011 15.96 16.66 3,771.05 American Funds Global Small Capitalization Investment Division (Class 2)/(a)(j)/........................... 2002 12.03 10.68 0.00 2003 10.68 16.14 248.94 2004 16.14 19.19 874.83 2005 19.19 23.66 3,034.21 2006 23.66 28.88 8,369.00 2007 28.88 34.49 9,984.89 2008 34.49 15.76 9,747.17 2009 15.76 25.01 10,588.10 2010 25.01 30.12 12,592.07 2011 30.12 23.95 12,588.31 American Funds(R) Growth Allocation Investment Division (Class C)/(i)/.............................. 2008 9.99 6.36 5,371.53 2009 6.36 8.41 9,511.06 2010 8.41 9.41 38,206.02 2011 9.41 8.84 39,621.07 American Funds Growth Investment Division (Class 2)/(a)(j)/.................................... 2002 84.55 81.59 1.16 2003 81.59 109.80 213.24 2004 109.80 121.49 750.36 2005 121.49 138.86 1,130.53 2006 138.86 150.55 3,008.94 2007 150.55 166.36 3,261.55 2008 166.36 91.68 3,298.78 2009 91.68 125.72 3,439.62 2010 125.72 146.76 4,338.96 2011 146.76 138.19 4,062.93
25
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ American Funds Growth-Income Investment Division (Class 2)/(a)(j)/....................................... 2002 $ 69.94 $ 65.60 0.00 2003 65.60 85.45 104.66 2004 85.45 92.76 1,079.47 2005 92.76 96.57 1,746.28 2006 96.57 109.44 3,215.01 2007 109.44 113.07 4,285.93 2008 113.07 69.12 3,745.16 2009 69.12 89.23 3,937.57 2010 89.23 97.80 4,076.35 2011 97.80 94.44 4,134.71 American Funds(R) Moderate Allocation Investment Division (Class C)/(i)/.......................................... 2008 10.01 7.68 0.00 2009 7.68 9.35 1,683.75 2010 9.35 10.14 2,433.50 2011 10.14 10.01 4,680.36 Barclays Capital Aggregate Bond Index Investment Division/(a)/........................................... 2002 11.71 12.23 0.00 2003 12.23 12.47 2,135.85 2004 12.47 12.77 7,143.10 2005 12.77 12.83 9,498.74 2006 12.83 13.13 17,290.68 2007 13.13 13.81 32,305.85 2008 13.81 14.38 27,321.87 2009 14.38 14.89 35,470.90 2010 14.89 15.52 36,511.56 2011 15.52 16.42 44,741.07 BlackRock Bond Income Investment Division/(a)/............ 2002 40.41 41.94 0.00 2003 41.94 43.66 1.59 2004 43.66 44.85 463.63 2005 44.85 45.18 1,569.21 2006 45.18 46.40 1,663.84 2007 46.40 48.51 3,284.42 2008 48.51 46.08 1,492.96 2009 46.08 49.61 1,321.50 2010 49.61 52.87 2,498.58 2011 52.87 55.42 3,216.81 BlackRock Large Cap Core Investment Division*/(g)/........ 2007 78.10 78.77 541.05 2008 78.77 48.69 492.61 2009 48.69 57.23 463.38 2010 57.23 63.46 673.14 2011 63.46 62.74 1,488.20 BlackRock Large Cap Investment Division/(a)(g)/........... 2002 49.58 47.00 0.00 2003 47.00 60.21 6.02 2004 60.21 65.66 428.83 2005 65.66 66.90 526.93 2006 66.90 75.09 532.54 2007 75.09 78.75 0.00
26
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ BlackRock Large Cap Value Investment Division/(a)/.... 2002 $ 8.60 $ 7.91 0.00 2003 7.91 10.56 549.93 2004 10.56 11.79 1,211.71 2005 11.79 12.27 2,995.73 2006 12.27 14.42 4,300.92 2007 14.42 14.66 6,799.21 2008 14.66 9.38 5,668.16 2009 9.38 10.27 5,974.95 2010 10.27 11.03 10,047.59 2011 11.03 11.10 12,903.48 BlackRock Legacy Large Cap Growth Investment Division/(a)/....................................... 2002 20.37 17.80 0.00 2003 17.80 23.74 79.46 2004 23.74 25.41 132.01 2005 25.41 26.75 252.46 2006 26.75 27.40 342.57 2007 27.40 32.00 1,342.28 2008 32.00 19.98 1,837.22 2009 19.98 26.89 1,533.12 2010 26.89 31.68 1,895.34 2011 31.68 28.38 1,824.26 BlackRock Legacy Large Cap Growth Investment Division (formerly FI Large Cap Investment Division)/(k)/.... 2006 17.09 17.29 261.90 2007 17.29 17.68 0.00 2008 17.68 9.59 0.00 2009 9.59 9.99 0.00 BlackRock Money Market Investment Division/(b)/....... 2003 22.17 22.03 0.00 2004 22.03 21.89 0.00 2005 21.89 22.15 0.00 2006 22.15 22.84 0.00 2007 22.84 23.61 0.00 2008 23.61 23.88 0.00 2009 23.88 23.61 0.00 2010 23.61 23.28 0.00 2011 23.28 22.96 0.00 Calvert VP SRI Balanced Investment Division/(a)/...... 2002 17.30 16.96 0.00 2003 16.96 19.96 92.43 2004 19.96 21.30 1,335.42 2005 21.30 22.20 1,304.11 2006 22.20 23.81 1,464.93 2007 23.81 24.12 993.28 2008 24.12 16.33 727.80 2009 16.33 20.18 824.31 2010 20.18 22.31 783.58 2011 22.31 23.01 1,578.21
27
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Clarion Global Real Estate Investment Division/(d)/......... 2004 $ 9.99 $12.83 2,370.18 2005 12.83 14.33 4,213.75 2006 14.33 19.45 10,092.59 2007 19.45 16.30 6,491.19 2008 16.30 9.37 6,422.91 2009 9.37 12.45 6,974.02 2010 12.45 14.26 10,030.10 2011 14.26 13.27 9,032.19 Davis Venture Value Investment Division/(a)/................ 2002 22.20 21.60 0.00 2003 21.60 27.85 111.16 2004 27.85 30.75 748.08 2005 30.75 33.35 2,892.00 2006 33.35 37.60 5,553.60 2007 37.60 38.68 6,860.60 2008 38.68 23.07 5,270.29 2009 23.07 29.95 5,825.99 2010 29.95 32.99 10,639.56 2011 32.99 31.14 11,515.82 FI Value Leaders Investment Division/(a)/................... 2002 19.51 18.53 0.00 2003 18.53 23.18 475.08 2004 23.18 25.95 737.34 2005 25.95 28.26 1,354.18 2006 28.26 31.12 1,183.22 2007 31.12 31.90 922.86 2008 31.90 19.15 946.41 2009 19.15 22.94 1,015.63 2010 22.94 25.86 1,365.80 2011 25.86 23.87 1,305.66 Harris Oakmark International Investment Division/(a)/....... 2002 9.89 8.83 0.00 2003 8.83 11.75 0.00 2004 11.75 13.96 1,291.02 2005 13.96 15.73 3,416.24 2006 15.73 19.99 7,646.84 2007 19.99 19.49 10,592.00 2008 19.49 11.36 6,692.29 2009 11.36 17.37 8,922.58 2010 17.37 19.94 11,617.64 2011 19.94 16.86 13,153.26 Invesco Small Cap Growth Investment Division/(a)/........... 2002 8.91 8.47 0.00 2003 8.47 11.60 500.68 2004 11.60 12.17 569.56 2005 12.17 13.00 610.19 2006 13.00 14.63 1.69 2007 14.63 16.03 3.15 2008 16.03 9.68 180.24 2009 9.68 12.78 200.05 2010 12.78 15.90 287.94 2011 15.90 15.51 75.94
28
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Janus Forty Investment Division/(h)/........................ 2007 $145.83 $178.90 256.85 2008 178.90 102.32 691.59 2009 102.32 144.13 1,268.00 2010 144.13 155.49 1,784.40 2011 155.49 141.76 1,603.10 Lazard Mid Cap Investment Division/(a)/..................... 2002 9.98 9.66 0.00 2003 9.66 12.02 1,288.94 2004 12.02 13.56 1,582.17 2005 13.56 14.45 1,753.16 2006 14.45 16.34 899.72 2007 16.34 15.68 853.20 2008 15.68 9.54 772.75 2009 9.54 12.86 1,154.85 2010 12.86 15.58 1,749.83 2011 15.58 14.56 2,192.17 Loomis Sayles Small Cap Core Investment Division/(a)/....... 2002 18.85 17.20 0.00 2003 17.20 23.15 38.65 2004 23.15 26.53 619.34 2005 26.53 27.91 951.90 2006 27.91 32.04 2,565.57 2007 32.04 35.26 2,833.72 2008 35.26 22.23 1,009.30 2009 22.23 28.48 1,065.61 2010 28.48 35.73 1,351.72 2011 35.73 35.36 1,350.90 Loomis Sayles Small Cap Growth Investment Division/(a)/..... 2002 6.73 6.24 0.00 2003 6.24 8.90 1,491.89 2004 8.90 9.75 1,919.95 2005 9.75 10.04 2,237.05 2006 10.04 10.86 2,155.40 2007 10.86 11.17 2,284.03 2008 11.17 6.46 1,505.98 2009 6.46 8.27 2,027.52 2010 8.27 10.71 4,147.47 2011 10.71 10.85 4,418.66 Lord Abbett Bond Debenture Investment Division/(a)/......... 2002 13.26 13.56 0.00 2003 13.56 15.93 55.05 2004 15.93 16.99 1,105.41 2005 16.99 17.01 1,847.75 2006 17.01 18.31 3,416.36 2007 18.31 19.23 5,606.79 2008 19.23 15.43 3,736.84 2009 15.43 20.82 4,661.19 2010 20.82 23.19 4,806.54 2011 23.19 23.89 5,409.06
29
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Met/Artisan Mid Cap Value Investment Division/(a)/..... 2002 $22.51 $23.16 1.57 2003 23.16 30.23 2,361.98 2004 30.23 32.68 4,061.07 2005 32.68 35.36 4,889.45 2006 35.36 39.11 5,160.17 2007 39.11 35.84 5,001.26 2008 35.84 19.03 3,458.14 2009 19.03 26.50 3,721.27 2010 26.50 29.99 5,149.90 2011 29.99 31.50 4,256.99 Met/Franklin Income Investment Division/(i)/........... 2008 9.99 7.98 0.00 2009 7.98 10.06 442.53 2010 10.06 11.10 10,354.54 2011 11.10 11.18 11,096.38 Met/Franklin Low Duration Total Return Investment Division/(n)/........................................ 2011 9.98 9.76 4,480.90 Met/Franklin Mutual Shares Investment Division/(i)/.... 2008 9.99 6.60 0.00 2009 6.60 8.12 372.04 2010 8.12 8.89 3,462.57 2011 8.89 8.72 3,895.01 Met/Franklin Templeton Founding Strategy Investment Division/(i)/........................................ 2008 9.99 7.03 2,987.07 2009 7.03 8.91 113.95 2010 8.91 9.67 208.36 2011 9.67 9.37 1,008.92 Met/Templeton Growth Investment Division/(i)/.......... 2008 9.99 6.56 0.00 2009 6.56 8.59 240.24 2010 8.59 9.12 1,291.70 2011 9.12 8.37 1,430.71 MetLife Aggressive Strategy Investment Division........ 2011 12.16 10.41 20,179.64 MetLife Aggressive Strategy Investment Division (formerly MetLife Aggressive Allocation Investment Division)/(e)(m)/......................... 2005 9.99 11.15 0.00 2006 11.15 12.71 0.00 2007 12.71 12.94 2,025.81 2008 12.94 7.60 2,690.46 2009 7.60 9.85 4,462.04 2010 9.85 11.24 9,964.52 2011 11.24 12.19 0.00 MetLife Conservative Allocation Investment Division/(e)/........................................ 2005 9.99 10.29 0.00 2006 10.29 10.85 246.36 2007 10.85 11.30 674.91 2008 11.30 9.54 4,811.04 2009 9.54 11.33 4,795.84 2010 11.33 12.30 4,786.51 2011 12.30 12.52 13,414.76
30
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ MetLife Conservative to Moderate Allocation Investment Division/(e)/........................................ 2005 $ 9.99 $10.51 2,607.14 2006 10.51 11.34 2,607.14 2007 11.34 11.72 3,521.82 2008 11.72 9.06 8,710.86 2009 9.06 11.05 7,370.08 2010 11.05 12.16 8,829.17 2011 12.16 12.11 18,288.42 MetLife Mid Cap Stock Index Investment Division/(a)/... 2002 8.95 8.62 8.43 2003 8.62 11.43 871.20 2004 11.43 13.05 4,139.79 2005 13.05 14.41 5,382.64 2006 14.41 15.61 6,366.59 2007 15.61 16.55 11,065.63 2008 16.55 10.38 10,706.55 2009 10.38 14.00 13,079.64 2010 14.00 17.40 11,789.40 2011 17.40 16.78 15,581.29 MetLife Moderate Allocation Investment Division/(e)/... 2005 9.99 10.74 527.34 2006 10.74 11.85 38,145.98 2007 11.85 12.19 79,401.10 2008 12.19 8.58 74,971.27 2009 8.58 10.70 67,725.80 2010 10.70 11.95 107,996.42 2011 11.95 11.62 118,424.34 MetLife Moderate to Aggressive Allocation Investment Division/(e)/........................................ 2005 9.99 10.97 9,497.11 2006 10.97 12.36 9,626.62 2007 12.36 12.65 16,302.49 2008 12.65 8.09 23,713.76 2009 8.09 10.30 22,321.07 2010 10.30 11.65 50,393.30 2011 11.65 11.06 32,395.23 MetLife Stock Index Investment Division/(a)/........... 2002 28.08 26.79 0.00 2003 26.79 33.79 3,560.51 2004 33.79 36.74 9,069.67 2005 36.74 37.82 13,139.50 2006 37.82 42.96 16,104.79 2007 42.96 44.46 24,042.36 2008 44.46 27.51 27,574.58 2009 27.51 34.16 33,272.23 2010 34.16 38.56 28,749.50 2011 38.56 38.65 31,438.85
31
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ MFS(R) Research International Investment Division/(a)/...... 2002 $ 7.79 $ 7.28 0.00 2003 7.28 9.49 14.75 2004 9.49 11.19 51.30 2005 11.19 12.84 353.65 2006 12.84 16.03 3,516.25 2007 16.03 17.91 3,893.52 2008 17.91 10.17 7,278.53 2009 10.17 13.20 5,873.53 2010 13.20 14.50 6,227.74 2011 14.50 12.77 8,087.35 MFS(R) Total Return Investment Division/(a)/................ 2002 31.97 31.73 0.00 2003 31.73 36.52 1,001.40 2004 36.52 39.97 1,401.55 2005 39.97 40.54 2,395.40 2006 40.54 44.75 3,447.32 2007 44.75 45.94 3,746.67 2008 45.94 35.18 3,360.60 2009 35.18 41.04 3,652.09 2010 41.04 44.43 3,614.95 2011 44.43 44.76 2,960.38 MFS(R) Value Investment Division/(a)/....................... 2002 10.00 9.67 0.00 2003 9.67 11.94 4,378.71 2004 11.94 13.09 6,521.36 2005 13.09 12.70 7,622.54 2006 12.70 14.75 8,780.48 2007 14.75 13.96 8,034.77 2008 13.96 9.12 8,140.73 2009 9.12 10.85 7,668.96 2010 10.85 11.90 7,987.94 2011 11.90 11.81 11,424.88 Morgan Stanley EAFE(R) Index Investment Division/(a)/....... 2002 7.86 6.98 0.00 2003 6.98 9.45 1,749.85 2004 9.45 11.12 6,950.94 2005 11.12 12.38 10,074.83 2006 12.38 15.32 11,999.51 2007 15.32 16.69 18,301.03 2008 16.69 9.51 21,068.25 2009 9.51 12.03 25,153.37 2010 12.03 12.81 21,929.81 2011 12.81 11.03 28,793.93 Morgan Stanley Mid Cap Growth Investment Division/(l)/...... 2010 12.87 14.95 1,992.08 2011 14.95 13.72 2,158.77
32
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Morgan Stanley Mid Cap Growth Investment Division (formerly FI Mid Cap Opportunities Investment Division)/(a)(c)/..... 2002 $11.22 $10.81 0.00 2003 10.81 14.32 0.00 2004 14.32 16.49 658.97 2005 16.49 17.35 1,509.50 2006 17.35 19.09 2,459.23 2007 19.09 20.35 2,108.30 2008 20.35 8.94 2,035.11 2009 8.94 11.77 1,886.80 2010 11.77 12.74 0.00 Neuberger Berman Genesis Investment Division/(a)/........... 2002 12.74 10.81 3.34 2003 10.81 15.97 971.23 2004 15.97 18.12 4,164.39 2005 18.12 18.57 4,090.64 2006 18.57 21.32 6,961.54 2007 21.32 20.25 7,513.75 2008 20.25 12.27 3,711.29 2009 12.27 13.65 3,092.17 2010 13.65 16.33 4,407.46 2011 16.33 16.99 4,427.61 Neuberger Berman Mid Cap Value Investment Division/(a)/..... 2002 13.97 13.33 0.00 2003 13.33 17.90 832.96 2004 17.90 21.65 2,085.00 2005 21.65 23.89 5,035.38 2006 23.89 26.20 8,407.39 2007 26.20 26.66 8,584.25 2008 26.66 13.80 7,489.19 2009 13.80 20.11 7,881.52 2010 20.11 25.00 12,260.60 2011 25.00 23.01 12,218.23 Oppenheimer Capital Appreciation Investment Division/(a)/... 2002 6.54 6.28 0.00 2003 6.28 7.96 1,369.01 2004 7.96 8.35 1,564.27 2005 8.35 8.62 1,786.40 2006 8.62 9.15 757.44 2007 9.15 10.32 505.50 2008 10.32 5.50 1,105.02 2009 5.50 7.79 1,816.73 2010 7.79 8.40 5,862.62 2011 8.40 8.17 6,361.99 PIMCO Inflation Protected Bond Investment Division/(f)/..... 2006 10.99 11.10 0.00 2007 11.10 12.12 576.66 2008 12.12 11.13 5,855.81 2009 11.13 12.96 7,713.76 2010 12.96 13.77 18,661.71 2011 13.77 15.09 27,526.05
33
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ PIMCO Total Return Investment Division/(a)/................. 2002 $10.91 $11.35 0.00 2003 11.35 11.68 2,010.07 2004 11.68 12.09 5,982.63 2005 12.09 12.19 8,960.97 2006 12.19 12.56 12,287.44 2007 12.56 13.32 12,380.76 2008 13.32 13.19 12,474.41 2009 13.19 15.35 16,042.59 2010 15.35 16.38 31,470.36 2011 16.38 16.66 33,153.67 RCM Technology Investment Division/(a)/..................... 2002 3.67 2.96 0.00 2003 2.96 4.60 344.29 2004 4.60 4.34 1,006.93 2005 4.34 4.75 1,873.94 2006 4.75 4.93 2,398.63 2007 4.93 6.40 3,312.84 2008 6.40 3.50 2,693.54 2009 3.50 5.49 5,466.84 2010 5.49 6.92 7,327.23 2011 6.92 6.15 6,157.15 Russell 2000(R) Index Investment Division/(a)/.............. 2002 10.00 9.27 0.00 2003 9.27 13.32 461.65 2004 13.32 15.42 2,348.12 2005 15.42 15.86 3,666.83 2006 15.86 18.39 4,048.22 2007 18.39 17.82 5,647.42 2008 17.82 11.65 6,245.83 2009 11.65 14.44 9,630.01 2010 14.44 18.03 9,511.19 2011 18.03 17.02 11,123.88 SSgA Growth ETF Investment Division/(f)/.................... 2006 10.70 11.41 0.00 2007 11.41 11.88 62.15 2008 11.88 7.85 160.35 2009 7.85 10.00 1,690.87 2010 10.00 11.26 5,164.06 2011 11.26 10.86 4,556.81 SSgA Growth and Income ETF Investment Division/(f)/......... 2006 10.51 11.16 0.00 2007 11.16 11.59 0.00 2008 11.59 8.57 0.00 2009 8.57 10.55 0.00 2010 10.55 11.68 1.77 2011 11.68 11.64 23,894.32
34
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ T. Rowe Price Large Cap Growth Investment Division/(a)/..... 2002 $ 8.89 $ 8.67 0.00 2003 8.67 11.18 100.79 2004 11.18 12.10 2,980.22 2005 12.10 12.68 2,276.90 2006 12.68 14.12 2,642.90 2007 14.12 15.20 2,891.75 2008 15.20 8.69 3,145.27 2009 8.69 12.26 4,973.76 2010 12.26 14.11 8,126.80 2011 14.11 13.73 7,835.33 T. Rowe Price Mid Cap Growth Investment Division/(a)/....... 2002 4.83 4.54 0.00 2003 4.54 6.12 526.10 2004 6.12 7.11 981.52 2005 7.11 8.04 1,933.12 2006 8.04 8.42 6,384.30 2007 8.42 9.76 6,591.80 2008 9.76 5.80 9,133.51 2009 5.80 8.32 10,331.13 2010 8.32 10.48 11,527.22 2011 10.48 10.16 10,875.40 T. Rowe Price Small Cap Growth Investment Division/(a)/..... 2002 8.86 8.67 0.00 2003 8.67 12.06 0.00 2004 12.06 13.20 6.04 2005 13.20 14.41 228.27 2006 14.41 14.72 599.02 2007 14.72 15.90 825.91 2008 15.90 9.98 859.37 2009 9.98 13.65 695.66 2010 13.65 18.13 1,333.68 2011 18.13 18.13 1,265.31 Third Avenue Small Cap Value Investment Division/(a)/....... 2002 9.02 8.23 0.00 2003 8.23 11.48 0.00 2004 11.48 14.32 1.76 2005 14.32 16.30 230.07 2006 16.30 18.19 791.70 2007 18.19 17.39 770.75 2008 17.39 12.03 1,334.34 2009 12.03 15.01 1,308.09 2010 15.01 17.74 1,203.58 2011 17.74 15.92 1,215.23
35
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Western Asset Management Strategic Bond Opportunities Investment Division/(a)/............................ 2002 $16.06 $16.99 0.00 2003 16.99 18.87 51.08 2004 18.87 19.77 465.44 2005 19.77 20.00 1,665.10 2006 20.00 20.67 3,192.35 2007 20.67 21.14 3,466.92 2008 21.14 17.67 2,912.02 2009 17.67 22.99 3,222.66 2010 22.99 25.49 6,506.19 2011 25.49 26.60 7,088.18 Western Asset Management U.S. Government Investment Division/(a)/....................................... 2002 15.10 15.55 0.00 2003 15.55 15.59 119.97 2004 15.59 15.78 372.78 2005 15.78 15.78 884.03 2006 15.78 16.17 1,488.25 2007 16.17 16.59 2,072.44 2008 16.59 16.27 2,481.71 2009 16.27 16.70 2,910.79 2010 16.70 17.37 4,893.25 2011 17.37 18.03 4,616.60
36 METLIFE FINANCIAL FREEDOM SELECT 1.30 SEPARATE ACCOUNT CHARGE
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ American Funds(R) Balanced Allocation Investment Division (Class C)/(i)/.............................. 2008 $ 10.00 $ 7.02 2,631.53 2009 7.02 8.96 35,884.95 2010 8.96 9.92 51,686.81 2011 9.92 9.58 118,582.42 American Funds Bond Investment Division (Class 2)/(f)(j)/.................................... 2006 14.62 15.33 4,179.95 2007 15.33 15.60 15,641.01 2008 15.60 13.92 14,532.93 2009 13.92 15.44 16,978.55 2010 15.44 16.18 19,186.29 2011 16.18 16.90 18,589.37 American Funds Global Small Capitalization Investment Division (Class 2)/(a)(j)/........................... 2002 12.08 10.73 0.69 2003 10.73 16.23 1,254.51 2004 16.23 19.32 7,105.46 2005 19.32 23.84 16,415.78 2006 23.84 29.13 28,404.08 2007 29.13 34.82 40,438.60 2008 34.82 15.93 47,237.15 2009 15.93 25.31 63,693.22 2010 25.31 30.50 67,191.17 2011 30.50 24.28 77,000.36 American Funds(R) Growth Allocation Investment Division (Class C)/(i)/.............................. 2008 9.99 6.36 6,559.95 2009 6.36 8.42 77,454.83 2010 8.42 9.43 86,791.05 2011 9.43 8.87 137,806.54 American Funds Growth Investment Division (Class 2)/(a)(j)/.................................... 2002 86.12 83.15 0.00 2003 83.15 112.00 1,908.25 2004 112.00 124.06 5,585.20 2005 124.06 141.94 9,723.43 2006 141.94 154.04 15,774.53 2007 154.04 170.39 18,009.84 2008 170.39 93.99 19,606.98 2009 93.99 129.02 23,055.17 2010 129.02 150.77 24,930.01 2011 150.77 142.10 26,253.35
37
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ American Funds Growth-Income Investment Division (Class 2)/(a)(j)/....................................... 2002 $ 71.24 $ 66.85 50.08 2003 66.85 87.16 3,013.83 2004 87.16 94.72 7,944.50 2005 94.72 98.71 11,558.81 2006 98.71 111.97 14,967.77 2007 111.97 115.80 18,636.08 2008 115.80 70.86 20,705.15 2009 70.86 91.57 24,541.79 2010 91.57 100.46 26,438.87 2011 100.46 97.11 25,739.18 American Funds(R) Moderate Allocation Investment Division (Class C)/(i)/.......................................... 2008 10.01 7.69 1,563.29 2009 7.69 9.37 32,245.98 2010 9.37 10.16 37,963.13 2011 10.16 10.05 58,716.50 Barclays Capital Aggregate Bond Index Investment Division/(a)/........................................... 2002 11.75 12.28 8.36 2003 12.28 12.54 20,085.04 2004 12.54 12.85 47,752.02 2005 12.85 12.92 92,725.98 2006 12.92 13.24 106,127.97 2007 13.24 13.94 116,421.35 2008 13.94 14.53 101,814.51 2009 14.53 15.06 120,592.93 2010 15.06 15.71 127,451.82 2011 15.71 16.64 133,805.83 BlackRock Bond Income Investment Division/(a)/............ 2002 41.18 42.76 271.77 2003 42.76 44.56 1,481.26 2004 44.56 45.82 5,624.95 2005 45.82 46.20 7,646.56 2006 46.20 47.50 11,089.78 2007 47.50 49.70 12,917.97 2008 49.70 47.26 13,180.50 2009 47.26 50.94 11,883.54 2010 50.94 54.33 11,007.03 2011 54.33 57.02 10,042.55 BlackRock Large Cap Core Investment Division*/(g)/........ 2007 79.98 80.72 3,305.85 2008 80.72 49.95 3,192.64 2009 49.95 58.77 2,528.40 2010 58.77 65.24 2,647.33 2011 65.24 64.56 3,505.65 BlackRock Large Cap Investment Division/(a)(g)/........... 2002 50.54 47.92 0.37 2003 47.92 61.45 591.57 2004 61.45 67.09 2,610.30 2005 67.09 68.42 3,234.00 2006 68.42 76.88 3,193.59 2007 76.88 80.66 0.00
38
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ BlackRock Large Cap Value Investment Division/(a)/.... 2002 $ 8.60 $ 7.91 0.00 2003 7.91 10.58 207.85 2004 10.58 11.82 3,956.72 2005 11.82 12.32 5,567.18 2006 12.32 14.49 9,625.48 2007 14.49 14.74 18,627.73 2008 14.74 9.44 23,978.16 2009 9.44 10.35 26,748.29 2010 10.35 11.13 34,172.04 2011 11.13 11.21 35,985.43 BlackRock Legacy Large Cap Growth Investment Division/(a)/....................................... 2002 20.53 17.94 0.00 2003 17.94 23.96 19.58 2004 23.96 25.67 383.03 2005 25.67 27.05 496.87 2006 27.05 27.74 1,265.24 2007 27.74 32.43 1,338.96 2008 32.43 20.26 2,890.03 2009 20.26 27.30 5,421.79 2010 27.30 32.20 5,935.03 2011 32.20 28.87 7,593.82 BlackRock Legacy Large Cap Growth Investment Division (formerly FI Large Cap Investment Division)/(k)/.... 2006 17.25 17.46 58.23 2007 17.46 17.88 444.06 2008 17.88 9.71 585.67 2009 9.71 10.12 0.00 BlackRock Money Market Investment Division/(b)/....... 2003 22.61 22.49 0.00 2004 22.49 22.36 0.00 2005 22.36 22.65 0.00 2006 22.65 23.38 0.00 2007 23.38 24.19 0.00 2008 24.19 24.49 0.00 2009 24.49 24.24 0.00 2010 24.24 23.93 0.00 2011 23.93 23.62 0.00 Calvert VP SRI Balanced Investment Division/(a)/...... 2002 17.46 17.13 5.79 2003 17.13 20.18 1,918.65 2004 20.18 21.57 4,593.81 2005 21.57 22.49 7,424.82 2006 22.49 24.15 8,311.30 2007 24.15 24.49 9,079.89 2008 24.49 16.60 8,928.73 2009 16.60 20.53 9,306.13 2010 20.53 22.72 9,589.21 2011 22.72 23.45 10,584.34
39
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Clarion Global Real Estate Investment Division/(d)/......... 2004 $ 9.99 $12.84 5,322.67 2005 12.84 14.36 14,667.91 2006 14.36 19.50 25,498.77 2007 19.50 16.36 35,878.78 2008 16.36 9.41 38,464.10 2009 9.41 12.52 40,091.83 2010 12.52 14.35 41,121.47 2011 14.35 13.38 39,439.81 Davis Venture Value Investment Division/(a)/................ 2002 22.37 21.78 0.00 2003 21.78 28.11 664.92 2004 28.11 31.06 4,447.76 2005 31.06 33.72 13,592.62 2006 33.72 38.06 28,002.64 2007 38.06 39.20 34,928.19 2008 39.20 23.40 36,081.94 2009 23.40 30.41 41,118.00 2010 30.41 33.53 43,700.94 2011 33.53 31.68 43,250.62 FI Value Leaders Investment Division/(a)/................... 2002 19.69 18.71 0.00 2003 18.71 23.43 35.20 2004 23.43 26.26 177.38 2005 26.26 28.62 1,050.87 2006 28.62 31.55 942.92 2007 31.55 32.37 1,813.16 2008 32.37 19.45 1,960.29 2009 19.45 23.33 2,540.49 2010 23.33 26.32 2,804.64 2011 26.32 24.32 3,389.31 Harris Oakmark International Investment Division/(a)/....... 2002 9.90 8.84 0.00 2003 8.84 11.78 208.96 2004 11.78 14.01 4,441.45 2005 14.01 15.80 16,084.95 2006 15.80 20.10 37,615.27 2007 20.10 19.61 43,819.92 2008 19.61 11.44 43,519.19 2009 11.44 17.52 52,093.22 2010 17.52 20.13 59,032.72 2011 20.13 17.04 67,871.84 Invesco Small Cap Growth Investment Division/(a)/........... 2002 8.92 8.48 0.00 2003 8.48 11.62 182.58 2004 11.62 12.21 511.32 2005 12.21 13.05 1,033.94 2006 13.05 14.71 1,207.37 2007 14.71 16.13 1,491.25 2008 16.13 9.75 5,272.31 2009 9.75 12.88 8,765.61 2010 12.88 16.05 9,403.99 2011 16.05 15.67 10,916.19
40
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Janus Forty Investment Division/(h)/........................ 2007 $149.54 $183.57 128.73 2008 183.57 105.10 1,781.20 2009 105.10 148.20 2,785.17 2010 148.20 160.03 3,095.25 2011 160.03 146.05 3,238.96 Lazard Mid Cap Investment Division/(a)/..................... 2002 9.99 9.67 0.00 2003 9.67 12.05 1,038.85 2004 12.05 13.61 2,361.56 2005 13.61 14.51 3,263.02 2006 14.51 16.43 8,026.22 2007 16.43 15.78 10,653.28 2008 15.78 9.61 9,981.88 2009 9.61 12.97 10,818.50 2010 12.97 15.73 10,069.99 2011 15.73 14.71 10,918.42 Loomis Sayles Small Cap Core Investment Division/(a)/....... 2002 19.00 17.35 0.00 2003 17.35 23.37 436.65 2004 23.37 26.82 1,219.11 2005 26.82 28.24 2,463.70 2006 28.24 32.44 3,705.90 2007 32.44 35.75 6,825.27 2008 35.75 22.56 8,658.17 2009 22.56 28.93 9,112.87 2010 28.93 36.33 9,487.55 2011 36.33 35.99 10,898.00 Loomis Sayles Small Cap Growth Investment Division/(a)/..... 2002 6.74 6.25 0.00 2003 6.25 8.92 861.82 2004 8.92 9.79 3,198.31 2005 9.79 10.08 4,278.03 2006 10.08 10.92 5,493.72 2007 10.92 11.25 6,326.66 2008 11.25 6.51 7,769.04 2009 6.51 8.34 9,216.93 2010 8.34 10.81 11,366.04 2011 10.81 10.97 14,817.54 Lord Abbett Bond Debenture Investment Division/(a)/......... 2002 13.34 13.65 0.00 2003 13.65 16.05 992.83 2004 16.05 17.14 5,397.78 2005 17.14 17.17 10,786.13 2006 17.17 18.50 15,648.49 2007 18.50 19.46 21,232.32 2008 19.46 15.63 22,981.94 2009 15.63 21.11 24,179.23 2010 21.11 23.54 27,456.23 2011 23.54 24.27 27,867.79
41
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Met/Artisan Mid Cap Value Investment Division/(a)/..... 2002 $22.72 $23.39 0.00 2003 23.39 30.55 1,755.56 2004 30.55 33.07 5,787.83 2005 33.07 35.81 12,211.04 2006 35.81 39.65 15,415.48 2007 39.65 36.37 16,720.02 2008 36.37 19.33 15,675.24 2009 19.33 26.95 16,751.51 2010 26.95 30.53 15,624.85 2011 30.53 32.09 14,522.44 Met/Franklin Income Investment Division/(i)/........... 2008 9.99 7.99 560.21 2009 7.99 10.08 6,951.84 2010 10.08 11.13 10,665.08 2011 11.13 11.22 15,082.34 Met/Franklin Low Duration Total Return Investment Division/(n)/........................................ 2011 9.98 9.77 800.92 Met/Franklin Mutual Shares Investment Division/(i)/.... 2008 9.99 6.60 678.26 2009 6.60 8.14 7,047.17 2010 8.14 8.92 9,430.97 2011 8.92 8.75 15,195.81 Met/Franklin Templeton Founding Strategy Investment Division/(i)/........................................ 2008 9.99 7.03 1,798.91 2009 7.03 8.93 37,257.96 2010 8.93 9.70 47,853.10 2011 9.70 9.40 66,407.86 Met/Templeton Growth Investment Division/(i)/.......... 2008 9.99 6.57 0.00 2009 6.57 8.60 4,684.01 2010 8.60 9.14 6,926.56 2011 9.14 8.40 7,259.75 MetLife Aggressive Strategy Investment Division........ 2011 12.23 10.48 13,856.19 MetLife Aggressive Strategy Investment Division (formerly MetLife Aggressive Allocation Investment Division)/(e)(m)/......................... 2005 9.99 11.15 3,359.18 2006 11.15 12.73 5,819.60 2007 12.73 12.98 14,094.74 2008 12.98 7.63 15,193.46 2009 7.63 9.90 19,602.40 2010 9.90 11.31 18,400.42 2011 11.31 12.27 0.00 MetLife Conservative Allocation Investment Division/(e)/........................................ 2005 9.99 10.30 1,175.75 2006 10.30 10.87 4,128.53 2007 10.87 11.33 6,370.56 2008 11.33 9.57 10,147.11 2009 9.57 11.39 23,632.42 2010 11.39 12.37 34,512.17 2011 12.37 12.61 69,043.32
42
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ MetLife Conservative to Moderate Allocation Investment Division/(e)/........................................ 2005 $ 9.99 $10.52 2,212.95 2006 10.52 11.36 15,593.91 2007 11.36 11.76 40,950.77 2008 11.76 9.10 68,542.11 2009 9.10 11.11 63,745.06 2010 11.11 12.23 83,743.46 2011 12.23 12.20 122,289.61 MetLife Mid Cap Stock Index Investment Division/(a)/... 2002 8.97 8.64 199.54 2003 8.64 11.47 5,819.44 2004 11.47 13.11 10,497.05 2005 13.11 14.49 22,360.55 2006 14.49 15.71 29,660.75 2007 15.71 16.67 36,068.29 2008 16.67 10.47 44,570.58 2009 10.47 14.14 42,534.39 2010 14.14 17.58 40,892.15 2011 17.58 16.97 49,829.25 MetLife Moderate Allocation Investment Division/(e)/... 2005 9.99 10.75 11,668.37 2006 10.75 11.87 67,045.34 2007 11.87 12.22 120,718.32 2008 12.22 8.61 152,563.63 2009 8.61 10.75 222,239.06 2010 10.75 12.01 273,868.31 2011 12.01 11.70 287,084.29 MetLife Moderate to Aggressive Allocation Investment Division/(e)/........................................ 2005 9.99 10.98 309.33 2006 10.98 12.38 45,181.90 2007 12.38 12.69 173,779.52 2008 12.69 8.12 160,279.43 2009 8.12 10.35 253,121.59 2010 10.35 11.72 393,727.14 2011 11.72 11.13 460,084.36 MetLife Stock Index Investment Division/(a)/........... 2002 28.42 27.14 7.64 2003 27.14 34.25 8,207.04 2004 34.25 37.29 25,924.52 2005 37.29 38.42 48,991.14 2006 38.42 43.68 61,260.76 2007 43.68 45.26 66,152.91 2008 45.26 28.03 79,921.98 2009 28.03 34.83 78,376.53 2010 34.83 39.37 87,739.79 2011 39.37 39.50 96,361.55
43
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ MFS(R) Research International Investment Division/(a)/...... 2002 $ 7.81 $ 7.30 0.00 2003 7.30 9.51 1,173.20 2004 9.51 11.23 4,798.84 2005 11.23 12.91 8,939.85 2006 12.91 16.12 18,776.94 2007 16.12 18.03 26,177.24 2008 18.03 10.26 39,061.04 2009 10.26 13.32 43,850.06 2010 13.32 14.65 43,633.23 2011 14.65 12.91 44,769.26 MFS(R) Total Return Investment Division/(a)/................ 2002 32.46 32.23 0.57 2003 32.23 37.14 1,772.11 2004 37.14 40.68 6,580.74 2005 40.68 41.31 10,059.10 2006 41.31 45.64 12,375.50 2007 45.64 46.90 15,030.22 2008 46.90 35.95 12,993.98 2009 35.95 41.98 14,899.44 2010 41.98 45.50 14,891.42 2011 45.50 45.88 15,369.44 MFS(R) Value Investment Division/(a)/....................... 2002 10.04 9.71 0.00 2003 9.71 12.00 10,221.49 2004 12.00 13.17 18,229.30 2005 13.17 12.79 26,656.12 2006 12.79 14.87 31,680.13 2007 14.87 14.09 38,874.85 2008 14.09 9.22 37,791.46 2009 9.22 10.97 42,121.12 2010 10.97 12.04 43,477.77 2011 12.04 11.96 34,396.69 Morgan Stanley EAFE(R) Index Investment Division/(a)/....... 2002 7.89 7.01 248.58 2003 7.01 9.50 13,651.82 2004 9.50 11.19 27,550.49 2005 11.19 12.47 41,684.88 2006 12.47 15.44 54,371.66 2007 15.44 16.85 65,823.33 2008 16.85 9.61 85,082.09 2009 9.61 12.17 90,450.02 2010 12.17 12.96 92,378.75 2011 12.96 11.18 99,751.62 Morgan Stanley Mid Cap Growth Investment Division/(l)/...... 2010 13.04 15.16 8,071.74 2011 15.16 13.92 11,279.71
44
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Morgan Stanley Mid Cap Growth Investment Division (formerly FI Mid Cap Opportunities Investment Division)/(a)(c)/..... 2002 $11.28 $10.87 0.00 2003 10.87 14.41 0.00 2004 14.41 16.62 2,034.83 2005 16.62 17.50 3,054.68 2006 17.50 19.27 3,011.15 2007 19.27 20.57 5,910.11 2008 20.57 9.04 5,575.85 2009 9.04 11.92 5,817.85 2010 11.92 12.91 0.00 Neuberger Berman Genesis Investment Division/(a)/........... 2002 12.77 10.84 0.00 2003 10.84 16.03 7,055.96 2004 16.03 18.20 17,455.80 2005 18.20 18.67 27,140.41 2006 18.67 21.46 29,225.58 2007 21.46 20.40 31,186.86 2008 20.40 12.37 30,480.30 2009 12.37 13.78 31,525.39 2010 13.78 16.50 29,188.76 2011 16.50 17.19 23,674.65 Neuberger Berman Mid Cap Value Investment Division/(a)/..... 2002 14.02 13.38 0.00 2003 13.38 17.99 6,300.85 2004 17.99 21.78 12,910.42 2005 21.78 24.06 24,228.49 2006 24.06 26.41 32,571.06 2007 26.41 26.90 37,834.81 2008 26.90 13.95 40,957.57 2009 13.95 20.34 41,369.04 2010 20.34 25.31 42,070.33 2011 25.31 23.31 39,577.97 Oppenheimer Capital Appreciation Investment Division/(a)/... 2002 6.55 6.29 0.00 2003 6.29 7.98 940.97 2004 7.98 8.38 3,390.58 2005 8.38 8.67 5,442.23 2006 8.67 9.21 8,140.24 2007 9.21 10.39 12,572.77 2008 10.39 5.54 14,152.91 2009 5.54 7.86 14,413.61 2010 7.86 8.49 19,817.63 2011 8.49 8.26 22,875.86 PIMCO Inflation Protected Bond Investment Division/(f)/..... 2006 11.02 11.14 2,303.23 2007 11.14 12.18 1,951.66 2008 12.18 11.20 27,096.87 2009 11.20 13.05 31,817.32 2010 13.05 13.88 45,893.63 2011 13.88 15.23 58,893.54
45
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ PIMCO Total Return Investment Division/(a)/................. 2002 $10.93 $11.37 0.00 2003 11.37 11.71 4,216.29 2004 11.71 12.13 18,810.86 2005 12.13 12.25 41,307.11 2006 12.25 12.64 67,095.50 2007 12.64 13.41 80,517.67 2008 13.41 13.30 101,481.29 2009 13.30 15.49 128,561.48 2010 15.49 16.54 145,520.29 2011 16.54 16.84 146,435.37 RCM Technology Investment Division/(a)/..................... 2002 3.68 2.96 0.00 2003 2.96 4.61 1,331.34 2004 4.61 4.35 6,686.22 2005 4.35 4.77 9,440.12 2006 4.77 4.96 13,847.75 2007 4.96 6.44 15,799.74 2008 6.44 3.53 20,087.22 2009 3.53 5.54 25,129.08 2010 5.54 6.99 30,849.37 2011 6.99 6.21 34,248.55 Russell 2000(R) Index Investment Division/(a)/.............. 2002 10.04 9.31 3.17 2003 9.31 13.39 5,292.97 2004 13.39 15.51 12,562.79 2005 15.51 15.97 19,201.60 2006 15.97 18.54 24,030.54 2007 18.54 17.99 30,128.97 2008 17.99 11.77 31,114.92 2009 11.77 14.61 31,264.57 2010 14.61 18.25 33,126.76 2011 18.25 17.24 34,241.67 SSgA Growth ETF Investment Division/(f)/.................... 2006 10.71 11.43 0.00 2007 11.43 11.91 1,481.95 2008 11.91 7.88 1,590.76 2009 7.88 10.04 8,371.48 2010 10.04 11.32 16,964.90 2011 11.32 10.93 13,528.17 SSgA Growth and Income ETF Investment Division/(f)/......... 2006 10.51 11.17 0.00 2007 11.17 11.62 807.57 2008 11.62 8.59 796.14 2009 8.59 10.60 2,282.99 2010 10.60 11.74 15,438.69 2011 11.74 11.71 26,637.46
46
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ T. Rowe Price Large Cap Growth Investment Division/(a)/..... 2002 $ 8.93 $ 8.71 3.33 2003 8.71 11.24 2,228.75 2004 11.24 12.17 7,950.56 2005 12.17 12.77 12,533.58 2006 12.77 14.23 18,411.25 2007 14.23 15.34 22,993.55 2008 15.34 8.78 20,653.91 2009 8.78 12.39 22,747.12 2010 12.39 14.28 25,221.50 2011 14.28 13.91 33,104.75 T. Rowe Price Mid Cap Growth Investment Division/(a)/....... 2002 4.84 4.55 0.00 2003 4.55 6.14 2,759.96 2004 6.14 7.14 8,853.66 2005 7.14 8.08 18,443.49 2006 8.08 8.47 27,143.41 2007 8.47 9.83 39,282.99 2008 9.83 5.84 47,398.12 2009 5.84 8.39 64,008.01 2010 8.39 10.58 73,858.53 2011 10.58 10.27 83,813.75 T. Rowe Price Small Cap Growth Investment Division/(a)/..... 2002 8.91 8.72 0.00 2003 8.72 12.14 283.40 2004 12.14 13.30 7,007.65 2005 13.30 14.53 8,186.87 2006 14.53 14.87 10,355.33 2007 14.87 16.07 10,756.81 2008 16.07 10.10 10,279.57 2009 10.10 13.83 10,384.15 2010 13.83 18.38 13,040.96 2011 18.38 18.41 15,825.45 Third Avenue Small Cap Value Investment Division/(a)/....... 2002 9.02 8.23 0.00 2003 8.23 11.49 29.50 2004 11.49 14.35 474.81 2005 14.35 16.36 5,666.90 2006 16.36 18.27 9,126.40 2007 18.27 17.49 10,474.99 2008 17.49 12.11 10,563.96 2009 12.11 15.12 13,039.77 2010 15.12 17.90 15,608.22 2011 17.90 16.08 17,325.51
47
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Western Asset Management Strategic Bond Opportunities Investment Division/(a)/............................ 2002 $16.18 $17.13 0.00 2003 17.13 19.04 389.90 2004 19.04 19.98 6,424.70 2005 19.98 20.22 12,349.61 2006 20.22 20.93 14,381.41 2007 20.93 21.42 17,530.31 2008 21.42 17.92 15,034.01 2009 17.92 23.34 14,292.74 2010 23.34 25.91 16,052.15 2011 25.91 27.06 15,524.85 Western Asset Management U.S. Government Investment Division/(a)/....................................... 2002 15.21 15.68 0.00 2003 15.68 15.73 926.93 2004 15.73 15.95 5,024.99 2005 15.95 15.96 11,883.68 2006 15.96 16.37 16,352.16 2007 16.37 16.81 19,693.73 2008 16.81 16.50 14,702.25 2009 16.50 16.96 16,976.71 2010 16.96 17.66 19,610.92 2011 17.66 18.35 18,333.30
48 METLIFE FINANCIAL FREEDOM SELECT 1.25 SEPARATE ACCOUNT CHARGE
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ American Funds(R) Balanced Allocation Investment Division (Class C)/(i)/.............................. 2008 $ 10.00 $ 7.02 23,695.39 2009 7.02 8.96 49,092.20 2010 8.96 9.93 78,862.40 2011 9.93 9.60 117,316.24 American Funds Bond Investment Division (Class 2)/(f)(j)/.................................... 2006 14.69 15.41 11,192.15 2007 15.41 15.68 30,652.67 2008 15.68 14.00 31,408.07 2009 14.00 15.53 45,274.00 2010 15.53 16.29 54,084.24 2011 16.29 17.03 57,143.99 American Funds Global Small Capitalization Investment Division (Class 2)/(a)(j)/........................... 2002 12.10 10.76 557.68 2003 10.76 16.28 9,980.89 2004 16.28 19.38 32,169.56 2005 19.38 23.94 53,815.74 2006 23.94 29.25 90,191.95 2007 29.25 34.99 131,719.59 2008 34.99 16.02 169,468.34 2009 16.02 25.45 193,439.03 2010 25.45 30.70 208,123.10 2011 30.70 24.45 227,702.89 American Funds(R) Growth Allocation Investment Division (Class C)/(i)/.............................. 2008 9.99 6.36 64,878.63 2009 6.36 8.43 152,387.42 2010 8.43 9.44 178,649.80 2011 9.44 8.89 223,516.07 American Funds Growth Investment Division (Class 2)/(a)(j)/.................................... 2002 86.92 83.94 176.60 2003 83.94 113.13 2,601.77 2004 113.13 125.36 11,142.92 2005 125.36 143.50 20,806.09 2006 143.50 155.81 34,951.88 2007 155.81 172.44 44,644.32 2008 172.44 95.17 54,705.21 2009 95.17 130.70 62,292.46 2010 130.70 152.81 68,284.27 2011 152.81 144.10 71,930.06
49
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ American Funds Growth-Income Investment Division (Class 2)/(a)(j)/....................................... 2002 $ 71.90 $ 67.48 199.45 2003 67.48 88.04 3,257.00 2004 88.04 95.72 12,708.35 2005 95.72 99.80 24,898.68 2006 99.80 113.26 33,231.64 2007 113.26 117.19 41,703.72 2008 117.19 71.75 44,450.69 2009 71.75 92.76 50,541.67 2010 92.76 101.82 56,504.40 2011 101.82 98.48 57,501.61 American Funds(R) Moderate Allocation Investment Division (Class C)/(i)/.......................................... 2008 10.01 7.69 30,826.13 2009 7.69 9.38 109,227.75 2010 9.38 10.18 193,343.64 2011 10.18 10.07 248,217.61 Barclays Capital Aggregate Bond Index Investment Division/(a)/........................................... 2002 11.78 12.31 17.54 2003 12.31 12.57 38,474.72 2004 12.57 12.89 102,915.96 2005 12.89 12.96 205,314.72 2006 12.96 13.29 264,244.45 2007 13.29 14.00 327,729.86 2008 14.00 14.61 282,103.21 2009 14.61 15.14 340,842.79 2010 15.14 15.81 419,975.23 2011 15.81 16.75 509,557.97 BlackRock Bond Income Investment Division/(a)/............ 2002 41.57 43.17 0.64 2003 43.17 45.02 540.42 2004 45.02 46.31 5,630.30 2005 46.31 46.72 11,847.49 2006 46.72 48.05 19,508.65 2007 48.05 50.31 25,543.28 2008 50.31 47.86 26,578.65 2009 47.86 51.61 27,192.78 2010 51.61 55.08 30,229.93 2011 55.08 57.83 31,805.13 BlackRock Large Cap Core Investment Division*/(g)/........ 2007 80.94 81.72 5,796.29 2008 81.72 50.59 6,442.67 2009 50.59 59.55 7,097.46 2010 59.55 66.14 7,342.46 2011 66.14 65.49 11,962.62 BlackRock Large Cap Investment Division/(a)(g)/........... 2002 51.02 48.39 0.00 2003 48.39 62.09 883.88 2004 62.09 67.81 2,900.48 2005 67.81 69.19 5,431.09 2006 69.19 77.79 5,036.59 2007 77.79 81.62 0.00
50
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ BlackRock Large Cap Value Investment Division/(a)/.... 2002 $ 8.60 $ 7.91 1.23 2003 7.91 10.59 1,196.72 2004 10.59 11.84 7,231.85 2005 11.84 12.34 19,718.01 2006 12.34 14.52 48,280.56 2007 14.52 14.79 75,807.81 2008 14.79 9.47 90,392.29 2009 9.47 10.39 114,110.62 2010 10.39 11.18 137,754.16 2011 11.18 11.27 167,125.27 BlackRock Legacy Large Cap Growth Investment Division/(a)/....................................... 2002 20.61 18.02 0.00 2003 18.02 24.07 673.68 2004 24.07 25.80 2,340.14 2005 25.80 27.20 4,215.16 2006 27.20 27.91 7,416.89 2007 27.91 32.64 12,876.15 2008 32.64 20.41 19,315.95 2009 20.41 27.51 31,480.55 2010 27.51 32.46 38,677.78 2011 32.46 29.12 51,623.82 BlackRock Legacy Large Cap Growth Investment Division (formerly FI Large Cap Investment Division)/(k)/.... 2006 17.34 17.56 32.68 2007 17.56 17.98 2,030.63 2008 17.98 9.77 2,913.84 2009 9.77 10.19 0.00 BlackRock Money Market Investment Division/(b)/....... 2003 22.83 22.72 0.00 2004 22.72 22.60 0.00 2005 22.60 22.91 0.00 2006 22.91 23.65 0.00 2007 23.65 24.48 0.00 2008 24.48 24.81 0.00 2009 24.81 24.56 0.00 2010 24.56 24.26 0.00 2011 24.26 23.96 0.00 Calvert VP SRI Balanced Investment Division/(a)/...... 2002 17.55 17.22 0.00 2003 17.22 20.29 777.36 2004 20.29 21.70 3,141.99 2005 21.70 22.64 5,951.19 2006 22.64 24.32 13,156.87 2007 24.32 24.68 13,300.84 2008 24.68 16.74 16,907.54 2009 16.74 20.71 21,820.35 2010 20.71 22.93 20,662.01 2011 22.93 23.68 22,606.59
51
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Clarion Global Real Estate Investment Division/(d)/......... 2004 $ 9.99 $12.84 11,581.70 2005 12.84 14.37 42,000.82 2006 14.37 19.52 90,382.44 2007 19.52 16.39 109,841.59 2008 16.39 9.44 124,724.55 2009 9.44 12.56 131,566.52 2010 12.56 14.40 141,615.72 2011 14.40 13.43 158,305.52 Davis Venture Value Investment Division/(a)/................ 2002 22.46 21.87 0.00 2003 21.87 28.24 1,875.67 2004 28.24 31.22 11,457.85 2005 31.22 33.91 29,844.72 2006 33.91 38.29 61,001.71 2007 38.29 39.45 91,088.61 2008 39.45 23.56 112,177.12 2009 23.56 30.64 123,267.53 2010 30.64 33.80 133,911.58 2011 33.80 31.96 141,554.36 FI Value Leaders Investment Division/(a)/................... 2002 19.78 18.80 0.00 2003 18.80 23.56 2,175.01 2004 23.56 26.41 5,714.67 2005 26.41 28.81 12,826.61 2006 28.81 31.77 20,349.77 2007 31.77 32.61 25,293.61 2008 32.61 19.61 27,720.40 2009 19.61 23.52 28,790.91 2010 23.52 26.55 30,772.40 2011 26.55 24.55 30,525.18 Harris Oakmark International Investment Division/(a)/....... 2002 9.90 8.84 0.00 2003 8.84 11.79 1,704.64 2004 11.79 14.03 14,362.17 2005 14.03 15.83 37,553.48 2006 15.83 20.15 87,080.07 2007 20.15 19.67 144,563.14 2008 19.67 11.48 146,263.02 2009 11.48 17.59 162,253.72 2010 17.59 20.22 212,409.13 2011 20.22 17.12 268,956.12 Invesco Small Cap Growth Investment Division/(a)/........... 2002 8.92 8.48 0.00 2003 8.48 11.64 378.03 2004 11.64 12.23 1,643.36 2005 12.23 13.08 3,940.90 2006 13.08 14.75 6,935.68 2007 14.75 16.18 13,300.90 2008 16.18 9.79 16,971.45 2009 9.79 12.94 19,064.74 2010 12.94 16.12 20,418.00 2011 16.12 15.75 26,008.07
52
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Janus Forty Investment Division/(h)/........................ 2007 $151.43 $185.95 798.67 2008 185.95 106.51 6,667.54 2009 106.51 150.27 12,415.18 2010 150.27 162.35 18,256.71 2011 162.35 148.24 20,900.08 Lazard Mid Cap Investment Division/(a)/..................... 2002 10.00 9.68 55.05 2003 9.68 12.06 3,497.54 2004 12.06 13.63 5,787.16 2005 13.63 14.54 9,521.77 2006 14.54 16.47 12,501.98 2007 16.47 15.83 22,878.08 2008 15.83 9.64 24,616.10 2009 9.64 13.02 27,600.18 2010 13.02 15.80 38,020.00 2011 15.80 14.78 54,210.37 Loomis Sayles Small Cap Core Investment Division/(a)/....... 2002 19.08 17.42 0.00 2003 17.42 23.49 430.45 2004 23.49 26.96 1,863.82 2005 26.96 28.40 4,900.94 2006 28.40 32.65 15,693.52 2007 32.65 35.99 22,855.24 2008 35.99 22.73 21,501.83 2009 22.73 29.16 21,946.62 2010 29.16 36.64 25,083.33 2011 36.64 36.31 25,726.93 Loomis Sayles Small Cap Growth Investment Division/(a)/..... 2002 6.74 6.25 1.07 2003 6.25 8.93 2,561.45 2004 8.93 9.80 4,385.38 2005 9.80 10.11 7,510.69 2006 10.11 10.95 12,060.14 2007 10.95 11.28 17,747.54 2008 11.28 6.54 22,091.02 2009 6.54 8.37 25,613.36 2010 8.37 10.86 27,843.91 2011 10.86 11.02 42,168.18 Lord Abbett Bond Debenture Investment Division/(a)/......... 2002 13.38 13.69 0.00 2003 13.69 16.12 1,981.64 2004 16.12 17.21 8,587.43 2005 17.21 17.26 23,450.00 2006 17.26 18.60 45,738.67 2007 18.60 19.57 70,857.63 2008 19.57 15.73 77,907.52 2009 15.73 21.25 86,973.56 2010 21.25 23.71 95,482.34 2011 23.71 24.46 105,647.47
53
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Met/Artisan Mid Cap Value Investment Division/(a)/..... 2002 $22.83 $23.50 1.02 2003 23.50 30.71 7,695.71 2004 30.71 33.26 25,237.45 2005 33.26 36.04 44,612.30 2006 36.04 39.92 52,659.81 2007 39.92 36.63 54,931.52 2008 36.63 19.49 56,108.74 2009 19.49 27.17 55,578.19 2010 27.17 30.80 56,398.35 2011 30.80 32.39 55,261.66 Met/Franklin Income Investment Division/(i)/........... 2008 9.99 7.99 1,937.75 2009 7.99 10.09 6,608.10 2010 10.09 11.14 20,273.98 2011 11.14 11.24 22,635.60 Met/Franklin Low Duration Total Return Investment Division/(n)/........................................ 2011 9.98 9.77 1,490.51 Met/Franklin Mutual Shares Investment Division/(i)/.... 2008 9.99 6.60 2,698.36 2009 6.60 8.14 2,097.54 2010 8.14 8.93 15,536.24 2011 8.93 8.77 25,478.90 Met/Franklin Templeton Founding Strategy Investment Division/(i)/............................. 2008 9.99 7.04 7,679.09 2009 7.04 8.93 22,044.65 2010 8.93 9.71 26,813.26 2011 9.71 9.42 29,223.56 Met/Templeton Growth Investment Division/(i)/.......... 2008 9.99 6.57 1,132.59 2009 6.57 8.61 6,678.34 2010 8.61 9.15 10,026.19 2011 9.15 8.42 15,774.85 MetLife Aggressive Strategy Investment Division........ 2011 12.27 10.51 314,537.87 MetLife Aggressive Strategy Investment Division (formerly MetLife Aggressive Allocation Investment Division)/(e)(m)/......................... 2005 9.99 11.16 6,449.53 2006 11.16 12.74 24,157.56 2007 12.74 13.00 41,782.13 2008 13.00 7.64 96,445.46 2009 7.64 9.92 157,384.66 2010 9.92 11.34 222,059.50 2011 11.34 12.30 0.00 MetLife Conservative Allocation Investment Division/(e)/........................................ 2005 9.99 10.31 32.51 2006 10.31 10.88 1,699.76 2007 10.88 11.34 8,866.09 2008 11.34 9.59 19,317.68 2009 9.59 11.41 51,902.19 2010 11.41 12.41 110,774.26 2011 12.41 12.65 141,725.72
54
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ MetLife Conservative to Moderate Allocation Investment Division/(e)/........................................ 2005 $ 9.99 $10.52 14,398.27 2006 10.52 11.37 32,374.88 2007 11.37 11.77 59,185.56 2008 11.77 9.11 117,516.07 2009 9.11 11.13 167,702.08 2010 11.13 12.26 228,058.96 2011 12.26 12.24 353,105.41 MetLife Mid Cap Stock Index Investment Division/(a)/... 2002 8.98 8.65 187.20 2003 8.65 11.49 13,757.52 2004 11.49 13.13 32,870.98 2005 13.13 14.53 59,192.70 2006 14.53 15.76 82,502.56 2007 15.76 16.74 109,888.53 2008 16.74 10.51 131,074.88 2009 10.51 14.20 155,813.34 2010 14.20 17.67 160,695.96 2011 17.67 17.07 186,937.16 MetLife Moderate Allocation Investment Division/(e)/... 2005 9.99 10.75 13,532.17 2006 10.75 11.88 150,936.81 2007 11.88 12.24 352,859.06 2008 12.24 8.63 558,674.10 2009 8.63 10.78 778,042.83 2010 10.78 12.05 1,142,102.75 2011 12.05 11.74 1,341,920.08 MetLife Moderate to Aggressive Allocation Investment Division/(e)/........................................ 2005 9.99 10.98 48,337.02 2006 10.98 12.39 217,821.36 2007 12.39 12.70 572,854.06 2008 12.70 8.14 767,247.67 2009 8.14 10.38 1,029,192.43 2010 10.38 11.75 1,260,551.02 2011 11.75 11.17 1,601,815.46 MetLife Stock Index Investment Division/(a)/........... 2002 28.60 27.31 444.58 2003 27.31 34.49 11,042.87 2004 34.49 37.56 54,080.78 2005 37.56 38.72 114,095.58 2006 38.72 44.05 148,632.31 2007 44.05 45.66 198,235.70 2008 45.66 28.29 254,666.91 2009 28.29 35.18 285,745.44 2010 35.18 39.78 325,473.64 2011 39.78 39.93 384,006.70
55
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ MFS(R) Research International Investment Division/(a)/...... 2002 $ 7.81 $ 7.31 3.60 2003 7.31 9.53 2,237.70 2004 9.53 11.25 9,928.64 2005 11.25 12.94 15,108.88 2006 12.94 16.17 39,835.88 2007 16.17 18.09 63,548.82 2008 18.09 10.30 89,069.56 2009 10.30 13.38 104,781.49 2010 13.38 14.72 115,903.10 2011 14.72 12.98 135,173.85 MFS(R) Total Return Investment Division/(a)/................ 2002 32.71 32.48 0.00 2003 32.48 37.45 813.24 2004 37.45 41.05 3,319.32 2005 41.05 41.69 7,916.83 2006 41.69 46.09 18,599.64 2007 46.09 47.39 24,407.57 2008 47.39 36.34 24,687.40 2009 36.34 42.46 27,389.02 2010 42.46 46.04 29,118.27 2011 46.04 46.45 29,665.43 MFS(R) Value Investment Division/(a)/....................... 2002 10.06 9.73 323.04 2003 9.73 12.03 20,898.58 2004 12.03 13.21 47,327.08 2005 13.21 12.83 81,629.90 2006 12.83 14.93 97,471.07 2007 14.93 14.15 118,286.34 2008 14.15 9.26 118,061.83 2009 9.26 11.03 117,130.80 2010 11.03 12.12 126,976.80 2011 12.12 12.04 135,143.46 Morgan Stanley EAFE(R) Index Investment Division/(a)/....... 2002 7.91 7.03 405.39 2003 7.03 9.53 21,562.40 2004 9.53 11.22 53,078.66 2005 11.22 12.51 111,871.57 2006 12.51 15.51 146,569.71 2007 15.51 16.92 191,996.23 2008 16.92 9.66 241,376.94 2009 9.66 12.24 262,138.82 2010 12.24 13.04 314,845.03 2011 13.04 11.25 394,293.89 Morgan Stanley Mid Cap Growth Investment Division/(l)/...... 2010 13.13 15.26 52,979.85 2011 15.26 14.03 66,626.50
56
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Morgan Stanley Mid Cap Growth Investment Division (formerly FI Mid Cap Opportunities Investment Division)/(a)(c)/..... 2002 $11.31 $10.91 0.00 2003 10.91 14.46 0.00 2004 14.46 16.69 8,701.89 2005 16.69 17.58 12,151.14 2006 17.58 19.37 21,275.09 2007 19.37 20.68 33,848.67 2008 20.68 9.10 39,576.57 2009 9.10 12.00 49,610.94 2010 12.00 12.99 0.00 Neuberger Berman Genesis Investment Division/(a)/........... 2002 12.78 10.86 664.90 2003 10.86 16.05 11,564.49 2004 16.05 18.24 35,746.57 2005 18.24 18.72 63,891.80 2006 18.72 21.53 73,092.95 2007 21.53 20.48 84,582.71 2008 20.48 12.42 85,010.32 2009 12.42 13.84 86,336.40 2010 13.84 16.59 85,109.39 2011 16.59 17.29 82,307.37 Neuberger Berman Mid Cap Value Investment Division/(a)/..... 2002 14.04 13.41 0.00 2003 13.41 18.03 1,999.23 2004 18.03 21.85 13,686.43 2005 21.85 24.15 38,654.06 2006 24.15 26.52 66,258.56 2007 26.52 27.03 90,297.05 2008 27.03 14.02 104,607.81 2009 14.02 20.45 106,521.89 2010 20.45 25.46 114,813.76 2011 25.46 23.47 121,882.83 Oppenheimer Capital Appreciation Investment Division/(a)/... 2002 6.55 6.30 490.13 2003 6.30 7.99 1,297.22 2004 7.99 8.40 7,973.79 2005 8.40 8.69 15,056.60 2006 8.69 9.23 23,525.13 2007 9.23 10.42 38,557.25 2008 10.42 5.56 49,894.69 2009 5.56 7.90 60,167.90 2010 7.90 8.53 69,860.03 2011 8.53 8.31 75,956.63 PIMCO Inflation Protected Bond Investment Division/(f)/..... 2006 11.04 11.16 1,016.65 2007 11.16 12.21 6,604.14 2008 12.21 11.23 60,635.35 2009 11.23 13.09 115,423.41 2010 13.09 13.93 147,938.86 2011 13.93 15.29 194,432.56
57
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ PIMCO Total Return Investment Division/(a)/................. 2002 $10.93 $11.38 1.97 2003 11.38 11.73 14,215.84 2004 11.73 12.16 41,826.85 2005 12.16 12.28 89,228.83 2006 12.28 12.67 121,051.40 2007 12.67 13.46 125,705.69 2008 13.46 13.35 133,471.50 2009 13.35 15.56 219,866.07 2010 15.56 16.62 275,112.04 2011 16.62 16.94 306,222.44 RCM Technology Investment Division/(a)/..................... 2002 3.68 2.96 2.35 2003 2.96 4.62 6,716.30 2004 4.62 4.36 24,603.44 2005 4.36 4.78 25,580.43 2006 4.78 4.98 31,715.23 2007 4.98 6.46 47,810.31 2008 6.46 3.54 60,189.60 2009 3.54 5.57 105,200.37 2010 5.57 7.02 152,250.59 2011 7.02 6.25 211,853.44 Russell 2000(R) Index Investment Division/(a)/.............. 2002 10.06 9.32 128.23 2003 9.32 13.42 8,854.14 2004 13.42 15.56 20,312.33 2005 15.56 16.03 37,877.46 2006 16.03 18.61 52,823.37 2007 18.61 18.07 72,826.83 2008 18.07 11.83 77,159.70 2009 11.83 14.69 91,120.41 2010 14.69 18.36 106,148.60 2011 18.36 17.36 134,309.61 SSgA Growth ETF Investment Division/(f)/.................... 2006 10.71 11.43 810.50 2007 11.43 11.92 1,471.08 2008 11.92 7.89 1,131.69 2009 7.89 10.06 59,989.07 2010 10.06 11.35 114,290.31 2011 11.35 10.97 152,834.41 SSgA Growth and Income ETF Investment Division/(f)/......... 2006 10.52 11.18 529.08 2007 11.18 11.63 719.70 2008 11.63 8.61 4,681.36 2009 8.61 10.62 51,246.70 2010 10.62 11.77 94,190.06 2011 11.77 11.75 106,413.03
58
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ T. Rowe Price Large Cap Growth Investment Division/(a)/..... 2002 $ 8.94 $ 8.72 0.00 2003 8.72 11.27 3,241.49 2004 11.27 12.21 12,433.77 2005 12.21 12.82 23,203.64 2006 12.82 14.29 37,622.29 2007 14.29 15.41 57,672.55 2008 15.41 8.82 56,700.87 2009 8.82 12.46 67,437.85 2010 12.46 14.37 77,446.97 2011 14.37 14.00 88,592.94 T. Rowe Price Mid Cap Growth Investment Division/(a)/....... 2002 4.84 4.55 0.00 2003 4.55 6.15 2,513.05 2004 6.15 7.15 12,867.84 2005 7.15 8.10 36,733.24 2006 8.10 8.49 82,534.12 2007 8.49 9.86 134,469.83 2008 9.86 5.87 197,698.55 2009 5.87 8.43 241,004.76 2010 8.43 10.63 283,766.63 2011 10.63 10.33 323,728.31 T. Rowe Price Small Cap Growth Investment Division/(a)/..... 2002 8.93 8.75 90.72 2003 8.75 12.18 1,207.58 2004 12.18 13.35 7,339.04 2005 13.35 14.60 11,013.68 2006 14.60 14.94 25,240.67 2007 14.94 16.16 31,188.14 2008 16.16 10.16 32,954.85 2009 10.16 13.92 43,461.76 2010 13.92 18.51 50,162.81 2011 18.51 18.54 85,636.62 Third Avenue Small Cap Value Investment Division/(a)/....... 2002 9.02 8.24 0.00 2003 8.24 11.50 1,575.16 2004 11.50 14.37 3,402.20 2005 14.37 16.39 14,846.86 2006 16.39 18.32 31,294.34 2007 18.32 17.54 41,758.16 2008 17.54 12.16 54,823.93 2009 12.16 15.18 59,819.44 2010 15.18 17.98 66,164.72 2011 17.98 16.16 64,203.63
59
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Western Asset Management Strategic Bond Opportunities Investment Division/(a)/............................ 2002 $16.24 $17.20 0.00 2003 17.20 19.13 6,448.48 2004 19.13 20.08 18,309.18 2005 20.08 20.34 26,774.36 2006 20.34 21.06 44,725.89 2007 21.06 21.56 56,045.55 2008 21.56 18.05 61,890.14 2009 18.05 23.51 55,652.31 2010 23.51 26.12 70,037.20 2011 26.12 27.30 72,772.04 Western Asset Management U.S. Government Investment Division/(a)/....................................... 2002 15.27 15.74 0.00 2003 15.74 15.80 1,102.58 2004 15.80 16.03 9,814.61 2005 16.03 16.05 26,071.81 2006 16.05 16.47 33,535.79 2007 16.47 16.92 39,618.60 2008 16.92 16.62 55,836.52 2009 16.62 17.08 56,864.74 2010 17.08 17.80 60,617.33 2011 17.80 18.50 74,527.87
60 METLIFE FINANCIAL FREEDOM SELECT .95 SEPARATE ACCOUNT CHARGE
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ American Funds(R) Balanced Allocation Investment Division (Class C)/(i)/.............................. 2008 $ 10.00 $ 7.03 0.00 2009 7.03 9.01 0.00 2010 9.01 10.01 0.00 2011 10.01 9.70 0.00 American Funds Bond Investment Division (Class 2)/(f)(j)/.................................... 2006 15.09 15.86 0.00 2007 15.86 16.19 0.00 2008 16.19 14.50 0.00 2009 14.50 16.14 0.00 2010 16.14 16.97 0.00 2011 16.97 17.79 0.00 American Funds Global Small Capitalization Investment Division (Class 2)/(a)(j)/........................... 2002 12.26 10.91 0.00 2003 10.91 16.56 0.00 2004 16.56 19.77 0.00 2005 19.77 24.49 0.00 2006 24.49 30.03 0.00 2007 30.03 36.02 0.00 2008 36.02 16.54 0.00 2009 16.54 26.36 8.41 2010 26.36 31.89 42.63 2011 31.89 25.48 75.62 American Funds(R) Growth Allocation Investment Division (Class C)/(i)/.............................. 2008 9.99 6.38 0.00 2009 6.38 8.47 0.00 2010 8.47 9.52 0.00 2011 9.52 8.98 0.00 American Funds Growth Investment Division (Class 2)/(a)(j)/.................................... 2002 91.86 88.84 0.00 2003 88.84 120.09 0.00 2004 120.09 133.48 93.00 2005 133.48 153.25 117.55 2006 153.25 166.90 134.38 2007 166.90 185.26 155.01 2008 185.26 102.55 0.00 2009 102.55 141.27 3.60 2010 141.27 165.66 20.67 2011 165.66 156.69 34.55
61
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ American Funds Growth-Income Investment Division (Class 2)/(a)(j)/....................................... 2002 $ 75.98 $ 71.42 83.36 2003 71.42 93.45 108.72 2004 93.45 101.91 0.00 2005 101.91 106.58 0.00 2006 106.58 121.32 0.00 2007 121.32 125.91 0.00 2008 125.91 77.31 0.00 2009 77.31 100.26 0.00 2010 100.26 110.38 0.00 2011 110.38 107.07 0.00 American Funds(R) Moderate Allocation Investment Division (Class C)/(i)/.......................................... 2008 10.01 7.71 0.00 2009 7.71 9.42 0.00 2010 9.42 10.26 0.00 2011 10.26 10.18 0.00 Barclays Capital Aggregate Bond Index Investment Division/(a)/........................................... 2002 11.91 12.46 0.00 2003 12.46 12.76 0.00 2004 12.76 13.13 0.00 2005 13.13 13.25 0.00 2006 13.25 13.62 0.00 2007 13.62 14.39 0.00 2008 14.39 15.06 0.00 2009 15.06 15.66 0.00 2010 15.66 16.39 0.00 2011 16.39 17.42 0.00 BlackRock Bond Income Investment Division/(a)/............ 2002 44.00 45.76 0.00 2003 45.76 47.85 0.00 2004 47.85 49.38 0.00 2005 49.38 49.97 0.00 2006 49.97 51.54 0.00 2007 51.54 54.13 0.00 2008 54.13 51.65 0.00 2009 51.65 55.86 0.00 2010 55.86 59.80 0.00 2011 59.80 62.97 0.00 BlackRock Large Cap Core Investment Division*/(g)/........ 2007 86.95 87.96 0.00 2008 87.96 54.62 0.00 2009 54.62 64.49 0.00 2010 64.49 71.84 0.00 2011 71.84 71.34 0.00 BlackRock Large Cap Investment Division/(a)(g)/........... 2002 54.02 51.32 0.00 2003 51.32 66.03 0.00 2004 66.03 72.34 0.00 2005 72.34 74.03 0.00 2006 74.03 83.48 0.00 2007 83.48 87.68 0.00
62
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ BlackRock Large Cap Value Investment Division/(a)/.... 2002 $ 8.61 $ 7.93 0.00 2003 7.93 10.64 0.00 2004 10.64 11.93 1,049.86 2005 11.93 12.48 1,334.96 2006 12.48 14.72 1,533.91 2007 14.72 15.04 1,776.64 2008 15.04 9.67 0.00 2009 9.67 10.63 0.00 2010 10.63 11.47 4.08 2011 11.47 11.60 0.00 BlackRock Legacy Large Cap Growth Investment Division/(a)/....................................... 2002 21.09 18.47 0.00 2003 18.47 24.74 0.00 2004 24.74 26.60 0.00 2005 26.60 28.13 0.00 2006 28.13 28.95 0.00 2007 28.95 33.96 0.00 2008 33.96 21.29 0.00 2009 21.29 28.79 0.00 2010 28.79 34.07 0.00 2011 34.07 30.66 0.00 BlackRock Legacy Large Cap Growth Investment Division (formerly FI Large Cap Investment Division)/(k)/.... 2006 17.85 18.11 0.00 2007 18.11 18.60 0.00 2008 18.60 10.14 0.00 2009 10.14 10.58 0.00 BlackRock Money Market Investment Division/(b)/....... 2003 24.22 24.15 0.00 2004 24.15 24.10 0.00 2005 24.10 24.50 0.00 2006 24.50 25.37 0.00 2007 25.37 26.34 0.00 2008 26.34 26.77 0.00 2009 26.77 26.58 0.00 2010 26.58 26.33 0.00 2011 26.33 26.08 0.00 Calvert VP SRI Balanced Investment Division/(a)/...... 2002 18.07 17.75 0.00 2003 17.75 20.98 0.00 2004 20.98 22.50 0.00 2005 22.50 23.55 0.00 2006 23.55 25.37 0.00 2007 25.37 25.83 0.00 2008 25.83 17.57 0.00 2009 17.57 21.80 0.00 2010 21.80 24.21 0.00 2011 24.21 25.08 0.00
63
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Clarion Global Real Estate Investment Division/(d)/......... 2004 $ 9.99 $12.87 0.00 2005 12.87 14.44 0.00 2006 14.44 19.68 0.00 2007 19.68 16.57 0.00 2008 16.57 9.57 0.00 2009 9.57 12.77 0.00 2010 12.77 14.69 0.00 2011 14.69 13.74 0.00 Davis Venture Value Investment Division/(a)/................ 2002 22.98 22.41 0.00 2003 22.41 29.02 0.00 2004 29.02 32.19 0.00 2005 32.19 35.07 0.00 2006 35.07 39.71 0.00 2007 39.71 41.04 0.00 2008 41.04 24.59 1.08 2009 24.59 32.06 19.11 2010 32.06 35.48 81.75 2011 35.48 33.65 141.58 FI Value Leaders Investment Division/(a)/................... 2002 20.33 19.36 238.42 2003 19.36 24.32 340.41 2004 24.32 27.35 0.00 2005 27.35 29.92 0.00 2006 29.92 33.10 0.00 2007 33.10 34.07 0.00 2008 34.07 20.55 0.00 2009 20.55 24.73 0.00 2010 24.73 28.00 0.00 2011 28.00 25.96 0.00 Harris Oakmark International Investment Division/(a)/....... 2002 9.92 8.88 0.00 2003 8.88 11.87 0.00 2004 11.87 14.17 0.00 2005 14.17 16.03 0.00 2006 16.03 20.47 0.00 2007 20.47 20.05 0.00 2008 20.05 11.74 0.00 2009 11.74 18.03 0.00 2010 18.03 20.79 0.00 2011 20.79 17.66 0.00 Invesco Small Cap Growth Investment Division/(a)/........... 2002 8.94 8.51 0.00 2003 8.51 11.71 0.00 2004 11.71 12.35 0.00 2005 12.35 13.25 0.00 2006 13.25 14.98 0.00 2007 14.98 16.48 0.00 2008 16.48 10.00 0.00 2009 10.00 13.26 0.00 2010 13.26 16.57 0.00 2011 16.57 16.24 0.00
64
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Janus Forty Investment Division/(h)/........................ 2007 $163.29 $200.92 0.00 2008 200.92 115.43 0.23 2009 115.43 163.34 1.03 2010 163.34 177.00 1.85 2011 177.00 162.10 2.72 Lazard Mid Cap Investment Division/(a)/..................... 2002 10.02 9.71 548.23 2003 9.71 12.14 653.11 2004 12.14 13.76 0.00 2005 13.76 14.73 0.00 2006 14.73 16.73 0.00 2007 16.73 16.12 0.00 2008 16.12 9.85 0.00 2009 9.85 13.35 0.00 2010 13.35 16.25 0.00 2011 16.25 15.24 0.00 Loomis Sayles Small Cap Core Investment Division/(a)/....... 2002 19.56 17.88 0.00 2003 17.88 24.18 0.00 2004 24.18 27.84 0.00 2005 27.84 29.42 0.00 2006 29.42 33.92 0.00 2007 33.92 37.50 0.00 2008 37.50 23.75 0.00 2009 23.75 30.57 4.15 2010 30.57 38.52 22.40 2011 38.52 38.28 36.84 Loomis Sayles Small Cap Growth Investment Division/(a)/..... 2002 6.77 6.28 0.00 2003 6.28 9.00 0.00 2004 9.00 9.91 0.00 2005 9.91 10.25 0.00 2006 10.25 11.14 0.00 2007 11.14 11.51 0.00 2008 11.51 6.69 0.00 2009 6.69 8.60 0.00 2010 8.60 11.18 0.00 2011 11.18 11.38 0.00 Lord Abbett Bond Debenture Investment Division/(a)/......... 2002 13.63 13.97 0.00 2003 13.97 16.49 0.00 2004 16.49 17.67 0.00 2005 17.67 17.76 0.00 2006 17.76 19.21 0.00 2007 19.21 20.27 0.00 2008 20.27 16.34 0.00 2009 16.34 22.14 14.99 2010 22.14 24.78 75.83 2011 24.78 25.64 132.45
65
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Met/Artisan Mid Cap Value Investment Division/(a)/........ 2002 $23.46 $24.19 0.00 2003 24.19 31.71 0.00 2004 31.71 34.45 0.00 2005 34.45 37.43 0.00 2006 37.43 41.59 0.00 2007 41.59 38.28 0.00 2008 38.28 20.42 0.00 2009 20.42 28.57 0.00 2010 28.57 32.48 0.00 2011 32.48 34.26 0.00 Met/Franklin Income Investment Division/(i)/.............. 2008 9.99 8.01 0.00 2009 8.01 10.14 0.00 2010 10.14 11.23 0.00 2011 11.23 11.36 0.00 Met/Franklin Low Duration Total Return Investment Division/(n)/........................................... 2011 9.98 9.79 0.00 Met/Franklin Mutual Shares Investment Division/(i)/....... 2008 9.99 6.62 0.00 2009 6.62 8.18 0.00 2010 8.18 9.00 0.00 2011 9.00 8.87 0.00 Met/Franklin Templeton Founding Strategy Investment Division/(i)/........................................... 2008 9.99 7.05 0.00 2009 7.05 8.98 0.00 2010 8.98 9.79 0.00 2011 9.79 9.53 0.00 Met/Templeton Growth Investment Division/(i)/............. 2008 9.99 6.58 0.00 2009 6.58 8.65 0.00 2010 8.65 9.23 0.00 2011 9.23 8.51 0.00 MetLife Aggressive Strategy Investment Division........... 2011 12.49 10.73 0.00 MetLife Aggressive Strategy Investment Division (formerly MetLife Aggressive Allocation Investment Division)/(e)(m)/....................................... 2005 9.99 11.18 0.00 2006 11.18 12.81 0.00 2007 12.81 13.10 0.00 2008 13.10 7.73 0.00 2009 7.73 10.06 0.00 2010 10.06 11.53 0.00 2011 11.53 12.53 0.00 MetLife Conservative Allocation Investment Division/(e)/.. 2005 9.99 10.33 0.00 2006 10.33 10.93 0.00 2007 10.93 11.43 0.00 2008 11.43 9.69 0.00 2009 9.69 11.58 0.00 2010 11.58 12.62 0.00 2011 12.62 12.91 0.00
66
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ MetLife Conservative to Moderate Allocation Investment Division/(e)/........................................ 2005 $ 9.99 $10.54 0.00 2006 10.54 11.43 0.00 2007 11.43 11.87 0.00 2008 11.87 9.21 0.00 2009 9.21 11.29 0.00 2010 11.29 12.47 0.00 2011 12.47 12.48 0.00 MetLife Mid Cap Stock Index Investment Division/(a)/... 2002 9.03 8.71 0.00 2003 8.71 11.61 0.00 2004 11.61 13.31 0.00 2005 13.31 14.77 0.00 2006 14.77 16.07 0.00 2007 16.07 17.12 0.00 2008 17.12 10.78 0.00 2009 10.78 14.61 0.00 2010 14.61 18.24 0.00 2011 18.24 17.67 0.00 MetLife Moderate Allocation Investment Division/(e)/... 2005 9.99 10.78 0.00 2006 10.78 11.94 0.00 2007 11.94 12.34 0.00 2008 12.34 8.72 0.00 2009 8.72 10.93 2,003.30 2010 10.93 12.26 2,213.27 2011 12.26 11.97 2,398.42 MetLife Moderate to Aggressive Allocation Investment Division/(e)/........................................ 2005 9.99 11.00 0.00 2006 11.00 12.45 0.00 2007 12.45 12.81 0.00 2008 12.81 8.23 0.00 2009 8.23 10.52 0.00 2010 10.52 11.96 0.00 2011 11.96 11.40 24.39 MetLife Stock Index Investment Division/(a)/........... 2002 29.66 28.37 0.00 2003 28.37 35.93 0.00 2004 35.93 39.25 0.00 2005 39.25 40.58 0.00 2006 40.58 46.30 0.00 2007 46.30 48.15 0.00 2008 48.15 29.92 0.00 2009 29.92 37.32 0.00 2010 37.32 42.32 0.00 2011 42.32 42.61 0.00
67
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ MFS(R) Research International Investment Division/(a)/...... 2002 $ 7.84 $ 7.35 0.00 2003 7.35 9.61 0.00 2004 9.61 11.38 0.00 2005 11.38 13.13 0.00 2006 13.13 16.46 0.00 2007 16.46 18.47 0.00 2008 18.47 10.54 2.61 2009 10.54 13.74 15.20 2010 13.74 15.16 51.06 2011 15.16 13.41 76.63 MFS(R) Total Return Investment Division/(a)/................ 2002 34.23 34.05 0.00 2003 34.05 39.37 0.00 2004 39.37 43.28 0.00 2005 43.28 44.10 0.00 2006 44.10 48.89 0.00 2007 48.89 50.42 0.00 2008 50.42 38.78 0.00 2009 38.78 45.45 0.00 2010 45.45 49.43 0.00 2011 49.43 50.02 0.00 MFS(R) Value Investment Division/(a)/....................... 2002 10.17 9.85 0.00 2003 9.85 12.22 0.00 2004 12.22 13.46 0.00 2005 13.46 13.11 0.00 2006 13.11 15.30 0.00 2007 15.30 14.55 0.00 2008 14.55 9.55 0.00 2009 9.55 11.41 5.86 2010 11.41 12.57 56.17 2011 12.57 12.53 86.88 Morgan Stanley EAFE(R) Index Investment Division/(a)/....... 2002 8.00 7.12 330.63 2003 7.12 9.67 661.18 2004 9.67 11.43 1,161.83 2005 11.43 12.79 1,457.54 2006 12.79 15.89 1,646.37 2007 15.89 17.39 1,863.44 2008 17.39 9.96 0.00 2009 9.96 12.65 0.00 2010 12.65 13.53 4.30 2011 13.53 11.70 0.00 Morgan Stanley Mid Cap Growth Investment Division/(l)/...... 2010 13.66 15.91 0.00 2011 15.91 14.67 0.00
68
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Morgan Stanley Mid Cap Growth Investment Division (formerly FI Mid Cap Opportunities Investment Division)/(a)(c)/..... 2002 $11.50 $11.10 0.00 2003 11.10 14.76 0.00 2004 14.76 17.09 0.00 2005 17.09 18.05 0.00 2006 18.05 19.95 0.00 2007 19.95 21.36 0.00 2008 21.36 9.43 0.00 2009 9.43 12.47 0.00 2010 12.47 13.52 0.00 Neuberger Berman Genesis Investment Division/(a)/........... 2002 12.86 10.94 0.00 2003 10.94 16.22 0.00 2004 16.22 18.49 703.07 2005 18.49 19.03 888.99 2006 19.03 21.95 1,020.41 2007 21.95 20.94 1,187.12 2008 20.94 12.74 0.00 2009 12.74 14.24 0.00 2010 14.24 17.12 2.52 2011 17.12 17.89 0.00 Neuberger Berman Mid Cap Value Investment Division/(a)/..... 2002 14.20 13.58 0.00 2003 13.58 18.32 0.00 2004 18.32 22.25 0.00 2005 22.25 24.67 0.00 2006 24.67 27.18 0.00 2007 27.18 27.78 0.00 2008 27.78 14.45 0.00 2009 14.45 21.15 0.66 2010 21.15 26.41 5.85 2011 26.41 24.41 8.93 Oppenheimer Capital Appreciation Investment Division/(a)/... 2002 6.58 6.33 0.00 2003 6.33 8.06 0.00 2004 8.06 8.50 0.00 2005 8.50 8.82 0.00 2006 8.82 9.40 0.00 2007 9.40 10.64 0.00 2008 10.64 5.70 0.00 2009 5.70 8.11 0.00 2010 8.11 8.79 0.00 2011 8.79 8.58 0.00 PIMCO Inflation Protected Bond Investment Division/(f)/..... 2006 11.14 11.28 0.00 2007 11.28 12.38 0.00 2008 12.38 11.42 0.00 2009 11.42 13.35 48.58 2010 13.35 14.26 251.19 2011 14.26 15.69 442.45
69
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ PIMCO Total Return Investment Division/(a)/.............. 2002 $10.98 $11.45 433.98 2003 11.45 11.83 635.34 2004 11.83 12.30 0.00 2005 12.30 12.46 0.00 2006 12.46 12.90 0.00 2007 12.90 13.74 0.00 2008 13.74 13.67 0.00 2009 13.67 15.98 0.00 2010 15.98 17.12 0.00 2011 17.12 17.50 0.00 RCM Technology Investment Division/(a)/.................. 2002 3.69 2.98 0.00 2003 2.98 4.66 0.00 2004 4.66 4.41 0.00 2005 4.41 4.85 0.00 2006 4.85 5.06 0.00 2007 5.06 6.60 0.00 2008 6.60 3.63 0.00 2009 3.63 5.72 0.00 2010 5.72 7.23 0.00 2011 7.23 6.45 0.00 Russell 2000(R) Index Investment Division/(a)/........... 2002 10.17 9.44 0.00 2003 9.44 13.63 0.00 2004 13.63 15.85 0.00 2005 15.85 16.38 0.00 2006 16.38 19.08 0.00 2007 19.08 18.57 0.00 2008 18.57 12.20 2.25 2009 12.20 15.19 11.05 2010 15.19 19.04 19.22 2011 19.04 18.05 27.24 SSgA Growth ETF Investment Division/(f)/................. 2006 10.73 11.47 0.00 2007 11.47 12.00 0.00 2008 12.00 7.97 0.00 2009 7.97 10.19 0.00 2010 10.19 11.53 0.00 2011 11.53 11.17 0.00 SSgA Growth and Income ETF Investment Division/(f)/...... 2006 10.54 11.22 0.00 2007 11.22 11.71 0.00 2008 11.71 8.69 0.00 2009 8.69 10.75 0.00 2010 10.75 11.96 0.00 2011 11.96 11.97 0.00
70
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ T. Rowe Price Large Cap Growth Investment Division/(a)/.. 2002 $ 9.04 $ 8.83 0.00 2003 8.83 11.44 0.00 2004 11.44 12.44 0.00 2005 12.44 13.10 0.00 2006 13.10 14.65 0.00 2007 14.65 15.83 0.00 2008 15.83 9.09 0.00 2009 9.09 12.89 0.00 2010 12.89 14.90 0.00 2011 14.90 14.57 0.00 T. Rowe Price Mid Cap Growth Investment Division/(a)/.... 2002 4.86 4.58 0.00 2003 4.58 6.20 0.00 2004 6.20 7.24 0.00 2005 7.24 8.22 0.00 2006 8.22 8.64 0.00 2007 8.64 10.07 0.00 2008 10.07 6.01 0.00 2009 6.01 8.66 0.00 2010 8.66 10.95 0.00 2011 10.95 10.67 0.00 T. Rowe Price Small Cap Growth Investment Division/(a)/.. 2002 9.08 8.90 0.00 2003 8.90 12.43 0.00 2004 12.43 13.67 903.53 2005 13.67 14.99 1,147.98 2006 14.99 15.39 1,322.70 2007 15.39 16.70 1,546.69 2008 16.70 10.53 0.00 2009 10.53 14.46 0.00 2010 14.46 19.29 2.32 2011 19.29 19.39 0.00 Third Avenue Small Cap Value Investment Division/(a)/.... 2002 9.03 8.25 0.00 2003 8.25 11.56 0.00 2004 11.56 14.49 0.00 2005 14.49 16.58 0.00 2006 16.58 18.58 0.00 2007 18.58 17.84 0.00 2008 17.84 12.40 0.00 2009 12.40 15.53 0.00 2010 15.53 18.45 0.00 2011 18.45 16.63 0.00
71
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Western Asset Management Strategic Bond Opportunities Investment Division/(a)/............................ 2002 $16.62 $17.63 0.00 2003 17.63 19.66 0.00 2004 19.66 20.70 0.00 2005 20.70 21.03 0.00 2006 21.03 21.84 0.00 2007 21.84 22.43 0.00 2008 22.43 18.84 0.00 2009 18.84 24.61 0.00 2010 24.61 27.41 0.00 2011 27.41 28.74 0.00 Western Asset Management U.S. Government Investment Division/(a)/....................................... 2002 15.63 16.14 0.00 2003 16.14 16.24 0.00 2004 16.24 16.52 0.00 2005 16.52 16.60 0.00 2006 16.60 17.08 0.00 2007 17.08 17.60 0.00 2008 17.60 17.34 0.00 2009 17.34 17.88 0.00 2010 17.88 18.68 0.00 2011 18.68 19.48 0.00
72 METLIFE FINANCIAL FREEDOM SELECT 0.60 SEPARATE ACCOUNT CHARGE
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ American Funds(R) Balanced Allocation Investment Division (Class C)/(i)/......................... 2008 $ 10.00 $ 7.05 5,299.96 2009 7.05 9.06 7,857.12 2010 9.06 10.11 12,530.93 2011 10.11 9.83 16,085.62 American Funds Bond Investment Division (Class 2)/(f)(j)/............................... 2006 15.57 16.41 0.00 2007 16.41 16.81 23.86 2008 16.81 15.11 0.00 2009 15.11 16.87 0.00 2010 16.87 17.80 0.13 2011 17.80 18.73 0.00 American Funds Global Small Capitalization Investment Division (Class 2)/(a)(j)/........... 2002 12.44 11.09 0.00 2003 11.09 16.89 0.00 2004 16.89 20.24 60.51 2005 20.24 25.16 128.70 2006 25.16 30.95 198.08 2007 30.95 37.26 370.00 2008 37.26 17.17 927.80 2009 17.17 27.46 1,382.31 2010 27.46 33.34 1,641.45 2011 33.34 26.73 1,239.91 American Funds(R) Growth Allocation Investment Division (Class C)/(i)/......................... 2008 9.99 6.39 0.00 2009 6.39 8.52 253.02 2010 8.52 9.61 1,742.24 2011 9.61 9.10 885.38 American Funds Growth Investment Division (Class 2)/(a)(j)/............................... 2002 97.98 94.91 0.00 2003 94.91 128.75 4.61 2004 128.75 143.61 20.17 2005 143.61 165.46 38.07 2006 165.46 180.83 57.42 2007 180.83 201.43 66.22 2008 201.43 111.90 152.98 2009 111.90 154.68 483.27 2010 154.68 182.02 674.64 2011 182.02 172.76 863.53
73
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ American Funds Growth-Income Investment Division (Class 2)/(a)(j)/....................................... 2002 $ 81.05 $ 76.30 0.00 2003 76.30 100.19 136.86 2004 100.19 109.65 232.41 2005 109.65 115.07 307.05 2006 115.07 131.44 375.63 2007 131.44 136.90 450.47 2008 136.90 84.36 487.10 2009 84.36 109.78 540.33 2010 109.78 121.29 573.59 2011 121.29 118.06 613.67 American Funds(R) Moderate Allocation Investment Division (Class C)/(i)/.......................................... 2008 10.01 7.73 0.00 2009 7.73 9.48 0.00 2010 9.48 10.36 0.00 2011 10.36 10.31 0.00 Barclays Capital Aggregate Bond Index Investment Division/(a)/........................................... 2002 12.06 12.65 0.00 2003 12.65 13.00 89.65 2004 13.00 13.41 173.19 2005 13.41 13.58 242.15 2006 13.58 14.02 1,503.66 2007 14.02 14.86 2,452.12 2008 14.86 15.60 535.20 2009 15.60 16.28 797.67 2010 16.28 17.11 698.24 2011 17.11 18.24 461.40 BlackRock Bond Income Investment Division/(a)/............ 2002 47.00 48.96 0.00 2003 48.96 51.39 0.00 2004 51.39 53.21 15.09 2005 53.21 54.03 88.59 2006 54.03 55.93 0.00 2007 55.93 58.94 0.22 2008 58.94 56.44 2.77 2009 56.44 61.26 5.12 2010 61.26 65.81 7.25 2011 65.81 69.54 9.99 BlackRock Large Cap Core Investment Division*/(g)/........ 2007 94.52 95.85 3.26 2008 95.85 59.73 18.05 2009 59.73 70.77 64.19 2010 70.77 79.11 102.70 2011 79.11 78.83 140.39
74
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ BlackRock Large Cap Investment Division/(a)(g)/....... 2002 $57.75 $54.95 0.00 2003 54.95 70.95 0.00 2004 70.95 78.00 0.00 2005 78.00 80.11 0.00 2006 80.11 90.65 0.00 2007 90.65 95.31 0.00 BlackRock Large Cap Value Investment Division/(a)/.... 2002 8.61 7.95 0.00 2003 7.95 10.70 0.00 2004 10.70 12.04 0.00 2005 12.04 12.64 0.00 2006 12.64 14.97 0.00 2007 14.97 15.34 0.00 2008 15.34 9.89 41.63 2009 9.89 10.92 41.27 2010 10.92 11.83 41.18 2011 11.83 12.00 40.87 BlackRock Legacy Large Cap Growth Investment Division/(a)/....................................... 2002 21.67 19.00 0.00 2003 19.00 25.54 0.00 2004 25.54 27.57 0.00 2005 27.57 29.25 0.00 2006 29.25 30.21 0.00 2007 30.21 35.56 0.00 2008 35.56 22.38 12.16 2009 22.38 30.36 22.78 2010 30.36 36.06 30.38 2011 36.06 32.56 40.58 BlackRock Legacy Large Cap Growth Investment Division (formerly FI Large Cap Investment Division)/(k)/.... 2006 18.46 18.78 0.00 2007 18.78 19.36 0.00 2008 19.36 10.59 0.00 2009 10.59 11.06 0.00 BlackRock Money Market Investment Division/(b)/....... 2003 25.95 25.93 0.00 2004 25.93 25.97 0.00 2005 25.97 26.49 0.00 2006 26.49 27.53 0.00 2007 27.53 28.68 0.00 2008 28.68 29.25 0.00 2009 29.25 29.15 0.00 2010 29.15 28.98 0.00 2011 28.98 28.81 0.00
75
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Calvert VP SRI Balanced Investment Division/(a)/............ 2002 $18.69 $18.40 0.00 2003 18.40 21.82 0.00 2004 21.82 23.48 0.00 2005 23.48 24.66 0.00 2006 24.66 26.66 0.00 2007 26.66 27.23 1.81 2008 27.23 18.59 13.24 2009 18.59 23.15 26.55 2010 23.15 25.80 37.00 2011 25.80 26.81 47.80 Clarion Global Real Estate Investment Division/(d)/......... 2004 9.99 12.90 0.00 2005 12.90 14.52 0.00 2006 14.52 19.87 0.00 2007 19.87 16.78 9.75 2008 16.78 9.73 19.79 2009 9.73 13.03 124.58 2010 13.03 15.04 196.36 2011 15.04 14.11 268.94 Davis Venture Value Investment Division/(a)/................ 2002 23.61 23.06 0.00 2003 23.06 29.97 0.00 2004 29.97 33.35 0.00 2005 33.35 36.47 0.00 2006 36.47 41.44 0.00 2007 41.44 42.98 215.30 2008 42.98 25.84 334.89 2009 25.84 33.81 488.07 2010 33.81 37.55 559.97 2011 37.55 35.73 215.38 FI Value Leaders Investment Division/(a)/................... 2002 21.00 20.02 0.00 2003 20.02 25.25 0.00 2004 25.25 28.49 0.00 2005 28.49 31.28 0.00 2006 31.28 34.72 0.00 2007 34.72 35.87 0.00 2008 35.87 21.71 0.00 2009 21.71 26.22 0.00 2010 26.22 29.79 0.00 2011 29.79 27.72 0.00 Harris Oakmark International Investment Division/(a)/....... 2002 9.95 8.91 0.00 2003 8.91 11.96 0.00 2004 11.96 14.33 0.00 2005 14.33 16.27 0.00 2006 16.27 20.84 0.00 2007 20.84 20.49 390.68 2008 20.49 12.04 523.56 2009 12.04 18.56 638.25 2010 18.56 21.47 700.49 2011 21.47 18.30 265.17
76
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Invesco Small Cap Growth Investment Division/(a)/........... 2002 $ 8.96 $ 8.55 0.00 2003 8.55 11.81 0.00 2004 11.81 12.49 130.70 2005 12.49 13.44 321.15 2006 13.44 15.26 535.66 2007 15.26 16.85 531.10 2008 16.85 10.26 666.40 2009 10.26 13.65 921.55 2010 13.65 17.12 975.65 2011 17.12 16.83 59.24 Janus Forty Investment Division/(h)/........................ 2007 178.29 219.90 2.12 2008 219.90 126.78 22.81 2009 126.78 180.03 66.66 2010 180.03 195.77 104.89 2011 195.77 179.92 143.12 Lazard Mid Cap Investment Division/(a)/..................... 2002 10.04 9.76 0.00 2003 9.76 12.24 0.00 2004 12.24 13.92 0.00 2005 13.92 14.95 0.00 2006 14.95 17.04 0.00 2007 17.04 16.48 1.97 2008 16.48 10.10 30.00 2009 10.10 13.74 61.84 2010 13.74 16.78 85.76 2011 16.78 15.80 112.57 Loomis Sayles Small Cap Core Investment Division/(a)/....... 2002 20.13 18.44 0.00 2003 18.44 25.01 0.00 2004 25.01 28.90 0.00 2005 28.90 30.64 0.00 2006 30.64 35.45 0.00 2007 35.45 39.34 0.00 2008 39.34 25.00 0.00 2009 25.00 32.29 66.26 2010 32.29 40.83 114.28 2011 40.83 40.73 268.70 Loomis Sayles Small Cap Growth Investment Division/(a)/..... 2002 6.80 6.32 0.00 2003 6.32 9.09 101.01 2004 9.09 10.04 355.78 2005 10.04 10.42 551.61 2006 10.42 11.36 740.59 2007 11.36 11.78 803.13 2008 11.78 6.87 807.43 2009 6.87 8.86 812.71 2010 8.86 11.57 819.49 2011 11.57 11.82 821.03
77
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Lord Abbett Bond Debenture Investment Division/(a)/......... 2002 $13.93 $14.30 0.00 2003 14.30 16.94 0.00 2004 16.94 18.21 0.00 2005 18.21 18.38 0.00 2006 18.38 19.94 0.00 2007 19.94 21.12 12.88 2008 21.12 17.08 39.02 2009 17.08 23.23 73.86 2010 23.23 26.08 103.02 2011 26.08 27.08 121.55 Met/Artisan Mid Cap Value Investment Division/(a)/.......... 2002 24.23 25.03 0.00 2003 25.03 32.92 18.37 2004 32.92 35.88 69.12 2005 35.88 39.13 130.26 2006 39.13 43.63 189.05 2007 43.63 40.30 48.52 2008 40.30 21.58 48.45 2009 21.58 30.29 48.39 2010 30.29 34.55 0.48 2011 34.55 36.57 0.00 Met/Franklin Income Investment Division/(i)/................ 2008 9.99 8.03 0.00 2009 8.03 10.20 583.99 2010 10.20 11.34 827.58 2011 11.34 11.51 932.66 Met/Franklin Low Duration Total Return Investment Division/(n)/............................................. 2011 9.98 9.82 0.00 Met/Franklin Mutual Shares Investment Division/(i)/......... 2008 9.99 6.63 0.00 2009 6.63 8.23 9.58 2010 8.23 9.09 17.79 2011 9.09 8.98 25.39 Met/Franklin Templeton Founding Strategy Investment Division/(i)/............................................. 2008 9.99 7.07 0.00 2009 7.07 9.03 0.00 2010 9.03 9.88 0.00 2011 9.88 9.65 0.00 Met/Templeton Growth Investment Division/(i)/............... 2008 9.99 6.60 0.00 2009 6.60 8.70 0.00 2010 8.70 9.31 0.00 2011 9.31 8.62 0.00 MetLife Aggressive Strategy Investment Division............. 2011 12.75 10.98 3,968.98
78
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ MetLife Aggressive Strategy Investment Division (formerly MetLife Aggressive Allocation Investment Division)/(e)(m)/......................... 2005 $ 9.99 $11.21 0.00 2006 11.21 12.88 0.00 2007 12.88 13.22 113.94 2008 13.22 7.83 1,080.76 2009 7.83 10.23 2,277.56 2010 10.23 11.77 3,242.99 2011 11.77 12.79 0.00 MetLife Conservative Allocation Investment Division/(e)/........................................ 2005 9.99 10.35 0.00 2006 10.35 11.00 0.00 2007 11.00 11.54 0.00 2008 11.54 9.82 0.00 2009 9.82 11.77 0.00 2010 11.77 12.87 25.58 2011 12.87 13.21 4.65 MetLife Conservative to Moderate Allocation Investment Division/(e)/........................................ 2005 9.99 10.57 0.00 2006 10.57 11.50 1,064.53 2007 11.50 11.98 1,957.00 2008 11.98 9.33 461.34 2009 9.33 11.48 847.70 2010 11.48 12.72 731.60 2011 12.72 12.78 930.90 MetLife Mid Cap Stock Index Investment Division/(a)/... 2002 9.09 8.79 0.00 2003 8.79 11.76 103.65 2004 11.76 13.52 194.33 2005 13.52 15.06 261.98 2006 15.06 16.44 402.06 2007 16.44 17.57 510.74 2008 17.57 11.11 421.19 2009 11.11 15.11 1,229.22 2010 15.11 18.92 1,515.44 2011 18.92 18.40 2,693.30 MetLife Moderate Allocation Investment Division/(e)/... 2005 9.99 10.80 0.00 2006 10.80 12.01 0.00 2007 12.01 12.46 321.38 2008 12.46 8.83 2,222.44 2009 8.83 11.11 4,153.92 2010 11.11 12.50 5,679.00 2011 12.50 12.26 7,971.62
79
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ MetLife Moderate to Aggressive Allocation Investment Division/(e)/............................................. 2005 $ 9.99 $11.03 0.00 2006 11.03 12.52 63.94 2007 12.52 12.93 926.68 2008 12.93 8.33 2,093.10 2009 8.33 10.70 4,797.09 2010 10.70 12.20 7,747.39 2011 12.20 11.67 10,763.39 MetLife Stock Index Investment Division/(a)/................ 2002 30.96 29.65 0.00 2003 29.65 37.69 33.05 2004 37.69 41.32 91.42 2005 41.32 42.87 160.04 2006 42.87 49.09 617.41 2007 49.09 51.22 976.68 2008 51.22 31.94 469.01 2009 31.94 39.98 690.37 2010 39.98 45.50 693.09 2011 45.50 45.97 307.27 MFS(R) Research International Investment Division/(a)/...... 2002 7.88 7.40 0.00 2003 7.40 9.71 0.00 2004 9.71 11.54 0.00 2005 11.54 13.35 0.00 2006 13.35 16.80 0.00 2007 16.80 18.92 8.24 2008 18.92 10.84 113.90 2009 10.84 14.18 691.22 2010 14.18 15.70 1,173.92 2011 15.70 13.93 1,962.57 MFS(R) Total Return Investment Division/(a)/................ 2002 36.10 35.97 0.00 2003 35.97 41.74 24.70 2004 41.74 46.05 50.36 2005 46.05 47.08 70.56 2006 47.08 52.38 72.29 2007 52.38 54.21 72.69 2008 54.21 41.84 84.95 2009 41.84 49.20 91.54 2010 49.20 53.70 25.05 2011 53.70 54.53 26.73 MFS(R) Value Investment Division/(a)/....................... 2002 10.30 9.99 0.00 2003 9.99 12.44 46.66 2004 12.44 13.75 178.91 2005 13.75 13.44 365.40 2006 13.44 15.75 516.86 2007 15.75 15.02 160.74 2008 15.02 9.90 127.36 2009 9.90 11.86 127.21 2010 11.86 13.11 1.33 2011 13.11 13.12 0.00
80
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Morgan Stanley EAFE(R) Index Investment Division/(a)/....... 2002 $ 8.10 $ 7.22 0.00 2003 7.22 9.85 0.00 2004 9.85 11.68 0.00 2005 11.68 13.11 0.00 2006 13.11 16.35 271.79 2007 16.35 17.96 462.19 2008 17.96 10.32 170.67 2009 10.32 13.16 308.06 2010 13.16 14.11 418.31 2011 14.11 12.25 394.28 Morgan Stanley Mid Cap Growth Investment Division/(l)/...... 2010 14.30 16.70 181.13 2011 16.70 15.45 253.99 Morgan Stanley Mid Cap Growth Investment Division (formerly FI Mid Cap Opportunities Investment Division)/(a)(c)/..... 2002 11.71 11.33 0.00 2003 11.33 15.12 0.00 2004 15.12 17.56 0.00 2005 17.56 18.62 0.00 2006 18.62 20.65 0.00 2007 20.65 22.19 0.00 2008 22.19 9.83 0.00 2009 9.83 13.05 103.05 2010 13.05 14.16 0.00 Neuberger Berman Genesis Investment Division/(a)/........... 2002 12.95 11.03 0.00 2003 11.03 16.42 0.00 2004 16.42 18.78 0.00 2005 18.78 19.40 0.00 2006 19.40 22.46 0.00 2007 22.46 21.50 0.00 2008 21.50 13.13 0.00 2009 13.13 14.73 0.00 2010 14.73 17.76 0.00 2011 17.76 18.63 0.00 Neuberger Berman Mid Cap Value Investment Division/(a)/..... 2002 14.38 13.78 0.00 2003 13.78 18.65 0.00 2004 18.65 22.74 0.00 2005 22.74 25.30 0.00 2006 25.30 27.96 0.00 2007 27.96 28.68 1.16 2008 28.68 14.97 34.00 2009 14.97 21.99 168.44 2010 21.99 27.55 260.41 2011 27.55 25.56 356.60
81
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Oppenheimer Capital Appreciation Investment Division/(a)/... 2002 $ 6.61 $ 6.37 0.00 2003 6.37 8.15 0.00 2004 8.15 8.62 0.00 2005 8.62 8.97 0.00 2006 8.97 9.59 0.00 2007 9.59 10.90 69.33 2008 10.90 5.86 833.49 2009 5.86 8.37 418.72 2010 8.37 9.10 600.72 2011 9.10 8.92 738.63 PIMCO Inflation Protected Bond Investment Division/(f)/..... 2006 11.26 11.43 0.00 2007 11.43 12.59 0.00 2008 12.59 11.65 27.56 2009 11.65 13.67 54.18 2010 13.67 14.64 62.90 2011 14.64 16.18 69.35 PIMCO Total Return Investment Division/(a)/................. 2002 11.03 11.52 0.00 2003 11.52 11.95 80.37 2004 11.95 12.47 170.86 2005 12.47 12.67 244.94 2006 12.67 13.17 251.39 2007 13.17 14.08 255.24 2008 14.08 14.05 287.05 2009 14.05 16.48 377.80 2010 16.48 17.73 213.42 2011 17.73 18.18 285.33 RCM Technology Investment Division/(a)/..................... 2002 3.71 3.00 0.00 2003 3.00 4.70 0.00 2004 4.70 4.47 0.00 2005 4.47 4.94 0.00 2006 4.94 5.17 0.00 2007 5.17 6.76 78.66 2008 6.76 3.73 778.66 2009 3.73 5.90 450.15 2010 5.90 7.49 629.94 2011 7.49 6.71 778.71 Russell 2000(R) Index Investment Division/(a)/.............. 2002 10.30 9.58 0.00 2003 9.58 13.88 90.86 2004 13.88 16.20 167.76 2005 16.20 16.79 226.95 2006 16.79 19.63 232.89 2007 19.63 19.18 241.68 2008 19.18 12.64 257.77 2009 12.64 15.79 259.23 2010 15.79 19.87 43.58 2011 19.87 18.90 55.11
82
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ SSgA Growth ETF Investment Division/(f)/.................... 2006 $10.75 $11.53 0.00 2007 11.53 12.10 0.00 2008 12.10 8.06 0.00 2009 8.06 10.35 0.00 2010 10.35 11.74 0.00 2011 11.74 11.42 1,730.82 SSgA Growth and Income ETF Investment Division/(f)/......... 2006 10.56 11.27 0.00 2007 11.27 11.80 9.25 2008 11.80 8.79 67.80 2009 8.79 10.92 128.46 2010 10.92 12.18 179.36 2011 12.18 12.24 222.44 T. Rowe Price Large Cap Growth Investment Division/(a)/..... 2002 9.16 8.96 0.00 2003 8.96 11.65 0.00 2004 11.65 12.71 0.00 2005 12.71 13.43 0.00 2006 13.43 15.07 0.00 2007 15.07 16.35 22.08 2008 16.35 9.42 181.48 2009 9.42 13.40 357.89 2010 13.40 15.55 516.42 2011 15.55 15.25 635.89 T. Rowe Price Mid Cap Growth Investment Division/(a)/....... 2002 4.88 4.61 0.00 2003 4.61 6.26 0.00 2004 6.26 7.34 0.00 2005 7.34 8.36 0.00 2006 8.36 8.82 0.00 2007 8.82 10.32 615.75 2008 10.32 6.18 1,140.64 2009 6.18 8.93 1,262.10 2010 8.93 11.34 1,441.13 2011 11.34 11.09 622.24 T. Rowe Price Small Cap Growth Investment Division/(a)/..... 2002 9.25 9.09 0.00 2003 9.09 12.74 0.00 2004 12.74 14.05 0.00 2005 14.05 15.46 0.00 2006 15.46 15.93 0.00 2007 15.93 17.34 3.68 2008 17.34 10.98 29.24 2009 10.98 15.13 72.95 2010 15.13 20.25 110.76 2011 20.25 20.42 143.40
83
BEGINNING NUMBER OF OF YEAR END OF YEAR ACCUMULATION ACCUMULATION ACCUMULATION UNITS END INVESTMENT DIVISION YEAR UNIT VALUE UNIT VALUE OF YEAR ------------------- ---- ------------ ------------ ------------ Third Avenue Small Cap Value Investment Division/(a)/....... 2002 $ 9.03 $ 8.27 0.00 2003 8.27 11.63 0.00 2004 11.63 14.63 0.00 2005 14.63 16.79 0.00 2006 16.79 18.88 0.00 2007 18.88 18.20 1.37 2008 18.20 12.69 40.78 2009 12.69 15.96 64.64 2010 15.96 19.02 89.65 2011 19.02 17.21 114.32 Western Asset Management Strategic Bond Opportunities Investment Division/(a)/.................................. 2002 17.08 18.14 0.00 2003 18.14 20.30 0.00 2004 20.30 21.45 0.00 2005 21.45 21.87 0.00 2006 21.87 22.79 0.00 2007 22.79 23.49 17.25 2008 23.49 19.79 0.00 2009 19.79 25.95 304.38 2010 25.95 29.01 480.49 2011 29.01 30.52 555.79 Western Asset Management U.S. Government Investment Division/(a)/............................................. 2002 16.05 16.60 0.00 2003 16.60 16.77 56.86 2004 16.77 17.12 122.11 2005 17.12 17.26 176.32 2006 17.26 17.83 181.06 2007 17.83 18.43 184.45 2008 18.43 18.23 204.39 2009 18.23 18.86 477.81 2010 18.86 19.77 529.52 2011 19.77 20.69 1,522.36
-------- /(a)/ The inception date for the Deferred Annuities was July 12, 2002. /(b)/ Inception Date: May 1, 2003. /(c)/ The Investment Division with the name FI Mid Cap Opportunities was merged into the Janus Mid Cap Investment Division prior to the opening of business May 3, 2004, and was renamed FI Mid Cap Opportunities. The Investment Division with the name FI Mid Cap Opportunities on April 30, 2004 ceased to exist. The Accumulation Unit Values history prior to May 1, 2004 is of the Investment Division which no longer exists. /(d)/ Inception Date: May 1, 2004. /(e)/ Inception Date: May 1, 2005. /(f)/ Inception Date: May 1, 2006. 84 /(g)/ The assets of BlackRock Large Cap Investment Division (formerly BlackRock Investment Trust Investment Division) of the Metropolitan Fund were merged into the BlackRock Large Cap Core Investment Division of the Met Investors Fund on April 30, 2007. Accumulation Unit Values prior to April 30, 2007 are those of the BlackRock Large Cap Investment Division. /(h)/ Inception date: April 30, 2007. /(i)/ Inception date: April 28, 2008. /(j)/ The Accumulation Unit Values for American Funds Bond, American Funds Growth-Income, American Funds Growth and American Funds Global Capitalization Investment Divisions are calculated with an additional .25% Separate Account Charge as indicated in the Separate Account Charge section of the Table of Expenses. /(k)/ The assets of FI Large Cap Investment Division of the Metropolitan Fund were merged into the BlackRock Legacy Large Cap Growth Investment Division of the Metropolitan Fund on May 1, 2009. Accumulation Unit Values prior to May 1, 2009 are those of the FI Large Cap Investment Division. /(l)/ The assets of FI Mid Cap Opportunities Investment Division were merged into this Investment Division on May 3, 2010. Accumulation Unit Values prior to May 3, 2010 are those of FI Mid Cap Opportunities Investment Division /(m)/ The assets of MetLife Aggressive Allocation Investment Division of the Metropolitan Fund were merged into the MetLife Aggressive Strategy Investment Division of the Met Investors Trust on May 2, 2011. Accumulation Unit Values prior to May 2, 2011 are those of the MetLife Aggressive Allocation Investment Division. /(n)/ Inception Date: May 2, 2011. * We are waiving a portion of the Separate Account charge for the Investment Division investing in the BlackRock Large Cap Core Portfolio. Please see the Table of Expenses for more information. 85 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Contract Owners of Metropolitan Life Separate Account E and Board of Directors of Metropolitan Life Insurance Company We have audited the accompanying statements of assets and liabilities of Metropolitan Life Separate Account E (the "Separate Account") of Metropolitan Life Insurance Company (the "Company") comprising each of the individual Investment Divisions listed in Note 2.A. as of December 31, 2011, the related statements of operations for the respective stated period in the year then ended, the statements of changes in net assets for the respective stated periods in the two years then ended, and the financial highlights in Note 8 for the respective stated periods in the five years then ended. These financial statements and financial highlights are the responsibility of the Separate Account's management. Our responsibility is to express an opinion on these financial statements and financial highlights 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 and financial highlights are free of material misstatement. The Separate Account is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits 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 Separate Account'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. Our procedures included confirmation of investments owned as of December 31, 2011, by correspondence with the custodian or mutual fund companies. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the Investment Divisions constituting the Separate Account of the Company as of December 31, 2011, the results of their operations for the respective stated period in the year then ended, the changes in their net assets for the respective stated periods in the two years then ended, and the financial highlights for the respective stated periods in the five years then ended, in conformity with accounting principles generally accepted in the United States of America. /s/ DELOITTE & TOUCHE LLP Certified Public Accountants Tampa, Florida March 29, 2012 This page is intentionally left blank. METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2011 AMERICAN FUNDS AMERICAN FUNDS GLOBAL SMALL AMERICAN FUNDS AMERICAN FUNDS BOND CAPITALIZATION GROWTH GROWTH-INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ASSETS: Investments at fair value $ 132,354,113 $ 488,925,359 $ 943,068,272 $ 689,767,520 Accrued dividends -- -- -- -- Due from Metropolitan Life Insurance Company -- 5 24 -- ------------------- ------------------- ------------------- ------------------- Total Assets 132,354,113 488,925,364 943,068,296 689,767,520 ------------------- ------------------- ------------------- ------------------- LIABILITIES: Accrued fees 17 11 12 11 Due to Metropolitan Life Insurance Company 18 -- -- 87 ------------------- ------------------- ------------------- ------------------- Total Liabilities 35 11 12 98 ------------------- ------------------- ------------------- ------------------- NET ASSETS $ 132,354,078 $ 488,925,353 $ 943,068,284 $ 689,767,422 =================== =================== =================== =================== CONTRACT OWNERS' EQUITY Net assets from accumulation units $ 132,138,201 $ 488,673,384 $ 942,560,627 $ 689,474,747 Net assets from contracts in payout 215,877 251,969 507,657 292,675 ------------------- ------------------- ------------------- ------------------- Total Net Assets $ 132,354,078 $ 488,925,353 $ 943,068,284 $ 689,767,422 =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 1 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2011 CALVERT VP SRI CALVERT VP SRI FIDELITY VIP FIDELITY VIP BALANCED MID CAP GROWTH EQUITY-INCOME FUNDSMANAGER 60% INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ASSETS: Investments at fair value $ 49,903,386 $ 11,298,702 $ 78,185,095 $ 198,202,400 Accrued dividends -- -- -- -- Due from Metropolitan Life Insurance Company -- -- 1 -- ------------------- ------------------- ------------------- ------------------- Total Assets 49,903,386 11,298,702 78,185,096 198,202,400 ------------------- ------------------- ------------------- ------------------- LIABILITIES: Accrued fees 3 -- 2 -- Due to Metropolitan Life Insurance Company 10 5 -- 3 ------------------- ------------------- ------------------- ------------------- Total Liabilities 13 5 2 3 ------------------- ------------------- ------------------- ------------------- NET ASSETS $ 49,903,373 $ 11,298,697 $ 78,185,094 $ 198,202,397 =================== =================== =================== =================== CONTRACT OWNERS' EQUITY Net assets from accumulation units $ 49,903,373 $ 11,298,697 $ 77,147,239 $ 198,202,397 Net assets from contracts in payout -- -- 1,037,855 -- ------------------- ------------------- ------------------- ------------------- Total Net Assets $ 49,903,373 $ 11,298,697 $ 78,185,094 $ 198,202,397 =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 2 MIST FIDELITY VIP ALLIANCEBERNSTEIN MIST AMERICAN INVESTMENT GRADE FIDELITY VIP GLOBAL DYNAMIC FUNDS BALANCED MIST AMERICAN FIDELITY VIP GROWTH BOND MONEY MARKET ALLOCATION ALLOCATION FUNDS BOND INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 74,754,197 $ 21,398,781 $ 12,168,040 $ 479,791,729 $ 618,948,668 $ 79,806,804 -- -- -- -- -- -- 6 -- -- -- -- -- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 74,754,203 21,398,781 12,168,040 479,791,729 618,948,668 79,806,804 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -- -- -- 2 3 4 -- 3 2 1 19 4 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -- 3 2 3 22 8 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 74,754,203 $ 21,398,778 $ 12,168,038 $ 479,791,726 $ 618,948,646 $ 79,806,796 =================== =================== =================== =================== =================== =================== $ 74,754,203 $ 21,398,778 $ 12,168,038 $ 479,791,726 $ 618,937,672 $ 79,806,796 -- -- -- -- 10,974 -- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 74,754,203 $ 21,398,778 $ 12,168,038 $ 479,791,726 $ 618,948,646 $ 79,806,796 =================== =================== =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 3 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2011 MIST AMERICAN MIST AMERICAN FUNDS GROWTH MIST AMERICAN FUNDS MODERATE MIST AQR GLOBAL ALLOCATION FUNDS GROWTH ALLOCATION RISK BALANCED INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ASSETS: Investments at fair value $ 303,484,673 $ 269,245,338 $ 857,229,363 $ 599,167,861 Accrued dividends -- -- -- -- Due from Metropolitan Life Insurance Company -- -- -- -- ------------------- ------------------- ------------------- ------------------- Total Assets 303,484,673 269,245,338 857,229,363 599,167,861 ------------------- ------------------- ------------------- ------------------- LIABILITIES: Accrued fees 6 2 3 2 Due to Metropolitan Life Insurance Company 15 6 16 1 ------------------- ------------------- ------------------- ------------------- Total Liabilities 21 8 19 3 ------------------- ------------------- ------------------- ------------------- NET ASSETS $ 303,484,652 $ 269,245,330 $ 857,229,344 $ 599,167,858 =================== =================== =================== =================== CONTRACT OWNERS' EQUITY Net assets from accumulation units $ 303,474,418 $ 269,245,330 $ 857,165,771 $ 599,167,858 Net assets from contracts in payout 10,234 -- 63,573 -- ------------------- ------------------- ------------------- ------------------- Total Net Assets $ 303,484,652 $ 269,245,330 $ 857,229,344 $ 599,167,858 =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 4 MIST BLACKROCK GLOBAL TACTICAL MIST BLACKROCK MIST CLARION GLOBAL MIST DREMAN STRATEGIES LARGE CAP CORE VARIABLE B VARIABLE C REAL ESTATE SMALL CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 709,763,097 $ 607,789,700 $ 12,494,160 $ 1,080,417 $ 213,895,892 $ 14,113,647 -- -- -- -- -- -- -- -- -- -- -- -- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 709,763,097 607,789,700 12,494,160 1,080,417 213,895,892 14,113,647 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 2 21 1 -- 11 3 1 33 -- -- 38 2 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 3 54 1 -- 49 5 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 709,763,094 $ 607,789,646 $ 12,494,159 $ 1,080,417 $ 213,895,843 $ 14,113,642 =================== =================== =================== =================== =================== =================== $ 709,763,094 $ 603,871,095 $ 12,442,377 $ 1,080,417 $ 213,800,897 $ 14,113,642 -- 3,918,551 51,782 -- 94,946 -- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 709,763,094 $ 607,789,646 $ 12,494,159 $ 1,080,417 $ 213,895,843 $ 14,113,642 =================== =================== =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 5 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2011 MIST HARRIS OAKMARK MIST INVESCO MIST LAZARD INTERNATIONAL SMALL CAP GROWTH MIST JANUS FORTY MID CAP INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ASSETS: Investments at fair value $ 402,888,497 $ 35,466,964 $ 326,899,932 $ 57,642,199 Accrued dividends -- -- -- -- Due from Metropolitan Life Insurance Company -- -- -- -- ------------------- ------------------- ------------------- ------------------- Total Assets 402,888,497 35,466,964 326,899,932 57,642,199 ------------------- ------------------- ------------------- ------------------- LIABILITIES: Accrued fees 13 21 11 16 Due to Metropolitan Life Insurance Company 15 8 2 23 ------------------- ------------------- ------------------- ------------------- Total Liabilities 28 29 13 39 ------------------- ------------------- ------------------- ------------------- NET ASSETS $ 402,888,469 $ 35,466,935 $ 326,899,919 $ 57,642,160 =================== =================== =================== =================== CONTRACT OWNERS' EQUITY Net assets from accumulation units $ 402,698,148 $ 35,449,747 $ 326,872,871 $ 57,598,399 Net assets from contracts in payout 190,321 17,188 27,048 43,761 ------------------- ------------------- ------------------- ------------------- Total Net Assets $ 402,888,469 $ 35,466,935 $ 326,899,919 $ 57,642,160 =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 6 MIST LEGG MASON MIST MET/FRANKLIN CLEARBRIDGE MIST LOOMIS SAYLES MIST LORD ABBETT MIST MET/EATON MIST MET/FRANKLIN LOW DURATION AGGRESSIVE GROWTH GLOBAL MARKETS BOND DEBENTURE VANCE FLOATING RATE INCOME TOTAL RETURN INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 81,432,392 $ 23,690,473 $ 299,293,886 $ 5,996,931 $ 82,869,298 $ 6,635,683 -- -- -- -- -- -- -- -- -- -- -- -- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 81,432,392 23,690,473 299,293,886 5,996,931 82,869,298 6,635,683 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 6 7 13 5 7 12 31 1 10 2 16 4 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 37 8 23 7 23 16 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 81,432,355 $ 23,690,465 $ 299,293,863 $ 5,996,924 $ 82,869,275 $ 6,635,667 =================== =================== =================== =================== =================== =================== $ 81,426,285 $ 23,690,465 $ 299,041,767 $ 5,996,924 $ 82,865,991 $ 6,635,667 6,070 -- 252,096 -- 3,284 -- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 81,432,355 $ 23,690,465 $ 299,293,863 $ 5,996,924 $ 82,869,275 $ 6,635,667 =================== =================== =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 7 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2011 MIST MET/FRANKLIN MIST MET/FRANKLIN TEMPLETON FOUNDING MIST MET/TEMPLETON MIST MET/TEMPLETON MUTUAL SHARES STRATEGY GROWTH INTERNATIONAL BOND INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ASSETS: Investments at fair value $ 50,810,507 $ 59,253,291 $ 22,033,947 $ 7,057,743 Accrued dividends -- -- -- -- Due from Metropolitan Life Insurance Company -- -- -- -- ------------------- ------------------- ------------------- ------------------- Total Assets 50,810,507 59,253,291 22,033,947 7,057,743 ------------------- ------------------- ------------------- ------------------- LIABILITIES: Accrued fees 7 9 12 3 Due to Metropolitan Life Insurance Company 17 14 15 2 ------------------- ------------------- ------------------- ------------------- Total Liabilities 24 23 27 5 ------------------- ------------------- ------------------- ------------------- NET ASSETS $ 50,810,483 $ 59,253,268 $ 22,033,920 $ 7,057,738 =================== =================== =================== =================== CONTRACT OWNERS' EQUITY Net assets from accumulation units $ 50,810,483 $ 59,253,268 $ 22,033,920 $ 7,057,738 Net assets from contracts in payout -- -- -- -- ------------------- ------------------- ------------------- ------------------- Total Net Assets $ 50,810,483 $ 59,253,268 $ 22,033,920 $ 7,057,738 =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 8 MIST MFS MIST METLIFE MIST METLIFE EMERGING MARKETS MIST MFS RESEARCH MIST MORGAN STANLEY MIST OPPENHEIMER AGGRESSIVE STRATEGY BALANCED PLUS EQUITY INTERNATIONAL MID CAP GROWTH CAPITAL APPRECIATION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- -------------------- $ 102,483,297 $ 601,466,009 $ 41,739,150 $ 219,299,292 $ 331,439,458 $ 49,214,046 -- -- -- -- -- -- -- -- -- -- -- -- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------- 102,483,297 601,466,009 41,739,150 219,299,292 331,439,458 49,214,046 ------------------- ------------------- ------------------- ------------------- ------------------- -------------------- 8 1 4 14 18 10 4 -- 2 34 10 39 ------------------- ------------------- ------------------- ------------------- ------------------- -------------------- 12 1 6 48 28 49 ------------------- ------------------- ------------------- ------------------- ------------------- -------------------- $ 102,483,285 $ 601,466,008 $ 41,739,144 $ 219,299,244 $ 331,439,430 $ 49,213,997 =================== =================== =================== =================== =================== ==================== $ 100,919,890 $ 601,466,008 $ 41,739,144 $ 218,816,532 $ 331,261,206 $ 49,198,557 1,563,395 -- -- 482,712 178,224 15,440 ------------------- ------------------- ------------------- ------------------- ------------------- -------------------- $ 102,483,285 $ 601,466,008 $ 41,739,144 $ 219,299,244 $ 331,439,430 $ 49,213,997 =================== =================== =================== =================== =================== ====================
The accompanying notes are an integral part of these financial statements. 9 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2011 MIST PIMCO INFLATION PROTECTED MIST PIMCO MIST PIONEER MIST PYRAMIS BOND TOTAL RETURN STRATEGIC INCOME GOVERNMENT INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ASSETS: Investments at fair value $ 607,250,059 $ 1,123,078,640 $ 55,464,793 $ 200,414,662 Accrued dividends -- -- -- -- Due from Metropolitan Life Insurance Company -- -- -- -- ------------------- ------------------- ------------------- ------------------- Total Assets 607,250,059 1,123,078,640 55,464,793 200,414,662 ------------------- ------------------- ------------------- ------------------- LIABILITIES: Accrued fees 4 10 5 1 Due to Metropolitan Life Insurance Company 27 7 1 1 ------------------- ------------------- ------------------- ------------------- Total Liabilities 31 17 6 2 ------------------- ------------------- ------------------- ------------------- NET ASSETS $ 607,250,028 $ 1,123,078,623 $ 55,464,787 $ 200,414,660 =================== =================== =================== =================== CONTRACT OWNERS' EQUITY Net assets from accumulation units $ 606,544,479 $ 1,122,592,997 $ 55,464,787 $ 200,414,660 Net assets from contracts in payout 705,549 485,626 -- -- ------------------- ------------------- ------------------- ------------------- Total Net Assets $ 607,250,028 $ 1,123,078,623 $ 55,464,787 $ 200,414,660 =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 10 MIST RCM MIST SSGA GROWTH MIST SSGA MIST T. ROWE PRICE MIST THIRD AVENUE MSF ARTIO TECHNOLOGY AND INCOME ETF GROWTH ETF MID CAP GROWTH SMALL CAP VALUE INTERNATIONAL STOCK INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 133,833,514 $ 811,024,310 $ 95,770,082 $ 276,466,849 $ 9,963,728 $ 149,064,959 -- -- -- -- -- -- -- 237 -- -- -- -- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 133,833,514 811,024,547 95,770,082 276,466,849 9,963,728 149,064,959 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 13 265 9 11 6 16 30 -- 17 26 7 25 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 43 265 26 37 13 41 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 133,833,471 $ 811,024,282 $ 95,770,056 $ 276,466,812 $ 9,963,715 $ 149,064,918 =================== =================== =================== =================== =================== =================== $ 133,823,852 $ 810,832,690 $ 95,770,056 $ 276,310,561 $ 9,963,715 $ 148,766,852 9,619 191,592 -- 156,251 -- 298,066 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 133,833,471 $ 811,024,282 $ 95,770,056 $ 276,466,812 $ 9,963,715 $ 149,064,918 =================== =================== =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 11 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2011 MSF BARCLAYS CAPITAL MSF BLACKROCK MSF BLACKROCK MSF BLACKROCK AGGREGATE BOND INDEX AGGRESSIVE GROWTH BOND INCOME DIVERSIFIED INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------- ------------------- ------------------- ------------------- ASSETS: Investments at fair value $ 1,115,074,038 $ 441,856,481 $ 503,747,532 $ 634,685,565 Accrued dividends -- -- -- -- Due from Metropolitan Life Insurance Company -- 9 53 -- -------------------- ------------------- ------------------- ------------------- Total Assets 1,115,074,038 441,856,490 503,747,585 634,685,565 -------------------- ------------------- ------------------- ------------------- LIABILITIES: Accrued fees 9 10 11 5 Due to Metropolitan Life Insurance Company 20 -- -- -- -------------------- ------------------- ------------------- ------------------- Total Liabilities 29 10 11 5 -------------------- ------------------- ------------------- ------------------- NET ASSETS $ 1,115,074,009 $ 441,856,480 $ 503,747,574 $ 634,685,560 ==================== =================== =================== =================== CONTRACT OWNERS' EQUITY Net assets from accumulation units $ 1,112,756,211 $ 441,576,064 $ 500,625,707 $ 629,538,010 Net assets from contracts in payout 2,317,798 280,416 3,121,867 5,147,550 -------------------- ------------------- ------------------- ------------------- Total Net Assets $ 1,115,074,009 $ 441,856,480 $ 503,747,574 $ 634,685,560 ==================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 12 MSF BLACKROCK MSF BLACKROCK LEGACY LARGE CAP MSF BLACKROCK MSF DAVIS VENTURE MSF FI VALUE MSF JENNISON LARGE CAP VALUE GROWTH MONEY MARKET VALUE LEADERS GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 206,549,431 $ 154,395,869 $ 87,677,066 $ 549,949,408 $ 60,845,362 $ 82,954,060 -- -- 34 -- -- -- -- 21 29 21 35 -- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 206,549,431 154,395,890 87,677,129 549,949,429 60,845,397 82,954,060 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 13 9 -- 13 18 6 12 -- -- -- -- 21 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 25 9 -- 13 18 27 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 206,549,406 $ 154,395,881 $ 87,677,129 $ 549,949,416 $ 60,845,379 $ 82,954,033 =================== =================== =================== =================== =================== =================== $ 206,511,942 $ 153,657,221 $ 87,042,968 $ 547,984,742 $ 60,432,496 $ 82,710,120 37,464 738,660 634,161 1,964,674 412,883 243,913 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 206,549,406 $ 154,395,881 $ 87,677,129 $ 549,949,416 $ 60,845,379 $ 82,954,033 =================== =================== =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 13 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2011 MSF MET/DIMENSIONAL MSF LOOMIS SAYLES MSF LOOMIS SAYLES MSF MET/ARTISAN INTERNATIONAL SMALL SMALL CAP CORE SMALL CAP GROWTH MID CAP VALUE COMPANY INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ASSETS: Investments at fair value $ 152,652,687 $ 46,369,385 $ 212,168,288 $ 4,062,767 Accrued dividends -- -- -- -- Due from Metropolitan Life Insurance Company 17 -- 57 -- ------------------- ------------------- ------------------- ------------------- Total Assets 152,652,704 46,369,385 212,168,345 4,062,767 ------------------- ------------------- ------------------- ------------------- LIABILITIES: Accrued fees 16 12 13 6 Due to Metropolitan Life Insurance Company -- 34 -- 1 ------------------- ------------------- ------------------- ------------------- Total Liabilities 16 46 13 7 ------------------- ------------------- ------------------- ------------------- NET ASSETS $ 152,652,688 $ 46,369,339 $ 212,168,332 $ 4,062,760 =================== =================== =================== =================== CONTRACT OWNERS' EQUITY Net assets from accumulation units $ 151,935,236 $ 46,337,166 $ 211,475,470 $ 4,062,760 Net assets from contracts in payout 717,452 32,173 692,862 -- ------------------- ------------------- ------------------- ------------------- Total Net Assets $ 152,652,688 $ 46,369,339 $ 212,168,332 $ 4,062,760 =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 14 MSF METLIFE MSF METLIFE MSF METLIFE MSF METLIFE CONSERVATIVE CONSERVATIVE TO MID CAP MSF METLIFE MODERATE TO MSF METLIFE ALLOCATION MODERATE ALLOCATION STOCK INDEX MODERATE ALLOCATION AGGRESSIVE ALLOCATION STOCK INDEX INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- --------------------- ------------------- $ 516,749,315 $ 1,291,252,091 $ 384,380,612 $ 3,601,073,999 $ 1,520,709,956 $ 2,511,243,453 -- -- -- -- -- -- -- -- -- -- -- 7 ------------------- ------------------- ------------------- ------------------- --------------------- ------------------- 516,749,315 1,291,252,091 384,380,612 3,601,073,999 1,520,709,956 2,511,243,460 ------------------- ------------------- ------------------- ------------------- --------------------- ------------------- 5 3 12 4 1 9 25 9 13 24 14 -- ------------------- ------------------- ------------------- ------------------- --------------------- ------------------- 30 12 25 28 15 9 ------------------- ------------------- ------------------- ------------------- --------------------- ------------------- $ 516,749,285 $ 1,291,252,079 $ 384,380,587 $ 3,601,073,971 $ 1,520,709,941 $ 2,511,243,451 =================== =================== =================== =================== ===================== =================== $ 516,739,571 $ 1,290,921,160 $ 383,904,359 $ 3,600,262,644 $ 1,517,696,002 $ 2,491,896,535 9,714 330,919 476,228 811,327 3,013,939 19,346,916 ------------------- ------------------- ------------------- ------------------- --------------------- ------------------- $ 516,749,285 $ 1,291,252,079 $ 384,380,587 $ 3,601,073,971 $ 1,520,709,941 $ 2,511,243,451 =================== =================== =================== =================== ===================== ===================
The accompanying notes are an integral part of these financial statements. 15 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2011 MSF MFS TOTAL MSF MORGAN STANLEY MSF NEUBERGER RETURN MSF MFS VALUE EAFE INDEX BERMAN GENESIS INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ASSETS: Investments at fair value $ 135,335,299 $ 271,032,910 $ 428,461,188 $ 263,644,696 Accrued dividends -- -- -- -- Due from Metropolitan Life Insurance Company -- -- -- -- ------------------- ------------------- ------------------- ------------------- Total Assets 135,335,299 271,032,910 428,461,188 263,644,696 ------------------- ------------------- ------------------- ------------------- LIABILITIES: Accrued fees 13 11 8 16 Due to Metropolitan Life Insurance Company 3 18 11 17 ------------------- ------------------- ------------------- ------------------- Total Liabilities 16 29 19 33 ------------------- ------------------- ------------------- ------------------- NET ASSETS $ 135,335,283 $ 271,032,881 $ 428,461,169 $ 263,644,663 =================== =================== =================== =================== CONTRACT OWNERS' EQUITY Net assets from accumulation units $ 133,257,929 $ 267,760,530 $ 428,167,382 $ 263,332,026 Net assets from contracts in payout 2,077,354 3,272,351 293,787 312,637 ------------------- ------------------- ------------------- ------------------- Total Net Assets $ 135,335,283 $ 271,032,881 $ 428,461,169 $ 263,644,663 =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 16 MSF NEUBERGER BERMAN MID CAP MSF OPPENHEIMER MSF RUSSELL 2000 MSF T. ROWE PRICE MSF T. ROWE PRICE MSF VAN ECK GLOBAL VALUE GLOBAL EQUITY INDEX LARGE CAP GROWTH SMALL CAP GROWTH NATURAL RESOURCES INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 447,971,939 $ 201,576,467 $ 253,478,600 $ 174,880,406 $ 265,121,448 $ 35,583,748 -- -- -- -- -- -- -- -- 6 -- -- -- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 447,971,939 201,576,467 253,478,606 174,880,406 265,121,448 35,583,748 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 11 8 13 11 13 4 6 6 -- 11 26 1 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 17 14 13 22 39 5 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 447,971,922 $ 201,576,453 $ 253,478,593 $ 174,880,384 $ 265,121,409 $ 35,583,743 =================== =================== =================== =================== =================== =================== $ 447,673,474 $ 201,496,612 $ 253,293,269 $ 169,647,866 $ 264,933,790 $ 35,583,743 298,448 79,841 185,324 5,232,518 187,619 -- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 447,971,922 $ 201,576,453 $ 253,478,593 $ 174,880,384 $ 265,121,409 $ 35,583,743 =================== =================== =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 17 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONCLUDED) DECEMBER 31, 2011 MSF WESTERN ASSET MSF WESTERN ASSET MANAGEMENT STRATEGIC MANAGEMENT BOND OPPORTUNITIES U.S. GOVERNMENT MSF ZENITH EQUITY INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------- ------------------- ------------------- ASSETS: Investments at fair value $ 248,899,127 $ 235,422,509 $ 66,504,191 Accrued dividends -- -- -- Due from Metropolitan Life Insurance Company -- -- 24 -------------------- ------------------- ------------------- Total Assets 248,899,127 235,422,509 66,504,215 -------------------- ------------------- ------------------- LIABILITIES: Accrued fees 12 15 2 Due to Metropolitan Life Insurance Company 18 13 -- -------------------- ------------------- ------------------- Total Liabilities 30 28 2 -------------------- ------------------- ------------------- NET ASSETS $ 248,899,097 $ 235,422,481 $ 66,504,213 ==================== =================== =================== CONTRACT OWNERS' EQUITY Net assets from accumulation units $ 248,003,143 $ 235,001,777 $ 62,235,774 Net assets from contracts in payout 895,954 420,704 4,268,439 -------------------- ------------------- ------------------- Total Net Assets $ 248,899,097 $ 235,422,481 $ 66,504,213 ==================== =================== ===================
The accompanying notes are an integral part of these financial statements. 18 This page is intentionally left blank. METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2011 AMERICAN FUNDS AMERICAN FUNDS GLOBAL SMALL AMERICAN FUNDS AMERICAN FUNDS BOND CAPITALIZATION GROWTH GROWTH-INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------- -------------------- -------------------- -------------------- INVESTMENT INCOME: Dividends $ 3,997,260 $ 7,712,085 $ 6,341,640 $ 11,206,313 -------------------- -------------------- -------------------- -------------------- EXPENSES: Mortality and expense risk and other charges 1,748,615 7,058,858 12,785,208 8,808,216 Administrative charges 335,741 1,375,920 2,498,434 1,717,847 -------------------- -------------------- -------------------- -------------------- Total expenses 2,084,356 8,434,778 15,283,642 10,526,063 -------------------- -------------------- -------------------- -------------------- Net investment income (loss) 1,912,904 (722,693) (8,942,002) 680,250 -------------------- -------------------- -------------------- -------------------- NET REALIZED AND CHANGE IN UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions -- -- -- -- Realized gains (losses) on sale of investments (481,200) (1,937,100) 8,178,841 (497,604) -------------------- -------------------- -------------------- -------------------- Net realized gains (losses) (481,200) (1,937,100) 8,178,841 (497,604) -------------------- -------------------- -------------------- -------------------- Change in unrealized gains (losses) on investments 4,732,695 (121,022,693) (55,277,508) (23,849,987) -------------------- -------------------- -------------------- -------------------- Net realized and change in unrealized gains (losses) on investments 4,251,495 (122,959,793) (47,098,667) (24,347,591) -------------------- -------------------- -------------------- -------------------- Net increase (decrease) in net assets resulting from operations $ 6,164,399 $ (123,682,486) $ (56,040,669) $ (23,667,341) -=================== ==================== ==================== ====================
(a) For the period May 2, 2011 to December 31, 2011. The accompanying notes are an integral part of these financial statements. 20 FIDELITY VIP CALVERT VP SRI CALVERT VP SRI FIDELITY VIP FIDELITY VIP INVESTMENT GRADE BALANCED MID CAP GROWTH EQUITY-INCOME FUNDSMANAGER 60% FIDELITY VIP GROWTH BOND INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------- -------------------- -------------------- -------------------- -------------------- ------------------- $ 659,004 $ -- $ 2,033,497 $ 2,839,495 $ 290,698 $ 681,874 -------------------- -------------------- -------------------- -------------------- -------------------- ------------------- 479,626 91,317 682,183 2,919,272 637,194 160,152 105,267 24,504 209,972 -- 171,248 43,026 -------------------- -------------------- -------------------- -------------------- -------------------- ------------------- 584,893 115,821 892,155 2,919,272 808,442 203,178 -------------------- -------------------- -------------------- -------------------- -------------------- ------------------- 74,111 (115,821) 1,141,342 (79,777) (517,744) 478,696 -------------------- -------------------- -------------------- -------------------- -------------------- ------------------- -- 697,265 -- 428,988 292,932 570,538 (290,776) 699,965 (2,749,961) 128,093 (811,579) 146,197 -------------------- -------------------- -------------------- -------------------- -------------------- ------------------- (290,776) 1,397,230 (2,749,961) 557,081 (518,647) 716,735 -------------------- -------------------- -------------------- -------------------- -------------------- ------------------- 1,902,701 (1,100,516) 1,511,658 (7,937,164) 505,122 124,265 -------------------- -------------------- -------------------- -------------------- -------------------- ------------------- 1,611,925 296,714 (1,238,303) (7,380,083) (13,525) 841,000 -------------------- -------------------- -------------------- -------------------- -------------------- ------------------- $ 1,686,036 $ 180,893 $ (96,961) $ (7,459,860) $ (531,269) $ 1,319,696 ==================== ==================== ==================== ==================== ==================== ===================
The accompanying notes are an integral part of these financial statements. 21 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2011 MIST ALLIANCEBERNSTEIN MIST AMERICAN FIDELITY VIP GLOBAL DYNAMIC FUNDS BALANCED MIST AMERICAN MONEY MARKET ALLOCATION ALLOCATION FUNDS BOND INVESTMENT DIVISION INVESTMENT DIVISION (a) INVESTMENT DIVISION INVESTMENT DIVISION -------------------- ----------------------- ---------------------- ------------------- INVESTMENT INCOME: Dividends $ 14,835 $ 1,942,733 $ 7,706,590 $ 1,618,278 -------------------- ----------------------- ---------------------- ------------------- EXPENSES: Mortality and expense risk and other charges 156,028 1,282,666 6,231,839 788,172 Administrative charges 21,638 324,397 1,520,244 187,589 -------------------- ----------------------- ---------------------- ------------------- Total expenses 177,666 1,607,063 7,752,083 975,761 -------------------- ----------------------- ---------------------- ------------------- Net investment income (loss) (162,831) 335,670 (45,493) 642,517 -------------------- ----------------------- ---------------------- ------------------- NET REALIZED AND CHANGE IN UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions -- 2,726,233 339,313 103 Realized gains (losses) on sale of investments -- -- 2,199,902 293,900 -------------------- ----------------------- ---------------------- ------------------- Net realized gains (losses) -- 2,726,233 2,539,215 294,003 -------------------- ----------------------- ---------------------- ------------------- Change in unrealized gains (losses) on investments -- 2,398,335 (26,212,914) 2,430,315 -------------------- ----------------------- ---------------------- ------------------- Net realized and change in unrealized gains (losses) on investments -- 5,124,568 (23,673,699) 2,724,318 -------------------- ----------------------- ---------------------- ------------------- Net increase (decrease) in net assets resulting from operations $ (162,831) $ 5,460,238 $ (23,719,192) $ 3,366,835 ==================== ======================= ====================== ===================
(a) For the period May 2, 2011 to December 31, 2011. The accompanying notes are an integral part of these financial statements. 22 MIST AMERICAN MIST AMERICAN MIST BLACKROCK FUNDS GROWTH MIST AMERICAN FUNDS MODERATE MIST AQR GLOBAL GLOBAL TACTICAL MIST BLACKROCK ALLOCATION FUNDS GROWTH ALLOCATION RISK BALANCED STRATEGIES LARGE CAP CORE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION (a) INVESTMENT DIVISION (a) INVESTMENT DIVISION -------------------- -------------------- -------------------- ----------------------- ------------------------ -------------------- $ 3,619,474 $ 844,102 $ 12,942,104 $ 8,034,038 $ 4,616,152 $ 7,178,156 -------------------- -------------------- -------------------- ----------------------- ------------------------ -------------------- 3,396,872 2,531,750 8,567,272 1,516,420 1,979,061 6,289,703 803,320 623,056 2,082,575 383,542 500,623 1,342,574 -------------------- -------------------- -------------------- ----------------------- ------------------------ -------------------- 4,200,192 3,154,806 10,649,847 1,899,962 2,479,684 7,632,277 -------------------- -------------------- -------------------- ----------------------- ------------------------ -------------------- (580,718) (2,310,704) 2,292,257 6,134,076 2,136,468 (454,121) -------------------- -------------------- -------------------- ----------------------- ------------------------ -------------------- -- -- 4,056,897 1,769,075 5,360,049 -- 7,429,105 291,118 2,701,648 -- -- (15,466,300) -------------------- -------------------- -------------------- ----------------------- ------------------------ -------------------- 7,429,105 291,118 6,758,545 1,769,075 5,360,049 (15,466,300) -------------------- -------------------- -------------------- ----------------------- ------------------------ -------------------- (26,279,387) (15,352,098) (19,966,753) 5,327,552 (6,803,039) 12,686,156 -------------------- -------------------- -------------------- ----------------------- ------------------------ -------------------- (18,850,282) (15,060,980) (13,208,208) 7,096,627 (1,442,990) (2,780,144) -------------------- -------------------- -------------------- ----------------------- ------------------------ -------------------- $ (19,431,000) $ (17,371,684) $ (10,915,951) $ 13,230,703 $ 693,478 $ (3,234,265) ==================== ==================== ==================== ======================= ======================== ====================
The accompanying notes are an integral part of these financial statements. 23 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2011 MIST CLARION GLOBAL MIST DREMAN VARIABLE B VARIABLE C REAL ESTATE SMALL CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------- -------------------- -------------------- -------------------- INVESTMENT INCOME: Dividends $ 159,349 $ 12,312 $ 8,859,838 $ 173,064 -------------------- -------------------- -------------------- -------------------- EXPENSES: Mortality and expense risk and other charges 128,929 1,899 2,413,035 125,514 Administrative charges -- -- 552,446 30,422 -------------------- -------------------- -------------------- -------------------- Total expenses 128,929 1,899 2,965,481 155,936 -------------------- -------------------- -------------------- -------------------- Net investment income (loss) 30,420 10,413 5,894,357 17,128 -------------------- -------------------- -------------------- -------------------- NET REALIZED AND CHANGE IN UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions -- -- -- -- Realized gains (losses) on sale of investments (458,462) (3,391) (5,517,197) 67,004 -------------------- -------------------- -------------------- -------------------- Net realized gains (losses) (458,462) (3,391) (5,517,197) 67,004 -------------------- -------------------- -------------------- -------------------- Change in unrealized gains (losses) on investments 358,894 (3,100) (15,609,550) (1,567,033) -------------------- -------------------- -------------------- -------------------- Net realized and change in unrealized gains (losses) on investments (99,568) (6,491) (21,126,747) (1,500,029) -------------------- -------------------- -------------------- -------------------- Net increase (decrease) in net assets resulting from operations $ (69,148) $ 3,922 $ (15,232,390) $ (1,482,901) ==================== ==================== ==================== ====================
(a) For the period May 2, 2011 to December 31, 2011. The accompanying notes are an integral part of these financial statements. 24 MIST HARRIS MIST LEGG MASON OAKMARK MIST INVESCO MIST LAZARD CLEARBRIDGE MIST LOOMIS SAYLES INTERNATIONAL SMALL CAP GROWTH MIST JANUS FORTY MID CAP AGGRESSIVE GROWTH GLOBAL MARKETS INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ---------------------- -------------------- -------------------- -------------------- -------------------- -------------------- $ 320 $ -- $ 6,026,511 $ 463,865 $ 12,473 $ 466,340 ---------------------- -------------------- -------------------- -------------------- -------------------- -------------------- 4,465,236 392,706 3,703,434 623,748 641,548 215,930 1,048,779 89,349 874,869 144,937 146,079 52,374 ---------------------- -------------------- -------------------- -------------------- -------------------- -------------------- 5,514,015 482,055 4,578,303 768,685 787,627 268,304 ---------------------- -------------------- -------------------- -------------------- -------------------- -------------------- (5,513,695) (482,055) 1,448,208 (304,820) (775,154) 198,036 ---------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -- -- -- -- -- -- (2,755,023) 912,044 1,694,032 (562,041) 90,545 143,095 ---------------------- -------------------- -------------------- -------------------- -------------------- -------------------- (2,755,023) 912,044 1,694,032 (562,041) 90,545 143,095 ---------------------- -------------------- -------------------- -------------------- -------------------- -------------------- (62,286,695) (1,491,318) (34,037,911) (3,048,502) (2,134,269) (1,279,325) ---------------------- -------------------- -------------------- -------------------- -------------------- -------------------- (65,041,718) (579,274) (32,343,879) (3,610,543) (2,043,724) (1,136,230) ---------------------- -------------------- -------------------- -------------------- -------------------- -------------------- $ (70,555,413) $ (1,061,329) $ (30,895,671) $ (3,915,363) $ (2,818,878) $ (938,194) ====================== ==================== ==================== ==================== ==================== ====================
The accompanying notes are an integral part of these financial statements. 25 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2011 MIST MET/FRANKLIN MIST LORD ABBETT MIST MET/EATON MIST MET/FRANKLIN LOW DURATION BOND DEBENTURE VANCE FLOATING RATE INCOME TOTAL RETURN INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION (a) -------------------- -------------------- -------------------- ------------------------ INVESTMENT INCOME: Dividends $ 18,345,888 $ 100,153 $ 3,098,493 $ -- -------------------- -------------------- -------------------- ------------------------ EXPENSES: Mortality and expense risk and other charges 3,208,873 47,025 749,707 25,280 Administrative charges 733,407 11,648 175,949 5,848 -------------------- -------------------- -------------------- ------------------------ Total expenses 3,942,280 58,673 925,656 31,128 -------------------- -------------------- -------------------- ------------------------ Net investment income (loss) 14,403,608 41,480 2,172,837 (31,128) -------------------- -------------------- -------------------- ------------------------ NET REALIZED AND CHANGE IN UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions -- 13,168 1,923,800 -- Realized gains (losses) on sale of investments 2,290,866 (12,714) 320,239 (4,038) -------------------- -------------------- -------------------- ------------------------ Net realized gains (losses) 2,290,866 454 2,244,039 (4,038) -------------------- -------------------- -------------------- ------------------------ Change in unrealized gains (losses) on investments (7,309,571) (46,618) (4,384,031) (44,184) -------------------- -------------------- -------------------- ------------------------ Net realized and change in unrealized gains (losses) on investments (5,018,705) (46,164) (2,139,992) (48,222) -------------------- -------------------- -------------------- ------------------------ Net increase (decrease) in net assets resulting from operations $ 9,384,903 $ (4,684) $ 32,845 $ (79,350) ==================== ==================== ==================== ========================
(a) For the period May 2, 2011 to December 31, 2011. The accompanying notes are an integral part of these financial statements. 26 MIST MET/FRANKLIN MIST MET/FRANKLIN TEMPLETON FOUNDING MIST MET/TEMPLETON MIST MET/TEMPLETON MIST METLIFE MIST METLIFE MUTUAL SHARES STRATEGY GROWTH INTERNATIONAL BOND AGGRESSIVE STRATEGY BALANCED PLUS INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION (a) INVESTMENT DIVISION (a) ------------------- ------------------- ------------------- ------------------- ----------------------- ----------------------- $ 1,252,900 $ 1,061,477 $ 272,228 $ 416,987 $ -- $ 773,014 ------------------- ------------------- ------------------- ------------------- ----------------------- ----------------------- 466,516 642,182 218,753 61,960 716,570 1,715,635 113,503 152,620 52,377 15,385 166,860 429,267 ------------------- ------------------- ------------------- ------------------- ----------------------- ----------------------- 580,019 794,802 271,130 77,345 883,430 2,144,902 ------------------- ------------------- ------------------- ------------------- ----------------------- ----------------------- 672,881 266,675 1,098 339,642 (883,430) (1,371,888) ------------------- ------------------- ------------------- ------------------- ----------------------- ----------------------- 2,485,004 60,338 -- 7,629 -- -- 63,767 1,478,540 172,666 11,454 (1,223,379) -- ------------------- ------------------- ------------------- ------------------- ----------------------- ----------------------- 2,548,771 1,538,878 172,666 19,083 (1,223,379) -- ------------------- ------------------- ------------------- ------------------- ----------------------- ----------------------- (4,170,448) (3,784,395) (2,206,620) (521,008) (15,025,916) (2,485,885) ------------------- ------------------- ------------------- ------------------- ----------------------- ----------------------- (1,621,677) (2,245,517) (2,033,954) (501,925) (16,249,295) (2,485,885) ------------------- ------------------- ------------------- ------------------- ----------------------- ----------------------- $ (948,796) $ (1,978,842) $ (2,032,856) $ (162,283) $ (17,132,725) $ (3,857,773) =================== =================== =================== =================== ======================= =======================
The accompanying notes are an integral part of these financial statements. 27 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2011 MIST MFS EMERGING MARKETS MIST MFS RESEARCH MIST MORGAN STANLEY MIST OPPENHEIMER EQUITY INTERNATIONAL MID CAP GROWTH CAPITAL APPRECIATION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------- -------------------- -------------------- --------------------- INVESTMENT INCOME: Dividends $ 526,593 $ 4,842,535 $ 2,727,370 $ 56,698 -------------------- -------------------- -------------------- --------------------- EXPENSES: Mortality and expense risk and other charges 397,992 2,471,113 3,870,882 530,375 Administrative charges 98,109 602,971 812,144 123,915 -------------------- -------------------- -------------------- --------------------- Total expenses 496,101 3,074,084 4,683,026 654,290 -------------------- -------------------- -------------------- --------------------- Net investment income (loss) 30,492 1,768,451 (1,955,656) (597,592) -------------------- -------------------- -------------------- --------------------- NET REALIZED AND CHANGE IN UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions -- -- 10,100,029 -- Realized gains (losses) on sale of investments 72,819 (4,770,811) 8,214,313 (287,699) -------------------- -------------------- -------------------- --------------------- Net realized gains (losses) 72,819 (4,770,811) 18,314,342 (287,699) -------------------- -------------------- -------------------- --------------------- Change in unrealized gains (losses) on investments (8,862,777) (25,538,343) (43,580,440) (526,570) -------------------- -------------------- -------------------- --------------------- Net realized and change in unrealized gains (losses) on investments (8,789,958) (30,309,154) (25,266,098) (814,269) -------------------- -------------------- -------------------- --------------------- Net increase (decrease) in net assets resulting from operations $ (8,759,466) $ (28,540,703) $ (27,221,754) $ (1,411,861) ==================== ==================== ==================== =====================
(a) For the period May 2, 2011 to December 31, 2011. The accompanying notes are an integral part of these financial statements. 28 MIST PIMCO MIST SSGA INFLATION PROTECTED MIST PIMCO MIST PIONEER MIST PYRAMIS MIST RCM GROWTH AND BOND TOTAL RETURN STRATEGIC INCOME GOVERNMENT INCOME TECHNOLOGY INCOME ETF INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION (a) INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ----------------------- ------------------- ------------------- $ 8,933,129 $ 30,233,445 $ 2,057,332 $ 710,723 $ -- $ 12,277,353 ------------------- ------------------- ------------------- ----------------------- ------------------- ------------------- 5,730,131 11,478,602 496,857 495,860 1,624,138 7,439,216 1,349,961 2,701,235 118,761 121,464 366,214 1,834,137 ------------------- ------------------- ------------------- ----------------------- ------------------- ------------------- 7,080,092 14,179,837 615,618 617,324 1,990,352 9,273,353 ------------------- ------------------- ------------------- ----------------------- ------------------- ------------------- 1,853,037 16,053,608 1,441,714 93,399 (1,990,352) 3,004,000 ------------------- ------------------- ------------------- ----------------------- ------------------- ------------------- 25,394,542 34,565,013 279,725 1,577,120 -- 13,188,066 1,661,150 3,053,564 59,286 (1,016) 4,528,821 489,725 ------------------- ------------------- ------------------- ----------------------- ------------------- ------------------- 27,055,692 37,618,577 339,011 1,576,104 4,528,821 13,677,791 ------------------- ------------------- ------------------- ----------------------- ------------------- ------------------- 22,722,470 (32,790,032) (1,046,047) 2,283,413 (19,441,973) (22,210,213) ------------------- ------------------- ------------------- ----------------------- ------------------- ------------------- 49,778,162 4,828,545 (707,036) 3,859,517 (14,913,152) (8,532,422) ------------------- ------------------- ------------------- ----------------------- ------------------- ------------------- $ 51,631,199 $ 20,882,153 $ 734,678 $ 3,952,916 $ (16,903,504) $ (5,528,422) =================== =================== =================== ======================= =================== ===================
The accompanying notes are an integral part of these financial statements. 29 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2011 MIST SSGA MIST T. ROWE PRICE MIST THIRD AVENUE MSF ARTIO GROWTH ETF MID CAP GROWTH SMALL CAP VALUE INTERNATIONAL STOCK INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------- -------------------- -------------------- -------------------- INVESTMENT INCOME: Dividends $ 1,498,134 $ -- $ 105,722 $ 3,052,476 -------------------- -------------------- -------------------- -------------------- EXPENSES: Mortality and expense risk and other charges 962,323 2,955,553 92,212 1,829,859 Administrative charges 232,465 686,572 25,183 399,727 -------------------- -------------------- -------------------- -------------------- Total expenses 1,194,788 3,642,125 117,395 2,229,586 -------------------- -------------------- -------------------- -------------------- Net investment income (loss) 303,346 (3,642,125) (11,673) 822,890 -------------------- -------------------- -------------------- -------------------- NET REALIZED AND CHANGE IN UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions -- 7,410,915 -- -- Realized gains (losses) on sale of investments 2,063,340 4,372,165 7,471 (4,243,528) -------------------- -------------------- -------------------- -------------------- Net realized gains (losses) 2,063,340 11,783,080 7,471 (4,243,528) -------------------- -------------------- -------------------- -------------------- Change in unrealized gains (losses) on investments (5,913,643) (16,760,775) (1,051,353) (36,008,767) -------------------- -------------------- -------------------- -------------------- Net realized and change in unrealized gains (losses) on investments (3,850,303) (4,977,695) (1,043,882) (40,252,295) -------------------- -------------------- -------------------- -------------------- Net increase (decrease) in net assets resulting from operations $ (3,546,957) $ (8,619,820) $ (1,055,555) $ (39,429,405) ==================== ==================== ==================== ====================
(a) For the period May 2, 2011 to December 31, 2011. The accompanying notes are an integral part of these financial statements. 30 MSF BLACKROCK MSF BARCLAYS CAPITAL MSF BLACKROCK MSF BLACKROCK MSF BLACKROCK MSF BLACKROCK LEGACY LARGE CAP AGGREGATE BOND INDEX AGGRESSIVE GROWTH BOND INCOME DIVERSIFIED LARGE CAP VALUE GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------- ---------------------- ------------------- ---------------------- ---------------------- ------------------- $ 38,084,080 $ 1,303,444 $ 19,718,504 $ 16,576,484 $ 1,894,504 $ 44,256 -------------------- ---------------------- ------------------- ---------------------- ---------------------- ------------------- 11,639,844 4,949,910 5,272,842 7,152,212 2,153,568 1,679,636 2,655,315 1,010,190 1,200,098 1,397,700 502,232 425,801 -------------------- ---------------------- ------------------- ---------------------- ---------------------- ------------------- 14,295,159 5,960,100 6,472,940 8,549,912 2,655,800 2,105,437 -------------------- ---------------------- ------------------- ---------------------- ---------------------- ------------------- 23,788,921 (4,656,656) 13,245,564 8,026,572 (761,296) (2,061,181) -------------------- ---------------------- ------------------- ---------------------- ---------------------- ------------------- -- -- -- -- -- -- 6,260,260 11,767,838 968,641 (1,793,589) (2,110,608) 2,287,770 -------------------- ---------------------- ------------------- ---------------------- ---------------------- ------------------- 6,260,260 11,767,838 968,641 (1,793,589) (2,110,608) 2,287,770 -------------------- ---------------------- ------------------- ---------------------- ---------------------- ------------------- 35,508,667 (26,024,706) 11,150,590 11,482,045 4,546,025 (18,309,761) -------------------- ---------------------- ------------------- ---------------------- ---------------------- ------------------- 41,768,927 (14,256,868) 12,119,231 9,688,456 2,435,417 (16,021,991) -------------------- ---------------------- ------------------- ---------------------- ---------------------- ------------------- $ 65,557,848 $ (18,913,524) $ 25,364,795 $ 17,715,028 $ 1,674,121 $ (18,083,172) ==================== ====================== =================== ====================== ====================== ====================
The accompanying notes are an integral part of these financial statements. 31 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2011 MSF BLACKROCK MSF DAVIS VENTURE MSF FI VALUE MSF JENNISON MONEY MARKET VALUE LEADERS GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------- -------------------- -------------------- -------------------- INVESTMENT INCOME: Dividends $ -- $ 5,704,420 $ 640,195 $ 86,511 -------------------- -------------------- -------------------- -------------------- EXPENSES: Mortality and expense risk and other charges 1,020,266 5,992,196 705,004 793,582 Administrative charges 246,348 1,436,111 173,977 180,264 -------------------- -------------------- -------------------- -------------------- Total expenses 1,266,614 7,428,307 878,981 973,846 -------------------- -------------------- -------------------- -------------------- Net investment income (loss) (1,266,614) (1,723,887) (238,786) (887,335) -------------------- -------------------- -------------------- -------------------- NET REALIZED AND CHANGE IN UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions -- -- -- -- Realized gains (losses) on sale of investments -- 3,393,728 (2,860,117) 1,743,271 -------------------- -------------------- -------------------- -------------------- Net realized gains (losses) -- 3,393,728 (2,860,117) 1,743,271 -------------------- -------------------- -------------------- -------------------- Change in unrealized gains (losses) on investments -- (34,352,746) (1,901,241) (1,789,305) -------------------- -------------------- -------------------- -------------------- Net realized and change in unrealized gains (losses) on investments -- (30,959,018) (4,761,358) (46,034) -------------------- -------------------- -------------------- -------------------- Net increase (decrease) in net assets resulting from operations $ (1,266,614) $ (32,682,905) $ (5,000,144) $ (933,369) ==================== ==================== ==================== ====================
(a) For the period May 2, 2011 to December 31, 2011. The accompanying notes are an integral part of these financial statements. 32 MSF MET/DIMENSIONAL MSF METLIFE MSF METLIFE MSF LOOMIS SAYLES MSF LOOMIS SAYLES MSF MET/ARTISAN INTERNATIONAL SMALL CONSERVATIVE CONSERVATIVE TO SMALL CAP CORE SMALL CAP GROWTH MID CAP VALUE COMPANY ALLOCATION MODERATE ALLOCATION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------- -------------------- -------------------- -------------------- ------------------- -------------------- $ 57,980 $ -- $ 1,904,763 $ 74,757 $ 10,834,415 $ 25,356,564 -------------------- -------------------- -------------------- -------------------- ------------------- -------------------- 1,630,271 494,888 2,260,303 39,704 4,954,308 12,988,529 402,086 110,580 521,509 9,749 1,160,743 3,071,162 -------------------- -------------------- -------------------- -------------------- ------------------- -------------------- 2,032,357 605,468 2,781,812 49,453 6,115,051 16,059,691 -------------------- -------------------- -------------------- -------------------- ------------------- -------------------- (1,974,377) (605,468) (877,049) 25,304 4,719,364 9,296,873 -------------------- -------------------- -------------------- -------------------- ------------------- -------------------- -- -- -- 142,566 -- -- 1,733,783 705,937 (6,225,805) 47,762 2,238,716 3,119,728 -------------------- -------------------- -------------------- -------------------- ------------------- -------------------- 1,733,783 705,937 (6,225,805) 190,328 2,238,716 3,119,728 -------------------- -------------------- -------------------- -------------------- ------------------- -------------------- (708,103) 418,297 18,681,995 (958,109) 1,399,922 (17,598,815) -------------------- -------------------- -------------------- -------------------- ------------------- -------------------- 1,025,680 1,124,234 12,456,190 (767,781) 3,638,638 (14,479,087) -------------------- -------------------- -------------------- -------------------- ------------------- -------------------- $ (948,697) $ 518,766 $ 11,579,141 $ (742,477) $ 8,358,002 $ (5,182,214) ==================== ==================== ==================== ==================== =================== ====================
The accompanying notes are an integral part of these financial statements. 33 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2011 MSF METLIFE MSF METLIFE MID CAP MSF METLIFE MODERATE TO MSF METLIFE STOCK INDEX MODERATE ALLOCATION AGGRESSIVE ALLOCATION STOCK INDEX INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------- -------------------- ---------------------- -------------------- INVESTMENT INCOME: Dividends $ 3,070,209 $ 53,952,107 $ 22,985,906 $ 41,746,830 -------------------- -------------------- ---------------------- -------------------- EXPENSES: Mortality and expense risk and other charges 4,124,762 37,061,370 16,869,172 26,941,407 Administrative charges 935,994 8,890,063 3,972,718 5,768,603 -------------------- -------------------- ---------------------- -------------------- Total expenses 5,060,756 45,951,433 20,841,890 32,710,010 -------------------- -------------------- ---------------------- -------------------- Net investment income (loss) (1,990,547) 8,000,674 2,144,016 9,036,820 -------------------- -------------------- ---------------------- -------------------- NET REALIZED AND CHANGE IN UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 16,598,962 -- -- 16,260,879 Realized gains (losses) on sale of investments 5,032,036 3,413,004 (257,933) 2,104,267 -------------------- -------------------- ---------------------- -------------------- Net realized gains (losses) 21,630,998 3,413,004 (257,933) 18,365,146 -------------------- -------------------- ---------------------- -------------------- Change in unrealized gains (losses) on investments (31,516,016) (118,620,318) (82,743,124) (11,976,865) -------------------- -------------------- ---------------------- -------------------- Net realized and change in unrealized gains (losses) on investments (9,885,018) (115,207,314) (83,001,057) 6,388,281 -------------------- -------------------- ---------------------- -------------------- Net increase (decrease) in net assets resulting from operations $ (11,875,565) $ (107,206,640) $ (80,857,041) $ 15,425,101 ==================== ==================== ====================== ====================
(a) For the period May 2, 2011 to December 31, 2011. The accompanying notes are an integral part of these financial statements. 34 MSF NEUBERGER MSF MFS TOTAL MSF MORGAN STANLEY MSF NEUBERGER BERMAN MID CAP MSF OPPENHEIMER RETURN MSF MFS VALUE EAFE INDEX BERMAN GENESIS VALUE GLOBAL EQUITY INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- $ 3,693,311 $ 3,969,304 $ 10,423,643 $ 1,883,977 $ 3,196,031 $ 4,198,437 -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- 1,345,667 2,847,580 4,726,610 2,899,694 5,079,019 2,270,633 358,740 632,174 1,074,315 635,356 1,143,638 500,404 -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- 1,704,407 3,479,754 5,800,925 3,535,050 6,222,657 2,771,037 -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- 1,988,904 489,550 4,622,718 (1,651,073) (3,026,626) 1,427,400 -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -- -- -- -- -- -- (1,111,920) (771,664) 1,636,721 (11,750,296) 3,851,168 2,711,222 -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- (1,111,920) (771,664) 1,636,721 (11,750,296) 3,851,168 2,711,222 -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- 492,473 (703,266) (69,561,112) 25,875,010 (38,257,786) (25,269,443) -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- (619,447) (1,474,930) (67,924,391) 14,124,714 (34,406,618) (22,558,221) -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- $ 1,369,457 $ (985,380) $ (63,301,673) $ 12,473,641 $ (37,433,244) $ (21,130,821) ==================== ==================== ==================== ==================== ==================== ====================
The accompanying notes are an integral part of these financial statements. 35 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONCLUDED) FOR THE YEAR ENDED DECEMBER 31, 2011 MSF RUSSELL 2000 MSF T. ROWE PRICE MSF T. ROWE PRICE MSF VAN ECK GLOBAL INDEX LARGE CAP GROWTH SMALL CAP GROWTH NATURAL RESOURCES INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ---------------------- -------------------- -------------------- -------------------- INVESTMENT INCOME: Dividends $ 2,566,935 $ 77,614 $ -- $ 347,055 ---------------------- -------------------- -------------------- -------------------- EXPENSES: Mortality and expense risk and other charges 2,759,311 1,964,842 2,822,229 330,207 Administrative charges 614,898 415,556 616,391 81,065 ---------------------- -------------------- -------------------- -------------------- Total expenses 3,374,209 2,380,398 3,438,620 411,272 ---------------------- -------------------- -------------------- -------------------- Net investment income (loss) (807,274) (2,302,784) (3,438,620) (64,217) ---------------------- -------------------- -------------------- -------------------- NET REALIZED AND CHANGE IN UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions -- -- -- 2,990,402 Realized gains (losses) on sale of investments 3,720,824 4,920,269 10,695,895 (10,415) ---------------------- -------------------- -------------------- -------------------- Net realized gains (losses) 3,720,824 4,920,269 10,695,895 2,979,987 ---------------------- -------------------- -------------------- -------------------- Change in unrealized gains (losses) on investments (16,165,693) (6,874,835) (6,549,932) (9,826,380) ---------------------- -------------------- -------------------- -------------------- Net realized and change in unrealized gains (losses) on investments (12,444,869) (1,954,566) 4,145,963 (6,846,393) ---------------------- -------------------- -------------------- -------------------- Net increase (decrease) in net assets resulting from operations $ (13,252,143) $ (4,257,350) $ 707,343 $ (6,910,610) ====================== ==================== ==================== ====================
(a) For the period May 2, 2011 to December 31, 2011. The accompanying notes are an integral part of these financial statements. 36 MSF WESTERN ASSET MSF WESTERN ASSET MANAGEMENT STRATEGIC MANAGEMENT BOND OPPORTUNITIES U.S. GOVERNMENT MSF ZENITH EQUITY INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ----------------------- ---------------------- ---------------------- $ 13,233,885 $ 3,218,611 $ 797,965 ----------------------- ---------------------- ---------------------- 2,783,924 2,534,794 712,755 640,669 588,334 300,113 ----------------------- ---------------------- ---------------------- 3,424,593 3,123,128 1,012,868 ----------------------- ---------------------- ---------------------- 9,809,292 95,483 (214,903) ----------------------- ---------------------- ---------------------- -- 8,501,229 -- 2,685,564 (118,831) (2,272,347) ----------------------- ---------------------- ---------------------- 2,685,564 8,382,398 (2,272,347) ----------------------- ---------------------- ---------------------- (604,578) 1,018,684 (973,507) ----------------------- ---------------------- ---------------------- 2,080,986 9,401,082 (3,245,854) ----------------------- ---------------------- ---------------------- $ 11,890,278 $ 9,496,565 $ (3,460,757) ======================= ====================== ======================
The accompanying notes are an integral part of these financial statements. 37 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 AMERICAN FUNDS GLOBAL AMERICAN FUNDS BOND SMALL CAPITALIZATION AMERICAN FUNDS GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------- ----------------------------- ------------------------------ 2011 2010 2011 2010 2011 2010 ---------------- -------------- -------------- -------------- -------------- --------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 1,912,904 $ 2,130,045 $ (722,693) $ 1,499,951 $ (8,942,002) $ (7,611,597) Net realized gains (losses) (481,200) (844,224) (1,937,100) (6,774,900) 8,178,841 (7,968,450) Change in unrealized gains (losses) on investments 4,732,695 5,723,309 (121,022,693) 112,995,770 (55,277,508) 178,079,413 ---------------- -------------- -------------- -------------- -------------- --------------- Net increase (decrease) in net assets resulting from operations 6,164,399 7,009,130 (123,682,486) 107,720,821 (56,040,669) 162,499,366 ---------------- -------------- -------------- -------------- -------------- --------------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 4,605,981 5,134,778 38,959,482 51,991,152 39,620,489 41,944,806 Net transfers (including fixed account) (9,468,083) 287,661 (14,713,325) (8,532,736) (45,406,318) (36,480,164) Contract charges (463,334) (453,986) (1,922,053) (1,562,744) (2,746,185) (2,634,566) Transfers for contract benefits and terminations (13,214,005) (13,324,544) (47,884,031) (39,865,225) (96,681,685) (81,281,863) ---------------- -------------- -------------- -------------- -------------- --------------- Net increase (decrease) in net assets resulting from contract transactions (18,539,441) (8,356,091) (25,559,927) 2,030,447 (105,213,699) (78,451,787) ---------------- -------------- -------------- -------------- -------------- --------------- Net increase (decrease) in net assets (12,375,042) (1,346,961) (149,242,413) 109,751,268 (161,254,368) 84,047,579 NET ASSETS: Beginning of year 144,729,120 146,076,081 638,167,766 528,416,498 1,104,322,652 1,020,275,073 ---------------- -------------- -------------- -------------- -------------- --------------- End of year $ 132,354,078 $ 144,729,120 $ 488,925,353 $ 638,167,766 $ 943,068,284 $1,104,322,652 ================ ============== ============== ============== ============== ===============
(a) For the period May 2, 2011 to December 31, 2011. (b) For the period May 3, 2010 to December 31, 2010. The accompanying notes are an integral part of these financial statements. 38 AMERICAN FUNDS GROWTH-INCOME CALVERT VP SRI BALANCED CALVERT VP SRI MID CAP GROWTH FIDELITY VIP EQUITY-INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------------- ------------------------------- -------------------------------- ----------------------------- 2011 2010 2011 2010 2011 2010 2011 2010 ------------------ ---------------- --------------- --------------- --------------- ---------------- --------------- ------------- $ 680,250 $ 343,863 $ 74,111 $ 142,141 $ (115,821) $ (97,809) $ 1,141,342 $ 667,143 (497,604) (3,955,205) (290,776) (685,900) 1,397,230 110,586 (2,749,961) (3,399,915) (23,849,987) 69,327,843 1,902,701 5,550,635 (1,100,516) 2,821,839 1,511,658 14,153,055 ------------------ ---------------- --------------- --------------- --------------- ---------------- --------------- ------------- (23,667,341) 65,716,501 1,686,036 5,006,876 180,893 2,834,616 (96,961) 11,420,283 ------------------ ---------------- --------------- --------------- --------------- ---------------- --------------- ------------- 52,889,395 62,316,340 2,864,634 3,234,117 642,249 632,519 2,401,575 2,662,345 (10,212,170) 4,606,572 (1,098,691) (1,589,620) 390,259 (36,204) (1,577,272) (1,531,810) (2,239,908) (1,694,645) (14,863) (12,934) (1,911) (1,773) (20,303) (23,149) (65,594,062) (57,078,012) (4,400,030) (3,180,201) (2,147,199) (583,359) (14,171,358) (9,829,871) ------------------ ---------------- --------------- --------------- --------------- ---------------- --------------- ------------- (25,156,745) 8,150,255 (2,648,950) (1,548,638) (1,116,602) 11,183 (13,367,358) (8,722,485) ------------------ ---------------- --------------- --------------- --------------- ---------------- --------------- ------------- (48,824,086) 73,866,756 (962,914) 3,458,238 (935,709) 2,845,799 (13,464,319) 2,697,798 738,591,508 664,724,752 50,866,287 47,408,049 12,234,406 9,388,607 91,649,413 88,951,615 ------------------ ---------------- --------------- --------------- --------------- ---------------- --------------- ------------- $ 689,767,422 $ 738,591,508 $ 49,903,373 $ 50,866,287 $ 11,298,697 $ 12,234,406 $ 78,185,094 $91,649,413 ================== ================ =============== =============== =============== ================ =============== =============
The accompanying notes are an integral part of these financial statements. 39 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 FIDELITY VIP FIDELITY VIP FUNDSMANAGER 60% FIDELITY VIP GROWTH INVESTMENT GRADE BOND INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------------- ------------------------------- ---------------------------- 2011 2010 2011 2010 2011 2010 ------------------ --------------- --------------- --------------- --------------- ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (79,777) $ 241,361 $ (517,744) $ (530,689) $ 478,696 $ 572,208 Net realized gains (losses) 557,081 244,555 (518,647) (1,747,215) 716,735 371,896 Change in unrealized gains (losses) on investments (7,937,164) 7,448,599 505,122 19,174,195 124,265 525,375 ------------------ --------------- --------------- --------------- --------------- ------------ Net increase (decrease) in net assets resulting from operations (7,459,860) 7,934,515 (531,269) 16,896,291 1,319,696 1,469,479 ------------------ --------------- --------------- --------------- --------------- ------------ CONTRACT TRANSACTIONS: Purchase payments received from contract owners 556,880 154,271 2,599,413 2,733,475 1,569,362 1,784,716 Net transfers (including fixed account) 110,365,710 92,253,872 (2,458,152) (2,592,987) 17,672 294,062 Contract charges -- -- (4,018) (3,704) (1,524) (1,605) Transfers for contract benefits and terminations (4,893,840) (958,093) (14,018,654) (6,553,193) (3,661,147) (3,050,964) ------------------ --------------- --------------- --------------- --------------- ------------ Net increase (decrease) in net assets resulting from contract transactions 106,028,750 91,450,050 (13,881,411) (6,416,409) (2,075,637) (973,791) ------------------ --------------- --------------- --------------- --------------- ------------ Net increase (decrease) in net assets 98,568,890 99,384,565 (14,412,680) 10,479,882 (755,941) 495,688 NET ASSETS: Beginning of year 99,633,507 248,942 89,166,883 78,687,001 22,154,719 21,659,031 ------------------ --------------- --------------- --------------- --------------- ------------ End of year $ 198,202,397 $ 99,633,507 $ 74,754,203 $ 89,166,883 $ 21,398,778 $22,154,719 ================== =============== =============== =============== =============== ============
(a) For the period May 2, 2011 to December 31, 2011. (b) For the period May 3, 2010 to December 31, 2010. The accompanying notes are an integral part of these financial statements. 40 MIST ALLIANCEBERNSTEIN GLOBAL DYNAMIC MIST AMERICAN FUNDS FIDELITY VIP MONEY MARKET ALLOCATION BALANCED ALLOCATION MIST AMERICAN FUNDS BOND INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------- ------------------- --------------------------------- ----------------------------- 2011 2010 2011 (a) 2011 2010 2011 2010 ---------------- ------------ ------------------- ---------------- ---------------- --------------- ------------- $ (162,831) $ (151,091) $ 335,670 $ (45,493) $ (1,062,193) $ 642,517 $ 89,819 -- 8,110 2,726,233 2,539,215 531,199 294,003 74,511 -- -- 2,398,335 (26,212,914) 47,023,020 2,430,315 1,153,467 ---------------- ------------ ------------------- ---------------- ---------------- --------------- ------------- (162,831) (142,981) 5,460,238 (23,719,192) 46,492,026 3,366,835 1,317,797 ---------------- ------------ ------------------- ---------------- ---------------- --------------- ------------- 112,128,554 94,396,891 413,385,545 110,824,096 170,955,523 17,470,892 26,050,303 (109,363,322) (94,346,805) 62,687,480 19,902,322 67,661,263 893,819 16,191,510 -- -- -- (4,833,472) (2,349,575) (625,233) (240,968) (2,686,183) (3,294,615) (1,741,537) (23,073,710) (11,991,536) (3,193,810) (1,128,653) ---------------- ------------ ------------------- ---------------- ---------------- --------------- ------------- 79,049 (3,244,529) 474,331,488 102,819,236 224,275,675 14,545,668 40,872,192 ---------------- ------------ ------------------- ---------------- ---------------- --------------- ------------- (83,782) (3,387,510) 479,791,726 79,100,044 270,767,701 17,912,503 42,189,989 12,251,820 15,639,330 -- 539,848,602 269,080,901 61,894,293 19,704,304 ---------------- ------------ ------------------- ---------------- ---------------- --------------- ------------- $ 12,168,038 $12,251,820 $ 479,791,726 $ 618,948,646 $ 539,848,602 $ 79,806,796 $61,894,293 ================ ============ =================== ================ ================ =============== =============
The accompanying notes are an integral part of these financial statements. 41 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 MIST AMERICAN FUNDS MIST AMERICAN FUNDS GROWTH ALLOCATION MIST AMERICAN FUNDS GROWTH MODERATE ALLOCATION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------------- ----------------------------- ---------------------------- 2011 2010 2011 2010 2011 2010 ------------------ ---------------- -------------- -------------- -------------- ------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (580,718) $ (1,259,542) $ (2,310,704) $ (1,322,970) $ 2,292,257 $ 761,836 Net realized gains (losses) 7,429,105 2,901,779 291,118 22,594 6,758,545 774,379 Change in unrealized gains (losses) on investments (26,279,387) 33,173,352 (15,352,098) 26,881,903 (19,966,753) 52,534,878 ------------------ ---------------- -------------- -------------- -------------- ------------- Net increase (decrease) in net assets resulting from operations (19,431,000) 34,815,589 (17,371,684) 25,581,527 (10,915,951) 54,071,093 ------------------ ---------------- -------------- -------------- -------------- ------------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 22,562,960 25,149,812 68,751,380 78,568,522 128,104,989 205,176,066 Net transfers (including fixed account) (14,464,295) 10,819,336 26,166,684 35,988,154 20,511,116 99,670,190 Contract charges (2,458,404) (2,162,316) (1,871,942) (692,168) (6,918,596) (3,948,995) Transfers for contract benefits and terminations (15,077,691) (12,814,680) (7,621,585) (3,129,572) (36,334,226) (23,518,435) ------------------ ---------------- -------------- -------------- -------------- ------------- Net increase (decrease) in net assets resulting from contract transactions (9,437,430) 20,992,152 85,424,537 110,734,936 105,363,283 277,378,826 ------------------ ---------------- -------------- -------------- -------------- ------------- Net increase (decrease) in net assets (28,868,430) 55,807,741 68,052,853 136,316,463 94,447,332 331,449,919 NET ASSETS: Beginning of year 332,353,082 276,545,341 201,192,477 64,876,014 762,782,012 431,332,093 ------------------ ---------------- -------------- -------------- -------------- ------------- End of year $ 303,484,652 $ 332,353,082 $ 269,245,330 $ 201,192,477 $ 857,229,344 $762,782,012 ================== ================ ============== ============== ============== =============
(a) For the period May 2, 2011 to December 31, 2011. (b) For the period May 3, 2010 to December 31, 2010. The accompanying notes are an integral part of these financial statements. 42 MIST BLACKROCK MIST AQR GLOBAL GLOBAL TACTICAL RISK BALANCED STRATEGIES MIST BLACKROCK LARGE CAP CORE VARIABLE B VARIABLE C INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------ ----------------------- ------------------------------- --------------------------- ------------------------ 2011 (a) 2011 (a) 2011 2010 2011 2010 2011 2010 ------------------ ----------------------- ---------------- -------------- ------------- ------------- ------------ ----------- $ 6,134,076 $ 2,136,468 $ (454,121) $ 967,145 $ 30,420 $ 64,184 $ 10,413 $ 12,167 1,769,075 5,360,049 (15,466,300) (26,973,460) (458,462) (894,860) (3,391) (33,576) 5,327,552 (6,803,039) 12,686,156 93,404,052 358,894 2,364,194 (3,100) 140,629 ------------------ ----------------------- ---------------- -------------- ------------- ------------- ------------ ----------- 13,230,703 693,478 (3,234,265) 67,397,737 (69,148) 1,533,518 3,922 119,220 ------------------ ----------------------- ---------------- -------------- ------------- ------------- ------------ ----------- 512,377,832 629,143,144 25,161,138 25,719,963 1,076 1,973 -- -- 75,719,475 82,864,472 (6,231,167) (15,767,951) -- -- -- -- -- -- (464,397) (293,926) -- -- -- -- (2,160,152) (2,938,000) (64,881,338) (58,835,691) (1,703,485) (2,348,069) (15,916) (71,527) ------------------ ----------------------- ---------------- -------------- ------------- ------------- ------------ ---------- 585,937,155 709,069,616 (46,415,764) (49,177,605) (1,702,409) (2,346,096) (15,916) (71,527) ------------------ ----------------------- ---------------- -------------- ------------- ------------- ------------ ----------- 599,167,858 709,763,094 (49,650,029) 18,220,132 (1,771,557) (812,578) (11,994) 47,693 -- -- 657,439,675 639,219,543 14,265,716 15,078,294 1,092,411 1,044,718 ------------------ ----------------------- ---------------- -------------- ------------- ------------- ------------ ----------- $ 599,167,858 $ 709,763,094 $ 607,789,646 $ 657,439,675 $ 12,494,159 $ 14,265,716 $ 1,080,417 $1,092,411 ================== ======================= ================ ============== ============= ============= ============ ===========
The accompanying notes are an integral part of these financial statements. 43 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 MIST CLARION GLOBAL REAL ESTATE MIST DREMAN SMALL CAP VALUE MIST HARRIS OAKMARK INTERNATIONAL INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------------- ---------------------------- -------------------------------- 2011 2010 2011 2010 2011 2010 ------------------ -------------- --------------- ------------ -------------- ----------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 5,894,357 $ 14,192,568 $ 17,128 $ (40,346) $ (5,513,695) $ 2,087,253 Net realized gains (losses) (5,517,197) (7,589,978) 67,004 14,535 (2,755,023) (5,609,524) Change in unrealized gains (losses) on investments (15,609,550) 22,351,529 (1,567,033) 1,281,581 (62,286,695) 54,709,202 ------------------ -------------- --------------- ------------ -------------- ----------------- Net increase (decrease) in net assets resulting from operations (15,232,390) 28,954,119 (1,482,901) 1,255,770 (70,555,413) 51,186,931 ------------------ -------------- --------------- ------------ -------------- ----------------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 16,058,809 16,901,719 3,849,328 3,729,955 52,450,196 55,684,656 Net transfers (including fixed account) 2,947,656 (3,125,734) 2,394,616 1,930,885 30,416,989 35,509,224 Contract charges (792,701) (633,889) (87,391) (31,258) (1,799,747) (1,081,941) Transfers for contract benefits and terminations (17,651,756) (15,199,403) (282,895) (155,301) (29,822,147) (23,962,616) ------------------ -------------- --------------- ------------ -------------- ----------------- Net increase (decrease) in net assets resulting from contract transactions 562,008 (2,057,307) 5,873,658 5,474,281 51,245,291 66,149,323 ------------------ -------------- --------------- ------------ -------------- ----------------- Net increase (decrease) in net assets (14,670,382) 26,896,812 4,390,757 6,730,051 (19,310,122) 117,336,254 NET ASSETS: Beginning of year 228,566,225 201,669,413 9,722,885 2,992,834 422,198,591 304,862,337 ------------------ -------------- --------------- ------------ -------------- ----------------- End of year $ 213,895,843 $ 228,566,225 $ 14,113,642 $ 9,722,885 $ 402,888,469 $ 422,198,591 ================== ============== =============== ============ ============== =================
(a) For the period May 2, 2011 to December 31, 2011. (b) For the period May 3, 2010 to December 31, 2010. The accompanying notes are an integral part of these financial statements. 44 MIST LEGG MASON MIST INVESCO SMALL CAP GROWTH MIST JANUS FORTY MIST LAZARD MID CAP CLEARBRIDGE AGGRESSIVE GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------------- --------------------------------- ------------------------------- -------------------------------- 2011 2010 2011 2010 2011 2010 2011 2010 ----------------- --------------- ---------------- ---------------- --------------- --------------- --------------- ---------------- $ (482,055) $ (421,859) $ 1,448,208 $ 991,065 $ (304,820) $ (214,510) $ (775,154) $ (294,997) 912,044 (525,750) 1,694,032 (2,325,421) (562,041) (1,666,941) 90,545 (768,247) (1,491,318) 7,832,883 (34,037,911) 29,106,518 (3,048,502) 12,803,005 (2,134,269) 6,050,147 ----------------- --------------- ---------------- ---------------- --------------- --------------- --------------- ---------------- (1,061,329) 6,885,274 (30,895,671) 27,772,162 (3,915,363) 10,921,554 (2,818,878) 4,986,903 ----------------- --------------- ---------------- ---------------- --------------- --------------- --------------- ---------------- 3,144,653 2,697,542 36,842,239 63,143,370 4,885,854 4,356,820 10,021,380 3,827,190 1,935,017 (2,972,174) (36,925,469) 155,142 (49,708) 1,355,165 49,368,964 1,887,423 (124,306) (102,250) (2,013,612) (1,435,148) (198,843) (161,060) (231,580) (57,854) (3,198,790) (2,505,609) (20,987,743) (18,120,161) (5,216,805) (4,142,484) (4,703,187) (1,916,298) ----------------- --------------- ---------------- ---------------- --------------- --------------- --------------- ---------------- 1,756,574 (2,882,491) (23,084,585) 43,743,203 (579,502) 1,408,441 54,455,577 3,740,461 ----------------- --------------- ---------------- ---------------- --------------- --------------- --------------- ---------------- 695,245 4,002,783 (53,980,256) 71,515,365 (4,494,865) 12,329,995 51,636,699 8,727,364 34,771,690 30,768,907 380,880,175 309,364,810 62,137,025 49,807,030 29,795,656 21,068,292 ----------------- --------------- ---------------- ---------------- --------------- --------------- --------------- ---------------- $ 35,466,935 $ 34,771,690 $ 326,899,919 $ 380,880,175 $ 57,642,160 $ 62,137,025 $ 81,432,355 $ 29,795,656 ================= =============== ================ ================ =============== =============== =============== ================
The accompanying notes are an integral part of these financial statements. 45 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 MIST LOOMIS SAYLES GLOBAL MARKETS MIST LORD ABBETT BOND DEBENTURE MIST MET/EATON VANCE FLOATING RATE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------------- ------------------------------- ---------------------------------- 2011 2010 2011 2010 2011 2010 (b) ----------------- --------------- ---------------- -------------- -------------- ------------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 198,036 $ 57,888 $ 14,403,608 $ 13,400,996 $ 41,480 $ (3,900) Net realized gains (losses) 143,095 108,798 2,290,866 1,073,013 454 568 Change in unrealized gains (losses) on investments (1,279,325) 1,236,521 (7,309,571) 15,344,333 (46,618) 27,564 -------------- --------------- ---------------- -------------- -------------- ------------------- Net increase (decrease) in net assets resulting from operations (938,194) 1,403,207 9,384,903 29,818,342 (4,684) 24,232 -------------- --------------- ---------------- -------------- -------------- ------------------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 7,582,991 4,976,265 21,104,651 21,861,665 1,709,307 891,252 Net transfers (including fixed account) 4,747,575 4,182,111 2,409,217 9,744,111 3,394,688 405,511 Contract charges (150,503) (38,857) (1,026,357) (730,567) (22,023) (290) Transfers for contract benefits and terminations (944,464) (155,556) (27,440,537) (23,041,530) (386,478) (14,591) -------------- --------------- ---------------- -------------- -------------- ------------------- Net increase (decrease) in net assets resulting from contract transactions 11,235,599 8,963,963 (4,953,026) 7,833,679 4,695,494 1,281,882 -------------- --------------- ---------------- -------------- -------------- ------------------- Net increase (decrease) in net assets 10,297,405 10,367,170 4,431,877 37,652,021 4,690,810 1,306,114 NET ASSETS: Beginning of year 13,393,060 3,025,890 294,861,986 257,209,965 1,306,114 -- -------------- --------------- ---------------- -------------- -------------- ------------------- End of year $23,690,465 $ 13,393,060 $ 299,293,863 $ 294,861,986 $ 5,996,924 $ 1,306,114 ============== =============== ================ ============== ============== ===================
(a) For the period May 2, 2011 to December 31, 2011. (b) For the period May 3, 2010 to December 31, 2010. The accompanying notes are an integral part of these financial statements. 46 MIST MET/FRANKLIN LOW DURATION MIST MET/FRANKLIN TEMPLETON MIST MET/FRANKLIN INCOME TOTAL RETURN MIST MET/FRANKLIN MUTUAL SHARES FOUNDING STRATEGY INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------------- ----------------------- ------------------------------- ------------------------------ 2011 2010 2011 (a) 2011 2010 2011 2010 ----------------- --------------- ----------------------- --------------- --------------- --------------- -------------- $ 2,172,837 $ 955,014 $ (31,128) $ 672,881 $ (335,924) $ 266,675 $ (703,986) 2,244,039 420,886 (4,038) 2,548,771 377,198 1,538,878 921,374 (4,384,031) 2,943,481 (44,184) (4,170,448) 2,897,278 (3,784,395) 4,426,690 ----------------- --------------- ----------------------- --------------- --------------- --------------- -------------- 32,845 4,319,381 (79,350) (948,796) 2,938,552 (1,978,842) 4,644,078 ----------------- --------------- ----------------------- --------------- --------------- --------------- -------------- 13,668,533 13,700,406 2,171,280 7,962,310 8,942,107 3,330,701 4,947,679 17,640,435 13,511,076 4,657,569 7,453,138 10,306,906 1,731,315 3,308,459 (398,816) (174,850) (11,327) (302,374) (132,335) (448,304) (376,898) (4,090,256) (2,500,295) (102,505) (2,056,987) (1,180,859) (3,578,385) (2,619,175) ----------------- --------------- ----------------------- --------------- --------------- --------------- -------------- 26,819,896 24,536,337 6,715,017 13,056,087 17,935,819 1,035,327 5,260,065 ----------------- --------------- ----------------------- --------------- --------------- --------------- -------------- 26,852,741 28,855,718 6,635,667 12,107,291 20,874,371 (943,515) 9,904,143 56,016,534 27,160,816 -- 38,703,192 17,828,821 60,196,783 50,292,640 ----------------- --------------- ----------------------- --------------- --------------- --------------- -------------- $ 82,869,275 $ 56,016,534 $ 6,635,667 $ 50,810,483 $ 38,703,192 $ 59,253,268 $60,196,783 ================= =============== ======================= =============== =============== =============== ==============
The accompanying notes are an integral part of these financial statements. 47 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 MIST METLIFE AGGRESSIVE MIST MET/TEMPLETON STRATEGY MIST METLIFE MIST MET/TEMPLETON GROWTH INTERNATIONAL BOND INVESTMENT BALANCED PLUS INVESTMENT DIVISION INVESTMENT DIVISION DIVISION INVESTMENT DIVISION ----------------------------- ----------------------------- --------------- ------------------- 2011 2010 2011 2010 2011 (a) 2011 (a) --------------- ------------- -------------- -------------- --------------- ------------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 1,098 $ (36,150) $ 339,642 $ (17,673) $ (883,430) $ (1,371,888) Net realized gains (losses) 172,666 175,521 19,083 7,683 (1,223,379) -- Change in unrealized gains (losses) on investments (2,206,620) 1,090,653 (521,008) 224,095 (15,025,916) (2,485,885) --------------- ------------- -------------- -------------- --------------- ------------------- Net increase (decrease) in net assets resulting from operations (2,032,856) 1,230,024 (162,283) 214,105 (17,132,725) (3,857,773) --------------- ------------- -------------- -------------- --------------- ------------------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 3,585,962 4,277,271 1,977,676 2,536,123 9,235,767 535,878,034 Net transfers (including fixed account) 3,882,994 3,229,863 981,155 1,056,202 115,464,716 72,096,681 Contract charges (134,668) (63,960) (51,568) (9,239) (193,115) -- Transfers for contract benefits and terminations (901,511) (630,556) (130,108) (53,636) (4,891,358) (2,650,934) --------------- ------------- -------------- -------------- --------------- ------------------- Net increase (decrease) in net assets resulting from contract transactions 6,432,777 6,812,618 2,777,155 3,529,450 119,616,010 605,323,781 --------------- ------------- -------------- -------------- --------------- ------------------- Net increase (decrease) in net assets 4,399,921 8,042,642 2,614,872 3,743,555 102,483,285 601,466,008 NET ASSETS: Beginning of year 17,633,999 9,591,357 4,442,866 699,311 -- -- --------------- ------------- -------------- -------------- --------------- ------------------- End of year $ 22,033,920 $ 17,633,999 $ 7,057,738 $ 4,442,866 $ 102,483,285 $ 601,466,008 =============== ============= ============== ============== =============== ===================
(a) For the period May 2, 2011 to December 31, 2011. (b) For the period May 3, 2010 to December 31, 2010. The accompanying notes are an integral part of these financial statements. 48 MIST MORGAN STANLEY MIST OPPENHEIMER MIST MFS EMERGING MARKETS EQUITY MIST MFS RESEARCH INTERNATIONAL MID CAP GROWTH CAPITAL APPRECIATION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------------- --------------------------------- --------------------------------- ----------------------------- 2011 2010 2011 2010 2011 2010 (b) 2011 2010 ----------------- --------------- ---------------- ---------------- ---------------- ---------------- --------------- ------------- $ 30,492 $ (82,237) $ 1,768,451 $ 1,321,741 $ (1,955,656) $ (2,781,061) $ (597,592) $ (361,767) 72,819 58,220 (4,770,811) (11,417,961) 18,314,342 363,970 (287,699) (793,451) (8,862,777) 5,002,134 (25,538,343) 32,690,397 (43,580,440) 59,763,903 (526,570) 4,872,565 ----------------- --------------- ---------------- ---------------- ---------------- ---------------- --------------- ------------- (8,759,466) 4,978,117 (28,540,703) 22,594,177 (27,221,754) 57,346,812 (1,411,861) 3,717,347 ----------------- --------------- ---------------- ---------------- ---------------- ---------------- --------------- ------------- 11,252,563 13,602,873 18,801,518 22,637,792 18,132,310 11,345,607 6,094,203 8,087,873 7,657,130 5,410,332 (9,007,934) (14,428,774) (6,689,028) 339,607,206 (1,501,257) 1,727,499 (293,224) (106,857) (888,593) (723,632) (379,356) (190,863) (260,642) (173,446) (1,115,601) (434,390) (19,543,264) (17,194,311) (39,261,624) (21,249,880) (2,825,643) (2,360,479) ----------------- --------------- ---------------- ---------------- ---------------- ---------------- --------------- ------------- 17,500,868 18,471,958 (10,638,273) (9,708,925) (28,197,698) 329,512,070 1,506,661 7,281,447 ----------------- --------------- ---------------- ---------------- ---------------- ---------------- --------------- ------------- 8,741,402 23,450,075 (39,178,976) 12,885,252 (55,419,452) 386,858,882 94,800 10,998,794 32,997,742 9,547,667 258,478,220 245,592,968 386,858,882 -- 49,119,197 38,120,403 ----------------- --------------- ---------------- ---------------- ---------------- ---------------- --------------- ------------- $ 41,739,144 $ 32,997,742 $ 219,299,244 $ 258,478,220 $ 331,439,430 $ 386,858,882 $ 49,213,997 $49,119,197 ================= =============== ================ ================ ================ ================ =============== =============
The accompanying notes are an integral part of these financial statements. 49 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 MIST PIMCO INFLATION PROTECTED BOND MIST PIMCO TOTAL RETURN MIST PIONEER STRATEGIC INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------- ------------------------------ ------------------------------ 2011 2010 2011 2010 2011 2010 ---------------- ------------ -------------- --------------- --------------- -------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 1,853,037 $3,827,409 $ 16,053,608 $ 19,239,645 $ 1,441,714 $ 423,364 Net realized gains (losses) 27,055,692 10,472,904 37,618,577 7,447,473 339,011 41,477 Change in unrealized gains (losses) on investments 22,722,470 8,009,393 (32,790,032) 27,152,115 (1,046,047) 1,280,668 ---------------- ------------ -------------- --------------- --------------- -------------- Net increase (decrease) in net assets resulting from operations 51,631,199 22,309,706 20,882,153 53,839,233 734,678 1,745,509 ---------------- ------------ -------------- --------------- --------------- -------------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 84,786,072 83,479,725 139,998,412 175,008,002 16,258,528 16,184,763 Net transfers (including fixed account) 41,379,883 66,372,663 6,058,753 146,399,976 6,180,173 9,246,979 Contract charges (3,086,814) (1,630,995) (5,393,953) (3,004,374) (296,120) (81,633) Transfers for contract benefits and terminations (35,371,281) (25,281,140) (87,125,186) (69,566,031) (1,530,939) (404,068) ---------------- ------------ -------------- --------------- --------------- -------------- Net increase (decrease) in net assets resulting from contract transactions 87,707,860 122,940,253 53,538,026 248,837,573 20,611,642 24,946,041 ---------------- ------------ -------------- --------------- --------------- -------------- Net increase (decrease) in net assets 139,339,059 145,249,959 74,420,179 302,676,806 21,346,320 26,691,550 NET ASSETS: Beginning of year 467,910,969 322,661,010 1,048,658,444 745,981,638 34,118,467 7,426,917 ---------------- ------------ -------------- --------------- --------------- -------------- End of year $ 607,250,028 467,910,969 $1,123,078,623 $1,048,658,444 $ 55,464,787 $ 34,118,467 ================ ============ ============== =============== =============== ==============
(a) For the period May 2, 2011 to December 31, 2011. (b) For the period May 3, 2010 to December 31, 2010. The accompanying notes are an integral part of these financial statements. 50 MIST PYRAMIS GOVERNMENT MIST SSGA GROWTH INCOME MIST RCM TECHNOLOGY AND INCOME ETF MIST SSGA GROWTH ETF INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ---------------------- --------------------------------- --------------------------------- ----------------------------- 2011 (a) 2011 2010 2011 2010 2011 2010 ---------------------- ---------------- ---------------- ---------------- ---------------- --------------- ------------- $ 93,399 $ (1,990,352) $ (1,609,346) $ 3,004,000 $ (708,755) $ 303,346 $ 90,051 1,576,104 4,528,821 (1,369,845) 13,677,791 116,700 2,063,340 1,075,894 2,283,413 (19,441,973) 32,648,128 (22,210,213) 46,487,224 (5,913,643) 7,513,340 ---------------------- ---------------- ---------------- ---------------- ---------------- --------------- ------------- 3,952,916 (16,903,504) 29,668,937 (5,528,422) 45,895,169 (3,546,957) 8,679,285 ---------------------- ---------------- ---------------- ---------------- ---------------- --------------- ------------- 173,607,003 13,991,451 12,423,409 157,482,497 208,565,140 11,407,995 11,647,734 24,284,908 (1,016,006) 4,154,388 109,982,973 153,589,461 9,014,471 12,726,150 -- (517,513) (363,380) (5,839,559) (1,980,810) (568,402) (400,677) (1,430,167) (13,031,666) (9,023,144) (24,463,994) (9,273,469) (4,734,284) (3,120,829) ---------------------- ---------------- ---------------- ---------------- ---------------- --------------- ------------- 196,461,744 (573,734) 7,191,273 237,161,917 350,900,322 15,119,780 20,852,378 ---------------------- ---------------- ---------------- ---------------- ---------------- --------------- ------------- 200,414,660 (17,477,238) 36,860,210 231,633,495 396,795,491 11,572,823 29,531,663 -- 151,310,709 114,450,499 579,390,787 182,595,296 84,197,233 54,665,570 ---------------------- ---------------- ---------------- ---------------- ---------------- --------------- ------------- $ 200,414,660 $ 133,833,471 $ 151,310,709 $ 811,024,282 $ 579,390,787 $ 95,770,056 $84,197,233 ====================== ================ ================ ================ ================ =============== =============
The accompanying notes are an integral part of these financial statements. 51 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 MSF ARTIO MIST T. ROWE PRICE MID CAP GROWTH MIST THIRD AVENUE SMALL CAP VALUE INTERNATIONAL STOCK INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------------- --------------------------------- ---------------------------- 2011 2010 2011 2010 2011 2010 ------------------ -------------- -------------- ------------------ -------------- ------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (3,642,125) $ (2,819,703) $ (11,673) $ (2,852) $ 822,890 $ 462,436 Net realized gains (losses) 11,783,080 291,154 7,471 (40,527) (4,243,528) (4,928,490) Change in unrealized gains (losses) on investments (16,760,775) 55,974,973 (1,051,353) 1,603,706 (36,008,767) 14,916,195 ------------------ -------------- -------------- ------------------ -------------- ------------- Net increase (decrease) in net assets resulting from operations (8,619,820) 53,446,424 (1,055,555) 1,560,327 (39,429,405) 10,450,141 ------------------ -------------- -------------- ------------------ -------------- ------------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 35,279,068 33,065,062 1,714,359 1,470,460 7,030,950 9,449,836 Net transfers (including fixed account) 1,578,858 7,612,076 (326,471) (417,843) 1,051,932 (4,798,609) Contract charges (1,185,031) (708,168) (17,809) (16,542) (391,596) (338,634) Transfers for contract benefits and terminations (20,327,845) (15,568,222) (370,967) (319,757) (15,516,089) (15,468,031) ------------------ -------------- -------------- ------------------ -------------- ------------- Net increase (decrease) in net assets resulting from contract transactions 15,345,050 24,400,748 999,112 716,318 (7,824,803) (11,155,438) ------------------ -------------- -------------- ------------------ -------------- ------------- Net increase (decrease) in net assets 6,725,230 77,847,172 (56,443) 2,276,645 (47,254,208) (705,297) NET ASSETS: Beginning of year 269,741,582 191,894,410 10,020,158 7,743,513 196,319,126 197,024,423 ------------------ -------------- -------------- ------------------ -------------- ------------- End of year $ 276,466,812 $ 269,741,582 $ 9,963,715 $ 10,020,158 $149,064,918 $196,319,126 ================== ============== ============== ================== ============== =============
(a) For the period May 2, 2011 to December 31, 2011. (b) For the period May 3, 2010 to December 31, 2010. The accompanying notes are an integral part of these financial statements. 52 MSF BARCLAYS CAPITAL AGGREGATE BOND INDEX MSF BLACKROCK AGGRESSIVE GROWTH MSF BLACKROCK BOND INCOME MSF BLACKROCK DIVERSIFIED INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------------- --------------------------------- --------------------------------- ----------------------------- 2011 2010 2011 2010 2011 2010 2011 2010 ----------------- ---------------- ---------------- ---------------- ---------------- ---------------- -------------- -------------- $ 23,788,921 $ 21,660,262 $ (4,656,656) $ (5,510,351) $ 13,245,564 $ 11,883,376 $ 8,026,572 $ 4,514,459 6,260,260 2,835,526 11,767,838 4,319,375 968,641 18,060 (1,793,589) (9,782,726) 35,508,667 15,979,178 (26,024,706) 63,074,955 11,150,590 18,271,338 11,482,045 60,316,562 ----------------- ---------------- ---------------- ---------------- ---------------- ---------------- -------------- -------------- 65,557,848 40,474,966 (18,913,524) 61,883,979 25,364,795 30,172,774 17,715,028 55,048,295 ----------------- ---------------- ---------------- ---------------- ---------------- ---------------- -------------- -------------- 131,216,486 159,096,388 14,868,532 19,725,319 40,839,610 52,020,920 12,843,237 13,852,141 (37,583,700) 39,735,514 (14,309,119) (14,009,650) (12,254,499) 23,630,544 (23,041,359) (19,569,715) (4,599,915) (3,091,065) (454,999) (312,872) (1,480,623) (886,856) (289,599) (288,638) (93,887,204) (83,568,528) (46,251,640) (40,327,643) (48,730,575) (47,062,031) (76,364,804) (77,379,956) ----------------- ---------------- ---------------- ---------------- ---------------- ---------------- -------------- -------------- (4,854,333) 112,172,309 (46,147,226) (34,924,846) (21,626,087) 27,702,577 (86,852,525) (83,386,168) ----------------- ---------------- ---------------- ---------------- ---------------- ---------------- -------------- -------------- 60,703,515 152,647,275 (65,060,750) 26,959,133 3,738,708 57,875,351 (69,137,497) (28,337,873) 1,054,370,494 901,723,219 506,917,230 479,958,097 500,008,866 442,133,515 703,823,057 732,160,930 ----------------- ---------------- ---------------- ---------------- ---------------- ---------------- -------------- -------------- $1,115,074,009 $1,054,370,494 $ 441,856,480 $ 506,917,230 $ 503,747,574 $ 500,008,866 $634,685,560 $703,823,057 ================= ================ ================ ================ ================ ================ ============== ==============
The accompanying notes are an integral part of these financial statements. 53 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 MSF BLACKROCK MSF BLACKROCK LARGE CAP VALUE LEGACY LARGE CAP GROWTH MSF BLACKROCK MONEY MARKET INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------- ------------------------------- ------------------------------- 2011 2010 2011 2010 2011 2010 ---------------- -------------- -------------- ---------------- ---------------- -------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (761,296) $ (780,646) $ (2,061,181) $ (1,482,376) $ (1,266,614) $ (1,071,086) Net realized gains (losses) (2,110,608) (3,801,296) 2,287,770 589,751 -- -- Change in unrealized gains (losses) on investments 4,546,025 18,604,231 (18,309,761) 21,645,637 -- -- ---------------- -------------- -------------- ---------------- ---------------- -------------- Net increase (decrease) in net assets resulting from operations 1,674,121 14,022,289 (18,083,172) 20,753,012 (1,266,614) (1,071,086) ---------------- -------------- -------------- ---------------- ---------------- -------------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 21,492,157 20,692,506 24,851,525 17,076,573 12,247,227 6,382,984 Net transfers (including fixed account) 2,849,941 1,496,954 11,901,823 4,209,145 17,009,849 6,166,192 Contract charges (905,851) (655,020) (724,651) (426,777) (639,681) (416,922) Transfers for contract benefits and terminations (14,359,735) (11,469,333) (10,556,249) (9,189,369) (16,071,934) (13,143,423) ---------------- -------------- -------------- ---------------- ---------------- -------------- Net increase (decrease) in net assets resulting from contract transactions 9,076,512 10,065,107 25,472,448 11,669,572 12,545,461 (1,011,169) ---------------- -------------- -------------- ---------------- ---------------- -------------- Net increase (decrease) in net assets 10,750,633 24,087,396 7,389,276 32,422,584 11,278,847 (2,082,255) NET ASSETS: Beginning of year 195,798,773 171,711,377 147,006,605 114,584,021 76,398,280 78,480,535 ---------------- -------------- -------------- ---------------- ---------------- -------------- End of year $ 206,549,406 $ 195,798,773 $ 154,395,881 $ 147,006,605 $ 87,677,129 $ 76,398,280 ================ ============== ============== ================ ================ ==============
(a) For the period May 2, 2011 to December 31, 2011. (b) For the period May 3, 2010 to December 31, 2010. The accompanying notes are an integral part of these financial statements. 54 MSF DAVIS VENTURE VALUE MSF FI VALUE LEADERS MSF JENNISON GROWTH MSF LOOMIS SAYLES SMALL CAP CORE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------------- ------------------------------- ------------------------------ ------------------------------- 2011 2010 2011 2010 2011 2010 2011 2010 ------------------ ---------------- --------------- --------------- --------------- -------------- ---------------- -------------- $ (1,723,887) $ (2,246,214) $ (238,786) $ 91,134 $ (887,335) $ (456,790) $ (1,974,377) $(1,719,901) 3,393,728 709,689 (2,860,117) (3,773,660) 1,743,271 120,122 1,733,783 (2,686,986) (34,352,746) 56,902,615 (1,901,241) 12,070,359 (1,789,305) 6,511,803 (708,103) 37,222,601 ------------------ ---------------- --------------- --------------- --------------- -------------- ---------------- -------------- (32,682,905) 55,366,090 (5,000,144) 8,387,833 (933,369) 6,175,135 (948,697) 32,815,714 ------------------ ---------------- --------------- --------------- --------------- -------------- ---------------- -------------- 48,790,349 63,113,060 2,100,177 2,045,366 8,665,547 10,136,094 11,026,192 11,338,127 (9,991,955) 13,695,217 (1,936,831) (1,468,510) 13,265,073 7,197,883 (2,419,047) (8,066,883) (2,241,401) (1,564,211) (179,344) (180,506) (335,560) (158,723) (523,896) (402,418) (44,739,039) (40,048,934) (5,699,592) (6,290,996) (5,546,722) (3,530,419) (13,179,560) (11,556,566) ------------------ ---------------- --------------- --------------- --------------- -------------- ---------------- -------------- (8,182,046) 35,195,132 (5,715,590) (5,894,646) 16,048,338 13,644,835 (5,096,311) (8,687,740) ------------------ ---------------- --------------- --------------- --------------- -------------- ---------------- -------------- (40,864,951) 90,561,222 (10,715,734) 2,493,187 15,114,969 19,819,970 (6,045,008) 24,127,974 590,814,367 500,253,145 71,561,113 69,067,926 67,839,064 48,019,094 158,697,696 134,569,722 ------------------ ---------------- --------------- --------------- --------------- -------------- ---------------- -------------- $ 549,949,416 $ 590,814,367 $ 60,845,379 $ 71,561,113 $ 82,954,033 $ 67,839,064 $ 152,652,688 $158,697,696 ================== ================ =============== =============== =============== ============== ================ ==============
The accompanying notes are an integral part of these financial statements. 55 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 MSF MET/DIMENSIONAL MSF LOOMIS SAYLES SMALL CAP GROWTH MSF MET/ARTISAN MID CAP VALUE INTERNATIONAL SMALL COMPANY INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------------- ------------------------------ ---------------------------- 2011 2010 2011 2010 2011 2010 ----------------- ----------------- --------------- -------------- -------------- ------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (605,468) $ (480,045) $ (877,049) $ (1,248,953) $ 25,304 $ (1,928) Net realized gains (losses) 705,937 (1,044,946) (6,225,805) (11,883,832) 190,328 99,226 Change in unrealized gains (losses) on investments 418,297 11,610,770 18,681,995 39,292,335 (958,109) 441,874 ----------------- ----------------- --------------- -------------- -------------- ------------- Net increase (decrease) in net assets resulting from operations 518,766 10,085,779 11,579,141 26,159,550 (742,477) 539,172 ----------------- ----------------- --------------- -------------- -------------- ------------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 1,861,989 1,349,437 11,876,355 11,111,234 995,572 1,223,879 Net transfers (including fixed account) 5,246,079 (934,056) (5,298,073) (9,631,816) 598,134 590,627 Contract charges (91,903) (81,594) (433,039) (370,267) (27,252) (10,719) Transfers for contract benefits and terminations (4,768,447) (2,993,201) (23,161,304) (20,183,971) (123,999) (67,456) ----------------- ----------------- --------------- -------------- -------------- ------------- Net increase (decrease) in net assets resulting from contract transactions 2,247,718 (2,659,414) (17,016,061) (19,074,820) 1,442,455 1,736,331 ----------------- ----------------- --------------- -------------- -------------- ------------- Net increase (decrease) in net assets 2,766,484 7,426,365 (5,436,920) 7,084,730 699,978 2,275,503 NET ASSETS: Beginning of year 43,602,855 36,176,490 217,605,252 210,520,522 3,362,782 1,087,279 ----------------- ----------------- --------------- -------------- -------------- ------------- End of year $ 46,369,339 $ 43,602,855 $ 212,168,332 $ 217,605,252 $ 4,062,760 $ 3,362,782 ================= ================= =============== ============== ============== =============
(a) For the period May 2, 2011 to December 31, 2011. (b) For the period May 3, 2010 to December 31, 2010. The accompanying notes are an integral part of these financial statements. 56 MSF METLIFE CONSERVATIVE MSF METLIFE CONSERVATIVE ALLOCATION TO MODERATE ALLOCATION MSF METLIFE MID CAP STOCK INDEX MSF METLIFE MODERATE ALLOCATION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------ ----------------------------- ------------------------------- -------------------------------- 2011 2010 2011 2010 2011 2010 2011 2010 ------------------ ----------------- -------------- -------------- ---------------- -------------- ---------------- --------------- $ 4,719,364 $ 7,738,165 $ 9,296,873 $ 18,757,485 $ (1,990,547) $ (1,381,765) $ 8,000,674 $ 29,397,961 2,238,716 1,589,320 3,119,728 379,774 21,630,998 102,320 3,413,004 (1,002,375) 1,399,922 20,197,256 (17,598,815) 74,956,639 (31,516,016) 79,657,136 (118,620,318) 280,212,338 ------------------ ----------------- -------------- -------------- ---------------- -------------- ---------------- --------------- 8,358,002 29,524,741 (5,182,214) 94,093,898 (11,875,565) 78,377,691 (107,206,640) 308,607,924 ------------------ ----------------- -------------- -------------- ---------------- -------------- ---------------- --------------- 59,936,167 69,241,656 182,128,575 199,008,198 38,854,640 36,548,842 553,403,603 710,843,553 53,977,848 69,917,338 65,781,537 98,066,794 (5,485,063) (9,712,779) 112,260,513 247,228,217 (2,858,230) (1,863,311) (7,936,969) (5,146,378) (1,227,055) (891,948) (25,327,711) (15,239,926) (35,206,478) (29,585,393) (80,650,431) (60,344,977) (32,767,498) (27,182,635) (185,265,104) (123,335,313) ------------------ ----------------- -------------- -------------- ---------------- -------------- ---------------- --------------- 75,849,307 107,710,290 159,322,712 231,583,637 (624,976) (1,238,520) 455,071,301 819,496,531 ------------------ ----------------- -------------- -------------- ---------------- -------------- ---------------- --------------- 84,207,309 137,235,031 154,140,498 325,677,535 (12,500,541) 77,139,171 347,864,661 1,128,104,455 432,541,976 295,306,945 1,137,111,581 811,434,046 396,881,128 319,741,957 3,253,209,310 2,125,104,855 ------------------ ----------------- -------------- -------------- ---------------- -------------- ---------------- --------------- $ 516,749,285 $ 432,541,976 $1,291,252,079 $1,137,111,581 $384,380,587 $ 396,881,128 $3,601,073,971 $3,253,209,310 ================== ================= ============== ============== ================ ============== ================ ===============
The accompanying notes are an integral part of these financial statements. 57 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 MSF METLIFE MODERATE TO AGGRESSIVE ALLOCATION MSF METLIFE STOCK INDEX MSF MFS TOTAL RETURN INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------------- --------------------------------- --------------------------- 2011 2010 2011 2010 2011 2010 ---------------- ---------------- ---------------- ---------------- -------------- ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 2,144,016 $ 12,478,921 $ 9,036,820 $ 10,445,109 $ 1,988,904 $ 2,280,524 Net realized gains (losses) (257,933) (11,069,862) 18,365,146 (21,168,149) (1,111,920) (2,022,450) Change in unrealized gains (losses) on investments (82,743,124) 187,492,470 (11,976,865) 325,617,850 492,473 11,037,082 ---------------- ---------------- ---------------- ---------------- -------------- ------------ Net increase (decrease) in net assets resulting from operations (80,857,041) 188,901,529 15,425,101 314,894,810 1,369,457 11,295,156 ---------------- ---------------- ---------------- ---------------- -------------- ------------ CONTRACT TRANSACTIONS: Purchase payments received from contract owners 94,940,334 105,894,701 159,101,184 199,543,669 8,318,101 11,365,512 Net transfers (including fixed account) (31,249,710) (38,343,207) (54,441,859) (34,907,183) (1,380,207) (1,103,966) Contract charges (10,609,515) (10,114,317) (5,550,786) (4,104,734) (330,006) (236,053) Transfers for contract benefits and terminations (80,191,387) (74,021,751) (249,593,455) (222,486,830) (14,944,165) (12,711,002) ---------------- ---------------- ---------------- ---------------- -------------- ------------ Net increase (decrease) in net assets resulting from contract transactions (27,110,278) (16,584,574) (150,484,916) (61,955,078) (8,336,277) (2,685,509) ---------------- ---------------- ---------------- ---------------- -------------- ------------ Net increase (decrease) in net assets (107,967,319) 172,316,955 (135,059,815) 252,939,732 (6,966,820) 8,609,647 NET ASSETS: Beginning of year 1,628,677,260 1,456,360,305 2,646,303,266 2,393,363,534 142,302,103 133,692,456 ---------------- ---------------- ---------------- ---------------- -------------- ------------ End of year $1,520,709,941 $1,628,677,260 $2,511,243,451 $2,646,303,266 $ 135,335,283 $142,302,103 ================ ================ ================ ================ ============== ============
(a) For the period May 2, 2011 to December 31, 2011. (b) For the period May 3, 2010 to December 31, 2010. The accompanying notes are an integral part of these financial statements. 58 MSF NEUBERGER BERMAN MSF MFS VALUE MSF MORGAN STANLEY EAFE INDEX MSF NEUBERGER BERMAN GENESIS MID CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------------- ------------------------------- ------------------------------- --------------------------- 2011 2010 2011 2010 2011 2010 2011 2010 ------------------ ---------------- ---------------- -------------- ---------------- -------------- -------------- ------------ $ 489,550 $ 84,016 $ 4,622,718 $ 5,327,302 $ (1,651,073) $ (2,215,160) $ (3,026,626) $(2,420,888) (771,664) (3,371,173) 1,636,721 (356,109) (11,750,296) (20,723,045) 3,851,168 (2,402,496) (703,266) 28,930,431 (69,561,112) 25,732,016 25,875,010 71,460,191 (38,257,786) 103,216,633 ------------------ ---------------- ---------------- -------------- ---------------- -------------- -------------- ------------ (985,380) 25,643,274 (63,301,673) 30,703,209 12,473,641 48,521,986 (37,433,244) 98,393,249 ------------------ ---------------- ---------------- -------------- ---------------- -------------- -------------- ------------ 19,849,634 20,011,591 46,545,815 51,183,433 10,261,552 9,946,475 33,444,566 36,760,842 (1,240,023) 9,055,426 20,763,713 5,640,675 (13,442,941) (13,934,671) (11,368,846) 11,544,351 (719,847) (543,261) (1,609,533) (1,247,396) (451,851) (427,688) (1,381,513) (998,874) (26,071,270) (23,388,867) (36,072,546) (31,327,092) (29,480,656) (25,277,773) (40,978,076) (34,092,046) ------------------ ---------------- ---------------- -------------- ---------------- -------------- -------------- ------------ (8,181,506) 5,134,889 29,627,449 24,249,620 (33,113,896) (29,693,657) (20,283,869) 13,214,273 ------------------ ---------------- ---------------- -------------- ---------------- -------------- -------------- ------------ (9,166,886) 30,778,163 (33,674,224) 54,952,829 (20,640,255) 18,828,329 (57,717,113) 111,607,522 280,199,767 249,421,604 462,135,393 407,182,564 284,284,918 265,456,589 505,689,035 394,081,513 ------------------ ---------------- ---------------- -------------- ---------------- -------------- -------------- ------------ $ 271,032,881 $ 280,199,767 $ 428,461,169 $ 462,135,393 $ 263,644,663 $ 284,284,918 $ 447,971,922 $505,689,035 ================== ================ ================ ============== ================ ============== ============== ============
The accompanying notes are an integral part of these financial statements. 59 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 MSF T. ROWE MSF OPPENHEIMER GLOBAL EQUITY MSF RUSSELL 2000 INDEX PRICE LARGE CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------ --------------------------------- ----------------------------- 2011 2010 2011 2010 2011 2010 --------------- -------------- ---------------- ---------------- ---------------- ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 1,427,400 $ 400,332 $ (807,274) $ (646,144) $ (2,302,784) $(1,981,294) Net realized gains (losses) 2,711,222 717,448 3,720,824 (1,204,673) 4,920,269 1,249,987 Change in unrealized gains (losses) on investments (25,269,443) 27,084,280 (16,165,693) 59,052,489 (6,874,835) 27,301,732 --------------- -------------- ---------------- ---------------- ---------------- ------------ Net increase (decrease) in net assets resulting from operations (21,130,821) 28,202,060 (13,252,143) 57,201,672 (4,257,350) 26,570,425 --------------- -------------- ---------------- ---------------- ---------------- ------------ CONTRACT TRANSACTIONS: Purchase payments received from contract owners 15,780,525 17,523,370 20,490,122 18,820,358 6,108,434 6,435,128 Net transfers (including fixed account) 3,636,534 2,998,528 (8,430,152) (6,521,891) (4,168,617) (5,289,831) Contract charges (584,716) (375,512) (630,785) (520,718) (352,198) (336,637) Transfers for contract benefits and terminations (19,404,129) (15,921,370) (24,716,116) (19,167,652) (18,407,429) (15,183,043) --------------- -------------- ---------------- ---------------- ---------------- ------------ Net increase (decrease) in net assets resulting from contract transactions (571,786) 4,225,016 (13,286,931) (7,389,903) (16,819,810) (14,374,383) --------------- -------------- ---------------- ---------------- ---------------- ------------ Net increase (decrease) in net assets (21,702,607) 32,427,076 (26,539,074) 49,811,769 (21,077,160) 12,196,042 NET ASSETS: Beginning of year 223,279,060 190,851,984 280,017,667 230,205,898 195,957,544 183,761,502 --------------- -------------- ---------------- ---------------- ---------------- ------------ End of year $ 201,576,453 $ 223,279,060 $ 253,478,593 $ 280,017,667 $ 174,880,384 $195,957,544 =============== ============== ================ ================ ================ ============
(a) For the period May 2, 2011 to December 31, 2011. (b) For the period May 3, 2010 to December 31, 2010. The accompanying notes are an integral part of these financial statements. 60 MSF VAN ECK MSF WESTERN ASSET MANAGEMENT MSF WESTERN ASSET MANAGEMENT MSF T. ROWE PRICE SMALL CAP GROWTH GLOBAL NATURAL RESOURCES STRATEGIC BOND OPPORTUNITIES U.S. GOVERNMENT INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------- --------------------------- ------------------------------- ----------------------------- 2011 2010 2011 2010 2011 2010 2011 2010 ------------------ ------------------ ------------- ------------- ---------------- -------------- ---------------- ------------ $ (3,438,620) $ (2,570,350) $ (64,217) $ (137,446) $ 9,809,292 $ 12,330,577 $ 95,483 $ 2,704,673 10,695,895 2,234,083 2,979,987 692,754 2,685,564 1,062,078 8,382,398 675,608 (6,549,932) 64,165,490 (9,826,380) 4,578,050 (604,578) 14,079,765 1,018,684 5,628,530 ------------------ ------------------ ------------- ------------- ---------------- -------------- ---------------- ------------ 707,343 63,829,223 (6,910,610) 5,133,358 11,890,278 27,472,420 9,496,565 9,008,811 ------------------ ------------------ ------------- ------------- ---------------- -------------- ---------------- ------------ 21,942,313 16,008,375 10,973,817 9,680,033 7,748,617 7,181,098 18,992,601 24,020,828 4,699,938 18,356,933 7,740,528 4,579,076 (15,213,571) 14,579,265 (8,730,097) 12,142,791 (523,750) (278,052) (260,778) (76,312) (619,207) (613,628) (959,871) (706,184) (25,824,691) (18,003,923) (659,912) (229,383) (30,317,278) (24,463,267) (23,246,845) (21,266,077) ------------------ ------------------ ------------- ------------- ---------------- -------------- ---------------- ------------ 293,810 16,083,333 17,793,655 13,953,414 (38,401,439) (3,316,532) (13,944,212) 14,191,358 ------------------ ------------------ ------------- ------------- ---------------- -------------- ---------------- ------------ 1,001,153 79,912,556 10,883,045 19,086,772 (26,511,161) 24,155,888 (4,447,647) 23,200,169 264,120,256 184,207,700 24,700,698 5,613,926 275,410,258 251,254,370 239,870,128 216,669,959 ------------------ ------------------ ------------- ------------- ---------------- -------------- ---------------- ------------ $ 265,121,409 $ 264,120,256 $ 35,583,743 $ 24,700,698 $ 248,899,097 $ 275,410,258 $ 235,422,481 $239,870,128 ================== ================== ============= ============= ================ ============== ================ ============
The accompanying notes are an integral part of these financial statements. 61 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONCLUDED) FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 MSF ZENITH EQUITY INVESTMENT DIVISION -------------------------------- 2011 2010 ----------------- -------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (214,903) $ 207,659 Net realized gains (losses) (2,272,347) (4,427,478) Change in unrealized gains (losses) on investments (973,507) 13,668,268 ----------------- -------------- Net increase (decrease) in net assets resulting from operations (3,460,757) 9,448,449 ----------------- -------------- CONTRACT TRANSACTIONS: Purchase payments received from contract owners 748,333 809,045 Net transfers (including fixed account) (1,205,437) (1,636,802) Contract charges (82,022) (93,993) Transfers for contract benefits and terminations (10,961,347) (12,659,622) ----------------- -------------- Net increase (decrease) in net assets resulting from contract transactions (11,500,473) (13,581,372) ----------------- -------------- Net increase (decrease) in net assets (14,961,230) (4,132,923) NET ASSETS: Beginning of year 81,465,443 85,598,366 ----------------- -------------- End of year $ 66,504,213 $81,465,443 ================= ==============
(a) For the period May 2, 2011 to December 31, 2011. (b) For the period May 3, 2010 to December 31, 2010. The accompanying notes are an integral part of these financial statements. 62 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS 1. ORGANIZATION Metropolitan Life Separate Account E (the "Separate Account"), a separate account of Metropolitan Life Insurance Company (the "Company"), was established by the Company's Board of Directors on September 27, 1983 to support operations of the Company with respect to certain variable annuity contracts (the "Contracts"). The Company is a direct wholly-owned subsidiary of MetLife, Inc., a Delaware corporation. The Separate Account is registered as a unit investment trust under the Investment Company Act of 1940, as amended, and exists in accordance with the regulations of the New York State Department of Financial Services. The Separate Account is divided into Investment Divisions, each of which is treated as an individual accounting entity for financial reporting purposes. Each Investment Division invests in shares of the corresponding portfolio or fund (with the same name) of registered investment management companies (the "Trusts"), which are presented below: American Funds Insurance Series ("American Funds") Calvert Variable Series, Inc. ("Calvert") Fidelity Variable Insurance Products ("Fidelity VIP") Met Investors Series Trust ("MIST")* Metropolitan Series Fund, Inc. ("MSF")* *See Note 5 for a discussion of additional information on related party transactions. The assets of each of the Investment Divisions of the Separate Account are registered in the name of the Company. Under applicable insurance law, the assets and liabilities of the Separate Account are clearly identified and distinguished from the Company's other assets and liabilities. The portion of the Separate Account's assets applicable to the Contracts is not chargeable with liabilities arising out of any other business the Company may conduct. 2. LIST OF INVESTMENT DIVISIONS A. Purchase payments, less any applicable charges, applied to the Separate Account are invested in one or more Investment Divisions in accordance with the selection made by the contract owner. The following Investment Divisions had net assets as of December 31, 2011: American Funds Bond Investment Division American Funds Global Small Capitalization Investment Division American Funds Growth Investment Division American Funds Growth-Income Investment Division Calvert VP SRI Balanced Investment Division Calvert VP SRI Mid Cap Growth Investment Division Fidelity VIP Equity-Income Investment Division Fidelity VIP FundsManager 60% Investment Division Fidelity VIP Growth Investment Division Fidelity VIP Investment Grade Bond Investment Division Fidelity VIP Money Market Investment Division* MIST AllianceBernstein Global Dynamic Allocation Investment Division (a) MIST American Funds Balanced Allocation Investment Division* MIST American Funds Bond Investment Division MIST American Funds Growth Allocation Investment Division* MIST American Funds Growth Investment Division MIST American Funds Moderate Allocation Investment Division* MIST AQR Global Risk Balanced Investment Division (a) MIST BlackRock Global Tactical Strategies Investment Division (a) MIST BlackRock Large Cap Core Investment Division* Variable B Investment Division (b) Variable C Investment Division (b) MIST Clarion Global Real Estate Investment Division* MIST Dreman Small Cap Value Investment Division MIST Harris Oakmark International Investment Division* MIST Invesco Small Cap Growth Investment Division* MIST Janus Forty Investment Division* MIST Lazard Mid Cap Investment Division* MIST Legg Mason ClearBridge Aggressive Growth Investment Division* MIST Loomis Sayles Global Markets Investment Division 63 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 2. LIST OF INVESTMENT DIVISIONS -- (CONTINUED) MIST Lord Abbett Bond Debenture Investment Division* MIST Met/Eaton Vance Floating Rate Investment Division MIST Met/Franklin Income Investment Division MIST Met/Franklin Low Duration Total Return Investment Division (a) MIST Met/Franklin Mutual Shares Investment Division MIST Met/Franklin Templeton Founding Strategy Investment Division MIST Met/Templeton Growth Investment Division MIST Met/Templeton International Bond Investment Division MIST MetLife Aggressive Strategy Investment Division* (a) MIST MetLife Balanced Plus Investment Division (a) MIST MFS Emerging Markets Equity Investment Division MIST MFS Research International Investment Division* MIST Morgan Stanley Mid Cap Growth Investment Division* MIST Oppenheimer Capital Appreciation Investment Division* MIST PIMCO Inflation Protected Bond Investment Division* MIST PIMCO Total Return Investment Division* MIST Pioneer Strategic Income Investment Division MIST Pyramis Government Income Investment Division (a) MIST RCM Technology Investment Division* MIST SSgA Growth and Income ETF Investment Division* MIST SSgA Growth ETF Investment Division* MIST T. Rowe Price Mid Cap Growth Investment Division* MIST Third Avenue Small Cap Value Investment Division MSF Artio International Stock Investment Division* MSF Barclays Capital Aggregate Bond Index Investment Division* MSF BlackRock Aggressive Growth Investment Division* MSF BlackRock Bond Income Investment Division* MSF BlackRock Diversified Investment Division* MSF BlackRock Large Cap Value Investment Division* MSF BlackRock Legacy Large Cap Growth Investment Division* MSF BlackRock Money Market Investment Division* MSF Davis Venture Value Investment Division* MSF FI Value Leaders Investment Division* MSF Jennison Growth Investment Division* MSF Loomis Sayles Small Cap Core Investment Division* MSF Loomis Sayles Small Cap Growth Investment Division* MSF Met/Artisan Mid Cap Value Investment Division* MSF Met/Dimensional International Small Company Investment Division MSF MetLife Conservative Allocation Investment Division* MSF MetLife Conservative to Moderate Allocation Investment Division* MSF MetLife Mid Cap Stock Index Investment Division* MSF MetLife Moderate Allocation Investment Division* MSF MetLife Moderate to Aggressive Allocation Investment Division* MSF MetLife Stock Index Investment Division* MSF MFS Total Return Investment Division* MSF MFS Value Investment Division* MSF Morgan Stanley EAFE Index Investment Division* MSF Neuberger Berman Genesis Investment Division* MSF Neuberger Berman Mid Cap Value Investment Division* MSF Oppenheimer Global Equity Investment Division* MSF Russell 2000 Index Investment Division* MSF T. Rowe Price Large Cap Growth Investment Division* MSF T. Rowe Price Small Cap Growth Investment Division* MSF Van Eck Global Natural Resources Investment Division MSF Western Asset Management Strategic Bond Opportunities Investment Division* MSF Western Asset Management U.S. Government Investment Division* MSF Zenith Equity Investment Division 64 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 2. LIST OF INVESTMENT DIVISIONS -- (CONCLUDED) (a) This Investment Division began operations during the year ended December 31, 2011. (b) Variable B Investment Division and Variable C Investment Division only invest in the BlackRock Large Cap Core Portfolio. * This Investment Division invests in two or more share classes within the underlying portfolio or fund of the Trusts. B. The following Investment Division had no net assets as of December 31, 2011: Variable D Investment Division 3. PORTFOLIO CHANGES The following Investment Divisions ceased operations during the year ended December 31, 2011: MIST Legg Mason Value Equity Investment Division MSF MetLife Aggressive Allocation Investment Division The operations of the Investment Divisions were affected by the following changes that occurred during the year ended December 31, 2011: MERGERS: FORMER PORTFOLIO NEW PORTFOLIO (MIST) Legg Mason Value Equity Portfolio (MIST) Legg Mason ClearBridge Aggressive Growth Portfolio (MSF) MetLife Aggressive Allocation Portfolio (MIST) MetLife Aggressive Strategy Portfolio
4. SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") applicable for variable annuity separate accounts registered as unit investment trusts. SECURITY TRANSACTIONS Security transactions are recorded on a trade date basis. Realized gains and losses on the sales of investments are computed on the basis of the average cost of the investment sold. Income from dividends and realized gain distributions are recorded on the ex-distribution date. SECURITY VALUATION The Investment Divisions' investment in shares of the portfolio or fund of the Trusts is valued at fair value based on the closing net asset value ("NAV") or price per share as determined by the Trusts as of the end of the year. All changes in fair value are recorded as changes in unrealized gains (losses) on investments in the statements of operations of the applicable Investment Divisions. The Separate Account defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Separate Account prioritizes the inputs to fair valuation techniques and allows for the use of unobservable inputs to the extent that observable inputs are not available. The Separate Account has categorized its assets based on the priority of the inputs to the respective valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets (Level 1) and the lowest priority to unobservable inputs (Level 3). An asset's classification within the fair value hierarchy is based on the lowest level of significant input to its valuation. The input levels are as follows: Level 1 Unadjusted quoted prices in active markets for identical assets that the Separate Account has the ability to access. 65 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 4. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) SECURITY VALUATION -- (CONTINUED) Level 2 Observable inputs other than quoted prices in Level 1 that are observable either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market or prices for similar instruments. Level 3 Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets, representing the Separate Account's own assumptions about the assumptions a market participant would use in valuing the asset, and based on the best information available. Each Investment Division invests in shares of open-end mutual funds which calculate a daily NAV based on the fair value of the underlying securities in their portfolios. As a result, and as required by law, shares of open-end mutual funds are purchased and redeemed at their quoted daily NAV as reported by the Trusts at the close of each business day. On that basis, the inputs used to value all shares held by the Separate Account, which are measured at fair value on a recurring basis, are classified as Level 2. There were no transfers between Level 1 and Level 2, and no activity in Level 3 during the year. FEDERAL INCOME TAXES The operations of the Separate Account form a part of the total operations of the Company and are not taxed separately. The Company is taxed as a life insurance company under the provisions of the Internal Revenue Code ("IRC"). Under the current provisions of the IRC, the Company does not expect to incur federal income taxes on the earnings of the Separate Account to the extent the earnings are credited under the Contracts. Accordingly, no charge is currently being made to the Separate Account for federal income taxes. The Company will periodically review the status of this policy in the event of changes in the tax law. A charge may be made in future years for any federal income taxes that would be attributable to the Contracts. ANNUITY PAYOUTS Net assets allocated to Contracts in the payout period are computed according to industry standard mortality tables. The assumed investment return is between 3.0 and 6.0 percent. The mortality risk is fully borne by the Company and may result in additional amounts being transferred into the Separate Account by the Company to cover greater longevity of annuitants than expected. Conversely, if amounts allocated exceed amounts required, transfers may be made to the Company. PURCHASE PAYMENTS Purchase payments received from contract owners by the Company are credited as accumulation units as of the end of the valuation period in which received, as provided in the prospectus, and are reported as contract transactions on the statements of changes in net assets of the applicable Investment Divisions. NET TRANSFERS Funds transferred by the contract owner into or out of the Investment Divisions within the Separate Account or into and out of the fixed account (an investment option in the Company's general account) are recorded on a net basis as net transfers in the statements of changes in net assets of the applicable Investment Divisions. USE OF ESTIMATES The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect amounts reported herein. Actual results could differ from these estimates. ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS Effective January 1, 2010, the Separate Account adopted new guidance that requires new disclosures about significant transfers in and/or out of Levels 1 and 2 of the fair value hierarchy and activity in Level 3. In addition, this guidance provides clarification of existing disclosure requirements about the level of disaggregation and inputs and valuation techniques. The adoption of this guidance did not have an impact on the Separate Account's financial statements. 66 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 4. SIGNIFICANT ACCOUNTING POLICIES -- (CONCLUDED) FUTURE ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS In May 2011, the Financial Accounting Standards Board ("FASB") issued new guidance regarding fair value measurements (Accounting Standards Update ("ASU") 2011-04, FAIR VALUE MEASUREMENT (TOPIC 820): AMENDMENTS TO ACHIEVE COMMON FAIR VALUE MEASUREMENT AND DISCLOSURE REQUIREMENTS IN U.S. GAAP AND IFRSS), effective for the first interim or annual period beginning after December 15, 2011. The guidance should be applied prospectively. The amendments in this ASU are intended to establish common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP and International Financial Reporting Standards ("IFRS"). Some of the amendments clarify the FASB's intent on the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The Separate Account does not expect the adoption of this new guidance to have a material impact on its financial statements. 5. EXPENSES AND RELATED PARTY TRANSACTIONS The following annual Separate Account charges paid to the Company are asset-based charges and assessed through a daily reduction in unit values, which are recorded as expenses in the accompanying statements of operations of the applicable Investment Divisions: MORTALITY AND EXPENSE RISK -- The mortality risk assumed by the Company is the risk that those insured may die sooner than anticipated and therefore, the Company will pay an aggregate amount of death benefits greater than anticipated. The expense risk assumed is the risk that expenses incurred in issuing and administering the Contracts will exceed the amounts realized from the administrative charges assessed against the Contracts. In addition, the charge compensates the Company for the risk that the investor may live longer than estimated and the Company would be obligated to pay more in income payments than anticipated. ADMINISTRATIVE -- The Company has responsibility for the administration of the Contracts and the Separate Account. Generally, the administrative charge is related to the maintenance, including distribution, of each contract and the Separate Account. EARNINGS PRESERVATION BENEFIT -- For an additional charge, the Company will provide this additional death benefit. ENHANCED STEPPED-UP PROVISION -- For an additional charge, the total death benefit payable may be increased based on the greater of the account balance or highest annual contract anniversary value in the contract or the greater of the account balance, annual increase amount or highest annual contract anniversary value in the contract. GUARANTEED WITHDRAWAL BENEFIT FOR LIFE -- For a charge that includes the Mortality and Expense Risk charge and a guaranteed withdrawal benefit, the Company will guarantee the periodic return on the investment for life of a single annuitant or joint annuitants. Mortality and Expense Risk 0.00% - 2.05% Administrative 0.20% - 0.50% Earnings Preservation Benefit 0.25% Enhanced Stepped-Up Provision 0.10% - 0.35% Guaranteed Withdrawal Benefit for Life 1.90% - 2.05%
The above referenced charges may not necessarily correspond to the costs associated with providing the services or benefits indicated by the designation of the charge or associated with a particular contract. The range of the effective rates disclosed above excludes any waivers granted to certain Investment Divisions. The following optional rider charges paid to the Company are charged at each contract anniversary date through the redemption of units, which are recorded as contract changes in the accompanying statements of changes in net assets of the applicable Investment Divisions: GUARANTEED MINIMUM ACCUMULATION BENEFIT -- For an additional charge, the Company will guarantee that the contract value will not be less than a guaranteed minimum amount at the end of a specified number of years. 67 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 5. EXPENSES AND RELATED PARTY TRANSACTIONS -- (CONTINUED) LIFETIME WITHDRAWAL GUARANTEE -- For an additional charge, the Company will guarantee the periodic return on the investment for life. GUARANTEED WITHDRAWAL BENEFIT -- For an additional charge, the Company will guarantee the periodic return on the investment. GUARANTEED MINIMUM INCOME BENEFIT -- For an additional charge, the Company will guarantee a minimum payment regardless of market conditions. ENHANCED DEATH BENEFIT -- For an additional charge, the amount of the death benefit will be the greater of the account value or the death benefit base. ENHANCED GUARANTEED WITHDRAWAL BENEFIT -- For an additional charge, the Company will guarantee that at least the entire amount of purchase payments will be returned through a series of withdrawals without annuitizing. The table below represents the range of effective annual rates for each respective charge for the year ended December 31, 2011: Guaranteed Minimum Accumulation Benefit 0.75% Lifetime Withdrawal Guarantee 0.50% - 1.80% Guaranteed Withdrawal Benefit 0.50% - 0.95% Guaranteed Minimum Income Benefit 0.50% - 1.50% Enhanced Death Benefit 0.60% - 1.50% Enhanced Guaranteed Withdrawal Benefit 0.55% - 1.00%
The above referenced charges may not necessarily correspond to the costs associated with providing the services or benefits indicated by the designation of the charge or associated with a particular contract. A contract administrative charge which ranges from $15 to $30 is assessed on an annual basis for Contracts, which may be waived, if the Contract reaches a certain asset size or under certain circumstances. In addition, most Contracts impose a surrender charge which ranges from 0% to 10%, if the contract is partially or fully surrendered within the specified surrender charge period. These charges are paid to the Company, assessed through the redemption of units, and recorded as contract charges in the accompanying statements of changes in net assets of the applicable Investment Divisions. Certain investments in the various portfolios of MIST and MSF Trusts hold shares that are managed by MetLife Advisors, LLC, which acts in the capacity of investment advisor and is an affiliate of the Company. 68 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 6. STATEMENTS OF INVESTMENTS FOR THE YEAR ENDED AS OF DECEMBER 31, 2011 DECEMBER 31, 2011 ------------------------ ---------------------------- COST OF PROCEEDS SHARES COST ($) PURCHASES ($) FROM SALES ($) ---------- ------------- ------------- -------------- American Funds Bond Investment Division 12,176,090 134,523,375 11,846,281 28,474,565 American Funds Global Small Capitalization Investment Division 28,692,803 588,272,439 39,625,842 65,910,012 American Funds Growth Investment Division 18,248,226 942,818,652 22,868,966 137,026,221 American Funds Growth-Income Investment Division 20,857,802 719,119,322 34,744,014 59,221,844 Calvert VP SRI Balanced Investment Division 28,532,520 52,604,396 2,298,064 4,873,287 Calvert VP SRI Mid Cap Growth Investment Division 356,876 9,076,293 1,896,819 2,431,975 Fidelity VIP Equity-Income Investment Division 4,183,258 93,289,644 3,309,892 15,536,067 Fidelity VIP FundsManager 60% Investment Division 20,819,580 198,694,378 108,418,057 2,040,095 Fidelity VIP Growth Investment Division 2,026,408 79,558,110 1,696,789 15,803,011 Fidelity VIP Investment Grade Bond Investment Division 1,649,867 21,068,137 3,690,769 4,717,172 Fidelity VIP Money Market Investment Division 12,168,040 12,168,040 54,244,322 54,328,205 MIST AllianceBernstein Global Dynamic Allocation Investment Division (a) 49,310,558 477,393,394 477,393,394 -- MIST American Funds Balanced Allocation Investment Division 65,497,207 572,477,436 127,952,037 24,839,596 MIST American Funds Bond Investment Division 7,703,359 75,765,326 23,128,314 7,940,547 MIST American Funds Growth Allocation Investment Division 34,763,420 266,314,992 32,327,025 42,345,967 MIST American Funds Growth Investment Division 30,947,740 250,715,238 86,265,272 3,151,921 MIST American Funds Moderate Allocation Investment Division 87,383,196 785,870,643 141,143,956 29,432,313 MIST AQR Global Risk Balanced Investment Division (a) 56,901,031 593,840,309 593,840,309 -- MIST BlackRock Global Tactical Strategies Investment Division (a) 74,554,947 716,566,136 716,566,136 -- MIST BlackRock Large Cap Core Investment Division 70,422,130 738,776,794 36,808,285 83,680,335 Variable B Investment Division 1,444,411 15,589,414 167,485 1,839,475 Variable C Investment Division 124,903 1,350,564 12,999 18,513 MIST Clarion Global Real Estate Investment Division 23,037,305 299,066,040 23,438,627 16,983,425 MIST Dreman Small Cap Value Investment Division 1,080,677 14,011,019 6,724,661 834,343 MIST Harris Oakmark International Investment Division 34,480,128 479,421,633 76,185,523 30,455,813 MIST Invesco Small Cap Growth Investment Division 2,572,249 32,522,679 9,308,992 8,036,564 MIST Janus Forty Investment Division 5,356,119 338,534,777 30,856,507 52,494,256 MIST Lazard Mid Cap Investment Division 5,400,206 63,013,715 7,843,269 8,729,791 MIST Legg Mason ClearBridge Aggressive Growth Investment Division 10,608,549 81,902,408 63,502,847 9,823,810 MIST Loomis Sayles Global Markets Investment Division 2,090,951 23,475,679 13,860,771 2,427,551 MIST Lord Abbett Bond Debenture Investment Division 23,567,526 282,447,675 47,443,438 37,994,547 MIST Met/Eaton Vance Floating Rate Investment Division 582,792 6,015,985 5,829,683 1,079,840 MIST Met/Franklin Income Investment Division 8,180,581 80,930,440 41,895,041 10,979,534 MIST Met/Franklin Low Duration Total Return Investment Division (a) 672,990 6,679,866 7,267,714 583,809 MIST Met/Franklin Mutual Shares Investment Division 6,272,900 50,079,078 19,647,286 3,434,282 MIST Met/Franklin Templeton Founding Strategy Investment Division 6,224,084 52,169,917 10,690,933 9,329,570 MIST Met/Templeton Growth Investment Division 2,571,054 21,789,207 8,749,935 2,317,193 MIST Met/Templeton International Bond Investment Division 614,786 7,335,747 4,112,787 988,661 MIST MetLife Aggressive Strategy Investment Division (a) 11,387,108 117,509,213 129,816,874 11,084,281 MIST MetLife Balanced Plus Investment Division (a) 63,579,916 603,951,894 603,951,894 -- MIST MFS Emerging Markets Equity Investment Division 4,502,605 44,410,368 18,482,737 951,787 MIST MFS Research International Investment Division 24,435,808 275,884,691 22,867,940 31,740,010 MIST Morgan Stanley Mid Cap Growth Investment Division 30,976,063 315,255,995 33,203,693 53,258,592 MIST Oppenheimer Capital Appreciation Investment Division 8,195,773 52,625,146 7,000,163 6,092,454 MIST PIMCO Inflation Protected Bond Investment Division 51,282,522 567,678,277 150,694,944 35,740,419 MIST PIMCO Total Return Investment Division 93,667,792 1,101,452,241 205,527,726 101,372,586
69 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 6. STATEMENTS OF INVESTMENTS -- (CONTINUED) FOR THE YEAR ENDED AS OF DECEMBER 31, 2011 DECEMBER 31, 2011 ------------------------- ---------------------------- COST OF PROCEEDS SHARES COST ($) PURCHASES ($) FROM SALES ($) ----------- ------------- ------------- -------------- MIST Pioneer Strategic Income Investment Division 5,093,186 54,817,773 26,413,327 4,080,789 MIST Pyramis Government Income Investment Division (a) 18,677,974 198,131,249 198,355,032 222,767 MIST RCM Technology Investment Division 31,023,548 130,497,828 33,603,940 36,169,595 MIST SSgA Growth and Income ETF Investment Division 72,736,194 769,931,158 264,251,222 10,897,866 MIST SSgA Growth ETF Investment Division 8,974,683 88,522,448 34,123,956 18,701,908 MIST T. Rowe Price Mid Cap Growth Investment Division 29,713,922 245,679,529 48,058,908 28,946,681 MIST Third Avenue Small Cap Value Investment Division 737,507 10,496,226 1,614,814 627,698 MSF Artio International Stock Investment Division 19,069,935 210,548,356 15,085,109 22,088,719 MSF Barclays Capital Aggregate Bond Index Investment Division 97,650,187 1,046,865,226 158,674,335 139,741,267 MSF BlackRock Aggressive Growth Investment Division 17,105,551 380,610,437 14,746,917 65,552,224 MSF BlackRock Bond Income Investment Division 4,579,627 486,605,816 59,533,434 67,916,199 MSF BlackRock Diversified Investment Division 39,813,991 649,781,239 19,742,712 98,570,035 MSF BlackRock Large Cap Value Investment Division 20,046,234 225,694,132 27,529,711 19,216,296 MSF BlackRock Legacy Large Cap Growth Investment Division 6,284,012 145,999,572 42,598,930 19,188,890 MSF BlackRock Money Market Investment Division 876,771 87,677,066 68,982,430 57,705,201 MSF Davis Venture Value Investment Division 18,638,618 539,725,592 42,709,319 52,617,205 MSF FI Value Leaders Investment Division 463,870 78,988,384 6,408,447 12,364,914 MSF Jennison Growth Investment Division 6,880,552 76,249,066 30,090,450 14,931,144 MSF Loomis Sayles Small Cap Core Investment Division 691,847 143,385,432 16,686,392 23,758,907 MSF Loomis Sayles Small Cap Growth Investment Division 4,706,024 43,722,202 12,727,597 11,087,400 MSF Met/Artisan Mid Cap Value Investment Division 1,200,825 252,785,947 13,339,666 31,234,908 MSF Met/Dimensional International Small Company Investment Division 307,785 4,474,542 2,452,115 842,205 MSF MetLife Conservative Allocation Investment Division 44,800,240 482,177,017 111,805,119 31,237,518 MSF MetLife Conservative to Moderate Allocation Investment Division 115,560,765 1,228,725,041 221,022,592 52,403,659 MSF MetLife Mid Cap Stock Index Investment Division 29,837,614 368,030,271 62,370,894 48,389,342 MSF MetLife Moderate Allocation Investment Division 333,695,884 3,520,016,636 560,800,081 97,728,933 MSF MetLife Moderate to Aggressive Allocation Investment Division 146,760,295 1,580,308,648 83,985,444 108,952,421 MSF MetLife Stock Index Investment Division 85,869,971 2,520,044,366 169,147,802 294,336,615 MSF MFS Total Return Investment Division 1,050,367 141,718,954 14,561,648 20,910,259 MSF MFS Value Investment Division 22,249,446 277,799,040 24,191,475 31,885,197 MSF Morgan Stanley EAFE Index Investment Division 42,419,997 487,881,583 65,624,578 31,376,153 MSF Neuberger Berman Genesis Investment Division 22,043,156 333,199,085 8,273,799 43,040,336 MSF Neuberger Berman Mid Cap Value Investment Division 24,232,126 445,209,631 38,330,055 61,642,373 MSF Oppenheimer Global Equity Investment Division 14,528,644 200,024,087 24,864,216 24,010,049 MSF Russell 2000 Index Investment Division 20,219,560 243,544,280 30,656,549 44,752,472 MSF T. Rowe Price Large Cap Growth Investment Division 11,796,673 152,215,686 11,458,385 30,582,742 MSF T. Rowe Price Small Cap Growth Investment Division 16,136,879 207,699,604 37,774,007 40,920,696 MSF Van Eck Global Natural Resources Investment Division 2,641,704 40,367,896 21,940,486 1,220,979 MSF Western Asset Management Strategic Bond Opportunities Investment Division 19,214,700 233,828,163 24,364,359 52,958,568 MSF Western Asset Management U.S. Government Investment Division 19,359,572 233,005,630 34,215,083 39,564,742 MSF Zenith Equity Investment Division 218,054 79,979,845 1,569,903 13,285,341
70 This page is intentionally left blank. METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 7. SCHEDULES OF UNITS FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010: AMERICAN FUNDS GLOBAL SMALL AMERICAN FUNDS BOND CAPITALIZATION AMERICAN FUNDS GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------- --------------------------- --------------------------- 2011 2010 2011 2010 2011 2010 ------------- ------------- ------------- ------------- ------------- ------------- Units beginning of year 8,896,331 9,420,222 21,870,431 22,146,914 7,571,854 8,261,553 Units issued and transferred from other funding options 1,356,161 1,524,740 4,626,048 4,426,671 914,304 731,438 Units redeemed and transferred to other funding options (2,476,420) (2,048,631) (5,627,037) (4,703,154) (1,710,582) (1,421,137) ------------- ------------- ------------- ------------- ------------- ------------- Units end of year 7,776,072 8,896,331 20,869,442 21,870,431 6,775,576 7,571,854 ============= ============= ============= ============= ============= =============
FIDELITY VIP FIDELITY VIP EQUITY-INCOME FUNDSMANAGER 60% FIDELITY VIP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------- --------------------------- ------------------------- 2011 2010 2011 2010 2011 2010 ------------ ---------------- ------------- ------------- ------------ ------------ Units beginning of year 5,189,262 6,023,263 10,055,976 28,017 2,111,729 2,292,307 Units issued and transferred from other funding options 228,952 279,253 11,360,209 10,287,466 111,010 117,686 Units redeemed and transferred to other funding options (938,711) (1,113,254) (596,105) (259,507) (439,210) (298,264) ------------ ---------------- ------------- ------------- ------------ ------------ Units end of year 4,479,503 5,189,262 20,820,080 10,055,976 1,783,529 2,111,729 ============ ================ ============= ============= ============ ============
MIST AMERICAN FUNDS MIST AMERICAN MIST AMERICAN FUNDS BALANCED ALLOCATION FUNDS BOND GROWTH ALLOCATION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------- -------------------------- --------------------------- 2011 2010 2011 2010 2011 2010 ------------- ------------- ------------- ------------ ------------- ------------- Units beginning of year 54,397,965 30,034,186 5,961,314 1,987,475 35,239,687 32,850,723 Units issued and transferred from other funding options 17,985,030 28,437,604 3,681,706 4,794,290 6,621,024 8,273,527 Units redeemed and transferred to other funding options (7,861,598) (4,073,825) (2,283,154) (820,451) (7,656,407) (5,884,563) ------------- ------------- ------------- ------------ ------------- ------------- Units end of year 64,521,397 54,397,965 7,359,866 5,961,314 34,204,304 35,239,687 ============= ============= ============= ============ ============= =============
(a) For the period May 2, 2011 to December 31, 2011. (b) For the period May 3, 2010 to December 31, 2010. 72 AMERICAN FUNDS CALVERT VP SRI GROWTH-INCOME CALVERT VP SRI BALANCED MID CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------- -------------------------- ---------------------- 2011 2010 2011 2010 2011 2010 ------------- ------------- ------------ ------------- ---------- ----------- 7,599,619 7,531,106 1,850,748 1,901,894 371,121 370,911 1,332,035 1,512,821 142,931 179,536 50,570 40,809 (1,652,500) (1,444,308) (231,262) (230,682) (83,584) (40,599) ------------- ------------- ------------ ------------- ---------- ----------- 7,279,154 7,599,619 1,762,417 1,850,748 338,107 371,121 ============= ============= ============ ============= ========== ===========
MIST ALLIANCEBERNSTEIN FIDELITY VIP FIDELITY VIP GLOBAL DYNAMIC INVESTMENT GRADE BOND MONEY MARKET ALLOCATION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------ ---------------------------- ---------------------- 2011 2010 2011 2010 2011 (a) ----------- ------------ -------------- ------------- ---------------------- 761,081 794,594 766,151 942,138 -- 127,620 155,962 10,767,743 8,789,421 49,933,655 (197,343) (189,475) (10,747,151) (8,965,408) (707,619) ----------- ------------ -------------- ------------- ---------------------- 691,358 761,081 786,743 766,151 49,226,036 =========== ============ ============== ============= ======================
MIST AMERICAN MIST AQR MIST AMERICAN FUNDS MODERATE GLOBAL RISK FUNDS GROWTH ALLOCATION BALANCED INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------- ---------------------------- ---------------------- 2011 2010 2011 2010 2011 (a) ------------- ------------- -------------- ------------- ---------------------- 21,779,384 8,205,983 75,010,392 46,032,309 -- 13,871,732 14,813,655 21,099,474 34,956,719 57,034,923 (4,709,353) (1,240,254) (10,907,846) (5,978,636) (602,436) ------------- ------------- -------------- ------------- ---------------------- 30,941,763 21,779,384 85,202,020 75,010,392 56,432,487 ============= ============= ============== ============= ======================
73 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 7. SCHEDULES OF UNITS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010: MIST BLACKROCK GLOBAL TACTICAL MIST BLACKROCK STRATEGIES LARGE CAP CORE VARIABLE B INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ---------------------- --------------------------- ------------------------ 2011 (a) 2011 2010 2011 2010 ---------------------- ------------- ------------- ------------- ---------- Units beginning of year -- 20,665,064 21,088,063 103,828 122,189 Units issued and transferred from other funding options 75,032,567 3,888,249 2,874,595 850 1,656 Units redeemed and transferred to other funding options (937,242) (4,159,450) (3,297,594) (18,151) (20,017) ---------------------- ------------- ------------- ------------- ---------- Units end of year 74,095,325 20,393,863 20,665,064 86,527 103,828 ====================== ============= ============= ============= ==========
MIST HARRIS OAKMARK MIST INVESCO MIST INTERNATIONAL SMALL CAP GROWTH JANUS FORTY INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------- -------------------------- ------------------------- 2011 2010 2011 2010 2011 2010 ------------- ------------- ------------ ------------- ------------ ------------ Units beginning of year 22,318,089 18,765,510 2,311,559 2,575,281 2,367,336 2,084,776 Units issued and transferred from other funding options 7,985,226 7,975,938 916,018 771,970 604,963 880,341 Units redeemed and transferred to other funding options (5,698,082) (4,423,359) (903,067) (1,035,692) (750,919) (597,781) ------------- ------------- ------------ ------------- ------------ ------------ Units end of year 24,605,233 22,318,089 2,324,510 2,311,559 2,221,380 2,367,336 ============= ============= ============ ============= ============ ============
MIST MIST LORD ABBETT MIST MET/EATON MET/FRANKLIN BOND DEBENTURE VANCE FLOATING RATE INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------- ---------------------- -------------------------- 2011 2010 2011 2010 (b) 2011 2010 ------------- ------------- ----------- ---------- ------------- ------------ Units beginning of year 14,565,687 14,237,429 127,652 -- 5,033,319 2,693,910 Units issued and transferred from other funding options 3,423,502 3,519,086 646,952 134,290 4,744,184 3,044,576 Units redeemed and transferred to other funding options (3,916,254) (3,190,828) (192,859) (6,638) (2,391,453) (705,167) ------------- ------------- ----------- ---------- ------------- ------------ Units end of year 14,072,935 14,565,687 581,745 127,652 7,386,050 5,033,319 ============= ============= =========== ========== ============= ============
(a) For the period May 2, 2011 to December 31, 2011. (b) For the period May 3, 2010 to December 31, 2010. 74 MIST CLARION GLOBAL MIST DREMAN VARIABLE C REAL ESTATE SMALL CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ---------------------- --------------------------- ----------------------- 2011 2010 2011 2010 2011 2010 ------------- -------- ------------- ------------- ------------ ---------- 6,244 6,758 15,981,514 16,166,181 657,621 238,413 -- 27 3,423,382 2,583,837 635,165 480,691 (89) (541) (3,388,158) (2,768,504) (215,640) (61,483) ------------- -------- ------------- ------------- ------------ ---------- 6,155 6,244 16,016,738 15,981,514 1,077,146 657,621 ============= ======== ============= ============= ============ ==========
MIST LEGG MASON MIST MIST CLEARBRIDGE LOOMIS SAYLES LAZARD MID CAP AGGRESSIVE GROWTH GLOBAL MARKETS INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------------- --------------------------- ------------------------- 2011 2010 2011 2010 2011 2010 ------------- ------------ ------------- ------------- ------------ ------------ 4,081,305 4,007,439 3,935,646 3,431,934 1,021,819 277,759 962,912 1,020,944 9,744,680 1,763,048 1,469,364 1,009,229 (1,016,846) (947,078) (3,112,740) (1,259,336) (635,323) (265,169) ------------- ------------ ------------- ------------- ------------ ------------ 4,027,371 4,081,305 10,567,586 3,935,646 1,855,860 1,021,819 ============= ============ ============= ============= ============ ============
MIST MIST MET/FRANKLIN MIST MET/FRANKLIN LOW DURATION MET/FRANKLIN TEMPLETON TOTAL RETURN MUTUAL SHARES FOUNDING STRATEGY INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ---------------------- -------------------------- --------------------------- 2011 (a) 2011 2010 2011 2010 ---------------------- ------------- ------------ ------------- ------------- -- 4,333,640 2,188,969 6,203,619 5,631,074 872,602 2,722,869 2,554,173 1,570,872 1,738,280 (193,676) (1,265,159) (409,502) (1,478,751) (1,165,735) ---------------------- ------------- ------------ ------------- ------------- 678,926 5,791,350 4,333,640 6,295,740 6,203,619 ====================== ============= ============ ============= =============
75 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 7. SCHEDULES OF UNITS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010: MIST MIST MIST MET/TEMPLETON MET/TEMPLETON METLIFE AGGRESSIVE GROWTH INTERNATIONAL BOND STRATEGY INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------- ---------------------- ---------------------- 2011 2010 2011 2010 2011 (a) ------------ ------------ ----------- ---------- ---------------------- Units beginning of year 1,927,337 1,114,271 363,350 64,135 -- Units issued and transferred from other funding options 1,392,110 1,333,450 410,962 341,593 11,291,503 Units redeemed and transferred to other funding options (700,034) (520,384) (188,050) (42,378) (1,598,473) ------------ ------------ ----------- ---------- ---------------------- Units end of year 2,619,413 1,927,337 586,262 363,350 9,693,030 ============ ============ =========== ========== ======================
MIST MIST OPPENHEIMER MIST PIMCO MORGAN STANLEY CAPITAL INFLATION PROTECTED MID CAP GROWTH APPRECIATION BOND INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------- --------------------------- ---------------------------- 2011 2010 (b) 2011 2010 2011 2010 ------------- ------------- ------------- ------------- -------------- ------------- Units beginning of year 24,873,224 -- 5,676,113 4,735,360 33,648,714 24,705,878 Units issued and transferred from other funding options 4,016,812 28,145,306 1,594,453 2,193,952 17,584,975 13,780,063 Units redeemed and transferred to other funding options (5,705,451) (3,272,082) (1,420,411) (1,253,199) (11,465,216) (4,837,227) ------------- ------------- ------------- ------------- -------------- ------------- Units end of year 23,184,585 24,873,224 5,850,155 5,676,113 39,768,473 33,648,714 ============= ============= ============= ============= ============== =============
MIST SSGA MIST RCM GROWTH AND TECHNOLOGY INCOME ETF MIST SSGA GROWTH ETF INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------- --------------------------- --------------------------- 2011 2010 2011 2010 2011 2010 ------------- ------------- ------------- ------------- ------------- ------------- Units beginning of year 21,798,046 20,279,891 49,243,201 17,209,210 7,423,121 5,430,802 Units issued and transferred from other funding options 9,310,510 9,231,317 27,020,206 34,855,258 4,159,250 3,978,089 Units redeemed and transferred to other funding options (9,525,773) (7,713,162) (7,218,613) (2,821,267) (2,844,106) (1,985,770) ------------- ------------- ------------- ------------- ------------- ------------- Units end of year 21,582,783 21,798,046 69,044,794 49,243,201 8,738,265 7,423,121 ============= ============= ============= ============= ============= =============
(a) For the period May 2, 2011 to December 31, 2011. (b) For the period May 3, 2010 to December 31, 2010. 76 MIST MIST MIST METLIFE MFS EMERGING MFS RESEARCH BALANCED PLUS MARKETS EQUITY INTERNATIONAL INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ---------------------- ------------------------- --------------------------- 2011 (a) 2011 2010 2011 2010 ---------------------- ------------ ------------ ------------- ------------- -- 2,608,505 922,163 20,874,325 23,007,961 64,979,961 2,154,412 1,969,373 3,802,664 4,106,577 (947,594) (654,880) (283,031) (5,003,583) (6,240,213) ---------------------- ------------ ------------ ------------- ------------- 64,032,367 4,108,037 2,608,505 19,673,406 20,874,325 ====================== ============ ============ ============= =============
MIST MIST PYRAMIS MIST PIMCO PIONEER STRATEGIC GOVERNMENT TOTAL RETURN INCOME INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------- ------------------------- ---------------------- 2011 2010 2011 2010 2011 (a) -------------- -------------- ------------ ------------ ---------------------- 67,513,724 53,386,890 1,345,150 323,516 -- 22,014,158 25,560,090 1,370,699 1,195,142 19,525,713 (19,989,136) (11,433,256) (580,563) (173,508) (908,537) -------------- -------------- ------------ ------------ ---------------------- 69,538,746 67,513,724 2,135,286 1,345,150 18,617,176 ============== ============== ============ ============ ======================
MIST T. ROWE MIST THIRD AVENUE MSF ARTIO PRICE MID CAP GROWTH SMALL CAP VALUE INTERNATIONAL STOCK INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------- ---------------------- --------------------------- 2011 2010 2011 2010 2011 2010 ------------- ------------- ---------- ----------- ------------- ------------- 26,424,580 24,198,838 553,242 506,685 15,081,511 15,981,027 9,489,958 8,134,828 139,572 134,296 2,223,813 2,116,365 (7,840,368) (5,909,086) (81,441) (87,739) (2,980,314) (3,015,881) ------------- ------------- ---------- ----------- ------------- ------------- 28,074,170 26,424,580 611,373 553,242 14,325,010 15,081,511 ============= ============= ========== =========== ============= =============
77 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 7. SCHEDULES OF UNITS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010: MSF BARCLAYS CAPITAL AGGREGATE MSF BLACKROCK MSF BLACKROCK BOND INDEX AGGRESSIVE GROWTH BOND INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------- --------------------------- --------------------------- 2011 2010 2011 2010 2011 2010 -------------- -------------- ------------- ------------- ------------- ------------- Units beginning of year 67,541,233 60,512,287 13,591,177 14,747,259 14,977,082 15,377,793 Units issued and transferred from other funding options 17,480,170 19,250,119 1,304,655 1,444,253 2,235,579 2,575,622 Units redeemed and transferred to other funding options (17,661,161) (12,221,173) (2,539,336) (2,600,335) (3,348,912) (2,976,333) -------------- -------------- ------------- ------------- ------------- ------------- Units end of year 67,360,242 67,541,233 12,356,496 13,591,177 13,863,749 14,977,082 ============== ============== ============= ============= ============= =============
MSF BLACKROCK MSF DAVIS MSF FI VALUE MONEY MARKET VENTURE VALUE LEADERS INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------- --------------------------- --------------------------- 2011 2010 2011 2010 2011 2010 ------------- ------------- ------------- ------------- ------------- ------------- Units beginning of year 7,489,620 9,055,515 24,503,478 24,861,457 5,386,863 6,197,829 Units issued and transferred from other funding options 5,471,086 3,178,679 3,657,253 4,054,110 519,911 455,118 Units redeemed and transferred to other funding options (5,379,191) (4,744,574) (5,138,197) (4,412,089) (1,139,253) (1,266,084) ------------- ------------- ------------- ------------- ------------- ------------- Units end of year 7,581,515 7,489,620 23,022,534 24,503,478 4,767,521 5,386,863 ============= ============= ============= ============= ============= =============
MSF MSF MET/DIMENSIONAL MSF METLIFE MET/ARTISAN INTERNATIONAL CONSERVATIVE MID CAP VALUE SMALL COMPANY ALLOCATION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------- ---------------------- --------------------------- 2011 2010 2011 2010 2011 2010 ------------- ------------- ---------- ----------- ------------- ------------- Units beginning of year 10,171,808 11,496,387 194,434 76,087 34,931,385 25,915,327 Units issued and transferred from other funding options 1,286,453 1,025,545 173,804 140,907 15,179,052 15,748,970 Units redeemed and transferred to other funding options (2,320,023) (2,350,124) (84,109) (22,560) (9,189,532) (6,732,912) ------------- ------------- ---------- ----------- ------------- ------------- Units end of year 9,138,238 10,171,808 284,129 194,434 40,920,905 34,931,385 ============= ============= ========== =========== ============= =============
(a) For the period May 2, 2011 to December 31, 2011. (b) For the period May 3, 2010 to December 31, 2010. 78 MSF MSF BLACKROCK MSF BLACKROCK BLACKROCK LEGACY LARGE CAP DIVERSIFIED LARGE CAP VALUE GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------- --------------------------- --------------------------- 2011 2010 2011 2010 2011 2010 ------------- ------------- ------------- ------------- ------------- ------------- 20,865,957 23,518,536 17,848,335 16,843,730 10,566,230 11,310,287 845,517 922,191 5,752,391 4,039,447 2,872,411 1,950,868 (3,349,846) (3,574,770) (5,073,665) (3,034,842) (2,941,248) (2,694,925) ------------- ------------- ------------- ------------- ------------- ------------- 18,361,628 20,865,957 18,527,061 17,848,335 10,497,393 10,566,230 ============= ============= ============= ============= ============= =============
MSF LOOMIS MSF LOOMIS MSF SAYLES SMALL SAYLES SMALL JENNISON GROWTH CAP CORE CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------- --------------------------- --------------------------- 2011 2010 2011 2010 2011 2010 ------------- ------------- ------------- ------------- ------------- ------------- 12,651,183 10,221,743 8,483,306 9,510,756 4,256,184 4,562,561 8,635,917 5,124,755 1,299,042 987,645 1,809,520 773,789 (5,440,365) (2,695,315) (2,029,196) (2,015,095) (1,641,056) (1,080,166) ------------- ------------- ------------- ------------- ------------- ------------- 15,846,735 12,651,183 7,753,152 8,483,306 4,424,648 4,256,184 ============= ============= ============= ============= ============= =============
MSF METLIFE MSF METLIFE MSF METLIFE CONSERVATIVE TO MID CAP STOCK MODERATE MODERATE ALLOCATION INDEX ALLOCATION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------- --------------------------- ----------------------------- 2011 2010 2011 2010 2011 2010 -------------- ------------- ------------- ------------- -------------- -------------- 92,893,969 73,016,806 23,301,277 23,602,002 270,336,724 197,414,896 29,413,098 29,623,110 6,331,509 5,365,851 75,515,483 93,755,029 (16,619,339) (9,745,947) (6,554,086) (5,666,576) (38,727,364) (20,833,201) -------------- ------------- ------------- ------------- -------------- -------------- 105,687,728 92,893,969 23,078,700 23,301,277 307,124,843 270,336,724 ============== ============= ============= ============= ============== ==============
79 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 7. SCHEDULES OF UNITS -- (CONCLUDED) FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010: MSF METLIFE MODERATE TO MSF METLIFE MSF MFS AGGRESSIVE ALLOCATION STOCK INDEX TOTAL RETURN INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------- ----------------------------- --------------------------- 2011 2010 2011 2010 2011 2010 -------------- -------------- -------------- -------------- ------------- ------------- Units beginning of year 138,767,656 140,559,044 69,017,391 71,097,931 7,658,769 8,470,625 Units issued and transferred from other funding options 15,206,687 15,464,031 9,598,802 10,066,939 634,545 993,877 Units redeemed and transferred to other funding options (17,665,665) (17,255,419) (13,647,129) (12,147,479) (1,348,839) (1,805,733) -------------- -------------- -------------- -------------- ------------- ------------- Units end of year 136,308,678 138,767,656 64,969,064 69,017,391 6,944,475 7,658,769 ============== ============== ============== ============== ============= =============
MSF NEUBERGER BERMAN MSF OPPENHEIMER MSF RUSSELL MID CAP VALUE GLOBAL EQUITY 2000 INDEX INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------- --------------------------- --------------------------- 2011 2010 2011 2010 2011 2010 ------------- ------------- ------------- ------------- ------------- ------------- Units beginning of year 20,637,451 20,178,988 11,471,149 11,212,707 15,715,274 16,192,484 Units issued and transferred from other funding options 4,703,538 5,055,127 2,552,540 2,303,857 3,866,036 3,172,862 Units redeemed and transferred to other funding options (5,580,975) (4,596,664) (2,564,722) (2,045,415) (4,609,857) (3,650,072) ------------- ------------- ------------- ------------- ------------- ------------- Units end of year 19,760,014 20,637,451 11,458,967 11,471,149 14,971,453 15,715,274 ============= ============= ============= ============= ============= =============
MSF WESTERN ASSET MANAGEMENT MSF WESTERN STRATEGIC BOND ASSET MANAGEMENT MSF ZENITH OPPORTUNITIES U.S. GOVERNMENT EQUITY INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------- --------------------------- ------------------------- 2011 2010 2011 2010 2011 2010 ------------- ------------- ------------- ------------- ------------ ------------ Units beginning of year 13,288,962 13,614,452 15,023,442 14,375,216 3,651,183 4,320,085 Units issued and transferred from other funding options 1,681,261 2,816,037 3,579,419 4,114,150 133,676 162,748 Units redeemed and transferred to other funding options (3,636,878) (3,141,527) (4,549,677) (3,465,924) (657,756) (831,650) ------------- ------------- ------------- ------------- ------------ ------------ Units end of year 11,333,345 13,288,962 14,053,184 15,023,442 3,127,103 3,651,183 ============= ============= ============= ============= ============ ============
(a) For the period May 2, 2011 to December 31, 2011. (b) For the period May 3, 2010 to December 31, 2010. 80 MSF MSF MSF MFS MORGAN STANLEY NEUBERGER BERMAN VALUE EAFE INDEX GENESIS INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------- --------------------------- --------------------------- 2011 2010 2011 2010 2011 2010 ------------- ------------- ------------- ------------- ------------- ------------- 23,312,590 22,877,144 36,009,259 33,890,643 18,897,311 21,389,031 4,671,544 4,764,399 9,430,480 8,629,353 1,954,420 1,676,202 (5,588,621) (4,328,953) (6,923,547) (6,510,737) (4,166,630) (4,167,922) ------------- ------------- ------------- ------------- ------------- ------------- 22,395,513 23,312,590 38,516,192 36,009,259 16,685,101 18,897,311 ============= ============= ============= ============= ============= =============
MSF T. ROWE MSF T. ROWE MSF VAN ECK PRICE LARGE PRICE SMALL GLOBAL NATURAL CAP GROWTH CAP GROWTH RESOURCES INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------- --------------------------- ------------------------- 2011 2010 2011 2010 2011 2010 ------------- ------------- ------------- ------------- ------------ ------------ 13,494,657 14,615,966 14,000,629 12,978,831 1,309,383 379,256 2,183,137 1,818,424 4,272,993 3,955,490 1,504,512 1,164,782 (3,339,956) (2,939,733) (4,242,591) (2,933,692) (522,139) (234,655) ------------- ------------- ------------- ------------- ------------ ------------ 12,337,838 13,494,657 14,031,031 14,000,629 2,291,756 1,309,383 ============= ============= ============= ============= ============ ============
81 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 8. FINANCIAL HIGHLIGHTS The Company sells a number of variable annuity products which have unique combinations of features and fees, some of which directly affect the unit values of the Investment Divisions. Differences in the fee structures result in a variety of unit values, expense ratios, and total returns. The following table is a summary of unit values and units outstanding for the Contracts, net investment income ratios, and expense ratios, excluding expenses for the underlying portfolio or fund for each of the respective stated periods in the five years ended December 31, 2011: AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 --------------------------------------- --------------------------------------------- EXPENSE(2) TOTAL(3) UNIT VALUE INVESTMENT(1) RATIO RETURN LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) ---------- -------------- ------------- ------------- ----------- ------------------- American Funds Bond 2011 7,776,072 14.60 - 19.30 132,354,078 2.88 0.50 - 2.55 3.44 - 5.42 Investment Division 2010 8,896,331 14.11 - 18.31 144,729,120 2.96 0.50 - 2.55 3.76 - 5.75 2009 9,420,222 13.60 - 17.31 146,076,081 3.27 0.50 - 2.55 9.76 - 11.88 2008 9,086,361 12.39 - 15.47 126,975,777 5.10 0.50 - 2.30 (11.63) - (9.95) 2007 11,530,901 14.02 - 17.18 180,371,726 8.58 0.50 - 2.30 0.72 - 2.63 American Funds Global Small 2011 20,869,442 2.41 - 27.10 488,925,353 1.34 0.50 - 2.55 (21.18) - (19.67) Capitalization Investment 2010 21,870,431 3.03 - 33.77 638,167,766 1.73 0.50 - 2.55 19.33 - 21.62 Division 2009 22,146,914 2.52 - 27.79 528,416,498 0.29 0.50 - 2.55 57.24 - 60.26 2008 21,297,918 1.59 - 17.36 315,284,802 -- 0.50 - 2.30 (54.18) - (53.87) 2007 23,822,033 3.47 - 37.63 739,389,771 2.98 0.50 - 2.30 19.66 - 20.49 American Funds Growth 2011 6,775,576 12.97 - 177.66 943,068,284 0.60 0.50 - 2.55 (6.68) - (4.89) Investment Division 2010 7,571,854 13.72 - 186.99 1,104,322,652 0.71 0.50 - 2.55 15.70 - 17.91 2009 8,261,553 11.70 - 158.74 1,020,275,073 0.67 0.50 - 2.55 35.90 - 38.52 2008 8,477,946 8.50 - 114.72 752,066,110 0.81 0.50 - 2.30 (44.66) - (44.39) 2007 8,771,329 15.36 - 206.31 1,357,133,444 0.81 0.50 - 2.30 11.22 - 11.51 American Funds Growth-Income 2011 7,279,154 9.58 - 121.41 689,767,422 1.54 0.50 - 2.55 (4.30) - (2.47) Investment Division 2010 7,599,619 9.91 - 124.60 738,591,508 1.51 0.50 - 2.55 8.62 - 10.71 2009 7,531,106 9.04 - 112.66 664,724,752 1.65 0.50 - 2.55 27.94 - 30.40 2008 7,608,552 7.00 - 86.49 510,830,623 1.67 0.50 - 2.30 (38.81) - (38.31) 2007 8,436,306 11.44 - 140.21 910,533,909 1.55 0.50 - 2.30 3.34 - 4.25 Calvert VP SRI Balanced 2011 1,762,417 22.36 - 29.60 49,903,373 1.29 0.50 - 1.55 2.96 - 4.04 Investment Division 2010 1,850,748 21.72 - 28.66 50,866,287 1.43 0.50 - 1.55 10.37 - 11.54 2009 1,901,894 19.68 - 25.89 47,408,049 2.21 0.50 - 1.55 23.36 - 24.67 2008 1,958,099 15.95 - 20.92 39,625,750 2.49 0.50 - 1.55 (32.39) - (32.17) 2007 2,076,677 23.59 - 30.84 62,179,011 2.41 0.50 - 1.55 1.20 - 1.48 Calvert VP SRI Mid Cap 2011 338,107 33.41 - 33.42 11,298,697 -- 0.95 1.37 Growth Investment Division 2010 371,121 32.96 - 32.97 12,234,406 -- 0.95 30.24 2009 370,911 25.31 9,388,607 -- 0.95 30.77 - 30.78 2008 377,930 19.35 7,315,009 -- 0.95 - 1.35 (37.80) 2007 395,084 31.11 12,291,484 -- 0.95 - 1.35 9.12 Fidelity VIP Equity-Income 2011 4,479,503 5.48 - 44.17 78,185,094 2.34 0.95 - 1.35 (0.38) - 0.03 Investment Division 2010 5,189,262 5.50 - 44.15 91,649,413 1.80 0.95 - 1.35 13.62 - 14.07 2009 6,023,263 4.84 - 38.71 88,951,615 2.29 0.95 - 1.35 28.45 - 28.99 2008 7,160,081 3.77 - 30.01 77,071,469 2.30 0.95 - 1.35 (43.39) - (43.20) 2007 9,099,278 6.66 - 52.83 165,886,510 1.70 0.95 - 1.35 0.15 - 0.57 Fidelity VIP FundsManager 2011 20,820,080 9.48 - 9.54 198,202,397 1.89 1.90 - 2.05 (4.01) - (3.87) 60% Investment Division 2010 10,055,976 9.88 - 9.93 99,633,507 2.44 1.90 - 2.05 11.32 - 11.49 (Commenced 10/15/2009) 2009 28,017 8.87 - 8.90 248,942 1.19 1.90 - 2.05 0.07 - 0.09
82 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 8. FINANCIAL HIGHLIGHTS -- (CONTINUED) AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 ---------------------------------------- --------------------------------------------- EXPENSE(2) TOTAL(3) UNIT VALUE INVESTMENT(1) RATIO RETURN LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) ---------- ----------------- ----------- ------------- ----------- ------------------- Fidelity VIP Growth 2011 1,783,529 41.91 74,754,203 0.34 0.95 (0.74) Investment Division 2010 2,111,729 42.22 - 42.23 89,166,883 0.28 0.95 23.00 - 23.01 2009 2,292,307 34.32 - 34.33 78,687,001 0.45 0.95 27.08 - 27.09 2008 2,438,573 27.01 65,868,936 0.78 0.95 - 1.35 (47.67) 2007 2,815,092 51.61 145,295,256 0.83 0.95 - 1.35 25.76 Fidelity VIP Investment 2011 691,358 30.95 21,398,778 3.16 0.95 6.32 - 6.33 Grade Bond Investment Division 2010 761,081 29.11 22,154,719 3.50 0.95 6.79 2009 794,594 27.26 21,659,031 8.79 0.95 14.63 - 14.64 2008 730,222 23.78 17,363,022 4.32 0.95 - 1.35 (4.15) 2007 841,730 24.81 20,883,287 3.91 0.95 - 1.35 3.37 Fidelity VIP Money Market 2011 786,743 10.92 - 16.86 12,168,038 0.10 0.95 - 2.05 (1.94) - (0.83) Investment Division 2010 766,151 11.14 - 17.00 12,251,820 0.17 0.95 - 2.05 (1.82) - (0.70) 2009 942,138 11.34 - 17.12 15,639,330 0.72 0.95 - 2.05 (0.39) - (0.22) 2008 864,063 17.15 14,823,280 3.01 0.95 - 1.35 2.08 2007 933,116 16.80 15,686,013 5.07 0.95 - 1.35 4.09 MIST AllianceBernstein Global 2011 49,226,036 9.70 - 9.75 479,791,726 0.98 1.15 - 2.00 (3.01) - (2.47) Dynamic Allocation Investment Division (Commenced 5/2/2011) MIST American Funds Balanced 2011 64,521,397 9.23 - 9.92 618,948,646 1.26 0.50 - 2.30 (4.34) - (2.43) Allocation Investment Division 2010 54,397,965 9.65 - 10.17 539,848,602 1.00 0.50 - 2.30 9.61 - 11.67 (Commenced 4/28/2008) 2009 30,034,186 8.81 - 9.11 269,080,901 -- 0.50 - 2.30 26.39 - 29.21 2008 9,087,721 6.97 - 7.06 63,741,086 6.96 0.50 - 2.30 (30.30) - (29.40) MIST American Funds Bond 2011 7,359,866 10.47 - 10.90 79,806,796 2.15 1.15 - 2.25 3.44 - 4.58 Investment Division 2010 5,961,314 10.12 - 10.43 61,894,293 1.53 1.15 - 2.25 3.74 - 4.89 (Commenced 11/7/2008 and 2009 1,987,475 9.79 - 9.94 19,704,304 -- 1.15 - 2.05 9.85 - 10.84 began transactions in 2009) MIST American Funds Growth 2011 34,204,304 8.55 - 9.14 303,484,652 1.12 0.50 - 2.30 (6.89) - (5.21) Allocation Investment Division 2010 35,239,687 9.18 - 9.64 332,353,082 0.88 0.50 - 2.30 10.91 - 12.92 (Commenced 4/28/2008) 2009 32,850,723 8.28 - 8.54 276,545,341 -- 0.50 - 2.30 31.00 - 33.36 2008 15,561,108 6.32 - 6.40 99,006,699 7.24 0.50 - 2.30 (36.80) - (36.00) MIST American Funds Growth 2011 30,941,763 8.39 - 8.74 269,245,330 0.34 1.15 - 2.25 (6.71) - (5.69) Investment Division 2010 21,779,384 9.00 - 9.27 201,192,477 0.18 1.15 - 2.25 15.69 - 16.97 (Commenced 11/7/2008 and 2009 8,205,983 7.78 - 7.92 64,876,014 -- 1.15 - 2.25 35.80 - 37.30 began transactions in 2009) MIST American Funds Moderate 2011 85,202,020 9.69 - 10.36 857,229,344 1.54 0.50 - 2.30 (2.08) - (0.31) Allocation Investment Division 2010 75,010,392 9.89 - 10.39 762,782,012 1.41 0.50 - 2.30 7.40 - 9.36 (Commenced 4/28/2008) 2009 46,032,309 9.21 - 9.50 431,332,093 -- 0.50 - 2.30 20.59 - 22.79 2008 15,201,857 7.64 - 7.74 116,911,851 6.90 0.50 - 2.30 (23.60) - (22.60) MIST AQR Global Risk Balanced 2011 56,432,487 10.56 - 10.62 599,167,858 3.41 1.15 - 2.00 2.12 - 2.70 Investment Division (Commenced 5/2/2011) MIST BlackRock Global Tactical 2011 74,095,325 9.53 - 9.58 709,763,094 1.51 1.15 - 2.00 (4.68) - (4.14) Strategies Investment Division (Commenced 5/2/2011)
83 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 8. FINANCIAL HIGHLIGHTS -- (CONTINUED) AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 ---------------------------------------- ----------------------------------------------- EXPENSE(2) TOTAL(3) UNIT VALUE INVESTMENT(1) RATIO RETURN LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) ---------- --------------- ------------- ------------- ------------- ------------------- MIST BlackRock Large Cap 2011 20,393,863 6.37 - 81.12 607,789,646 1.10 (0.08) - 2.30 (2.02) - 0.54 Core Investment Division 2010 20,665,064 6.44 - 81.32 657,439,675 1.33 (0.08) - 2.30 9.90 - 12.73 (Commenced 4/30/2007) 2009 21,088,063 5.80 - 72.68 639,219,543 1.76 0.50 - 2.30 16.49 - 18.60 2008 22,354,205 4.93 - 61.28 589,682,261 0.68 0.50 - 2.30 (38.14) - (36.07) 2007 25,988,537 7.97 - 95.85 1,097,792,508 -- 0.60 - 2.30 (0.04) - 5.73 Variable B 2011 86,527 39.85 - 145.99 12,494,159 1.12 (0.08) - 1.00 (0.46) - (0.21) Investment Division 2010 103,828 39.93 - 146.66 14,265,716 1.36 (0.08) - 1.00 11.62 - 11.89 2009 122,189 35.69 - 131.40 15,078,294 1.65 1.00 18.25 - 18.55 2008 142,021 30.10 - 111.12 14,787,926 0.71 1.00 (37.74) - (37.59) 2007 167,124 48.23 - 178.48 28,073,493 1.59 1.00 5.57 - 6.09 Variable C 2011 6,155 145.99 - 188.23 1,080,417 1.10 (0.08) - 1.00 (0.46) - 0.54 Investment Division 2010 6,244 146.66 - 187.23 1,092,411 1.37 (0.08) - 1.00 11.62 - 12.73 2009 6,758 131.40 - 166.08 1,044,718 1.62 1.00 18.25 - 19.43 2008 9,309 111.12 - 139.06 1,191,340 0.73 1.00 (37.74) - (37.12) 2007 11,081 178.48 - 221.14 2,233,598 1.54 1.00 5.57 - 6.63 MIST Clarion Global Real 2011 16,016,738 2.31 - 14.23 213,895,843 3.87 0.50 - 2.30 (7.73) - (5.89) Estate Investment Division 2010 15,981,514 2.46 - 15.15 228,566,225 8.23 0.50 - 2.30 13.47 - 15.53 2009 16,166,181 2.14 - 13.11 201,669,413 3.29 0.50 - 2.30 31.67 - 34.24 2008 16,424,718 1.60 - 9.78 154,233,055 1.70 0.50 - 2.30 (42.03) - (41.96) 2007 17,894,107 2.76 - 16.85 292,163,974 0.99 0.50 - 2.30 (15.60) - (15.41) MIST Dreman Small Cap Value 2011 1,077,146 12.44 - 13.21 14,113,642 1.42 1.15 - 2.05 (12.18) - (11.38) Investment Division 2010 657,621 14.17 - 14.91 9,722,885 0.58 1.15 - 2.05 16.83 - 17.89 (Commenced 11/7/2008 and 2009 238,413 12.13 - 12.65 2,992,834 0.18 1.15 - 2.05 26.17 - 27.30 began transactions in 2009) MIST Harris Oakmark 2011 24,605,233 1.71 - 18.49 402,888,469 -- 0.50 - 2.30 (16.20) - (14.54) International Investment 2010 22,318,089 2.02 - 21.68 422,198,591 1.89 0.50 - 2.30 13.77 - 15.92 Division 2009 18,765,510 1.76 - 18.71 304,862,337 7.37 0.50 - 2.30 51.54 - 54.46 2008 16,641,709 1.15 - 12.13 169,380,762 1.70 0.50 - 2.30 (41.62) - (41.17) 2007 22,007,795 1.97 - 20.62 371,672,206 0.83 0.50 - 2.30 (1.99) - (1.62) MIST Invesco Small Cap 2011 2,324,510 1.56 - 17.01 35,466,935 -- 0.50 - 2.30 (3.33) - (1.57) Growth Investment Division 2010 2,311,559 1.60 - 17.28 34,771,690 -- 0.50 - 2.30 23.32 - 25.55 2009 2,575,281 1.28 - 13.77 30,768,907 -- 0.50 - 2.30 30.78 - 33.15 2008 2,229,587 0.97 - 10.34 19,921,697 -- 0.50 - 2.30 (39.75) - (39.03) 2007 2,376,018 1.61 - 16.96 34,057,199 -- 0.50 - 2.30 9.52 - 11.14 MIST Janus Forty Investment 2011 2,221,380 108.42 - 271.25 326,899,919 1.69 0.50 - 2.30 (9.64) - (7.92) Division 2010 2,367,336 119.99 - 294.59 380,880,175 1.59 0.50 - 2.30 6.91 - 8.97 (Commenced 4/30/2007) 2009 2,084,776 112.23 - 270.33 309,364,810 -- 0.50 - 2.30 39.61 - 42.29 2008 1,337,831 80.39 - 175.43 140,033,926 4.92 0.50 - 2.30 (43.31) - (42.40) 2007 278,638 141.80 - 304.58 50,773,976 -- 0.50 - 2.30 27.11 - 29.23 MIST Lazard Mid Cap 2011 4,027,371 1.46 - 15.97 57,642,160 0.76 0.50 - 2.30 (7.42) - (5.75) Investment Division 2010 4,081,305 1.57 - 16.94 62,137,025 0.89 0.50 - 2.30 20.07 - 22.25 2009 4,007,439 1.29 - 13.86 49,807,030 1.18 0.50 - 2.30 33.65 - 36.08 2008 4,047,265 0.96 - 10.18 36,431,561 1.00 0.50 - 2.30 (38.85) - (38.23) 2007 5,071,031 1.57 - 16.48 72,090,954 0.42 0.60 - 2.30 (4.27) - (2.14)
84 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 8. FINANCIAL HIGHLIGHTS -- (CONTINUED) AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 ---------------------------------------- --------------------------------------------- EXPENSE(2) TOTAL(3) UNIT VALUE INVESTMENT(1) RATIO RETURN LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) ---------- ----------------- ----------- ------------- ----------- ------------------- MIST Legg Mason ClearBridge 2011 10,567,586 0.78 - 12.38 81,432,355 0.02 0.95 - 2.30 (9.19) - 2.58 Aggressive Growth Investment 2010 3,935,646 0.77 - 12.07 29,795,656 0.03 0.95 - 2.30 20.97 - 22.89 Division 2009 3,431,934 0.63 - 9.83 21,068,292 0.06 0.95 - 2.30 29.92 - 32.20 2008 3,430,823 0.48 - 7.43 15,633,985 0.01 0.95 - 2.30 (39.54) - (39.24) 2007 4,023,244 0.79 - 12.29 28,814,564 0.12 0.95 - 2.30 0.00 - 1.65 MIST Loomis Sayles Global 2011 1,855,860 12.07 - 12.85 23,690,465 2.22 1.15 - 2.25 (3.67) - (2.61) Markets Investment Division 2010 1,021,819 12.54 - 13.20 13,393,060 2.23 1.15 - 2.25 19.30 - 20.62 (Commenced 11/7/2008 and 2009 277,759 10.60 - 10.94 3,025,890 0.16 1.15 - 2.00 38.04 - 39.22 began transactions in 2009) MIST Lord Abbett Bond 2011 14,072,935 2.39 - 27.52 299,293,863 5.99 0.50 - 2.30 2.09 - 3.94 Debenture Investment Division 2010 14,565,687 2.32 - 26.47 294,861,986 6.21 0.50 - 2.30 10.40 - 12.40 2009 14,237,429 2.08 - 23.55 257,209,965 7.15 0.50 - 2.30 33.66 - 36.09 2008 13,513,284 1.54 - 17.31 175,523,561 4.30 0.50 - 2.30 (19.79) - (19.00) 2007 16,100,140 1.92 - 21.37 253,650,839 5.19 0.50 - 2.30 5.49 - 6.00 MIST Met/Eaton Vance Floating 2011 581,745 10.17 - 10.33 5,996,924 2.13 1.15 - 2.05 (0.06) - 0.84 Rate Investment Division 2010 127,652 10.18 - 10.24 1,306,114 -- 1.15 - 2.05 1.81 - 2.42 (Commenced 5/3/2010) MIST Met/Franklin Income 2011 7,386,050 1.12 - 11.56 82,869,275 4.33 0.50 - 2.30 (0.18) - 1.63 Investment Division 2010 5,033,319 10.84 - 11.37 56,016,534 3.76 0.50 - 2.30 9.28 - 11.26 (Commenced 4/28/2008) 2009 2,693,910 9.92 - 10.22 27,160,816 -- 0.50 - 2.30 24.92 - 27.19 2008 1,062,043 7.94 - 8.01 8,486,992 4.42 0.95 - 2.30 (20.60) - (19.90) MIST Met/Franklin Low Duration 2011 678,926 9.72 - 9.80 6,635,667 -- 0.95 - 2.05 (2.63) - (1.92) Total Return Investment Division (Commenced 5/2/2011) MIST Met/Franklin Mutual 2011 5,791,350 8.44 - 9.02 50,810,483 2.71 0.50 - 2.30 (2.81) - (1.03) Shares Investment Division 2010 4,333,640 8.69 - 9.12 38,703,192 -- 0.50 - 2.30 8.51 - 10.46 (Commenced 4/28/2008) 2009 2,188,969 8.01 - 8.25 17,828,821 -- 0.50 - 2.30 22.05 - 24.27 2008 696,867 6.57 - 6.64 4,602,420 5.65 0.50 - 2.30 (34.30) - (33.60) MIST Met/Franklin Templeton 2011 6,295,740 9.07 - 9.69 59,253,268 1.72 0.50 - 2.30 (3.99) - (2.25) Founding Strategy Investment 2010 6,203,619 9.44 - 9.91 60,196,783 -- 0.50 - 2.30 7.54 - 9.49 Division 2009 5,631,074 8.78 - 9.05 50,292,640 -- 0.50 - 2.30 25.64 - 27.92 (Commenced 4/28/2008) 2008 2,808,700 7.01 - 7.06 19,766,948 3.23 0.95 - 2.30 (29.90) - (29.40) MIST Met/Templeton Growth 2011 2,619,413 8.18 - 8.66 22,033,920 1.28 0.50 - 2.05 (8.79) - (7.36) Investment Division 2010 1,927,337 8.96 - 9.34 17,633,999 1.01 0.50 - 2.05 5.48 - 7.12 (Commenced 4/28/2008) 2009 1,114,271 8.50 - 8.72 9,591,357 0.02 0.50 - 2.05 29.92 - 31.97 2008 329,768 6.54 - 6.61 2,167,857 1.01 0.50 - 2.30 (34.60) - (33.90) MIST Met/Templeton 2011 586,262 11.80 - 12.07 7,057,738 6.74 1.15 - 2.00 (2.30) - (1.47) International Bond Investment 2010 363,350 12.08 - 12.25 4,442,866 0.46 1.15 - 2.00 11.30 - 12.25 Division (Commenced 5/4/2009) 2009 64,135 10.85 - 10.92 699,311 -- 1.15 - 2.00 8.53 - 9.15 MIST MetLife Aggressive Strategy 2011 9,693,030 9.81 - 11.06 102,483,285 -- 0.50 - 2.30 (14.87) - (13.84) Investment Division (Commenced 5/2/2011)
85 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 8. FINANCIAL HIGHLIGHTS -- (CONTINUED) AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 -------------------------------------- --------------------------------------------- EXPENSE(2) TOTAL(3) UNIT VALUE INVESTMENT(1) RATIO RETURN LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) ---------- ------------- ------------- ------------- ----------- ------------------- MIST MetLife Balanced Plus 2011 64,032,367 9.35 - 9.40 601,466,008 0.29 1.15 - 2.00 (6.52) - (6.00) Investment Division (Commenced 5/2/2011) MIST MFS Emerging Markets 2011 4,108,037 9.61 - 10.22 41,739,144 1.34 1.15 - 2.25 (20.51) - (19.64) Equity Investment Division 2010 2,608,505 12.08 - 12.72 32,997,742 0.84 1.15 - 2.25 20.90 - 22.24 (Commenced 11/7/2008 and 2009 922,163 10.07 - 10.41 9,547,667 0.16 1.15 - 2.05 65.54 - 67.02 began transactions in 2009) MIST MFS Research International 2011 19,673,406 1.30 - 14.30 219,299,244 1.96 0.50 - 2.30 (12.74) - (11.15) Investment Division 2010 20,874,325 1.48 - 16.11 258,478,220 1.81 0.50 - 2.30 8.88 - 10.85 2009 23,007,961 1.34 - 14.57 245,592,968 3.18 0.50 - 2.30 28.57 - 30.91 2008 23,286,391 1.03 - 19.76 184,318,026 1.73 0.50 - 2.30 (43.41) - 1.39 2007 12,766,518 1.82 - 19.49 209,648,826 1.32 0.50 - 2.30 11.66 - 12.53 MIST Morgan Stanley Mid Cap 2011 23,184,585 1.38 - 15.69 331,439,430 0.71 0.50 - 2.30 (9.03) - (7.26) Growth Investment Division 2010 24,873,224 1.51 - 16.94 386,858,882 -- 0.50 - 2.30 15.85 - 16.84 (Commenced 5/3/2010) MIST Oppenheimer Capital 2011 5,850,155 7.42 - 10.72 49,213,997 0.11 0.50 - 2.30 (3.63) - (1.87) Appreciation Investment 2010 5,676,113 7.69 - 10.94 49,119,197 0.44 0.50 - 2.30 6.92 - 8.86 Division 2009 4,735,360 7.20 - 10.10 38,120,403 -- 0.50 - 2.30 40.44 - 42.99 2008 3,465,804 5.12 - 7.08 19,734,348 3.52 0.50 - 2.30 (47.22) - (46.44) 2007 2,717,423 9.70 - 13.22 29,294,308 0.01 0.50 - 2.30 10.98 - 13.38 MIST PIMCO Inflation 2011 39,768,473 13.97 - 16.47 607,250,028 1.61 0.50 - 2.30 8.62 - 10.77 Protected Bond Investment 2010 33,648,714 12.86 - 14.87 467,910,969 2.26 0.50 - 2.30 5.32 - 7.31 Division 2009 24,705,878 12.21 - 13.86 322,661,010 3.28 0.50 - 2.30 15.37 - 17.60 2008 16,609,891 10.58 - 11.78 186,022,258 3.60 0.50 - 2.30 (9.03) - (7.24) 2007 3,482,189 11.63 - 12.70 42,383,973 1.71 0.65 - 2.30 8.29 - 10.34 MIST PIMCO Total Return 2011 69,538,746 1.68 - 18.38 1,123,078,623 2.72 0.50 - 2.30 0.83 - 2.76 Investment Division 2010 67,513,724 1.65 - 17.91 1,048,658,444 3.43 0.50 - 2.30 5.71 - 7.71 2009 53,386,890 1.54 - 16.64 745,981,638 6.78 0.50 - 2.30 15.34 - 17.63 2008 41,057,029 1.32 - 14.17 488,023,782 3.85 0.50 - 2.30 (1.49) - (0.07) 2007 42,064,064 1.34 - 14.18 496,489,123 3.35 0.50 - 2.30 6.35 - 7.02 MIST Pioneer Strategic 2011 2,135,286 22.75 - 26.64 55,464,787 4.31 1.15 - 2.05 1.36 - 2.28 Income Investment Division 2010 1,345,150 22.44 - 26.04 34,118,467 3.53 1.15 - 2.05 9.77 - 10.76 (Commenced 11/7/2008 and 2009 323,516 20.44 - 23.51 7,426,917 0.48 1.15 - 2.05 30.07 - 31.25 began transactions in 2009) MIST Pyramis Government Income 2011 18,617,176 10.71 - 10.77 200,414,660 0.95 1.15 - 2.00 7.14 - 7.75 Investment Division (Commenced 5/2/2011) MIST RCM Technology 2011 21,582,783 0.62 - 15.62 133,833,471 -- 0.50 - 2.30 (12.02) - (10.34) Investment Division 2010 21,798,046 0.70 - 17.48 151,310,709 -- 0.50 - 2.30 24.79 - 27.08 2009 20,279,891 0.55 - 13.76 114,450,499 -- 0.50 - 2.30 55.36 - 58.17 2008 14,885,344 0.35 - 8.73 53,261,194 13.65 0.50 - 2.30 (45.31) - 7.25 2007 16,760,786 0.64 - 8.14 110,341,128 -- 0.50 - 2.30 28.00 - 30.45
86 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 8. FINANCIAL HIGHLIGHTS -- (CONTINUED) AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 -------------------------------------- --------------------------------------------- EXPENSE(2) TOTAL(3) UNIT VALUE INVESTMENT(1) RATIO RETURN LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) ---------- ------------- ------------- ------------- ----------- ------------------- MIST SSgA Growth and Income 2011 69,044,794 11.01 - 12.32 811,024,282 1.66 0.50 - 2.30 (1.23) - 0.56 ETF Investment Division 2010 49,243,201 11.14 - 12.25 579,390,787 1.07 0.50 - 2.30 9.69 - 11.68 2009 17,209,210 10.16 - 10.97 182,595,296 1.00 0.50 - 2.30 22.04 - 24.27 2008 1,018,446 8.32 - 8.83 8,767,451 1.56 0.50 - 2.30 (26.82) - (25.42) 2007 447,213 11.37 - 11.84 5,202,299 -- 0.50 - 2.30 2.90 - 5.43 MIST SSgA Growth ETF 2011 8,738,265 10.27 - 11.50 95,770,056 1.59 0.50 - 2.30 (4.36) - (2.62) Investment Division 2010 7,423,121 10.74 - 11.81 84,197,233 1.40 0.50 - 2.30 11.56 - 13.58 2009 5,430,802 9.63 - 10.39 54,665,570 1.01 0.50 - 2.30 26.17 - 28.45 2008 867,152 7.63 - 8.09 6,844,874 1.50 0.50 - 2.30 (34.51) - (33.31) 2007 1,059,021 11.65 - 12.13 12,618,364 -- 0.50 - 2.30 3.10 - 5.48 MIST T. Rowe Price Mid Cap 2011 28,074,170 1.02 - 17.28 276,466,812 -- 0.50 - 2.30 (3.88) - (2.14) Growth Investment Division 2010 26,424,580 1.05 - 17.69 269,741,582 -- 0.50 - 2.30 24.78 - 27.04 2009 24,198,838 0.84 - 13.94 191,894,410 -- 0.50 - 2.30 42.12 - 44.74 2008 22,042,286 0.58 - 9.65 118,146,449 0.02 0.50 - 2.30 (40.82) - (40.21) 2007 22,430,313 0.98 - 16.14 195,979,982 0.10 0.50 - 2.30 16.67 - 16.79 MIST Third Avenue Small Cap 2011 611,373 15.70 - 17.38 9,963,715 1.05 0.50 - 1.55 (10.38) - (9.44) Value Investment Division 2010 553,242 17.52 - 19.19 10,020,158 1.13 0.50 - 1.55 18.05 - 19.30 2009 506,685 14.84 - 16.09 7,743,513 1.12 0.50 - 1.55 24.51 - 25.82 2008 420,511 11.92 - 12.78 5,140,445 0.72 0.50 - 1.55 (30.90) - (30.20) 2007 372,086 17.25 - 18.31 6,558,207 0.92 0.50 - 1.55 (4.54) - (3.48) MSF Artio International 2011 14,325,010 1.14 - 13.42 149,064,918 1.71 0.65 - 2.30 (21.95) - (20.39) Stock Investment Division 2010 15,081,511 1.44 - 16.90 196,319,126 1.50 0.65 - 2.30 4.43 - 6.52 2009 15,981,027 1.36 - 15.91 197,024,423 0.60 0.95 - 2.30 19.12 - 21.03 2008 17,118,077 1.13 - 13.15 171,501,812 3.04 0.95 - 2.30 (44.65) - (44.61) 2007 17,936,510 2.04 - 23.76 317,896,584 1.01 0.95 - 2.30 8.51 - 9.29 MSF Barclays Capital Aggregate 2011 67,360,242 1.65 - 18.49 1,115,074,009 3.44 0.50 - 2.30 4.85 - 6.82 Bond Index Investment 2010 67,541,233 1.56 - 17.32 1,054,370,494 3.52 0.50 - 2.30 3.30 - 5.37 Division 2009 60,512,287 1.50 - 16.47 901,723,219 5.60 0.50 - 2.30 2.59 - 4.49 2008 53,280,392 1.45 - 15.77 761,920,074 4.54 0.50 - 2.30 4.32 - 5.13 2007 68,215,103 1.39 - 15.00 938,751,647 4.39 0.50 - 2.30 5.30 - 6.16 MSF BlackRock Aggressive 2011 12,356,496 13.09 - 52.05 441,856,480 0.27 0.95 - 2.30 (5.44) - (3.91) Growth Investment Division 2010 13,591,177 13.70 - 54.17 506,917,230 0.06 0.95 - 2.30 12.38 - 14.22 2009 14,747,259 12.07 - 47.42 479,958,097 0.18 0.95 - 2.30 45.67 - 48.03 2008 15,776,330 8.20 - 32.04 344,820,349 -- 0.95 - 2.30 (53.22) - (46.23) 2007 17,338,887 17.53 - 59.59 701,871,205 -- 0.95 - 2.30 19.41 - 19.44 MSF BlackRock Bond Income 2011 13,863,749 6.03 - 71.54 503,747,574 3.88 0.50 - 2.30 3.89 - 5.88 Investment Division 2010 14,977,082 5.73 - 67.64 500,008,866 3.80 0.50 - 2.30 5.61 - 7.64 2009 15,377,793 5.36 - 62.90 442,133,515 6.79 0.50 - 2.30 6.70 - 8.76 2008 16,836,670 4.97 - 57.90 424,475,862 5.20 0.50 - 2.30 (4.61) - (4.14) 2007 20,972,729 5.21 - 60.40 535,835,264 3.19 0.50 - 2.30 4.83 - 5.48 MSF BlackRock Diversified 2011 18,361,628 13.37 - 49.41 634,685,560 2.43 0.95 - 2.30 1.24 - 2.83 Investment Division 2010 20,865,957 13.00 - 48.05 703,823,057 1.90 0.95 - 2.30 6.83 - 8.62 2009 23,518,536 11.97 - 44.24 732,160,930 5.14 0.95 - 2.30 14.34 - 16.20 2008 26,879,083 10.30 - 38.07 719,674,176 2.84 0.95 - 2.30 (25.52) - (25.50) 2007 32,595,866 13.83 - 51.10 1,170,554,586 2.58 0.95 - 2.30 4.85 - 4.89
87 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 8. FINANCIAL HIGHLIGHTS -- (CONTINUED) AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 ---------------------------------------- --------------------------------------------- EXPENSE(2) TOTAL(3) UNIT VALUE INVESTMENT(1) RATIO RETURN LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) ---------- ----------------- ----------- ------------- ----------- ------------------- MSF BlackRock Large Cap 2011 18,527,061 0.81 - 12.12 206,549,406 0.92 0.50 - 2.30 (1.37) - 2.11 Value Investment Division 2010 17,848,335 1.12 - 11.94 195,798,773 0.86 0.50 - 2.30 6.45 - 8.38 2009 16,843,730 1.04 - 11.01 171,711,377 1.35 0.50 - 2.30 8.53 - 10.51 2008 15,206,819 0.95 - 9.97 139,910,970 0.61 0.50 - 2.30 (35.81) - (35.39) 2007 16,168,974 1.48 - 15.43 227,378,885 0.83 0.50 - 2.30 2.07 - 2.59 MSF BlackRock Legacy Large 2011 10,497,393 2.98 - 33.13 154,395,881 0.03 0.50 - 2.30 (11.22) - (9.54) Cap Growth Investment 2010 10,566,230 3.32 - 36.65 147,006,605 0.07 0.50 - 2.30 16.75 - 19.05 Division 2009 11,310,287 2.81 - 30.83 114,584,021 0.39 0.50 - 2.30 33.41 - 35.90 2008 12,006,106 2.08 - 22.70 70,886,323 0.29 0.50 - 2.30 (37.35) - (31.38) 2007 13,541,313 3.32 - 33.08 90,127,752 0.12 0.95 - 2.30 17.06 - 17.31 MSF BlackRock Money Market 2011 7,581,515 2.48 - 24.59 87,677,129 -- 0.95 - 2.30 (2.26) - (0.94) Investment Division 2010 7,489,620 2.52 - 24.90 76,398,280 -- 0.95 - 2.30 (2.28) - (0.93) 2009 9,055,515 2.55 - 25.21 78,480,535 0.33 0.95 - 2.30 (2.03) - (0.52) 2008 13,377,855 2.58 - 25.45 93,712,881 2.62 0.95 - 2.30 1.48 - 1.57 2007 10,358,956 2.54 - 25.08 62,077,315 4.87 0.95 - 2.30 3.55 - 3.67 MSF Davis Venture Value 2011 23,022,534 3.28 - 36.35 549,949,416 0.98 0.50 - 2.30 (6.44) - (4.65) Investment Division 2010 24,503,478 3.46 - 38.17 590,814,367 0.86 0.50 - 2.30 9.17 - 11.27 2009 24,861,457 3.13 - 34.34 500,253,145 1.35 0.50 - 2.30 28.66 - 31.14 2008 26,126,308 2.40 - 26.21 366,248,175 1.19 0.50 - 2.30 (40.30) - (39.83) 2007 30,239,376 4.02 - 43.56 632,228,776 0.67 0.50 - 2.30 3.08 - 3.84 MSF FI Value Leaders 2011 4,767,521 2.52 - 28.24 60,845,379 0.95 0.50 - 2.30 (8.51) - (6.85) Investment Division 2010 5,386,863 2.72 - 30.32 71,561,113 1.45 0.50 - 2.30 11.68 - 13.71 2009 6,197,829 2.40 - 26.67 69,067,926 2.64 0.50 - 2.30 18.72 - 20.88 2008 7,122,172 2.00 - 22.06 61,290,542 1.74 0.50 - 2.30 (39.76) - (39.41) 2007 9,038,999 3.32 - 36.41 119,087,321 0.78 0.50 - 2.30 2.79 - 3.44 MSF Jennison Growth 2011 15,846,735 0.52 - 13.26 82,954,033 0.11 0.95 - 2.30 (2.06) - (0.42) Investment Division 2010 12,651,183 0.53 - 13.32 67,839,064 0.45 0.95 - 2.30 8.78 - 10.58 2009 10,221,743 0.48 - 12.05 48,019,094 0.08 0.95 - 2.30 36.39 - 38.70 2008 7,367,023 0.35 - 8.69 23,825,643 2.33 0.95 - 2.30 (36.98) - (36.36) 2007 7,890,530 0.55 - 13.79 40,225,235 0.35 0.95 - 2.30 10.00 - 10.59 MSF Loomis Sayles Small Cap 2011 7,753,152 3.71 - 41.46 152,652,688 0.04 0.50 - 2.30 (1.94) - (0.16) Core Investment Division 2010 8,483,306 3.74 - 41.52 158,697,696 0.03 0.50 - 2.30 24.32 - 26.57 2009 9,510,756 2.97 - 32.81 134,569,722 0.12 0.50 - 2.30 26.97 - 29.28 2008 10,338,609 2.31 - 25.38 102,115,332 -- 0.50 - 2.30 (36.89) - (36.36) 2007 12,589,778 3.66 - 39.88 172,074,578 0.04 0.50 - 2.30 10.57 - 11.06 MSF Loomis Sayles Small Cap 2011 4,424,648 1.09 - 13.07 46,369,339 -- 0.50 - 2.30 0.41 - 2.23 Growth Investment Division 2010 4,256,184 1.08 - 12.81 43,602,855 -- 0.50 - 2.30 28.37 - 30.68 2009 4,562,561 0.83 - 9.82 36,176,490 -- 0.50 - 2.30 26.72 - 29.03 2008 4,490,130 0.65 - 7.63 27,534,390 -- 0.50 - 2.30 (41.96) - (41.71) 2007 5,050,433 1.12 - 13.09 50,686,417 -- 0.50 - 2.30 2.75 - 3.56 MSF Met/Artisan Mid Cap 2011 9,138,238 3.36 - 37.27 212,168,332 0.87 0.50 - 2.30 4.08 - 5.96 Value Investment Division 2010 10,171,808 3.19 - 35.17 217,605,252 0.68 0.50 - 2.30 12.15 - 14.19 2009 11,496,387 2.81 - 30.80 210,520,522 0.99 0.50 - 2.30 37.98 - 40.49 2008 13,047,548 2.01 - 21.92 163,902,675 0.24 0.50 - 2.30 (46.83) - (46.41) 2007 16,773,744 3.78 - 40.90 371,717,132 0.48 0.50 - 2.30 (8.03) - (7.55)
88 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 8. FINANCIAL HIGHLIGHTS -- (CONTINUED) AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 ----------------------------------------- --------------------------------------------- EXPENSE(2) TOTAL(3) UNIT VALUE INVESTMENT(1) RATIO RETURN LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) ------------- ------------- ------------- ------------- ----------- ------------------- MSF Met/Dimensional 2011 284,129 13.97 - 14.35 4,062,760 1.91 1.15 - 2.00 (17.91) - (17.21) International Small Company 2010 194,434 17.02 - 17.34 3,362,782 1.16 1.15 - 2.00 20.16 - 21.19 Investment Division 2009 76,087 14.17 - 14.31 1,087,279 -- 1.15 - 2.00 39.89 - 41.08 (Commenced 11/7/2008 and began transactions in 2009) MSF MetLife Conservative 2011 40,920,905 11.80 - 13.30 516,749,285 2.29 0.50 - 2.30 0.91 - 2.74 Allocation Investment Division 2010 34,931,385 11.69 - 12.95 432,541,976 3.47 0.50 - 2.30 7.55 - 9.50 2009 25,915,327 10.87 - 11.83 295,306,945 2.96 0.50 - 2.30 17.79 - 19.91 2008 17,373,413 9.23 - 9.86 166,398,948 0.94 0.50 - 2.30 (16.32) - (14.85) 2007 10,388,575 11.03 - 11.58 117,743,317 -- 0.50 - 2.30 3.08 - 5.08 MSF MetLife Conservative to 2011 105,687,728 11.41 - 12.87 1,291,252,079 2.04 0.50 - 2.30 (1.24) - 0.55 Moderate Allocation Investment 2010 92,893,969 11.56 - 12.80 1,137,111,581 3.28 0.50 - 2.30 8.99 - 10.97 Division 2009 73,016,806 10.60 - 11.53 811,434,046 3.04 0.50 - 2.30 20.87 - 23.06 2008 55,768,665 8.77 - 9.37 507,403,971 1.08 0.50 - 2.30 (23.41) - (21.98) 2007 40,982,217 11.45 - 12.01 481,838,013 -- 0.50 - 2.30 2.42 - 4.25 MSF MetLife Mid Cap Stock 2011 23,078,700 1.69 - 19.40 384,380,587 0.77 0.50 - 2.30 (4.41) - (2.53) Index Investment Division 2010 23,301,277 1.75 - 19.13 396,881,128 0.88 0.50 - 2.30 23.14 - 25.37 2009 23,602,002 1.41 - 15.26 319,741,957 1.65 0.50 - 2.30 33.67 - 36.09 2008 22,949,647 1.04 - 11.21 232,486,143 1.30 0.50 - 2.30 (39.01) - (37.35) 2007 23,583,090 1.66 - 18.38 372,939,266 0.66 0.50 - 2.30 5.73 - 11.06 MSF MetLife Moderate 2011 307,124,843 10.95 - 12.34 3,601,073,971 1.50 0.50 - 2.30 (3.61) - (1.86) Allocation Investment Division 2010 270,336,724 11.36 - 12.58 3,253,209,310 2.43 0.50 - 2.30 10.60 - 12.61 2009 197,414,896 10.27 - 11.17 2,125,104,855 2.71 0.50 - 2.30 23.65 - 25.90 2008 140,869,174 8.30 - 8.87 1,213,561,775 0.80 0.50 - 2.30 (30.31) - (28.98) 2007 102,023,736 11.91 - 12.49 1,247,257,412 0.03 0.50 - 2.30 1.97 - 3.82 MSF MetLife Moderate to 2011 136,308,678 10.42 - 11.75 1,520,709,941 1.42 0.50 - 2.30 (5.96) - (4.25) Aggressive Allocation 2010 138,767,656 11.08 - 12.27 1,628,677,260 2.14 0.50 - 2.30 12.10 - 14.13 Investment Division 2009 140,559,044 9.88 - 10.75 1,456,360,305 2.49 0.50 - 2.30 26.16 - 28.46 2008 120,035,284 7.83 - 8.37 975,444,229 0.60 0.50 - 2.30 (36.65) - (35.47) 2007 87,404,290 12.36 - 12.97 1,108,485,404 0.04 0.50 - 2.30 1.48 - 3.35 MSF MetLife Stock Index 2011 64,969,064 3.91 - 46.98 2,511,243,451 1.60 0.50 - 2.30 (0.67) - 1.18 Investment Division 2010 69,017,391 3.90 - 46.46 2,646,303,266 1.69 0.50 - 2.30 11.89 - 14.08 2009 71,097,931 3.45 - 40.78 2,393,363,534 2.63 0.50 - 2.30 23.06 - 25.42 2008 73,669,152 2.78 - 32.55 1,978,067,366 1.90 0.50 - 2.30 (38.08) - (37.57) 2007 78,221,903 4.49 - 52.14 3,349,337,677 1.00 0.50 - 2.30 3.70 - 4.45 MSF MFS Total Return 2011 6,944,475 4.86 - 55.90 135,335,283 2.63 0.50 - 2.30 (0.16) - 1.65 Investment Division 2010 7,658,769 4.81 - 54.99 142,302,103 2.91 0.50 - 2.30 7.30 - 9.25 2009 8,470,625 4.43 - 50.34 133,692,456 4.16 0.50 - 2.30 15.61 - 17.71 2008 9,513,697 3.79 - 42.76 117,792,924 3.58 0.50 - 2.30 (23.12) - (22.75) 2007 11,900,145 4.93 - 55.35 181,671,595 2.03 0.50 - 2.30 2.92 - 3.61 MSF MFS Value Investment 2011 22,395,513 1.20 - 14.91 271,032,881 1.44 0.50 - 2.30 (1.65) - 0.14 Division 2010 23,312,590 1.21 - 14.99 280,199,767 1.31 0.50 - 2.30 8.66 - 10.63 2009 22,877,144 1.10 - 13.64 249,421,604 -- 0.50 - 2.30 17.83 - 19.98 2008 23,729,130 0.93 - 10.00 216,469,833 1.94 0.50 - 2.30 (34.51) - (34.04) 2007 27,806,454 1.42 - 15.16 384,902,007 0.70 0.50 - 2.30 (4.70) - (4.53)
89 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 8. FINANCIAL HIGHLIGHTS -- (CONTINUED) AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 ---------------------------------------- --------------------------------------------- EXPENSE(2) TOTAL(3) UNIT VALUE INVESTMENT(1) RATIO RETURN LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) ---------- ----------------- ----------- ------------- ----------- ------------------- MSF Morgan Stanley EAFE 2011 38,516,192 1.11 - 14.53 428,461,169 2.30 0.50 - 2.30 (14.63) - (13.06) Index Investment Division 2010 36,009,259 1.29 - 16.76 462,135,393 2.56 0.50 - 2.30 5.46 - 7.50 2009 33,890,643 1.21 - 15.64 407,182,564 4.12 0.50 - 2.30 25.36 - 27.84 2008 32,911,652 0.96 - 12.27 309,589,902 2.79 0.50 - 2.30 (42.86) - (42.61) 2007 30,988,278 1.68 - 21.38 501,966,471 1.87 0.50 - 2.30 9.09 - 9.75 MSF Neuberger Berman 2011 16,685,101 1.75 - 18.85 263,644,663 0.67 0.50 - 2.30 3.11 - 4.98 Genesis Investment Division 2010 18,897,311 1.68 - 17.96 284,284,918 0.43 0.50 - 2.30 10.18 - 20.74 2009 21,389,031 1.40 - 14.87 265,456,589 1.00 0.50 - 2.30 10.27 - 12.28 2008 23,715,736 1.26 - 13.25 259,092,609 0.42 0.50 - 2.30 (39.13) - (38.86) 2007 29,000,340 2.07 - 21.67 511,252,758 0.22 0.50 - 2.30 (4.61) - (4.16) MSF Neuberger Berman Mid 2011 19,760,014 2.32 - 25.91 447,971,922 0.65 0.50 - 2.30 (8.79) - (7.14) Cap Value Investment Division 2010 20,637,451 2.52 - 27.90 505,689,035 0.73 0.50 - 2.30 23.19 - 25.42 2009 20,178,988 2.02 - 22.24 394,081,513 1.41 0.50 - 2.30 44.39 - 47.01 2008 21,460,291 1.39 - 15.13 282,701,972 0.70 0.50 - 2.30 (48.13) - (47.74) 2007 23,818,947 2.68 - 28.95 598,065,308 0.44 0.50 - 2.30 1.90 - 2.66 MSF Oppenheimer Global 2011 11,458,967 13.63 - 18.76 201,576,453 1.88 0.65 - 2.30 (10.48) - (8.82) Equity Investment Division 2010 11,471,149 15.07 - 20.63 223,279,060 1.45 0.65 - 2.30 13.29 - 15.48 2009 11,212,707 13.16 - 17.92 190,851,984 2.42 0.65 - 2.30 36.62 - 39.41 2008 11,151,246 9.53 - 12.89 137,369,852 2.09 0.65 - 2.30 (41.32) - (40.93) 2007 12,354,209 16.24 - 21.82 258,911,083 1.06 0.95 - 2.30 4.98 - 5.46 MSF Russell 2000 Index 2011 14,971,453 1.71 - 19.16 253,478,593 0.96 0.50 - 2.30 (6.46) - (4.71) Investment Division 2010 15,715,274 1.81 - 20.12 280,017,667 1.00 0.50 - 2.30 23.70 - 26.10 2009 16,192,484 1.45 - 15.97 230,205,898 1.91 0.50 - 2.30 22.81 - 25.20 2008 16,294,895 1.17 - 12.78 184,129,597 1.15 0.50 - 2.30 (34.64) - (33.99) 2007 17,619,764 1.79 - 19.36 299,893,291 0.85 0.50 - 2.30 (3.24) - (2.17) MSF T. Rowe Price Large Cap 2011 12,337,838 12.20 - 15.46 174,880,384 0.04 0.50 - 2.30 (3.57) - (1.75) Growth Investment Division 2010 13,494,657 12.65 - 15.75 195,957,544 0.17 0.50 - 2.30 14.08 - 16.30 2009 14,615,966 11.09 - 13.56 183,761,502 0.48 0.50 - 2.30 39.79 - 42.51 2008 14,856,276 7.93 - 9.53 132,037,051 0.47 0.50 - 2.30 (43.19) - (42.28) 2007 16,203,949 13.96 - 16.51 251,351,437 0.35 0.50 - 2.30 7.80 - 10.81 MSF T. Rowe Price Small Cap 2011 14,031,031 15.25 - 20.73 265,121,409 -- 0.50 - 2.30 (0.86) - 1.11 Growth Investment Division 2010 14,000,629 15.22 - 20.54 264,120,256 -- 0.50 - 2.30 31.60 - 34.02 2009 12,978,831 11.44 - 15.33 184,207,700 0.27 0.50 - 2.30 35.49 - 38.07 2008 13,211,532 8.98 - 11.11 136,853,170 -- 0.50 - 2.30 (37.77) - (36.66) 2007 14,116,618 14.43 - 17.54 232,434,680 -- 0.50 - 2.30 7.05 - 9.01 MSF Van Eck Global Natural 2011 2,291,756 15.14 - 15.58 35,583,743 1.07 1.15 - 2.05 (18.36) - (17.63) Resources Investment Division 2010 1,309,383 18.55 - 18.92 24,700,698 0.23 1.15 - 2.05 26.41 - 27.55 (Commenced 5/4/2009) 2009 379,256 14.68 - 14.83 5,613,926 -- 1.15 - 2.05 35.13 - 35.96 MSF Western Asset Management 2011 11,333,345 2.80 - 31.05 248,899,097 5.01 0.50 - 2.30 3.43 - 5.45 Strategic Bond Opportunities 2010 13,288,962 2.67 - 29.49 275,410,258 5.95 0.50 - 2.30 9.90 - 12.00 Investment Division 2009 13,614,452 2.40 - 26.35 251,254,370 6.51 0.50 - 2.30 28.90 - 31.36 2008 15,406,849 1.84 - 20.08 206,957,543 4.04 0.50 - 2.30 (15.98) - (15.67) 2007 19,927,428 2.19 - 23.81 311,823,601 2.60 0.50 - 2.30 2.34 - 3.21
90 METROPOLITAN LIFE SEPARATE ACCOUNT E OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONCLUDED) 8. FINANCIAL HIGHLIGHTS -- (CONCLUDED) AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 ---------------------------------------- ------------------------------------------- EXPENSE(2) TOTAL(3) UNIT VALUE INVESTMENT(1) RATIO RETURN LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) ---------- ----------------- ----------- ------------- ----------- ----------------- MSF Western Asset Management 2011 14,053,184 1.90 - 21.05 235,422,481 1.33 0.50 - 2.30 2.88 - 4.83 U.S. Government 2010 15,023,442 1.82 - 20.10 239,870,128 2.49 0.50 - 2.30 3.09 - 5.12 Investment Division 2009 14,375,216 1.75 - 19.15 216,669,959 4.26 0.50 - 2.30 1.71 - 3.56 2008 13,590,779 1.69 - 18.49 192,871,484 4.26 0.50 - 2.30 (1.74) - (1.02) 2007 15,975,615 1.72 - 18.68 223,878,416 2.78 0.50 - 2.30 2.99 - 3.55 MSF Zenith Equity 2011 3,127,103 21.27 66,504,213 1.06 1.35 (4.68) Investment Division 2010 3,651,183 22.31 81,465,443 1.61 1.35 12.61 2009 4,320,085 19.81 85,598,366 5.89 1.35 28.65 2008 5,123,370 15.40 78,903,521 2.74 1.35 (39.35) 2007 6,395,674 25.39 162,411,701 0.78 1.35 3.80
(1) These amounts represent the dividends, excluding distributions of capital gains, received by the Investment Divisions from the underlying portfolio or fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense risk charges, that are assessed against contract owner accounts either through reductions in the unit values or the redemption of units. The investment income ratio is calculated for each period indicated or from the effective date through the end of the reporting period. The recognition of investment income by the Investment Division is affected by the timing of the declaration of dividends by the underlying portfolio or fund in which the Investment Division invests. The investment income ratio is calculated as a weighted average ratio since the Investment Division may invest in two or more share classes, if any, within the underlying portfolio or fund of the Trusts which may have unique investment income ratios. (2) These amounts represent the annualized contract expenses of each of the applicable Investment Divisions, consisting primarily of mortality and expense risk charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying portfolio or fund have been excluded. (3) These amounts represent the total return for the period indicated, including changes in the value of the underlying portfolio or fund, and expenses assessed through the reduction of unit values. These ratios do not include any expenses assessed through the redemption of units. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. The total return is presented as a range of minimum to maximum values, based on minimum and maximum returns within each product grouping of the applicable Investment Divisions. 91 This page is intentionally left blank. INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholder of Metropolitan Life Insurance Company: We have audited the accompanying consolidated balance sheets of Metropolitan Life Insurance Company and subsidiaries (the "Company") as of December 31, 2011 and 2010, and the related consolidated statements of operations, equity, and cash flows for each of the three years in the period ended December 31, 2011. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes 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 consolidated 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 consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2011 and 2010, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 1, the Company changed its method of accounting for the recognition and presentation of other-than-temporary impairment losses for certain investments as required by accounting guidance adopted on April 1, 2009. /s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP New York, New York March 30, 2012 F-1 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2011 AND 2010 (IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
2011 -------- ASSETS Investments: Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $154,376 and $153,708, respectively)...................................................................................................... $168,178 Equity securities available-for-sale, at estimated fair value (cost: $1,379 and $1,898, respectively)............... 1,278 Trading and other securities, at estimated fair value (includes $473 and $463, respectively, of actively traded securities; and $117 and $201, respectively, relating to variable interest entities)............................... 697 Mortgage loans (net of valuation allowances of $393 and $522, respectively)......................................... 43,880 Policy loans........................................................................................................ 8,314 Real estate and real estate joint ventures (includes $15 and $10, respectively, relating to variable interest entities).......................................................................................................... 5,891 Other limited partnership interests (includes $152 and $187, respectively, relating to variable interest entities).. 4,334 Short-term investments, principally at estimated fair value......................................................... 6,140 Other invested assets, principally at estimated fair value (includes $98 and $102, respectively, relating to variable interest entities)........................................................................................ 12,505 -------- Total investments................................................................................................ 251,217 Cash and cash equivalents, principally at estimated fair value (includes $70 and $55, respectively, relating to variable interest entities)........................................................................................... 2,089 Accrued investment income (includes $1 and $3, respectively, relating to variable interest entities)................... 2,219 Premiums, reinsurance and other receivables (includes $10 and $1, respectively, relating to variable interest entities)............................................................................................................. 27,981 Deferred policy acquisition costs and value of business acquired....................................................... 7,779 Other assets (includes $4 and $6, respectively, relating to variable interest entities)................................ 4,233 Separate account assets................................................................................................ 106,678 -------- Total assets..................................................................................................... $402,196 ======== LIABILITIES AND EQUITY LIABILITIES Future policy benefits................................................................................................. $109,333 Policyholder account balances.......................................................................................... 88,856 Other policy-related balances.......................................................................................... 5,876 Policyholder dividends payable......................................................................................... 659 Policyholder dividend obligation....................................................................................... 2,919 Payables for collateral under securities loaned and other transactions................................................. 20,280 Short-term debt........................................................................................................ 101 Long-term debt (includes $116 and $236, respectively, at estimated fair value, relating to variable interest entities)............................................................................................................. 2,248 Current income tax payable............................................................................................. 123 Deferred income tax liability.......................................................................................... 2,827 Other liabilities (includes $42 and $61, respectively, relating to variable interest entities)......................... 36,614 Separate account liabilities........................................................................................... 106,678 -------- Total liabilities................................................................................................ 376,514 -------- CONTINGENCIES, COMMITMENTS AND GUARANTEES (NOTE 13) EQUITY Metropolitan Life Insurance Company stockholder's equity: Common stock, par value $0.01 per share; 1,000,000,000 shares authorized; 494,466,664 shares issued and outstanding at December 31, 2011 and 2010............................................................................. 5 Additional paid-in capital............................................................................................. 14,506 Retained earnings...................................................................................................... 8,077 Accumulated other comprehensive income (loss).......................................................................... 2,912 -------- Total Metropolitan Life Insurance Company stockholder's equity................................................... 25,500 Noncontrolling interests............................................................................................... 182 -------- Total equity..................................................................................................... 25,682 -------- Total liabilities and equity..................................................................................... $402,196 ========
2010 -------- ASSETS Investments: Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $154,376 and $153,708, respectively)...................................................................................................... $159,535 Equity securities available-for-sale, at estimated fair value (cost: $1,379 and $1,898, respectively)............... 1,821 Trading and other securities, at estimated fair value (includes $473 and $463, respectively, of actively traded securities; and $117 and $201, respectively, relating to variable interest entities)............................... 735 Mortgage loans (net of valuation allowances of $393 and $522, respectively)......................................... 41,667 Policy loans........................................................................................................ 8,270 Real estate and real estate joint ventures (includes $15 and $10, respectively, relating to variable interest entities).......................................................................................................... 5,755 Other limited partnership interests (includes $152 and $187, respectively, relating to variable interest entities).. 4,517 Short-term investments, principally at estimated fair value......................................................... 2,369 Other invested assets, principally at estimated fair value (includes $98 and $102, respectively, relating to variable interest entities)........................................................................................ 7,822 -------- Total investments................................................................................................ 232,491 Cash and cash equivalents, principally at estimated fair value (includes $70 and $55, respectively, relating to variable interest entities)........................................................................................... 3,485 Accrued investment income (includes $1 and $3, respectively, relating to variable interest entities)................... 2,183 Premiums, reinsurance and other receivables (includes $10 and $1, respectively, relating to variable interest entities)............................................................................................................. 26,802 Deferred policy acquisition costs and value of business acquired....................................................... 8,191 Other assets (includes $4 and $6, respectively, relating to variable interest entities)................................ 4,426 Separate account assets................................................................................................ 97,829 -------- Total assets..................................................................................................... $375,407 ======== LIABILITIES AND EQUITY LIABILITIES Future policy benefits................................................................................................. $102,950 Policyholder account balances.......................................................................................... 88,922 Other policy-related balances.......................................................................................... 5,649 Policyholder dividends payable......................................................................................... 722 Policyholder dividend obligation....................................................................................... 876 Payables for collateral under securities loaned and other transactions................................................. 17,014 Short-term debt........................................................................................................ 102 Long-term debt (includes $116 and $236, respectively, at estimated fair value, relating to variable interest entities)............................................................................................................. 3,610 Current income tax payable............................................................................................. 155 Deferred income tax liability.......................................................................................... 950 Other liabilities (includes $42 and $61, respectively, relating to variable interest entities)......................... 35,113 Separate account liabilities........................................................................................... 97,829 -------- Total liabilities................................................................................................ 353,892 -------- CONTINGENCIES, COMMITMENTS AND GUARANTEES (NOTE 13) EQUITY Metropolitan Life Insurance Company stockholder's equity: Common stock, par value $0.01 per share; 1,000,000,000 shares authorized; 494,466,664 shares issued and outstanding at December 31, 2011 and 2010............................................................................. 5 Additional paid-in capital............................................................................................. 14,445 Retained earnings...................................................................................................... 6,001 Accumulated other comprehensive income (loss).......................................................................... 916 -------- Total Metropolitan Life Insurance Company stockholder's equity................................................... 21,367 Noncontrolling interests............................................................................................... 148 -------- Total equity..................................................................................................... 21,515 -------- Total liabilities and equity..................................................................................... $375,407 ========
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. F-2 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009 (IN MILLIONS)
2011 2010 2009 ------- ------- -------- REVENUES Premiums...................................................................... $18,288 $18,519 $ 18,629 Universal life and investment-type product policy fees........................ 2,202 2,075 2,067 Net investment income......................................................... 11,627 11,593 10,175 Other revenues................................................................ 1,808 1,725 1,739 Net investment gains (losses): Other-than-temporary impairments on fixed maturity securities................ (244) (510) (1,521) Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive income (loss).......................................... 17 150 623 Other net investment gains (losses).......................................... 359 190 (769) ------- ------- -------- Total net investment gains (losses)........................................ 132 (170) (1,667) Net derivative gains (losses)................................................ 1,578 (266) (4,428) ------- ------- -------- Total revenues........................................................... 35,635 33,476 26,515 ------- ------- -------- EXPENSES Policyholder benefits and claims.............................................. 20,681 20,707 20,662 Interest credited to policyholder account balances............................ 2,372 2,523 2,669 Policyholder dividends........................................................ 1,355 1,443 1,612 Other expenses................................................................ 6,414 6,259 6,009 ------- ------- -------- Total expenses........................................................... 30,822 30,932 30,952 ------- ------- -------- Income (loss) from continuing operations before provision for income tax...... 4,813 2,544 (4,437) Provision for income tax expense (benefit).................................... 1,481 778 (1,896) ------- ------- -------- Income (loss) from continuing operations, net of income tax................... 3,332 1,766 (2,541) Income (loss) from discontinued operations, net of income tax................. 57 26 19 ------- ------- -------- Net income (loss)............................................................ 3,389 1,792 (2,522) Less: Net income (loss) attributable to noncontrolling interests.............. (8) (3) (5) ------- ------- -------- Net income (loss) attributable to Metropolitan Life Insurance Company......... $ 3,397 $ 1,795 $(2,517) ======= ======= ========
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. F-3 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) CONSOLIDATED STATEMENTS OF EQUITY FOR THE YEAR ENDED DECEMBER 31, 2011 (IN MILLIONS)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) ------------------------------------------------- NET FOREIGN DEFINED ADDITIONAL UNREALIZED OTHER-THAN- CURRENCY BENEFIT COMMON PAID-IN RETAINED INVESTMENT TEMPORARY TRANSLATION PLANS STOCK CAPITAL EARNINGS GAINS (LOSSES) IMPAIRMENTS ADJUSTMENTS ADJUSTMENT ------ ---------- -------- -------------- ----------- ----------- ---------- Balance at December 31, 2010....................... $5 $14,445 $ 6,001 $2,564 $(254) $35 $(1,429) Capital contributions from MetLife, Inc. (Note 15)............................................... 50 Excess tax benefits related to stock-based compensation...................................... 11 Dividends on common stock.......................... (1,321) Change in equity of noncontrolling interests....... Comprehensive income (loss): Net income (loss)............................... 3,397 Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income tax............... 782 Unrealized investment gains (losses), net of related offsets and income tax............ 1,695 (63) Foreign currency translation adjustments, net of income tax............................ 4 Defined benefit plans adjustment, net of income tax................................... (422) Other comprehensive income (loss)............ Comprehensive income (loss)..................... ------ ---------- -------- -------------- ----------- ----------- ---------- Balance at December 31, 2011....................... $5 $14,506 $ 8,077 $5,041 $(317) $39 $(1,851) ====== ========== ======== ============== =========== =========== ==========
TOTAL METROPOLITAN LIFE INSURANCE COMPANY NONCONTROLLING TOTAL STOCKHOLDER'S EQUITY INTERESTS EQUITY -------------------- -------------- -------- Balance at December 31, 2010....................... $ 21,367 $148 $ 21,515 Capital contributions from MetLife, Inc. (Note 15)............................................... 50 50 Excess tax benefits related to stock-based compensation...................................... 11 11 Dividends on common stock.......................... (1,321) (1,321) Change in equity of noncontrolling interests....... 42 42 Comprehensive income (loss): Net income (loss)............................... 3,397 (8) 3,389 Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income tax............... 782 782 Unrealized investment gains (losses), net of related offsets and income tax............ 1,632 1,632 Foreign currency translation adjustments, net of income tax............................ 4 4 Defined benefit plans adjustment, net of income tax................................... (422) (422) -------------------- -------------- -------- Other comprehensive income (loss)............ 1,996 -- 1,996 -------------------- -------------- -------- Comprehensive income (loss)..................... 5,393 (8) 5,385 -------------------- -------------- -------- Balance at December 31, 2011....................... $ 25,500 $182 $ 25,682 ==================== ============== ========
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. F-4 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) CONSOLIDATED STATEMENTS OF EQUITY -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2010 (IN MILLIONS)
ADDITIONAL COMMON PAID-IN RETAINED STOCK CAPITAL EARNINGS ------ ---------- -------- Balance at December 31, 2009......................... $5 $14,438 $4,817 Cumulative effect of change in accounting principle, net of income tax (Note 1).......................... 30 ------ ---------- -------- Balance at January 1, 2010........................... 5 14,438 4,847 Cumulative effect of change in accounting principle, net of income tax (Note 1).......................... (10) Capital contributions from MetLife, Inc. (Note 15)................................................. 3 Excess tax benefits related to stock-based compensation........................................ 4 Dividends on common stock............................ (631) Change in equity of noncontrolling interests......... Comprehensive income (loss): Net income (loss)................................. 1,795 Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income tax................. Unrealized investment gains (losses), net of related offsets and income tax.............. Foreign currency translation adjustments, net of income tax.............................. Defined benefit plans adjustment, net of income tax..................................... Other comprehensive income (loss).............. Comprehensive income (loss)....................... ------ ---------- -------- Balance at December 31, 2010......................... $5 $14,445 $6,001 ====== ========== ========
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) ------------------------------------------------- NET FOREIGN DEFINED TOTAL UNREALIZED OTHER-THAN- CURRENCY BENEFIT METROPOLITAN LIFE INVESTMENT TEMPORARY TRANSLATION PLANS INSURANCE COMPANY GAINS (LOSSES) IMPAIRMENTS ADJUSTMENTS ADJUSTMENT STOCKHOLDER'S EQUITY -------------- ----------- ----------- ---------- -------------------- Balance at December 31, 2009......................... $(265) $(341) $ 51 $(1,527) $17,178 Cumulative effect of change in accounting principle, net of income tax (Note 1).......................... 30 -------------- ----------- ----------- ---------- -------------------- Balance at January 1, 2010........................... (265) (341) 51 (1,527) 17,208 Cumulative effect of change in accounting principle, net of income tax (Note 1).......................... 10 -- Capital contributions from MetLife, Inc. (Note 15)................................................. 3 Excess tax benefits related to stock-based compensation........................................ 4 Dividends on common stock............................ (631) Change in equity of noncontrolling interests......... Comprehensive income (loss): Net income (loss)................................. 1,795 Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income tax................. 118 118 Unrealized investment gains (losses), net of related offsets and income tax.............. 2,701 87 2,788 Foreign currency translation adjustments, net of income tax.............................. (16) (16) Defined benefit plans adjustment, net of income tax..................................... 98 98 -------------------- Other comprehensive income (loss).............. 2,988 -------------------- Comprehensive income (loss)....................... 4,783 -------------- ----------- ----------- ---------- -------------------- Balance at December 31, 2010......................... $2,564 $(254) $ 35 $(1,429) $21,367 ============== =========== =========== ========== ====================
NONCONTROLLING TOTAL INTERESTS EQUITY -------------- ------- Balance at December 31, 2009......................... $ 291 $17,469 Cumulative effect of change in accounting principle, net of income tax (Note 1).......................... 30 -------------- ------- Balance at January 1, 2010........................... 291 17,499 Cumulative effect of change in accounting principle, net of income tax (Note 1).......................... -- Capital contributions from MetLife, Inc. (Note 15)................................................. 3 Excess tax benefits related to stock-based compensation........................................ 4 Dividends on common stock............................ (631) Change in equity of noncontrolling interests......... (146) (146) Comprehensive income (loss): Net income (loss)................................. (3) 1,792 Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income tax................. 118 Unrealized investment gains (losses), net of related offsets and income tax.............. 6 2,794 Foreign currency translation adjustments, net of income tax.............................. (16) Defined benefit plans adjustment, net of income tax..................................... 98 -------------- ------- Other comprehensive income (loss).............. 6 2,994 -------------- ------- Comprehensive income (loss)....................... 3 4,786 -------------- ------- Balance at December 31, 2010......................... $ 148 $21,515 ============== =======
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. F-5 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) CONSOLIDATED STATEMENTS OF EQUITY -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2009 (IN MILLIONS)
ADDITIONAL COMMON PAID-IN RETAINED STOCK CAPITAL EARNINGS ------ ---------- -------- Balance at December 31, 2008..................................................... $5 $14,437 $ 7,298 Cumulative effect of change in accounting principle, net of income tax (Note 1).............................................................................. 36 Capital contributions from MetLife, Inc. (Note 15)............................... 3 Excess tax liabilities related to stock-based compensation....................... (2) Change in equity of noncontrolling interests..................................... Comprehensive income (loss): Net income (loss)............................................................. (2,517) Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income tax........................................................................ Unrealized investment gains (losses), net of related offsets and income tax........................................................................ Foreign currency translation adjustments, net of income tax................. Defined benefit plans adjustment, net of income tax......................... Other comprehensive income (loss).......................................... Comprehensive income (loss)................................................... ------ ---------- -------- Balance at December 31, 2009..................................................... $5 $14,438 $ 4,817 ====== ========== ========
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) ------------------------------------------------- NET FOREIGN DEFINED UNREALIZED OTHER-THAN- CURRENCY BENEFIT INVESTMENT TEMPORARY TRANSLATION PLANS GAINS (LOSSES) IMPAIRMENTS ADJUSTMENTS ADJUSTMENT -------------- ----------- ----------- ---------- Balance at December 31, 2008..................................................... $(7,701) $ -- $ 143 $(1,437) Cumulative effect of change in accounting principle, net of income tax (Note 1).............................................................................. (36) Capital contributions from MetLife, Inc. (Note 15)............................... Excess tax liabilities related to stock-based compensation....................... Change in equity of noncontrolling interests..................................... Comprehensive income (loss): Net income (loss)............................................................. Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income tax........................................................................ (162) Unrealized investment gains (losses), net of related offsets and income tax........................................................................ 7,598 (305) Foreign currency translation adjustments, net of income tax................. (92) Defined benefit plans adjustment, net of income tax......................... (90) Other comprehensive income (loss).......................................... Comprehensive income (loss)................................................... -------------- ----------- ----------- ---------- Balance at December 31, 2009..................................................... $ (265) $(341) $ 51 $(1,527) ============== =========== =========== ==========
TOTAL METROPOLITAN LIFE INSURANCE COMPANY NONCONTROLLING TOTAL STOCKHOLDER'S EQUITY INTERESTS EQUITY -------------------- -------------- -------- Balance at December 31, 2008..................................................... $ 12,745 $ 83 $ 12,828 Cumulative effect of change in accounting principle, net of income tax (Note 1).............................................................................. -- -- Capital contributions from MetLife, Inc. (Note 15)............................... 3 3 Excess tax liabilities related to stock-based compensation....................... (2) (2) Change in equity of noncontrolling interests..................................... 218 218 Comprehensive income (loss): Net income (loss)............................................................. (2,517) (5) (2,522) Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income tax........................................................................ (162) (162) Unrealized investment gains (losses), net of related offsets and income tax........................................................................ 7,293 (5) 7,288 Foreign currency translation adjustments, net of income tax................. (92) (92) Defined benefit plans adjustment, net of income tax......................... (90) (90) -------------------- -------------- -------- Other comprehensive income (loss).......................................... 6,949 (5) 6,944 -------------------- -------------- -------- Comprehensive income (loss)................................................... 4,432 (10) 4,422 -------------------- -------------- -------- Balance at December 31, 2009..................................................... $ 17,178 $ 291 $ 17,469 ==================== ============== ========
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. F-6 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009 (IN MILLIONS)
2011 2010 2009 --------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss)............................................................ $ 3,389 $ 1,792 $ (2,522) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization expenses...................................... 407 394 381 Amortization of premiums and accretion of discounts associated with investments, net.......................................................... (683) (709) (715) (Gains) losses on investments and derivatives and from sales of businesses, net....................................................................... (1,735) 380 6,081 (Income) loss from equity method investments, net of dividends or distributions............................................................. 269 116 845 Interest credited to policyholder account balances.......................... 2,372 2,523 2,669 Universal life and investment-type product policy fees...................... (2,202) (2,075) (2,067) Change in trading and other securities...................................... 20 (14) (165) Change in accrued investment income......................................... 14 (117) 14 Change in premiums, reinsurance and other receivables....................... (208) (377) (507) Change in deferred policy acquisition costs, net............................ 94 147 (441) Change in income tax recoverable (payable).................................. 547 735 (2,340) Change in other assets...................................................... 767 283 (10) Change in insurance-related liabilities and policy-related balances......... 2,587 2,469 2,582 Change in other liabilities................................................. 726 684 3,330 Other, net.................................................................. (125) (120) (44) --------- --------- --------- Net cash provided by operating activities.................................... 6,239 6,111 7,091 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Sales, maturities and repayments of: Fixed maturity securities................................................... 53,325 49,828 41,437 Equity securities........................................................... 816 520 1,030 Mortgage loans.............................................................. 8,152 4,853 4,589 Real estate and real estate joint ventures.................................. 1,058 241 30 Other limited partnership interests......................................... 754 383 751 Purchases of: Fixed maturity securities................................................... (54,038) (57,961) (51,066) Equity securities........................................................... (278) (157) (544) Mortgage loans.............................................................. (10,443) (5,820) (3,231) Real estate and real estate joint ventures.................................. (980) (539) (318) Other limited partnership interests......................................... (658) (614) (585) Cash received in connection with freestanding derivatives.................... 1,011 712 1,801 Cash paid in connection with freestanding derivatives........................ (695) (920) (1,748) Issuances of loans to affiliates............................................. (525) -- -- Net change in policy loans................................................... (44) (171) (218) Net change in short-term investments......................................... (3,816) 841 4,268 Net change in other invested assets.......................................... (570) 142 (740) Net change in property, equipment and leasehold improvements................. (104) (138) (109) Other, net................................................................... 7 (7) 1 --------- --------- --------- Net cash used in investing activities........................................ $ (7,028) $ (8,807) $ (4,652) --------- --------- ---------
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. F-7 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009 (IN MILLIONS)
2011 2010 2009 --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Policyholder account balances: Deposits......................................................................... $ 55,586 $ 44,481 $ 51,313 Withdrawals...................................................................... (57,078) (43,381) (57,182) Net change in payables for collateral under securities loaned and other transactions. 3,266 2,352 (3,987) Net change in short-term debt........................................................ (1) (217) (95) Long-term debt issued................................................................ 110 188 1,205 Long-term debt repaid................................................................ (1,411) (324) (737) Dividends on common stock............................................................ (1,151) (232) -- Capital contribution................................................................. 47 -- -- Other, net........................................................................... 25 (33) 112 --------- --------- --------- Net cash (used in) provided by financing activities.................................. (607) 2,834 (9,371) --------- --------- --------- Change in cash and cash equivalents.................................................. (1,396) 138 (6,932) Cash and cash equivalents, beginning of year......................................... 3,485 3,347 10,279 --------- --------- --------- CASH AND CASH EQUIVALENTS, END OF YEAR............................................... $ 2,089 $ 3,485 $ 3,347 ========= ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Net cash paid during the year for: Interest......................................................................... $ 196 $ 217 $ 166 ========= ========= ========= Income tax....................................................................... $ 701 $ 183 $ 285 ========= ========= ========= Non-cash transactions during the year: Purchase money mortgage loans on sales of real estate joint ventures................. $ -- $ 2 $ 93 ========= ========= ========= Capital contributions from MetLife, Inc.............................................. $ 3 $ 3 $ 3 ========= ========= ========= Dividends to MetLife, Inc............................................................ $ 170 $ 399 $ -- ========= ========= ========= Real estate and real estate joint ventures acquired in satisfaction of debt.......... $ 151 $ 58 $ 209 ========= ========= ========= Long-term debt issued to MetLife, Inc. in exchange for fixed maturity securities..... $ -- $ -- $ 300 ========= ========= =========
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. F-8 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS Metropolitan Life Insurance Company and its subsidiaries (collectively, "MLIC" or the "Company") is a leading provider of insurance, annuities and employee benefit programs throughout the United States. The Company offers life insurance and annuities to individuals, as well as group insurance and retirement & savings products and services to corporations and other institutions. Metropolitan Life Insurance Company is a wholly-owned subsidiary of MetLife, Inc. BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of Metropolitan Life Insurance Company and its subsidiaries, as well as partnerships and joint ventures in which the Company has control, and variable interest entities ("VIEs") for which the Company is the primary beneficiary. See "-- Adoption of New Accounting Pronouncements." Closed block assets, liabilities, revenues and expenses are combined on a line-by-line basis with the assets, liabilities, revenues and expenses outside the closed block based on the nature of the particular item. See Note 10. Intercompany accounts and transactions have been eliminated. Certain amounts in the prior years' consolidated financial statements and related footnotes thereto have been reclassified to conform with the 2011 presentation as discussed throughout the Notes to the Consolidated Financial Statements. Since the Company is a member of a controlled group of affiliated companies, its results may not be indicative of those of a stand-alone entity. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in the consolidated financial statements. A description of critical estimates is incorporated within the discussion of the related accounting policies which follows. In applying these policies, management makes subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company's business and operations. Actual results could differ from these estimates. Investments The accounting policies for the Company's principal investments are as follows: Fixed Maturity and Equity Securities. The Company's fixed maturity and equity securities are classified as available-for-sale and are reported at their estimated fair value. Unrealized investment gains and losses on these securities are recorded as a separate component of other comprehensive income (loss), net of policyholder-related amounts and deferred income taxes. All security transactions are recorded on a trade date basis. Investment gains and losses on sales of securities are determined on a specific identification basis. F-9 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Interest income on fixed maturity securities is recorded when earned using an effective yield method giving effect to amortization of premiums and accretion of discounts. Dividends on equity securities are recorded when declared. Interest, dividends and prepayment fees are recorded in net investment income. Included within fixed maturity securities are structured securities including mortgage-backed and asset-backed securities ("ABS"). Amortization of the premium or discount considers the estimated timing and amount of prepayments of the underlying loans. Actual prepayment experience is periodically reviewed and effective yields are recalculated when differences arise between the originally anticipated and the actual prepayments received and currently anticipated. Prepayment assumptions for single class and multi-class mortgage-backed and ABS are estimated by management using inputs obtained from third-party specialists, including broker-dealers, and based on management's knowledge of the current market. For credit-sensitive mortgage-backed and ABS and certain prepayment-sensitive securities, the effective yield is recalculated on a prospective basis. For all other mortgage-backed and ABS, the effective yield is recalculated on a retrospective basis. The Company periodically evaluates fixed maturity and equity securities for impairment. The assessment of whether impairments have occurred is based on management's case-by-case evaluation of the underlying reasons for the decline in estimated fair value. The Company's review of its fixed maturity and equity securities for impairments includes an analysis of the total gross unrealized losses by three categories of severity and/or age of the gross unrealized loss, as summarized in Note 3 "-- Aging of Gross Unrealized Losses and OTTI Losses for Fixed Maturity and Equity Securities Available-for-Sale." Management considers a wide range of factors about the security issuer and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for near-term recovery. Inherent in management's evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations used by the Company in the impairment evaluation process include, but are not limited to: (i) the length of time and the extent to which the estimated fair value has been below cost or amortized cost; (ii) the potential for impairments of securities when the issuer is experiencing significant financial difficulties; (iii) the potential for impairments in an entire industry sector or sub-sector; (iv) the potential for impairments in certain economically depressed geographic locations; (v) the potential for impairments of securities where the issuer, series of issuers or industry has suffered a catastrophic type of loss or has exhausted natural resources; (vi) with respect to fixed maturity securities, whether the Company has the intent to sell or will more likely than not be required to sell a particular security before the decline in estimated fair value below amortized cost recovers; (vii) with respect to structured securities, changes in forecasted cash flows after considering the quality of underlying collateral; expected prepayment speeds; current and forecasted loss severity; consideration of the payment terms of the underlying assets backing a particular security; and the payment priority within the tranche structure of the security; and (viii) other subjective factors, including concentrations and information obtained from regulators and rating agencies. For fixed maturity securities in an unrealized loss position, an other-than-temporary impairment ("OTTI") is recognized in earnings when it is anticipated that the amortized cost will not be recovered. In such situations, the OTTI recognized in earnings is the entire difference between the fixed maturity security's amortized cost and its estimated fair value only when either: (i) the Company has the intent to sell the fixed maturity security; or (ii) it is more likely than not that the Company will be required to sell the fixed maturity security before recovery of the decline in estimated fair value below amortized cost. If neither of these two conditions exist, the difference between the amortized cost of the fixed maturity security and the present value of projected future cash flows expected to be collected is recognized as an OTTI in earnings ("credit loss"). If the estimated fair value is less than the present value of projected future cash flows expected to be collected, this portion of OTTI related to other-than credit factors ("noncredit F-10 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) loss") is recorded in other comprehensive income (loss). Adjustments are not made for subsequent recoveries in value. With respect to equity securities, the Company considers in its OTTI analysis its intent and ability to hold a particular equity security for a period of time sufficient to allow for the recovery of its estimated fair value to an amount equal to or greater than cost. If a sale decision is made for an equity security and it is not expected to recover to an amount at least equal to cost prior to the expected time of the sale, the security will be deemed other-than-temporarily impaired in the period that the sale decision was made and an OTTI loss will be recorded in earnings. When an OTTI loss has occurred, the OTTI loss is the entire difference between the equity security's cost and its estimated fair value with a corresponding charge to earnings. Upon acquisition, the Company classifies perpetual securities that have attributes of both debt and equity as fixed maturity securities if the securities have an interest rate step-up feature which, when combined with other qualitative factors, indicates that the securities have more debt-like characteristics; while those with more equity-like characteristics are classified as equity securities within non-redeemable preferred stock. Many of such securities, commonly referred to as "perpetual hybrid securities," have been issued by non-U.S. financial institutions that are accorded the highest two capital treatment categories by their respective regulatory bodies (i.e. core capital, or "Tier 1 capital" and perpetual deferrable securities, or "Upper Tier 2 capital"). With respect to perpetual hybrid securities, the Company considers in its OTTI analysis whether there has been any deterioration in credit of the issuer and the likelihood of recovery in value of the securities that are in a severe and extended unrealized loss position. The Company also considers whether any perpetual hybrid securities, with an unrealized loss, regardless of credit rating, have deferred any dividend payments. When an OTTI loss has occurred, the OTTI loss is the entire difference between the perpetual hybrid security's cost and its estimated fair value with a corresponding charge to earnings. The Company's methodology and significant inputs used to determine the amount of the credit loss on fixed maturity securities are as follows: (i)The Company calculates the recovery value by performing a discounted cash flow analysis based on the present value of future cash flows expected to be received. The discount rate is generally the effective interest rate of the fixed maturity security prior to impairment. (ii)When determining the collectability and the period over which value is expected to recover, the Company applies the same considerations utilized in its overall impairment evaluation process which incorporates information regarding the specific security, fundamentals of the industry and geographic area in which the security issuer operates, and overall macroeconomic conditions. Projected future cash flows are estimated using assumptions derived from management's best estimates of likely scenario-based outcomes after giving consideration to a variety of variables that include, but are not limited to: general payment terms of the security; the likelihood that the issuer can service the scheduled interest and principal payments; the quality and amount of any credit enhancements; the security's position within the capital structure of the issuer; possible corporate restructurings or asset sales by the issuer; and changes to the rating of the security or the issuer by rating agencies. (iii)Additional considerations are made when assessing the unique features that apply to certain structured securities such as residential mortgage-backed securities ("RMBS"), commercial mortgage-backed securities ("CMBS") and ABS. These additional factors for structured securities include, but are not limited to: the quality of underlying collateral; expected prepayment speeds; current and forecasted loss severity; consideration of the payment terms of the underlying assets backing a particular security; and the payment priority within the tranche structure of the security. F-11 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (iv)When determining the amount of the credit loss for U.S. and foreign corporate securities, foreign government securities and state and political subdivision securities, management considers the estimated fair value as the recovery value when available information does not indicate that another value is more appropriate. When information is identified that indicates a recovery value other than estimated fair value, management considers in the determination of recovery value the same considerations utilized in its overall impairment evaluation process as described in (ii) above. The cost or amortized cost of fixed maturity and equity securities is adjusted for OTTI in the period in which the determination is made. The Company does not change the revised cost basis for subsequent recoveries in value. In periods subsequent to the recognition of OTTI on a fixed maturity security, the Company accounts for the impaired security as if it had been purchased on the measurement date of the impairment. Accordingly, the discount (or reduced premium) based on the new cost basis is accreted into net investment income over the remaining term of the fixed maturity security in a prospective manner based on the amount and timing of estimated future cash flows. Trading and Other Securities. Trading and other securities are stated at estimated fair value. Trading and other securities include investments that are actively purchased and sold ("Actively Traded Securities"). These Actively Traded Securities are principally fixed maturity securities. Short sale agreement liabilities related to Actively Traded Securities, included in other liabilities, are also stated at estimated fair value. Trading and other securities also includes securities for which the fair value option ("FVO") has been elected ("FVO Securities"). FVO Securities include certain fixed maturity and equity securities held-for-investment by the general account to support asset and liability matching strategies for certain insurance products. FVO Securities also include securities held by consolidated securitization entities ("CSEs") with changes in estimated fair value subsequent to consolidation included in net investment gains (losses). Interest and dividends related to all trading and other securities are included in net investment income. Securities Lending. Securities lending transactions, whereby blocks of securities, which are included in fixed maturity securities and short-term investments, are loaned to third parties, are treated as financing arrangements and the associated liability is recorded at the amount of cash received. At the inception of a loan, the Company obtains collateral, usually cash, in an amount generally equal to 102% of the estimated fair value of the securities loaned and maintains it at a level greater than or equal to 100% for the duration of the loan. The Company monitors the estimated fair value of the securities loaned on a daily basis with additional collateral obtained as necessary. Income and expenses associated with securities lending transactions are reported as investment income and investment expense, respectively, within net investment income. Mortgage Loans. For the purposes of determining valuation allowances the Company disaggregates its mortgage loan investments into three portfolio segments: commercial, agricultural, and residential. The accounting and valuation allowance policies that are applicable to all portfolio segments are presented below, followed by the policies applicable to both commercial and agricultural loans, which are very similar, as well as policies applicable to residential loans. Commercial, Agricultural and Residential Mortgage Loans -- Mortgage loans are stated at unpaid principal balance, adjusted for any unamortized premium or discount, deferred fees or expenses, and net of valuation allowances. Interest income is accrued on the principal amount of the loan based on the loan's contractual interest rate. Amortization of premiums and discounts is recorded using the effective yield method. Interest income, amortization of premiums and F-12 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) discounts and prepayment fees are reported in net investment income. Interest ceases to accrue when collection of interest is not considered probable and/or when interest or principal payments are past due as follows: commercial -- 60 days; and agricultural and residential -- 90 days, unless, in the case of a residential loan, it is both well-secured and in the process of collection. When a loan is placed on non-accrual status, uncollected past due interest is charged-off against net investment income. Generally, the accrual of interest income resumes after all delinquent amounts are paid and management believes all future principal and interest payments will be collected. Cash receipts on non-accruing loans are recorded in accordance with the loan agreement as a reduction of principal and/or interest income. Charge-offs occur upon the realization of a credit loss, typically through foreclosure or after a decision is made to sell a loan, or for residential loans when, after considering the individual consumer's financial status, management believes that uncollectability is other-than-temporary. Gain or loss upon charge-off is recorded, net of previously established valuation allowances, in net investment gains (losses). Cash recoveries on principal amounts previously charged-off are generally recorded as an increase to the valuation allowance, unless the valuation allowance adequately provides for expected credit losses; then the recovery is recorded in net investment gains (losses). Gains and losses from sales of loans and increases or decreases to valuation allowances are recorded in net investment gains (losses). Mortgage loans are considered to be impaired when it is probable that, based upon current information and events, the Company will be unable to collect all amounts due under the contractual terms of the loan agreement. Specific valuation allowances are established using the same methodology for all three portfolio segments as the excess carrying value of a loan over either (i) the present value of expected future cash flows discounted at the loan's original effective interest rate, (ii) the estimated fair value of the loan's underlying collateral if the loan is in the process of foreclosure or otherwise collateral dependent, or (iii) the loan's observable market price. A common evaluation framework is used for establishing non-specific valuation allowances for all loan portfolio segments; however, a separate non-specific valuation allowance is calculated and maintained for each loan portfolio segment that is based on inputs unique to each loan portfolio segment. Non-specific valuation allowances are established for pools of loans with similar risk characteristics where a property-specific or market-specific risk has not been identified, but for which the Company expects to incur a credit loss. These evaluations are based upon several loan portfolio segment-specific factors, including the Company's experience for loan losses, defaults and loss severity, and loss expectations for loans with similar risk characteristics. These evaluations are revised as conditions change and new information becomes available. For commercial and agricultural mortgage loans, the Company typically uses 10 years or more of historical experience in establishing non-specific valuation allowances. For commercial mortgage loans, 20 years of historical experience is used which captures multiple economic cycles. For evaluations of commercial mortgage loans, in addition to historical experience, management considers factors that include the impact of a rapid change to the economy, which may not be reflected in the loan portfolio, and recent loss and recovery trend experience as compared to historical loss and recovery experience. For agricultural mortgage loans, ten years of historical experience is used which captures a full economic cycle. For evaluations of agricultural loans, in addition to historical experience, management considers factors that include increased stress in certain sectors, which may be evidenced by higher delinquency rates, or a change in the number of higher risk loans. For commercial and agricultural mortgage loans, on a quarterly basis, management incorporates the impact of these current market events and conditions on historical experience in determining the non-specific valuation allowance established for each portfolio segment level. For evaluations of residential mortgage loans, the key inputs of expected frequency F-13 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) and expected loss reflect current market conditions, with expected frequency adjusted, when appropriate, for differences from market conditions and the Company's experience. Commercial and Agricultural Mortgage Loans -- All commercial loans are reviewed on an ongoing basis which may include an analysis of the property financial statements and rent roll, lease rollover analysis, property inspections, market analysis, estimated valuations of the underlying collateral, loan-to-value ratios, debt service coverage ratios, and tenant creditworthiness. All agricultural loans are monitored on an ongoing basis. The monitoring process focuses on higher risk loans, which include those that are classified as restructured, potentially delinquent, delinquent or in foreclosure, as well as loans with higher loan-to-value ratios and lower debt service coverage ratios. The monitoring process for agricultural loans is generally similar, with a focus on higher risk loans, including reviews on a geographic and property-type basis. Higher risk commercial and agricultural loans are reviewed individually on an ongoing basis for potential credit loss and specific valuation allowances are established using the methodology described above for all loan portfolio segments. Quarterly, the remaining loans are reviewed on a pool basis by aggregating groups of loans that have similar risk characteristics for potential credit loss, and non-specific valuation allowances are established as described above using inputs that are unique to each segment of the loan portfolio. For commercial loans, the Company's primary credit quality indicator is the debt service coverage ratio, which compares a property's net operating income to amounts needed to service the principal and interest due under the loan. Generally, the lower the debt service coverage ratio, the higher the risk of experiencing a credit loss. The Company also reviews the loan-to-value ratio of its commercial loan portfolio. Loan-to-value ratios compare the unpaid principal balance of the loan to the estimated fair value of the underlying collateral. A loan-to-value ratio greater than 100% indicates that the loan's unpaid principal balance is greater than the collateral value. A loan-to-value ratio of less than 100% indicates an excess of collateral value over the loan's unpaid principal balance. Generally, the higher the loan-to-value ratio, the higher the risk of experiencing a credit loss. The debt service coverage ratio and loan-to-value ratio, as well as the values utilized in calculating these ratios, are updated annually, on a rolling basis, with a portion of the loan portfolio updated each quarter. For agricultural loans, the Company's primary credit quality indicator is the loan-to-value ratio. The values utilized in calculating this ratio are developed in connection with the ongoing review of the agricultural loan portfolio and are routinely updated. Residential Mortgage Loans -- The Company's residential loan portfolio is comprised primarily of closed end, amortizing residential loans and home equity lines of credit and it does not hold any optional adjustable rate mortgages, sub-prime, or low teaser rate loans. In contrast to the commercial and agricultural loan portfolios, residential loans are smaller-balance homogeneous loans that are collectively evaluated for impairment. Non-specific valuation allowances are established using the evaluation framework described above for pools of loans with similar risk characteristics from inputs that are unique to the residential segment of the loan portfolio. Loan specific valuation allowances are only established on residential loans when they have been restructured and are established using the methodology described above for all loan portfolio segments. For residential loans, the Company's primary credit quality indicator is whether the loan is performing or non-performing. The Company generally defines non-performing residential loans as those that are 90 or more days past due and/or in non-accrual status. The determination of F-14 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) performing or non-performing status is assessed monthly. Generally, non-performing residential loans have a higher risk of experiencing a credit loss. Mortgage Loans Modified in a Troubled Debt Restructuring. For a small portion of the portfolio, classified as troubled debt restructurings, concessions are granted related to the borrowers' financial difficulties. Generally, the types of concessions include: reduction of the contractual interest rate, extension of the maturity date at an interest rate lower than current market interest rates and/or a reduction of accrued interest. The amount, timing and extent of the concession granted is considered in determining any impairment or changes in the specific valuation allowance recorded in connection with the troubled debt restructuring. Through the continuous portfolio monitoring process, a specific valuation allowance may have been recorded prior to the quarter when the mortgage loan is modified in a troubled debt restructuring. Accordingly, the carrying value (after specific valuation allowance) before and after modification through a troubled debt restructuring may not change significantly, or may increase if the expected recovery is higher than the pre-modification recovery assessment. Policy Loans. Policy loans are stated at unpaid principal balances. Interest income on such loans is recorded as earned in net investment income using the contractually agreed upon interest rate. Generally, interest is capitalized on the policy's anniversary date. Valuation allowances are not established for policy loans, as these loans are fully collateralized by the cash surrender value of the underlying insurance policies. Any unpaid principal or interest on the loan is deducted from the cash surrender value or the death benefit prior to settlement of the policy. Real Estate. Real estate held-for-investment, including related improvements, is stated at cost less accumulated depreciation. Depreciation is provided on a straight-line basis over the estimated useful life of the asset (typically 20 to 55 years). Rental income is recognized on a straight-line basis over the term of the respective leases. The Company classifies a property as held-for-sale if it commits to a plan to sell a property within one year and actively markets the property in its current condition for a price that is reasonable in comparison to its estimated fair value. The Company classifies the results of operations and the gain or loss on sale of a property that either has been disposed of or classified as held-for-sale as discontinued operations, if the ongoing operations of the property will be eliminated from the ongoing operations of the Company and if the Company will not have any significant continuing involvement in the operations of the property after the sale. Real estate held-for-sale is stated at the lower of depreciated cost or estimated fair value less expected disposition costs. Real estate is not depreciated while it is classified as held-for-sale. The Company periodically reviews its properties held-for-investment for impairment and tests properties for recoverability whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable and the carrying value of the property exceeds its estimated fair value. Properties whose carrying values are greater than their undiscounted cash flows are written down to their estimated fair value, with the impairment loss included in net investment gains (losses). Impairment losses are based upon the estimated fair value of real estate, which is generally computed using the present value of expected future cash flows discounted at a rate commensurate with the underlying risks. Real estate acquired upon foreclosure is recorded at the lower of estimated fair value or the carrying value of the mortgage loan at the date of foreclosure. Real Estate Joint Ventures and Other Limited Partnership Interests. The Company uses the equity method of accounting for investments in real estate joint ventures and other limited partnership interests consisting of leveraged buy-out funds, hedge funds and other private equity funds in which it has more than a minor ownership interest or more than a minor influence over the joint venture's or partnership's operations, but does not have a controlling interest and is not the primary beneficiary. The equity method is also used for such investments in which the Company has more than a minor F-15 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) influence or more than a 20% interest. Generally, the Company records its share of earnings using a three-month lag methodology for instances where the timely financial information is not available and the contractual agreements provide for the delivery of the investees' financial information after the end of the Company's reporting period. The Company uses the cost method of accounting for investments in real estate joint ventures and other limited partnership interests in which it has a minor equity investment and virtually no influence over the joint venture's or the partnership's operations. Based on the nature and structure of these investments, they do not meet the characteristics of an equity security. The Company reports the distributions from real estate joint ventures and other limited partnership interests accounted for under the cost method and equity in earnings from real estate joint ventures and other limited partnership interests accounted for under the equity method in net investment income. In addition to the investees performing regular evaluations for the impairment of underlying investments, the Company routinely evaluates its investments in real estate joint ventures and other limited partnerships for impairments. The Company considers its cost method investments for OTTI when the carrying value of real estate joint ventures and other limited partnership interests exceeds the net asset value ("NAV"). The Company takes into consideration the severity and duration of this excess when deciding if the cost method investment is other-than-temporarily impaired. For equity method investees, the Company considers financial and other information provided by the investee, other known information and inherent risks in the underlying investments, as well as future capital commitments, in determining whether an impairment has occurred. When an OTTI is deemed to have occurred, the Company records a realized capital loss within net investment gains (losses) to record the investment at its estimated fair value. Short-term Investments. Short-term investments include securities and other investments with remaining maturities of one year or less, but greater than three months, at the time of purchase and are stated at estimated fair value or amortized cost, which approximates estimated fair value. Short-term investments also include investments in affiliated money market pools. Other Invested Assets. Other invested assets consist principally of freestanding derivatives with positive estimated fair values, loans to affiliates, leveraged leases, tax credit partnerships, investments in insurance enterprise joint ventures, and funds withheld. Freestanding derivatives with positive estimated fair values are described in "-- Derivative Financial Instruments" below. Leveraged leases are recorded net of non-recourse debt. The Company recognizes income on the leveraged leases by applying the leveraged lease's estimated rate of return to the net investment in the lease. The Company regularly reviews residual values and impairs them to expected values. Loans to affiliates are stated at unpaid principal balance, adjusted for amortization of any unamortized premium or discount. Tax credit partnerships are established for the purpose of investing in low-income housing and other social causes, where the primary return on investment is in the form of income tax credits and are accounted for under the equity method or under the effective yield method. The Company reports the equity in earnings of joint venture investments and tax credit partnerships in net investment income. Joint venture investments represent the Company's investments in entities that engage in insurance underwriting activities and are accounted for under the equity method. F-16 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Funds withheld represent a receivable for amounts contractually withheld by ceding companies in accordance with reinsurance agreements. The Company recognizes interest on funds withheld at rates defined by the terms of the agreement which may be contractually specified or directly related to the underlying investments and records it in net investment income. Investments Risks and Uncertainties. The Company's investments are exposed to four primary sources of risk: credit, interest rate, liquidity risk, and market valuation. The financial statement risks, stemming from such investment risks, are those associated with the determination of estimated fair values, the diminished ability to sell certain investments in times of strained market conditions, the recognition of impairments, the recognition of income on certain investments and the potential consolidation of VIEs. The use of different methodologies, assumptions and inputs relating to these financial statement risks may have a material effect on the amounts presented within the consolidated financial statements. When available, the estimated fair value of the Company's fixed maturity and equity securities are based on quoted prices in active markets that are readily and regularly obtainable. Generally, these are the most liquid of the Company's securities holdings and valuation of these securities does not involve management judgment. When quoted prices in active markets are not available, the determination of estimated fair value is based on market standard valuation methodologies as described in "-- Fair Value" below and in Note 5. Such estimated fair values are based on available market information and management's judgment about financial instruments. The observable and unobservable inputs used in the standard market valuation methodologies are described in Note 5. Financial markets are susceptible to severe events evidenced by rapid depreciation in asset values accompanied by a reduction in asset liquidity. The Company's ability to sell securities, or the price ultimately realized for these securities, depends upon the demand and liquidity in the market and increases the use of judgment in determining the estimated fair value of certain securities. The determination of the amount of valuation allowances and impairments, as applicable, is described previously by investment type. The determination of such valuation allowances and impairments is highly subjective and is based upon the Company's periodic evaluation and assessment of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available. The recognition of income on certain investments (e.g. structured securities, including mortgage-backed and ABS, certain structured investment transactions, trading and other securities) is dependent upon prepayments and defaults, which could result in changes in amounts to be earned. The Company has invested in certain structured transactions that are VIEs. These structured transactions include asset-backed securitizations, hybrid securities, real estate joint ventures, other limited partnership interests, and limited liability companies. The Company consolidates those VIEs for which it is deemed to be the primary beneficiary. The accounting guidance for the determination of when an entity is a VIE and when to consolidate a VIE is complex and requires significant management judgment. The determination of the VIE's primary beneficiary requires an evaluation of the contractual and implied rights and obligations associated with each party's relationship with or involvement in the entity, an estimate of the entity's expected losses and expected residual returns and the allocation of such estimates to each party involved in the entity. The Company generally uses a qualitative approach to determine whether it is the primary beneficiary. F-17 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) For most VIEs, the entity that has both the ability to direct the most significant activities of the VIE and the obligation to absorb losses or receive benefits that could be significant to the VIE is considered the primary beneficiary. However, for VIEs that are investment companies or apply measurement principles consistent with those utilized by investment companies, the primary beneficiary is based on a risks and rewards model and is defined as the entity that will absorb a majority of a VIE's expected losses, receive a majority of a VIE's expected residual returns if no single entity absorbs a majority of expected losses, or both. The Company reassesses its involvement with VIEs on a quarterly basis. The use of different methodologies, assumptions and inputs in the determination of the primary beneficiary could have a material effect on the amounts presented within the consolidated financial statements. Derivative Financial Instruments Derivatives are financial instruments whose values are derived from interest rates, foreign currency exchange rates, credit spreads and/or other financial indices. Derivatives may be exchange-traded or contracted in the over-the-counter ("OTC") market. The Company uses a variety of derivatives, including swaps, forwards, futures and option contracts, to manage various risks relating to its ongoing business operations. To a lesser extent, the Company uses credit derivatives, such as credit default swaps, to synthetically replicate investment risks and returns which are not readily available in the cash market. The Company also purchases certain securities, issues certain insurance policies and investment contracts and engages in certain reinsurance agreements that have embedded derivatives. Freestanding derivatives are carried in the Company's consolidated balance sheets either as assets within other invested assets or as liabilities within other liabilities at estimated fair value as determined through the use of quoted market prices for exchange-traded derivatives or through the use of pricing models for OTC derivatives. The determination of estimated fair value of freestanding derivatives, when quoted market values are not available, is based on market standard valuation methodologies and inputs that management believes are consistent with what other market participants would use when pricing the instruments. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, default risk, nonperformance risk, volatility, liquidity and changes in estimates and assumptions used in the pricing models. Accruals on derivatives are generally recorded in accrued investment income or within other liabilities in the consolidated balance sheets. However, accruals that are not expected to settle within one year are included with the derivative carrying value in other invested assets or other liabilities. The Company does not offset the fair value amounts recognized for derivatives executed with the same counterparty under the same master netting agreement. If a derivative is not designated as an accounting hedge or its use in managing risk does not qualify for hedge accounting, changes in the estimated fair value of the derivative are generally reported in net derivative gains (losses) except for those in net investment income for economic hedges of equity method investments in joint ventures, or for all derivatives held in relation to the trading portfolios. The fluctuations in estimated fair value of derivatives which have not been designated for hedge accounting can result in significant volatility in net income. To qualify for hedge accounting, at the inception of the hedging relationship, the Company formally documents its risk management objective and strategy for undertaking the hedging transaction, as well as its designation of the hedge as either (i) a hedge of the estimated fair value of a recognized asset or liability ("fair value hedge"); (ii) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid F-18 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) related to a recognized asset or liability ("cash flow hedge"); or (iii) a hedge of a net investment in a foreign operation. In this documentation, the Company sets forth how the hedging instrument is expected to hedge the designated risks related to the hedged item and sets forth the method that will be used to retrospectively and prospectively assess the hedging instrument's effectiveness and the method which will be used to measure ineffectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and periodically throughout the life of the designated hedging relationship. Assessments of hedge effectiveness and measurements of ineffectiveness are also subject to interpretation and estimation and different interpretations or estimates may have a material effect on the amount reported in net income. The accounting for derivatives is complex and interpretations of the primary accounting guidance continue to evolve in practice. Judgment is applied in determining the availability and application of hedge accounting designations and the appropriate accounting treatment under such accounting guidance. If it was determined that hedge accounting designations were not appropriately applied, reported net income could be materially affected. Under a fair value hedge, changes in the estimated fair value of the hedging derivative, including amounts measured as ineffectiveness, and changes in the estimated fair value of the hedged item related to the designated risk being hedged, are reported within net derivative gains (losses). The estimated fair values of the hedging derivatives are exclusive of any accruals that are separately reported in the consolidated statement of operations within interest income or interest expense to match the location of the hedged item. Under a cash flow hedge, changes in the estimated fair value of the hedging derivative measured as effective are reported within other comprehensive income (loss), a separate component of stockholder's equity and the deferred gains or losses on the derivative are reclassified into the consolidated statement of operations when the Company's earnings are affected by the variability in cash flows of the hedged item. Changes in the estimated fair value of the hedging instrument measured as ineffectiveness are reported within net derivative gains (losses). The estimated fair values of the hedging derivatives are exclusive of any accruals that are separately reported in the consolidated statement of operations within interest income or interest expense to match the location of the hedged item. In a hedge of a net investment in a foreign operation, changes in the estimated fair value of the hedging derivative that are measured as effective are reported within other comprehensive income (loss) consistent with the translation adjustment for the hedged net investment in the foreign operation. Changes in the estimated fair value of the hedging instrument measured as ineffectiveness are reported within net derivative gains (losses). The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer highly effective in offsetting changes in the estimated fair value or cash flows of a hedged item; (ii) the derivative expires, is sold, terminated, or exercised; (iii) it is no longer probable that the hedged forecasted transaction will occur; or (iv) the derivative is de-designated as a hedging instrument. When hedge accounting is discontinued because it is determined that the derivative is not highly effective in offsetting changes in the estimated fair value or cash flows of a hedged item, the derivative continues to be carried in the consolidated balance sheets at its estimated fair value, with changes in estimated fair value recognized currently in net derivative gains (losses). The carrying value of the hedged recognized asset or liability under a fair value hedge is no longer adjusted for changes in its estimated fair value due to the hedged risk, and the cumulative adjustment to its carrying value is amortized into income over the remaining life of the hedged item. Provided the hedged forecasted transaction is still probable of occurrence, the changes in estimated fair value of derivatives recorded in other comprehensive income (loss) related to discontinued cash flow hedges are released into the consolidated statements of operations when the Company's earnings are affected by the variability in cash flows of the hedged item. F-19 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) When hedge accounting is discontinued because it is no longer probable that the forecasted transactions will occur on the anticipated date or within two months of that date, the derivative continues to be carried in the consolidated balance sheets at its estimated fair value, with changes in estimated fair value recognized currently in net derivative gains (losses). Deferred gains and losses of a derivative recorded in other comprehensive income (loss) pursuant to the discontinued cash flow hedge of a forecasted transaction that is no longer probable are recognized immediately in net derivative gains (losses). In all other situations in which hedge accounting is discontinued, the derivative is carried at its estimated fair value in the consolidated balance sheets, with changes in its estimated fair value recognized in the current period as net derivative gains (losses). The Company issues certain products and purchases certain investments that contain embedded derivatives. The Company assesses each identified embedded derivative to determine whether it is required to be bifurcated. If the instrument would not be accounted for in its entirety at estimated fair value and it is determined that the terms of the embedded derivative are not clearly and closely related to the economic characteristics of the host contract, and that a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is bifurcated from the host contract and accounted for as a freestanding derivative. Such embedded derivatives are carried in the consolidated balance sheets at estimated fair value with the host contract and changes in their estimated fair value are generally reported in net derivative gains (losses). If the Company is unable to properly identify and measure an embedded derivative for separation from its host contract, the entire contract is carried on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) or net investment income. Additionally, the Company may elect to carry an entire contract on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) or net investment income if that contract contains an embedded derivative that requires bifurcation. Fair Value As described below, certain assets and liabilities are measured at estimated fair value in the Company's consolidated balance sheets. In addition, the notes to these consolidated financial statements include further disclosures of estimated fair values. The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. In most cases, the exit price and the transaction (or entry) price will be the same at initial recognition. Subsequent to initial recognition, fair values are based on unadjusted quoted prices for identical assets or liabilities in active markets that are readily and regularly obtainable. When such quoted prices are not available, fair values are based on quoted prices in markets that are not active, quoted prices for similar but not identical assets or liabilities, or other observable inputs. If these inputs are not available, or observable inputs are not determinative, unobservable inputs and/or adjustments to observable inputs requiring management judgment are used to determine the fair value of assets and liabilities. The Company considers three broad valuation techniques: (i) the market approach, (ii) the income approach, and (iii) the cost approach. The Company determines the most appropriate valuation technique to use, given what is being measured and the availability of sufficient inputs, giving priority to observable inputs. The Company categorizes its assets and liabilities measured at estimated fair value into a three-level hierarchy, based on the significant input with the lowest level in its valuation. The input levels are as follows: Level 1Unadjusted quoted prices in active markets for identical assets or liabilities. The Company defines active markets based on average trading volume for equity securities. The size of the bid/ask spread is used as an indicator of market activity for fixed maturity securities. F-20 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Level 2Quoted prices in markets that are not active or inputs that are observable either directly or indirectly. These inputs can include quoted prices for similar assets or liabilities other than quoted prices in Level 1, quoted prices in markets that are not active, or other significant inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3Unobservable inputs that are supported by little or no market activity and are significant to the estimated fair value of the assets or liabilities. Unobservable inputs reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the asset or liability. Cash and Cash Equivalents The Company considers all highly liquid securities and other investments purchased with an original or remaining maturity of three months or less at the date of purchase to be cash equivalents. Cash equivalents are stated at amortized cost, which approximates estimated fair value. Property, Equipment, Leasehold Improvements and Computer Software Property, equipment and leasehold improvements, which are included in other assets, are stated at cost, less accumulated depreciation and amortization. Depreciation is determined using the straight-line method over the estimated useful lives of the assets, as appropriate. The estimated life for company occupied real estate property is generally 40 years. Estimated lives generally range from five to 10 years for leasehold improvements and three to seven years for all other property and equipment. The cost basis of the property, equipment and leasehold improvements was $1.7 billion and $1.6 billion at December 31, 2011 and 2010, respectively. Accumulated depreciation and amortization of property, equipment and leasehold improvements was $999 million and $898 million at December 31, 2011 and 2010, respectively. Related depreciation and amortization expense was $118 million, $111 million and $111 million for the years ended December 31, 2011, 2010 and 2009, respectively. Computer software, which is included in other assets, is stated at cost, less accumulated amortization. Purchased software costs, as well as certain internal and external costs incurred to develop internal-use computer software during the application development stage, are capitalized. Such costs are amortized generally over a four-year period using the straight-line method. The cost basis of computer software was $1.6 billion and $1.5 billion at December 31, 2011 and 2010, respectively. Accumulated amortization of capitalized software was $1.2 billion and $1.1 billion at December 31, 2011 and 2010, respectively. Related amortization expense was $145 million, $132 million and $125 million for the years ended December 31, 2011, 2010 and 2009, respectively. Deferred Policy Acquisition Costs and Value of Business Acquired The Company incurs significant costs in connection with acquiring new and renewal insurance business. Costs that vary with and relate to the production of new business are deferred as deferred policy acquisition costs ("DAC"). Such costs consist principally of commissions, certain agency expenses and policy issuance expenses. Value of business acquired (" VOBA") is an intangible asset resulting from a business combination that represents the excess of book value over the estimated fair value of acquired insurance, annuity, and investment-type contracts in-force at the acquisition date. The estimated fair value of the acquired liabilities is based on actuarially determined projections, by each block of business, of future policy and contract charges, premiums, mortality and morbidity, separate account performance, surrenders, operating expenses, investment returns, F-21 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) nonperformance risk adjustment and other factors. Actual experience on the purchased business may vary from these projections. The recovery of DAC and VOBA is dependent upon the future profitability of the related business. DAC and VOBA are aggregated in the consolidated financial statements for reporting purposes. The Company amortizes DAC and VOBA on life insurance or investment-type contracts in proportion to gross premiums, gross margins or gross profits, depending on the type of contract as described below. The Company amortizes DAC and VOBA related to non-participating and non-dividend-paying traditional contracts (term insurance, non-participating whole life insurance, traditional group life insurance, and non-medical health insurance) over the appropriate premium paying period in proportion to the present value of actual historic and expected future gross premiums. The present value of expected premiums is based upon the premium requirement of each policy and assumptions for mortality, morbidity, persistency and investment returns at policy issuance, or policy acquisition (as it relates to VOBA), that include provisions for adverse deviation that are consistent with the assumptions used to calculate future policyholder benefit liabilities. These assumptions are not revised after policy issuance or acquisition unless the DAC or VOBA balance is deemed to be unrecoverable from future expected profits. Absent a premium deficiency, variability in amortization after policy issuance or acquisition is caused only by variability in premium volumes. The Company amortizes DAC and VOBA related to participating, dividend-paying traditional contracts over the estimated lives of the contracts in proportion to actual and expected future gross margins. The amortization includes interest based on rates in effect at inception or acquisition of the contracts. The future gross margins are dependent principally on investment returns, policyholder dividend scales, mortality, persistency, expenses to administer the business, creditworthiness of reinsurance counterparties and certain economic variables, such as inflation. For participating contracts within the closed block (dividend paying traditional contracts) future gross margins are also dependent upon changes in the policyholder dividend obligation. Of these factors, the Company anticipates that investment returns, expenses, persistency and other factor changes, as well as policyholder dividend scales are reasonably likely to impact significantly the rate of DAC and VOBA amortization. Each reporting period, the Company updates the estimated gross margins with the actual gross margins for that period. When the actual gross margins change from previously estimated gross margins, the cumulative DAC and VOBA amortization is re-estimated and adjusted by a cumulative charge or credit to current operations. When actual gross margins exceed those previously estimated, the DAC and VOBA amortization will increase, resulting in a current period charge to earnings. The opposite result occurs when the actual gross margins are below the previously estimated gross margins. Each reporting period, the Company also updates the actual amount of business in-force, which impacts expected future gross margins. When expected future gross margins are below those previously estimated, the DAC and VOBA amortization will increase, resulting in a current period charge to earnings. The opposite result occurs when the expected future gross margins are above the previously estimated expected future gross margins. Each period, the Company also reviews the estimated gross margins for each block of business to determine the recoverability of DAC and VOBA balances. The Company amortizes DAC and VOBA related to fixed and variable universal life contracts and fixed and variable deferred annuity contracts over the estimated lives of the contracts in proportion to actual and expected future gross profits. The amortization includes interest based on rates in effect at inception or acquisition of the contracts. The amount of future gross profits is dependent principally upon returns in excess of the amounts credited to policyholders, mortality, persistency, interest crediting rates, expenses to administer the business, creditworthiness of reinsurance counterparties, the effect of any hedges used and certain economic variables, such as inflation. Of these factors, the Company anticipates that investment returns, expenses and persistency are reasonably likely to impact significantly the rate of DAC and VOBA amortization. Each reporting period, the Company updates the estimated gross profits with the actual gross profits for that period. When the actual gross profits change from previously estimated gross profits, the cumulative DAC and VOBA amortization is F-22 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) re-estimated and adjusted by a cumulative charge or credit to current operations. When actual gross profits exceed those previously estimated, the DAC and VOBA amortization will increase, resulting in a current period charge to earnings. The opposite result occurs when the actual gross profits are below the previously estimated gross profits. Each reporting period, the Company also updates the actual amount of business remaining in-force, which impacts expected future gross profits. When expected future gross profits are below those previously estimated, the DAC and VOBA amortization will increase, resulting in a current period charge to earnings. The opposite result occurs when the expected future gross profits are above the previously estimated expected future gross profits. Each period, the Company also reviews the estimated gross profits for each block of business to determine the recoverability of DAC and VOBA balances. Separate account rates of return on variable universal life contracts and variable deferred annuity contracts affect in-force account balances on such contracts each reporting period which can result in significant fluctuations in amortization of DAC and VOBA. Returns that are higher than the Company's long-term expectation produce higher account balances, which increases the Company's future fee expectations and decreases future benefit payment expectations on minimum death and living benefit guarantees, resulting in higher expected future gross profits. The opposite result occurs when returns are lower than the Company's long-term expectation. The Company's practice to determine the impact of gross profits resulting from returns on separate accounts assumes that long-term appreciation in equity markets is not changed by short-term market fluctuations, but is only changed when sustained interim deviations are expected. The Company monitors these events and only changes the assumption when its long-term expectation changes. The Company also periodically reviews other long-term assumptions underlying the projections of estimated gross margins and profits. These include investment returns, policyholder dividend scales, interest crediting rates, mortality, persistency and expenses to administer business. Management annually updates assumptions used in the calculation of estimated gross margins and profits which may have significantly changed. If the update of assumptions causes expected future gross margins and profits to increase, DAC and VOBA amortization will decrease, resulting in a current period increase to earnings. The opposite result occurs when the assumption update causes expected future gross margins and profits to decrease. Periodically, the Company modifies product benefits, features, rights or coverages that occur by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by election or coverage within a contract. If such modification, referred to as an internal replacement, substantially changes the contract, the associated DAC or VOBA is written off immediately through income and any new deferrable costs associated with the replacement contract are deferred. If the modification does not substantially change the contract, the DAC or VOBA amortization on the original contract will continue and any acquisition costs associated with the related modification are expensed. Sales Inducements The Company generally has two different types of sales inducements which are included in other assets: (i) the policyholder receives a bonus whereby the policyholder's initial account balance is increased by an amount equal to a specified percentage of the customer's deposit; and (ii) the policyholder receives a higher interest rate using a dollar cost averaging method than would have been received based on the normal general account interest rate credited. The Company defers sales inducements and amortizes them over the life of the policy using the same methodology and assumptions used to amortize DAC. The amortization of sales inducements is included in policyholder benefits and claims. Each year, or more frequently if circumstances indicate a potentially significant recoverability issue exists, the Company reviews the deferred sales inducements to determine the recoverability of these balances. F-23 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Value of Distribution Agreements and Customer Relationships Acquired Value of distribution agreements acquired ("VODA") is reported in other assets and represents the present value of expected future profits associated with the expected future business derived from the distribution agreements acquired as part of a business combination. Value of customer relationships acquired ("VOCRA") is also reported in other assets and represents the present value of the expected future profits associated with the expected future business acquired through existing customers of the acquired company or business. The VODA and VOCRA associated with past acquisitions are amortized over useful lives ranging from 10 to 30 years and such amortization is included in other expenses. Each year, or more frequently if circumstances indicate a potentially significant recoverability issue exists, the Company reviews VODA and VOCRA to determine the recoverability of these balances. Goodwill Goodwill, which is included in other assets, is the excess of cost over the estimated fair value of net assets acquired which represents the future economic benefits arising from such net assets acquired that could not be individually identified. Goodwill is not amortized but is tested for impairment at least annually or more frequently if events or circumstances, such as adverse changes in the business climate, indicate that there may be justification for conducting an interim test. The Company performs its annual goodwill impairment testing during the third quarter of each year based upon data as of the close of the second quarter. Goodwill associated with a business acquisition is not tested for impairment during the year the business is acquired unless there is a significant identified impairment event. Impairment testing is performed using the fair value approach, which requires the use of estimates and judgment, at the "reporting unit" level. A reporting unit is the operating segment or a business one level below the operating segment, if discrete financial information is prepared and regularly reviewed by management at that level. For purposes of goodwill impairment testing, if the carrying value of a reporting unit exceeds its estimated fair value, there might be an indication of impairment. In such instances, the implied fair value of the goodwill is determined in the same manner as the amount of goodwill that would be determined in a business acquisition. The excess of the carrying value of goodwill over the implied fair value of goodwill would be recognized as an impairment and recorded as a charge against net income. In performing the Company's goodwill impairment tests, the estimated fair values of the reporting units are first determined using a market multiple approach. When further corroboration is required, the Company uses a discounted cash flow approach. For reporting units which are particularly sensitive to market assumptions, such as the retirement products and individual life reporting units, the Company may use additional valuation methodologies to estimate the reporting units' fair values. The key inputs, judgments and assumptions necessary in determining estimated fair value of the reporting units include projected operating earnings, current book value, the level of economic capital required to support the mix of business, long-term growth rates, comparative market multiples, the account value of in-force business, projections of new and renewal business, as well as margins on such business, the level of interest rates, credit spreads, equity market levels and the discount rate that the Company believes is appropriate for the respective reporting unit. The Company applies significant judgment when determining the estimated fair value of the Company's reporting units. The valuation methodologies utilized are subject to key judgments and assumptions that are sensitive to change. Estimates of fair value are inherently uncertain and represent only management's reasonable expectation regarding future developments. These estimates and the judgments and assumptions upon which the F-24 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) estimates are based will, in all likelihood, differ in some respects from actual future results. Declines in the estimated fair value of the Company's reporting units could result in goodwill impairments in future periods which could adversely affect the Company's results of operations or financial position. On an ongoing basis, the Company evaluates potential triggering events that may affect the estimated fair value of the Company's reporting units to assess whether any goodwill impairment exists. Deteriorating or adverse market conditions for certain reporting units may have an impact on the estimated fair value of these reporting units and could result in future impairments of goodwill. See Note 7 for discussion of goodwill impairment testing during 2011. Liability for Future Policy Benefits and Policyholder Account Balances The Company establishes liabilities for amounts payable under insurance policies, including traditional life insurance, traditional annuities and non-medical health insurance. Generally, amounts are payable over an extended period of time and related liabilities are calculated as the present value of future expected benefits to be paid reduced by the present value of future expected premiums. Such liabilities are established based on methods and underlying assumptions in accordance with GAAP and applicable actuarial standards. Principal assumptions used in the establishment of liabilities for future policy benefits are mortality, morbidity, policy lapse, renewal, retirement, disability incidence, disability terminations, investment returns, inflation, expenses and other contingent events as appropriate to the respective product type. These assumptions are established at the time the policy is issued and are intended to estimate the experience for the period the policy benefits are payable. Utilizing these assumptions, liabilities are established on a block of business basis. For long duration insurance contracts, assumptions such as mortality, morbidity and interest rates are "locked in" upon the issuance of new business. However, significant adverse changes in experience on such contracts may require us to establish premium deficiency reserves. Such reserves are determined based on assumptions at the time the premium deficiency reserve is established and do not include a provision for adverse deviation. Premium deficiency reserves may also be established for short duration contracts to provide for expected future losses. These reserves on short duration contracts are based on actuarial estimates of the amount of loss inherent in that period, including losses incurred for which claims have not been reported. The provisions for unreported claims are calculated using studies that measure the historical length of time between the incurred date of a claim and its eventual reporting to the company. Anticipated investment income is considered in the calculation of premium deficiency losses for short duration contracts. Future policy benefit liabilities for participating life insurance policies are equal to the aggregate of (i) net level premium reserves for death and endowment policy benefits (calculated based upon the non-forfeiture interest rate, ranging from 3% to 7%, and mortality rates guaranteed in calculating the cash surrender values described in such contracts); and (ii) the liability for terminal dividends. Participating business represented approximately 6% of the Company's life insurance in-force at both December 31, 2011 and 2010. Participating policies represented approximately 32%, 32% and 33% of gross life insurance premiums for the years ended December 31, 2011, 2010 and 2009, respectively. Future policy benefit liabilities for non-participating life insurance policies are equal to the aggregate of the present value of expected future benefit payments and related expenses less the present value of expected future net premiums. Assumptions as to mortality and persistency are based upon the Company's experience when the basis of the liability is established. Interest rate assumptions for the aggregate future policy benefit liabilities range from 2% to 10%. F-25 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Future policy benefit liabilities for individual and group traditional fixed annuities after annuitization are equal to the present value of expected future payments. Interest rate assumptions used in establishing such liabilities range from 2% to 11%. Future policy benefit liabilities for non-medical health insurance are calculated using the net level premium method and assumptions as to future morbidity, withdrawals and interest, which provide a margin for adverse deviation. Interest rate assumptions used in establishing such liabilities range from 4% to 7%. Future policy benefit liabilities for disabled lives are estimated using the present value of benefits method and experience assumptions as to claim terminations, expenses and interest. Interest rate assumptions used in establishing such liabilities range from 2% to 9%. Liabilities for unpaid claims and claim expenses are included in future policyholder benefits and represent the amount estimated for claims that have been reported but not settled and claims incurred but not reported. Other policy-related balances include claims that have been reported but not settled and claims incurred but not reported on life and non-medical health insurance. Liabilities for unpaid claims are estimated based upon the Company's historical experience and other actuarial assumptions that consider the effects of current developments, anticipated trends and risk management programs. The effects of changes in such estimated liabilities are included in the results of operations in the period in which the changes occur. Liabilities for universal and variable life secondary guarantees and paid-up guarantees are determined by estimating the expected value of death benefits payable when the account balance is projected to be zero and recognizing those benefits ratably over the accumulation period based on total expected assessments. The assumptions used in estimating the secondary and paid-up guarantee liabilities are consistent with those used for amortizing DAC, and are thus subject to the same variability and risk. The assumptions of investment performance and volatility for variable products are consistent with historical Standard & Poor's Ratings Services ("S&P") experience of the appropriate underlying equity index, such as the S&P 500 Index. The benefits used in calculating the liabilities are based on the average benefits payable over a range of scenarios. Future policy benefit liabilities are established for certain variable annuity products with guaranteed minimum benefits as described below under "-- Variable Annuity Guaranteed Minimum Benefits." The Company regularly reviews its estimates of actuarial liabilities for future policy benefits and compares them with its actual experience. Differences between actual experience and the assumptions used in pricing these policies and guarantees, and in the establishment of the related liabilities, result in changes in the additional liability balances with related charges or credits to benefit expenses in the period in which the changes occur. Policyholder account balances ("PABs") relate to investment-type contracts, universal life-type policies and certain guaranteed minimum benefits. Investment-type contracts principally include traditional individual fixed annuities in the accumulation phase and non-variable group annuity contracts. PABs for these contracts are equal to: (i) policy account values, which consist of an accumulation of gross premium payments; (ii) credited interest, ranging from 1% to 13%, less expenses, mortality charges and withdrawals; and (iii) fair value adjustments relating to business combinations. Variable Annuity Guaranteed Minimum Benefits The Company issues certain variable annuity products with guaranteed minimum benefits that provide the policyholder a minimum return based on their initial deposit (i.e., the benefit base) less withdrawals. In some cases the benefit base may be increased by additional deposits, bonus amounts, accruals or optional market value resets. These guarantees are accounted for as insurance liabilities or as embedded derivatives depending on how and when the benefit is paid. Specifically, a guarantee is accounted for as an embedded derivative if a guarantee F-26 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) is paid without requiring (i) the occurrence of specific insurable event, or (ii) the policyholder to annuitize. Alternatively, a guarantee is accounted for as an insurance liability if the guarantee is paid only upon either (i) the occurrence of a specific insurable event, or (ii) annuitization. In certain cases, a guarantee may have elements of both an insurance liability and an embedded derivative and in such cases the guarantee is accounted for under a split of the two models. These guarantees include: . Guaranteed minimum death benefit ("GMDB") that guarantees the contractholder a return of their purchase payment upon death even if the account value is reduced to zero. An enhanced death benefit may be available for an additional fee. . Guaranteed minimum income benefit ("GMIB") that provides the contractholder, after a specified period of time determined at the time of issuance of the variable annuity contract, with a minimum accumulation of their purchase payments, even if the account value is reduced to zero, that can be annuitized to receive a monthly income stream that is not less than a specified amount. Certain of these contracts also provide for a guaranteed lump sum return of purchase premium in lieu of the annuitization benefit. . Guaranteed minimum withdrawal benefits ("GMWB") that guarantee the contractholder a return of their purchase payment via partial withdrawals, even if the account value is reduced to zero, provided that the contractholder's cumulative withdrawals in a contract year do not exceed a certain limit. Certain of these contracts include guaranteed withdrawals that are life contingent. . Guaranteed minimum accumulation benefits ("GMAB") that provide the contractholder, after a specified period of time determined at the time of issuance of the variable annuity contract, with a minimum accumulation of their purchase payments even if the account value is reduced to zero. Guarantees accounted for as insurance liabilities in future policy benefits include GMDB, the portion of GMIB that require annuitization, and the life-contingent portion of certain GMWB. These liabilities are established as follows: GMDB liabilities are determined by estimating the expected value of death benefits in excess of the projected account balance and recognizing the excess ratably over the accumulation period based on total expected assessments. The assumptions used in estimating the GMDB liabilities are consistent with those used for amortizing DAC, and are thus subject to the same variability and risk. The assumptions of investment performance and volatility are consistent with the historical experience of the appropriate underlying equity index, such as the S&P 500 Index. The benefit assumptions used in calculating the liabilities are based on the average benefits payable over a range of scenarios. GMIB liabilities are determined by estimating the expected value of the income benefits in excess of the projected account balance at any future date of annuitization and recognizing the excess ratably over the accumulation period based on total expected assessments. The assumptions used for estimating the GMIB liabilities are consistent with those used for estimating the GMDB liabilities. In addition, the calculation of guaranteed annuitization benefit liabilities incorporates an assumption for the percentage of the potential annuitizations that may be elected by the contractholder. Certain GMIB have settlement features that result in a portion of that guarantee being accounted for as an embedded derivative and are recorded in PABs as described below. The liability for the life contingent portion of GMWB is determined based on the expected value of the life contingent payments and expected assessments using assumptions consistent with those used for estimating the GMDB liabilities. F-27 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Guarantees accounted for as embedded derivatives in PABs include the non life-contingent portion of GMWB, GMAB and the portion of certain GMIB that do not require annuitization. These guarantees are recorded at estimated fair value separately from the host variable annuity with changes in estimated fair value reported in net derivative gains (losses). At inception, the Company attributes to the embedded derivative a portion of the projected future guarantee fees to be collected from the policyholder equal to the present value of projected future guaranteed benefits. Any additional fees represent "excess" fees and are reported in universal life and investment-type product policy fees. The estimated fair values of these embedded derivatives are then determined based on the present value of projected future benefits minus the present value of projected future fees. The projections of future benefits and future fees require capital market and actuarial assumptions including expectations concerning policyholder behavior. A risk neutral valuation methodology is used under which the cash flows from the guarantees are projected under multiple capital market scenarios using observable risk free rates. The valuation of these embedded derivatives also includes an adjustment for the Company's nonperformance risk and risk margins related to non-capital market inputs. The nonperformance adjustment, which is captured as a spread over the risk free rate in determining the discount rate to discount the cash flows of the liability, is determined by taking into consideration publicly available information relating to spreads in the secondary market for MetLife, Inc.'s debt, including related credit default swaps. These observable spreads are then adjusted, as necessary, to reflect the priority of these liabilities and the claims paying ability of the issuing insurance subsidiaries compared to MetLife, Inc. Risk margins are established to capture the non-capital market risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties in certain actuarial assumptions. The establishment of risk margins requires the use of significant management judgment, including assumptions of the amount and cost of capital needed to cover the guarantees. These guarantees may be more costly than expected in volatile or declining equity markets. Market conditions including, but not limited to, changes in interest rates, equity indices, market volatility and foreign currency exchange rates, changes in nonperformance risk, variations in actuarial assumptions regarding policyholder behavior, mortality and risk margins related to non-capital market inputs may result in significant fluctuations in the estimated fair value of the guarantees that could materially affect net income. The Company ceded the risk associated with certain of the GMIB and GMWB described in the preceding paragraphs. With respect to GMIB, a portion of the directly written GMIB guarantees are accounted for as insurance (i.e., not as embedded derivatives) but where the reinsurance agreements contain embedded derivatives. These embedded derivatives are included in premiums, reinsurance, and other receivables in the consolidated balance sheet with changes in estimated fair value reported in net derivative gains (losses). The value of the embedded derivatives on the ceded risk is determined using a methodology consistent with that described previously for the guarantees directly written by the Company with the exception of the input for nonperformance risk that reflects the credit of the reinsurer. Other Policy-Related Balances Other policy-related balances include policy and contract claims, unearned revenue liabilities, premiums received in advance, policyholder dividends due and unpaid and policyholder dividends left on deposit. The liability for policy and contract claims generally relates to incurred but not reported death, disability, long-term care ("LTC") and dental claims, as well as claims which have been reported but not yet settled. The liability for these claims is based on the Company's estimated ultimate cost of settling all claims. The Company derives estimates for the development of incurred but not reported claims principally from actuarial analyses of historical patterns of claims and claims development for each line of business. The methods used to determine F-28 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) these estimates are continually reviewed. Adjustments resulting from this continuous review process and differences between estimates and payments for claims are recognized in policyholder benefits and claims expense in the period in which the estimates are changed or payments are made. The unearned revenue liability relates to universal life-type and investment-type products and represents policy charges for services to be provided in future periods. The charges are deferred as unearned revenue and amortized using the product's estimated gross profits and margins, similar to DAC. Such amortization is recorded in universal life and investment-type product policy fees. The Company accounts for the prepayment of premiums on its individual life, group life and health contracts as premium received in advance and applies the cash received to premiums when due. Also included in other policy-related balances are policyholder dividends due and unpaid on participating policies and policyholder dividends left on deposit. Such liabilities are presented at amounts contractually due to policyholders. Recognition of Insurance Revenue and Related Benefits Premiums related to traditional life and annuity policies with life contingencies are recognized as revenues when due from policyholders. Policyholder benefits and expenses are provided against such revenues to recognize profits over the estimated lives of the policies. When premiums are due over a significantly shorter period than the period over which benefits are provided, any excess profit is deferred and recognized into operations in a constant relationship to insurance in-force or, for annuities, the amount of expected future policy benefit payments. Premiums related to non-medical health and disability contracts are recognized on a pro rata basis over the applicable contract term. Deposits related to universal life-type and investment-type products are credited to PABs. Revenues from such contracts consist of amounts assessed against PABs for mortality, policy administration and surrender charges and are recorded in universal life and investment-type product policy fees in the period in which services are provided. Amounts that are charged to operations include interest credited and benefit claims incurred in excess of related PABs. Premiums, policy fees, policyholder benefits and expenses are presented net of reinsurance. The portion of fees allocated to embedded derivatives described previously is recognized within net derivative gains (losses) as part of the estimated fair value of embedded derivatives. Other Revenues Other revenues include, in addition to items described elsewhere herein, advisory fees, broker-dealer commissions and fees and administrative service fees. Such fees and commissions are recognized in the period in which services are performed. Other revenues also include changes in account value relating to corporate-owned life insurance ("COLI"). Under certain COLI contracts, if the Company reports certain unlikely adverse results in its consolidated financial statements, withdrawals would not be immediately available and would be subject to market value adjustment, which could result in a reduction of the account value. F-29 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Policyholder Dividends Policyholder dividends are approved annually by Metropolitan Life Insurance Company and its insurance subsidiaries' boards of directors. The aggregate amount of policyholder dividends is related to actual interest, mortality, morbidity and expense experience for the year, as well as management's judgment as to the appropriate level of statutory surplus to be retained by Metropolitan Life Insurance Company and its insurance subsidiaries. Income Taxes Metropolitan Life Insurance Company and its includable subsidiaries join with MetLife, Inc. and its includable subsidiaries in filing a consolidated U.S. life and non-life federal income tax return in accordance with the provisions of the Internal Revenue Code of 1986, as amended (the "Code"). Metropolitan Life Insurance Company and its includable subsidiaries participate in a tax sharing agreement with MetLife, Inc. The Company's accounting for income taxes represents management's best estimate of various events and transactions. Deferred tax assets and liabilities resulting from temporary differences between the financial reporting and tax bases of assets and liabilities are measured at the balance sheet date using enacted tax rates expected to apply to taxable income in the years the temporary differences are expected to reverse. The realization of deferred tax assets depends upon the existence of sufficient taxable income within the carryback or carryforward periods under the tax law in the applicable tax jurisdiction. Valuation allowances are established when management determines, based on available information, that it is more likely than not that deferred income tax assets will not be realized. Factors in management's determination include the performance of the business and its ability to generate capital gains. Significant judgment is required in determining whether valuation allowances should be established, as well as the amount of such allowances. When making such determination, consideration is given to, among other things, the following: (i)future taxable income exclusive of reversing temporary differences and carryforwards; (ii)future reversals of existing taxable temporary differences; (iii)taxable income in prior carryback years; and (iv)tax planning strategies. The Company may be required to change its provision for income taxes in certain circumstances. Examples of such circumstances include when estimates used in determining valuation allowances on deferred tax assets significantly change or when receipt of new information indicates the need for adjustment in valuation allowances. Additionally, future events, such as changes in tax laws, tax regulations, or interpretations of such laws or regulations, could have an impact on the provision for income tax and the effective tax rate. Any such changes could significantly affect the amounts reported in the consolidated financial statements in the year these changes occur. The Company determines whether it is more likely than not that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 % likely of being realized upon settlement. Unrecognized tax benefits due to tax uncertainties that do not meet the threshold are included within other liabilities and are charged to earnings in the period that such determination is made. F-30 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company classifies interest recognized as interest expense and penalties recognized as a component of income tax. Reinsurance The Company enters into reinsurance agreements primarily as a purchaser of reinsurance for its various insurance products and also as a provider of reinsurance for some insurance products issued by third parties. For each of its reinsurance agreements, the Company determines whether the agreement provides indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards. The Company reviews all contractual features, particularly those that may limit the amount of insurance risk to which the reinsurer is subject or features that delay the timely reimbursement of claims. For reinsurance of existing in-force blocks of long-duration contracts that transfer significant insurance risk, the difference, if any, between the amounts paid (received), and the liabilities ceded (assumed) related to the underlying contracts is considered the net cost of reinsurance at the inception of the reinsurance agreement. The net cost of reinsurance is recorded as an adjustment to DAC and recognized as a component of other expenses on a basis consistent with the way the acquisition costs on the underlying reinsured contracts would be recognized. Subsequent amounts paid (received) on the reinsurance of in-force blocks, as well as amounts paid (received) related to new business, are recorded as ceded (assumed) premiums and ceded (assumed) future policy benefit liabilities are established. For prospective reinsurance of short-duration contracts that meet the criteria for reinsurance accounting, amounts paid (received) are recorded as ceded (assumed) premiums and ceded (assumed) unearned premiums and are reflected as a component of premiums, reinsurance and other receivables (future policy benefits). Such amounts are amortized through earned premiums over the remaining contract period in proportion to the amount of protection provided. For retroactive reinsurance of short-duration contracts that meet the criteria of reinsurance accounting, amounts paid (received) in excess of (which do not exceed) the related insurance liabilities ceded (assumed) are recognized immediately as a loss. Any gains on such retroactive agreements are deferred and recorded in other liabilities. The gains are amortized primarily using the recovery method. The assumptions used to account for both long and short-duration reinsurance agreements are consistent with those used for the underlying contracts. Ceded policyholder and contract related liabilities, other than those currently due, are reported gross on the balance sheet. Amounts currently recoverable under reinsurance agreements are included in premiums, reinsurance and other receivables and amounts currently payable are included in other liabilities. Such assets and liabilities relating to reinsurance agreements with the same reinsurer may be recorded net on the balance sheet, if a right of offset exists within the reinsurance agreement. In the event that reinsurers do not meet their obligations to the Company under the terms of the reinsurance agreements, reinsurance balances recoverable could become uncollectible. In such instances, reinsurance recoverable balances are stated net of allowances for uncollectible reinsurance. The funds withheld liability represents amounts withheld by the Company in accordance with the terms of the reinsurance agreements. The Company withholds the funds rather than transferring the underlying investments and, as a result, records funds withheld liability within other liabilities. The Company recognizes interest on funds withheld, included in other expenses, at rates defined by the terms of the agreement which may be contractually specified or directly related to the investment portfolio. F-31 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Premiums, fees and policyholder benefits and claims include amounts assumed under reinsurance agreements and are net of reinsurance ceded. Amounts received from reinsurers for policy administration are reported in other revenues. If the Company determines that a reinsurance agreement does not expose the reinsurer to a reasonable possibility of a significant loss from insurance risk, the Company records the agreement using the deposit method of accounting. Deposits received are included in other liabilities and deposits made are included within premiums, reinsurance and other receivables. As amounts are paid or received, consistent with the underlying contracts, the deposit assets or liabilities are adjusted. Interest on such deposits is recorded as other revenues or other expenses, as appropriate. Periodically, the Company evaluates the adequacy of the expected payments or recoveries and adjusts the deposit asset or liability through other revenues or other expenses, as appropriate. Accounting for reinsurance requires extensive use of assumptions and estimates, particularly related to the future performance of the underlying business and the potential impact of counterparty credit risks. The Company periodically reviews actual and anticipated experience compared to the aforementioned assumptions used to establish assets and liabilities relating to ceded and assumed reinsurance and evaluates the financial strength of counterparties to its reinsurance agreements using criteria similar to that evaluated in the security impairment process discussed previously. Cessions under reinsurance agreements do not discharge the Company's obligations as the primary insurer. Employee Benefit Plans The Company sponsors and administers various qualified and non-qualified defined benefit pension plans and other postretirement employee benefit plans covering eligible employees and sales representatives who meet specified eligibility requirements of the sponsor and its participating affiliates. A December 31 measurement date is used for all of the Company's defined benefit pension and other postretirement benefit plans. Pension benefits are provided utilizing either a traditional formula or cash balance formula. The traditional formula provides benefits based upon years of credited service and either final average or career average earnings. The cash balance formula utilizes hypothetical or notional accounts which credit participants with benefits equal to a percentage of eligible pay, as well as earnings credits, determined annually based upon the average annual rate of interest on 30-year U.S. Treasury securities, for each account balance. The Company also provides certain postemployment benefits and certain postretirement medical and life insurance benefits for retired participants. Participants that were hired prior to 2003 (or, in certain cases, rehired during or after 2003) and meet age and service criteria while working for the Company, may become eligible for these other postretirement benefits, at various levels, in accordance with the applicable plans. Virtually all retirees, or their beneficiaries, contribute a portion of the total cost of postretirement medical benefits. Participants hired after 2003 are not eligible for any employer subsidy for postretirement medical benefits. The projected pension benefit obligation ("PBO") is defined as the actuarially calculated present value of vested and non-vested pension benefits accrued based on future salary levels. The accumulated pension benefit obligation ("ABO") is the actuarial present value of vested and non-vested pension benefits accrued based on current salary levels. Obligations, both PBO and ABO, of the defined benefit pension plans are determined using a variety of actuarial assumptions, from which actual results may vary, as described below. The expected postretirement plan benefit obligations represent the actuarial present value of all other postretirement benefits expected to be paid after retirement to employees and their dependents and is used in measuring the periodic postretirement benefit expense. The accumulated postretirement plan benefit obligations ("APBO") represent the actuarial present value of future other postretirement benefits attributed to employee F-32 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) services rendered through a particular date and is the valuation basis upon which liabilities are established. The APBO is determined using a variety of actuarial assumptions, from which actual results may vary, as described below. The Company recognizes the funded status of the PBO for pension plans and the APBO for other postretirement plans for each of its plans in the consolidated balance sheets. The actuarial gains or losses, prior service costs and credits and the remaining net transition asset or obligation that had not yet been included in net periodic benefit costs are charged, net of income tax, to accumulated other comprehensive income (loss). Net periodic benefit cost is determined using management estimates and actuarial assumptions to derive service cost, interest cost, and expected return on plan assets for a particular year. Net periodic benefit cost also includes the applicable amortization of any prior service cost (credit) arising from the increase (decrease) in prior years' benefit costs due to plan amendments or initiation of new plans. These costs are amortized into net periodic benefit cost over the expected service years of employees whose benefits are affected by such plan amendments. Actual experience related to plan assets and/or the benefit obligations may differ from that originally assumed when determining net periodic benefit cost for a particular period, resulting in gains or losses. To the extent such aggregate gains or losses exceed 10 percent of the greater of the benefit obligations or the market-related asset value of the plans, they are amortized into net periodic benefit cost over the expected service years of employees expected to receive benefits under the plans. The obligations and expenses associated with these plans require an extensive use of assumptions such as the discount rate, expected rate of return on plan assets, rate of future compensation increases, healthcare cost trend rates, as well as assumptions regarding participant demographics such as rate and age of retirements, withdrawal rates and mortality. Management, in consultation with its external consulting actuarial firms, determines these assumptions based upon a variety of factors such as historical performance of the plan and its assets, currently available market and industry data and expected benefit payout streams. The assumptions used may differ materially from actual results due to, among other factors, changing market and economic conditions and changes in participant demographics. These differences may have a significant effect on the Company's consolidated financial statements and liquidity. The Company also sponsors defined contribution savings and investment plans ("SIP") for substantially all employees under which a portion of participant contributions is matched. Applicable matching contributions are made each payroll period. Accordingly, the Company recognizes compensation cost for current matching contributions. As all contributions are transferred currently as earned to the SIP trust, no liability for matching contributions is recognized in the consolidated balance sheets. Stock-Based Compensation Stock-based compensation recognized in the Company's consolidated results of operations is allocated from MetLife, Inc. The accounting policies described below represent those that MetLife, Inc. applies in determining such allocated expenses. As more fully described in Note 15, MetLife, Inc. grants certain employees and directors stock-based compensation awards under various plans that are subject to specific vesting conditions. The cost of all stock-based transactions is measured at fair value at grant date and recognized over the period during which a grantee is required to provide goods or services in exchange for the award. Although the terms of MetLife, Inc.'s stock-based plans do not accelerate vesting upon retirement, or the attainment of retirement eligibility, the requisite service period subsequent to attaining such eligibility is considered nonsubstantive. Accordingly, MetLife, Inc. recognizes compensation expense related to stock-based awards over the shorter of the requisite service period or the period to attainment of retirement eligibility. An estimation of future forfeitures of stock- F-33 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) based awards is incorporated into the determination of compensation expense when recognizing expense over the requisite service period. Foreign Currency Assets, liabilities and operations of foreign affiliates and subsidiaries, if any, are recorded based on the functional currency of each entity. The determination of the functional currency is made based on the appropriate economic and management indicators. The local currencies of foreign operations are the functional currencies. Assets and liabilities of foreign affiliates and subsidiaries, if any, are translated from the functional currency to U.S. dollars at the exchange rates in effect at each year-end and income and expense accounts are translated at the average rates of exchange prevailing during the year. The resulting translation adjustments are charged or credited directly to other comprehensive income or loss, net of applicable taxes. Gains and losses from foreign currency transactions, including the effect of re-measurement of monetary assets and liabilities to the appropriate functional currency, are reported as part of net investment gains (losses) in the period in which they occur. Discontinued Operations The results of operations of a component of the Company that either has been disposed of or is classified as held-for-sale are reported in discontinued operations if the operations and cash flows of the component have been or will be eliminated from the ongoing operations of the Company as a result of the disposal transaction and the Company will not have any significant continuing involvement in the operations of the component after the disposal transaction. Litigation Contingencies The Company is a party to a number of legal actions and is involved in a number of regulatory investigations. Given the inherent unpredictability of these matters, it is difficult to estimate the impact on the Company's financial position. Liabilities are established when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Except as otherwise disclosed in Note 13, legal costs are recognized in other expenses as incurred. On a quarterly and annual basis, the Company reviews relevant information with respect to liabilities for litigation, regulatory investigations and litigation-related contingencies to be reflected in the Company's consolidated financial statements. It is possible that an adverse outcome in certain of the Company's litigation and regulatory investigations, or the use of different assumptions in the determination of amounts recorded, could have a material effect upon the Company's consolidated net income or cash flows in particular quarterly or annual periods. Separate Accounts Separate accounts are established in conformity with insurance laws and are generally not chargeable with liabilities that arise from any other business of the Company. Separate account assets are subject to general account claims only to the extent the value of such assets exceeds the separate account liabilities. Assets within the Company's separate accounts primarily include: mutual funds, fixed maturity and equity securities, mortgage loans, derivatives, hedge funds, other limited partnership interests, short-term investments and cash and cash equivalents. The Company reports separately, as assets and liabilities, investments held in separate accounts and liabilities of the separate accounts if (i) such separate accounts are legally recognized; (ii) assets supporting the contract liabilities are legally insulated from the Company's general account liabilities; (iii) investments are directed by the contractholder; and (iv) all investment performance, net of contract fees and assessments, is passed through to the contractholder. The Company reports separate account assets meeting such criteria at their F-34 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) fair value which is based on the estimated fair values of the underlying assets comprising the portfolios of an individual separate account. Investment performance (including investment income, net investment gains (losses) and changes in unrealized gains (losses)) and the corresponding amounts credited to contractholders of such separate accounts are offset within the same line in the consolidated statements of operations. Separate accounts credited with a contractual investment return are combined on a line-by-line basis with the Company's general account assets, liabilities, revenues and expenses and the accounting for these investments is consistent with the methodologies described herein for similar financial instruments held within the general account. The Company's revenues reflect fees charged to the separate accounts, including mortality charges, risk charges, policy administration fees, investment management fees and surrender charges. Such fees are included in universal life and investment-type product policy fees in the consolidated statements of operations. ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS Financial Instruments Effective July 1, 2011, the Company adopted new guidance regarding accounting for troubled debt restructurings. This guidance clarifies whether a creditor has granted a concession and whether a debtor is experiencing financial difficulties for the purpose of determining when a restructuring constitutes a troubled debt restructuring. Additionally, the guidance prohibits creditors from using the borrower's effective rate test to evaluate whether a concession has been granted to the borrower. The adoption did not have a material impact on the Company's consolidated financial statements. See also expanded disclosures in Note 3. Effective January 1, 2011, the Company adopted new guidance regarding accounting for investment funds determined to be VIEs. Under this guidance, an insurance entity would not be required to consolidate a voting-interest investment fund when it holds the majority of the voting interests of the fund through its separate accounts. In addition, an insurance entity would not consider the interests held through separate accounts for the benefit of policyholders in the insurer's evaluation of its economic interest in a VIE, unless the separate account contractholder is a related party. The adoption did not have a material impact on the Company's consolidated financial statements. Effective December 31, 2010, the Company adopted guidance regarding disclosures about the credit quality of financing receivables and valuation allowances for credit losses, including credit quality indicators. Such disclosures must be disaggregated by portfolio segment or class based on how a company develops its valuation allowances for credit losses and how it manages its credit exposure. The Company has provided all material required disclosures in its consolidated financial statements. Effective July 1, 2010, the Company adopted guidance regarding accounting for embedded credit derivatives within structured securities. This guidance clarifies the type of embedded credit derivative that is exempt from embedded derivative bifurcation requirements. Specifically, embedded credit derivatives resulting only from subordination of one financial instrument to another continue to qualify for the scope exception. Embedded credit derivative features other than subordination must be analyzed to determine whether they require bifurcation and separate accounting. As a result of the adoption of this guidance, the Company elected FVO for certain structured securities that were previously accounted for as fixed maturity securities. Upon adoption, the Company reclassified $50 million of securities from fixed maturity securities to trading and other securities. These securities had cumulative unrealized losses of $10 million, net of income tax, which was recognized as a cumulative effect adjustment to decrease retained earnings with a corresponding increase to accumulated other comprehensive income (loss) as of July 1, 2010. F-35 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Effective January 1, 2010, the Company adopted guidance related to financial instrument transfers and consolidation of VIEs. The financial instrument transfer guidance eliminates the concept of a qualified special purpose entity ("QSPE"), eliminates the guaranteed mortgage securitization exception, changes the criteria for achieving sale accounting when transferring a financial asset and changes the initial recognition of retained beneficial interests. The new consolidation guidance changes the definition of the primary beneficiary, as well as the method of determining whether an entity is a primary beneficiary of a VIE from a quantitative model to a qualitative model. Under the new qualitative model, the entity that has both the ability to direct the most significant activities of the VIE and the obligation to absorb losses or receive benefits that could be significant to the VIE is considered to be the primary beneficiary of the VIE. The guidance requires a quarterly reassessment, as well as enhanced disclosures, including the effects of a company's involvement with VIEs on its financial statements. As a result of the adoption of this guidance, the Company consolidated certain former QSPEs that were previously accounted for as equity security collateralized debt obligations. The Company also elected FVO for all of the consolidated assets and liabilities of these entities. Upon consolidation, the Company recorded $278 million of securities classified as trading and other securities and $232 million of long-term debt based on estimated fair values at January 1, 2010 and de-recognized less than $1 million in equity securities. The consolidation also resulted in an increase in retained earnings of $30 million, net of income tax, at January 1, 2010. For the year ended December 31, 2010, the Company recorded $15 million of net investment income on the consolidated assets, $15 million of interest expense in other expenses on the related long-term debt and ($30) million in net investment gains (losses) to remeasure the assets and liabilities at their estimated fair values. In addition, the Company also deconsolidated certain partnerships for which the Company does not have the power to direct activities and for which the Company has concluded it is no longer the primary beneficiary. These deconsolidations did not result in a cumulative effect adjustment to retained earnings and did not have a material impact on the Company's consolidated financial statements. Also effective January 1, 2010, the Company adopted guidance that indefinitely defers the above changes relating to the Company's interests in entities that have all the attributes of an investment company or for which it is industry practice to apply measurement principles for financial reporting that are consistent with those applied by an investment company. As a result of the deferral, the above guidance did not apply to certain real estate joint ventures and other limited partnership interests held by the Company. Effective April 1, 2009, the Company adopted OTTI guidance. This guidance amends the previously used methodology for determining whether an OTTI exists for fixed maturity securities, changes the presentation of OTTI for fixed maturity securities and requires additional disclosures for OTTI on fixed maturity and equity securities in interim and annual financial statements. The Company's net cumulative effect adjustment of adopting the OTTI guidance was an increase of $36 million to retained earnings with a corresponding increase to accumulated other comprehensive loss to reclassify the noncredit loss portion of previously recognized OTTI losses on fixed maturity securities held at April 1, 2009. This cumulative effect adjustment was comprised of an increase in the amortized cost basis of fixed maturity securities of $59 million, net of policyholder related amounts of $4 million and net of deferred income taxes of $19 million, resulting in the net cumulative effect adjustment of $36 million. The increase in the amortized cost basis of fixed maturity securities of $59 million by sector was as follows: $25 million -- ABS, $25 million -- RMBS and $9 million -- U.S. corporate securities. As a result of the adoption of the OTTI guidance, the Company's pre-tax earnings for the year ended December 31, 2009 increased by $566 million, offset by an increase in other comprehensive loss representing OTTI relating to noncredit losses recognized during the year ended December 31, 2009. F-36 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Effective January 1, 2009, the Company adopted guidance on disclosures about derivative instruments and hedging. This guidance requires enhanced qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments and disclosures about credit risk-related contingent features in derivative agreements. The Company has provided all of the material disclosures in its consolidated financial statements. Effective January 1, 2009, the Company adopted prospectively an update on accounting for transfers of financial assets and repurchase financing transactions. This update provides guidance for evaluating whether to account for a transfer of a financial asset and repurchase financing as a single transaction or as two separate transactions. The adoption did not have a material impact on the Company's consolidated financial statements. Business Combinations and Noncontrolling Interests Effective January 1, 2011, the Company adopted new guidance that addresses when a business combination should be assumed to have occurred for the purpose of providing pro forma disclosure. Under the new guidance, if an entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period. The guidance also expands the supplemental pro forma disclosures to include additional narratives. The adoption did not have an impact on the Company's consolidated financial statements. Effective January 1, 2009, the Company adopted revised guidance on business combinations and accounting for noncontrolling interests in the consolidated financial statements. Under this guidance: . All business combinations (whether full, partial or "step" acquisitions) result in all assets and liabilities of an acquired business being recorded at fair value, with limited exceptions. . Acquisition costs are generally expensed as incurred; restructuring costs associated with a business combination are generally expensed as incurred subsequent to the acquisition date. . The fair value of the purchase price, including the issuance of equity securities, is determined on the acquisition date. . Assets acquired and liabilities assumed in a business combination that arise from contingencies are recognized at fair value if the acquisition-date fair value can be reasonably determined. If the fair value is not estimable, an asset or liability is recorded if existence or incurrence at the acquisition date is probable and its amount is reasonably estimable. . Changes in deferred income tax asset valuation allowances and income tax uncertainties after the acquisition date generally affect income tax expense. . Noncontrolling interests (formerly known as "minority interests") are valued at fair value at the acquisition date and are presented as equity rather than liabilities. . Net income (loss) includes amounts attributable to noncontrolling interests. . When control is attained on previously noncontrolling interests, the previously held equity interests are remeasured at fair value and a gain or loss is recognized. . Purchases or sales of equity interests that do not result in a change in control are accounted for as equity transactions. . When control is lost in a partial disposition, realized gains or losses are recorded on equity ownership sold and the remaining ownership interest is remeasured and holding gains or losses are recognized. F-37 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The adoption of this guidance on a prospective basis did not have an impact on the Company's consolidated financial statements. Effective January 1, 2009, the Company adopted prospectively guidance on determination of the useful life of intangible assets. This guidance amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. This change is intended to improve the consistency between the useful life of a recognized intangible asset and the period of expected future cash flows used to measure the fair value of the asset. The Company determines useful lives and provides all of the material disclosures prospectively on intangible assets acquired on or after January 1, 2009 in accordance with this guidance. Fair Value Effective January 1, 2010, the Company adopted guidance that requires disclosures about significant transfers into and/or out of Levels 1 and 2 of the fair value hierarchy and activity in Level 3. In addition, this guidance provides clarification of existing disclosure requirements about level of disaggregation and inputs and valuation techniques. The adoption of this guidance did not have an impact on the Company's consolidated financial statements. The following pronouncements relating to fair value had no material impact on the Company's consolidated financial statements: . Effective January 1, 2009, the Company implemented fair value measurements guidance for certain nonfinancial assets and liabilities that are recorded at fair value on a non-recurring basis. This guidance applies to such items as: (i) nonfinancial assets and nonfinancial liabilities initially measured at estimated fair value in a business combination; (ii) reporting units measured at estimated fair value in the first step of a goodwill impairment test; and (iii) indefinite-lived intangible assets measured at estimated fair value for impairment assessment. . Effective January 1, 2009, the Company adopted prospectively guidance on issuer's accounting for liabilities measured at fair value with a third-party credit enhancement. This guidance states that an issuer of a liability with a third-party credit enhancement should not include the effect of the credit enhancement in the fair value measurement of the liability. In addition, it requires disclosures about the existence of any third-party credit enhancement related to liabilities that are measured at fair value. . Effective April 1, 2009, the Company adopted guidance on: (i) estimating the fair value of an asset or liability if there was a significant decrease in the volume and level of trading activity for these assets or liabilities; and (ii) identifying transactions that are not orderly. The Company has provided all of the material disclosures in its consolidated financial statements. . Effective December 31, 2009, the Company adopted guidance on: (i) measuring the fair value of investments in certain entities that calculate NAV per share; (ii) how investments within its scope would be classified in the fair value hierarchy; and (iii) enhanced disclosure requirements, for both interim and annual periods, about the nature and risks of investments measured at fair value on a recurring or non-recurring basis. . Effective December 31, 2009, the Company adopted guidance on measuring liabilities at fair value. This guidance provides clarification for measuring fair value in circumstances in which a quoted price in an active market for the identical liability is not available. In such circumstances a company is required to measure fair value using either a valuation technique that uses: (i) the quoted price of the identical liability when traded as an asset; or (ii) quoted prices for similar liabilities or similar liabilities F-38 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) when traded as assets; or (iii) another valuation technique that is consistent with the principles of fair value measurement such as an income approach (e.g., present value technique) or a market approach (e.g., "entry" value technique). Defined Benefit and Other Postretirement Plans Effective December 31, 2011, the Company adopted guidance regarding enhanced disclosures for employers' participation in multiemployer pension plans. The revised disclosures require additional qualitative and quantitative information about the employer's involvement in significant multiemployer pension and other postretirement plans. The adoption of this guidance did not have an impact on the Company's consolidated financial statements. Effective December 31, 2009, the Company adopted guidance to enhance the transparency surrounding the types of assets and associated risks in an employer's defined benefit pension or other postretirement benefit plans. This guidance requires an employer to disclose information about the valuation of plan assets similar to that required under other fair value disclosure guidance. The Company provided all of the material disclosures in its consolidated financial statements. Other Pronouncements Effective January 1, 2011, the Company adopted new guidance regarding goodwill impairment testing. This guidance modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity would be required to perform Step 2 of the test if qualitative factors indicate that it is more likely than not that goodwill impairment exists. The adoption did not have an impact on the Company's consolidated financial statements. Effective April 1, 2009, the Company adopted prospectively guidance which establishes general standards for accounting and disclosures of events that occur subsequent to the balance sheet date but before financial statements are issued or available to be issued. The Company has provided all of the material disclosures in its consolidated financial statements. FUTURE ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS In December 2011, the Financial Accounting Standards Board ("FASB") issued new guidance regarding comprehensive income (Accounting Standards Update ("ASU") 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05). The amendments in ASU 2011-12 are effective for fiscal years and interim periods within those years beginning after December 15, 2011. Consistent with the effective date of the amendments in ASU 2011-05 discussed below, ASU 2011-12 defers the effective date pertaining to reclassification adjustments out of accumulated other comprehensive income in ASU 2011-05. The amendments are being made to allow the FASB time to re-deliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented. All other requirements in ASU 2011-05 are not affected by ASU 2011-12, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. The Company is currently evaluating the impact of this guidance on its consolidated financial statements. F-39 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In December 2011, the FASB issued new guidance regarding balance sheet offsetting disclosures (ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities), effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The guidance should be applied retrospectively for all comparative periods presented. The amendments in ASU 2011-11 require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effects of those arrangements on its financial position. Entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The objective of ASU 2011-11 is to facilitate comparison between those entities that prepare their financial statements on the basis of GAAP and those entities that prepare their financial statements on the basis of International Financial Reporting Standards ("IFRS"). The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures. In December 2011, the FASB issued new guidance regarding derecognition of in substance real estate (ASU 2011-10 Property, Plant and Equipment (Topic 360): Derecognition of in Substance Real Estate -- a Scope Clarification (a consensus of the FASB Emerging Issues Task Force), effective for fiscal years, and interim periods within those fiscal years, beginning on or after June 15, 2012. The amendments should be applied prospectively to deconsolidation events occurring after the effective date. Under the amendments in ASU 2011-10, when a parent ceases to have a controlling financial interest in a subsidiary that is in substance real estate as a result of a default on the subsidiary's nonrecourse debt, the reporting entity should apply the guidance in Subtopic 360-20 to determine whether it should derecognize the in substance real estate. Generally, a reporting entity would not satisfy the requirements to derecognize in substance real estate before the legal transfer of the real estate to the lender and the extinguishment of the related nonrecourse indebtedness. The Company is currently evaluating the impact of this guidance on its consolidated financial statements. In September 2011, the FASB issued new guidance on goodwill impairment testing (ASU 2011-08, Intangibles -- Goodwill and Other (Topic 350): Testing Goodwill for Impairment), effective for calendar years beginning after December 15, 2011. Early adoption is permitted. The objective of this standard is to simplify how an entity tests goodwill for impairment. The amendments in this standard will allow an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value as a basis for determining whether it needs to perform the quantitative two-step goodwill impairment test. Only if an entity determines, based on qualitative assessment, that it is more likely than not that a reporting unit's fair value is less than its carrying value will it be required to calculate the fair value of the reporting unit. The Company does not expect the adoption of this new guidance to have a material impact on its consolidated financial statements. In July 2011, the FASB issued new guidance on other expenses (ASU 2011-06, Other Expenses (Topic 720): Fees Paid to the Federal Government by Health Insurers), effective for calendar years beginning after December 31, 2013. The objective of this standard is to address how health insurers should recognize and classify in their income statements fees mandated by the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act. The amendments in this standard specify that the liability for the fee should be estimated and recorded in full once the entity provides qualifying health insurance in the applicable calendar year in which the fee is payable with a corresponding deferred cost that is amortized to expense using the straight-line method of allocation unless another method better allocates the fee over the calendar year that it is payable. The Company is currently evaluating the impact of this guidance on its consolidated financial statements. In June 2011, the FASB issued new guidance regarding comprehensive income (ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income), effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The guidance should be applied F-40 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) retrospectively and early adoption is permitted. The new guidance provides companies with the option to present the total of comprehensive income, components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The objective of the standard is to increase the prominence of items reported in other comprehensive income and to facilitate convergence of GAAP and IFRS. The standard eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholder's equity. The amendments in ASU 2011-05 do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified in net income. The Company intends to adopt the two-statement approach in the first quarter of 2012. In May 2011, the FASB issued new guidance regarding fair value measurements (ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs), effective for the first interim or annual period beginning after December 15, 2011. The guidance should be applied prospectively. The amendments in this ASU are intended to establish common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP and IFRS. Some of the amendments clarify the FASB's intent on the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The Company does not expect the adoption of this new guidance to have a material impact on its consolidated financial statements. In April 2011, the FASB issued new guidance regarding effective control in repurchase agreements (ASU 2011-03, Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements), effective for the first interim or annual period beginning on or after December 15, 2011. The guidance should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. The amendments in this ASU remove from the assessment of effective control the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets. The Company does not expect the adoption of this new guidance to have a material impact on its consolidated financial statements. In October 2010, the FASB issued new guidance regarding accounting for deferred acquisition costs (ASU 2010-26, Financial Services -- Insurance (Topic 944): Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts) ("ASU 2010-26"), effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. ASU 2010-26 specifies that only costs related directly to successful acquisition of new or renewal contracts can be capitalized as DAC; all other acquisition-related costs must be expensed as incurred. As a result, sales manager compensation and administrative costs currently capitalized by the Company will no longer be deferred. The Company will adopt ASU 2010-26 in the first quarter of 2012 and will apply it retrospectively to all prior periods presented in its consolidated financial statements for all insurance contracts. The Company estimates that DAC will be reduced by approximately $1.4 billion to $1.6 billion and total equity will be reduced by approximately $900 million to $1.0 billion, net of income tax, as of the date of adoption. Additionally, the Company estimates that net income (loss) will be reduced by approximately $41 million to $46 million in 2011, $20 million to $22 million in 2010, and $39 million to $44 million in 2009, as of the date of adoption. F-41 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2. ACQUISITIONS AND DISPOSITIONS 2009 DISPOSITION THROUGH ASSUMPTION REINSURANCE On October 30, 2009, the Company completed the disposal, through assumption reinsurance, of substantially all of the insurance business of MetLife Canada, a wholly-owned indirect subsidiary, to a third-party. Pursuant to the assumption reinsurance agreement, the consideration paid by the Company was $259 million, comprised of cash of $14 million and fixed maturity securities, mortgage loans and other assets totaling $245 million. At the date of the assumption reinsurance agreement, the carrying value of insurance liabilities transferred was $267 million, resulting in a gain of $5 million, net of income tax. The gain was recognized in net investment gains (losses). 3. INVESTMENTS FIXED MATURITY AND EQUITY SECURITIES AVAILABLE-FOR-SALE The following tables present the cost or amortized cost, gross unrealized gains and losses, estimated fair value of fixed maturity and equity securities and the percentage that each sector represents by the respective total holdings for the periods shown. The unrealized loss amounts presented below include the noncredit loss component of OTTI losses:
DECEMBER 31, 2011 -------------------------------------------------- GROSS UNREALIZED COST OR ------------------------ ESTIMATED AMORTIZED TEMPORARY OTTI FAIR % OF COST GAINS LOSSES LOSSES VALUE TOTAL --------- ------- --------- ------ --------- ----- (IN MILLIONS) FIXED MATURITY SECURITIES: U.S. corporate securities.................. $ 56,298 $ 6,113 $ 715 $ -- $ 61,696 36.7% Foreign corporate securities............... 27,298 2,400 551 1 29,146 17.3 U.S. Treasury and agency securities........ 21,572 4,272 -- -- 25,844 15.4 RMBS....................................... 25,445 1,564 766 524 25,719 15.3 CMBS....................................... 8,750 473 114 4 9,105 5.4 ABS (1).................................... 6,589 156 166 (7) 6,586 3.9 State and political subdivision securities. 5,387 842 47 -- 6,182 3.7 Foreign government securities.............. 3,037 915 52 -- 3,900 2.3 --------- ------- --------- ------ --------- ----- Total fixed maturity securities........ $154,376 $16,735 $2,411 $522 $168,178 100.0% ========= ======= ========= ====== ========= ===== EQUITY SECURITIES: Common stock............................... $ 830 $ 32 $ 6 $ -- $ 856 67.0% Non-redeemable preferred stock............. 549 11 138 -- 422 33.0 --------- ------- --------- ------ --------- ----- Total equity securities................ $ 1,379 $ 43 $ 144 $ -- $ 1,278 100.0% ========= ======= ========= ====== ========= =====
F-42 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2010 ------------------------------------------------- GROSS UNREALIZED COST OR ----------------------- ESTIMATED AMORTIZED TEMPORARY OTTI FAIR % OF COST GAINS LOSSES LOSSES VALUE TOTAL --------- ------ --------- ------ --------- ----- (IN MILLIONS) FIXED MATURITY SECURITIES: U.S. corporate securities.................. $ 50,764 $3,322 $ 959 $ -- $ 53,127 33.3% Foreign corporate securities............... 28,841 2,218 492 -- 30,567 19.2 U.S. Treasury and agency securities........ 20,154 1,190 367 -- 20,977 13.1 RMBS....................................... 30,540 1,257 747 371 30,679 19.2 CMBS....................................... 9,401 484 174 10 9,701 6.1 ABS........................................ 6,522 146 187 38 6,443 4.0 State and political subdivision securities. 4,693 86 195 -- 4,584 2.9 Foreign government securities.............. 2,793 682 18 -- 3,457 2.2 --------- ------ --------- ------ --------- ----- Total fixed maturity securities........ $153,708 $9,385 $3,139 $419 $159,535 100.0% ========= ====== ========= ====== ========= ===== EQUITY SECURITIES: Common stock............................... $ 937 $ 42 $ 7 $ -- $ 972 53.4% Non-redeemable preferred stock............. 961 52 164 -- 849 46.6 --------- ------ --------- ------ --------- ----- Total equity securities................ $ 1,898 $ 94 $ 171 $ -- $ 1,821 100.0% ========= ====== ========= ====== ========= =====
---------- (1)OTTI losses as presented above represent the noncredit portion of OTTI losses that is included in accumulated other comprehensive income (loss). OTTI losses include both the initial recognition of noncredit losses, and the effects of subsequent increases and decreases in estimated fair value for those fixed maturity securities that were previously noncredit loss impaired. The noncredit loss component of OTTI losses for ABS was in an unrealized gain (loss) position of $7 million at December 31, 2011 due to increases in estimated fair value subsequent to initial recognition of noncredit losses on such securities. See also "-- Net Unrealized Investment Gains (Losses)." Within fixed maturity securities, a reclassification from the ABS sector to the RMBS sector has been made to the prior year amounts to conform to the current year presentation for securities backed by sub-prime residential mortgage loans to be consistent with market convention relating to the risks inherent in such securities and the Company's management of its investments within these asset sectors. The Company held non-income producing fixed maturity securities with an estimated fair value of $7 million and $55 million with unrealized gains (losses) of ($3) million and ($13) million at December 31, 2011 and 2010, respectively. The Company held foreign currency derivatives with notional amounts of $8.5 billion and $8.3 billion to hedge the exchange rate risk associated with foreign denominated fixed maturity securities at December 31, 2011 and 2010, respectively. Concentrations of Credit Risk (Fixed Maturity Securities) -- Summary. The following section contains a summary of the concentrations of credit risk related to fixed maturity securities holdings. F-43 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company was not exposed to any concentrations of credit risk of any single issuer greater than 10% of the Company's equity, other than the government securities summarized in the table below. Concentrations of Credit Risk (Government and Agency Securities). The following section contains a summary of the concentrations of credit risk related to government and agency fixed maturity and fixed-income securities holdings, which were greater than 10% of the Company's equity at:
DECEMBER 31, ------------------ 2011 2010 ------- ------- CARRYING VALUE (1) ------------------ (IN MILLIONS) U.S. Treasury and agency fixed maturity securities............ $25,844 $20,977 U.S. Treasury and agency fixed-income securities included in: Short-term investments..................................... $ 5,133 $ 1,378 Cash equivalents........................................... $ 910 $ 2,497
---------- (1)Represents estimated fair value for fixed maturity securities, and for short-term investments and cash equivalents, estimated fair value or amortized cost, which approximates estimated fair value. Concentrations of Credit Risk (Equity Securities). The Company was not exposed to any concentrations of credit risk in its equity securities holdings of any single issuer greater than 10% of the Company's equity or 1% of total investments at December 31, 2011 and 2010. Maturities of Fixed Maturity Securities. The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date (excluding scheduled sinking funds), were as follows at:
DECEMBER 31, --------------------------------------- 2011 2010 ------------------- ------------------- ESTIMATED ESTIMATED AMORTIZED FAIR AMORTIZED FAIR COST VALUE COST VALUE --------- --------- --------- --------- (IN MILLIONS) Due in one year or less................ $ 8,089 $ 8,159 $ 3,974 $ 4,052 Due after one year through five years.. 26,375 27,486 25,910 27,017 Due after five years through ten years. 34,660 38,517 31,060 33,543 Due after ten years.................... 44,468 52,606 46,301 48,100 --------- --------- --------- --------- Subtotal.............................. 113,592 126,768 107,245 112,712 RMBS, CMBS and ABS..................... 40,784 41,410 46,463 46,823 --------- --------- --------- --------- Total fixed maturity securities..... $154,376 $168,178 $153,708 $159,535 ========= ========= ========= =========
Actual maturities may differ from contractual maturities due to the exercise of call or prepayment options. Fixed maturity securities not due at a single maturity date have been included in the above table in the year of final contractual maturity. RMBS, CMBS and ABS are shown separately in the table, as they are not due at a single maturity. F-44 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) EVALUATING AVAILABLE-FOR-SALE SECURITIES FOR OTHER-THAN-TEMPORARY IMPAIRMENT As described more fully in Note 1, the Company performs a regular evaluation, on a security-by-security basis, of its available-for-sale securities holdings, including fixed maturity securities, equity securities and perpetual hybrid securities, in accordance with its impairment policy in order to evaluate whether such investments are other-than-temporarily impaired. NET UNREALIZED INVESTMENT GAINS (LOSSES) The components of net unrealized investment gains (losses), included in accumulated other comprehensive income (loss), were as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2011 2010 2009 -------- -------- ------ (IN MILLIONS) Fixed maturity securities.................................................. $ 14,266 $ 6,189 $(216) Fixed maturity securities with noncredit OTTI losses in accumulated other comprehensive income (loss).............................................. (522) (419) (574) -------- -------- ------ Total fixed maturity securities........................................... 13,744 5,770 (790) Equity securities.......................................................... (98) (66) (75) Derivatives................................................................ 1,293 90 (156) Short-term investments..................................................... (10) (13) (23) Other...................................................................... 45 48 52 -------- -------- ------ Subtotal................................................................ 14,974 5,829 (992) -------- -------- ------ Amounts allocated from:.................................................... Insurance liability loss recognition...................................... (3,495) (426) -- DAC and VOBA related to noncredit OTTI losses recognized in accumulated other comprehensive income (loss)....................................... 33 27 49 DAC and VOBA.............................................................. (1,323) (999) 6 Policyholder dividend obligation.......................................... (2,919) (876) -- -------- -------- ------ Subtotal................................................................ (7,704) (2,274) 55 Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in accumulated other comprehensive income (loss).............. 172 138 184 Deferred income tax benefit (expense)...................................... (2,717) (1,382) 142 -------- -------- ------ Net unrealized investment gains (losses)................................... 4,725 2,311 (611) Net unrealized investment gains (losses) attributable to noncontrolling interests................................................................ (1) (1) 5 -------- -------- ------ Net unrealized investment gains (losses) attributable to Metropolitan Life Insurance Company........................................................ $ 4,724 $ 2,310 $(606) ======== ======== ======
F-45 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The changes in fixed maturity securities with noncredit OTTI losses included in accumulated other comprehensive income (loss) were as follows:
DECEMBER 31, ------------- 2011 2010 ------ ------ (IN MILLIONS) Balance, beginning of period...................... $(419) $(574) Noncredit OTTI losses recognized (1).............. (17) (150) Securities sold with previous noncredit OTTI loss. 85 87 Subsequent changes in estimated fair value........ (171) 218 ------ ------ Balance, end of period............................ $(522) $(419) ====== ======
---------- (1)Noncredit OTTI losses recognized, net of DAC, were ($16) million and ($148) million for the years ended December 31, 2011 and 2010, respectively. The changes in net unrealized investment gains (losses) were as follows:
YEARS ENDED DECEMBER 31, -------------------------- 2011 2010 2009 -------- -------- -------- (IN MILLIONS) Balance, beginning of period.................................................... $ 2,310 $ (606) $(7,701) Cumulative effect of change in accounting principles, net of income tax......... -- 10 (36) Fixed maturity securities on which noncredit OTTI losses have been recognized.................................................................... (103) 155 (515) Unrealized investment gains (losses) during the year............................ 9,248 6,650 13,344 Unrealized investment gains (losses) relating to: Insurance liability gain (loss) recognition.................................... (3,069) (426) 1 DAC and VOBA related to noncredit OTTI losses recognized in accumulated other comprehensive income (loss)............................................ 6 (22) 45 DAC and VOBA................................................................... (324) (1,005) (1,994) Policyholder dividend obligation............................................... (2,043) (876) -- Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in accumulated other comprehensive income (loss).................. 34 (46) 165 Deferred income tax benefit (expense).......................................... (1,335) (1,518) (3,920) -------- -------- -------- Net unrealized investment gains (losses)........................................ 4,724 2,316 (611) Net unrealized investment gains (losses) attributable to noncontrolling interests..................................................................... -- (6) 5 -------- -------- -------- Balance, end of period.......................................................... $ 4,724 $ 2,310 $ (606) ======== ======== ======== Change in net unrealized investment gains (losses).............................. $ 2,414 $ 2,922 $ 7,090 Change in net unrealized investment gains (losses) attributable to noncontrolling interests...................................................... -- (6) 5 -------- -------- -------- Change in net unrealized investment gains (losses) attributable to Metropolitan Life Insurance Company........................................................ $ 2,414 $ 2,916 $ 7,095 ======== ======== ========
F-46 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONTINUOUS GROSS UNREALIZED LOSSES AND OTTI LOSSES FOR FIXED MATURITY AND EQUITY SECURITIES AVAILABLE-FOR-SALE BY SECTOR The following tables present the estimated fair value and gross unrealized losses of fixed maturity and equity securities in an unrealized loss position, aggregated by sector and by length of time that the securities have been in a continuous unrealized loss position. The unrealized loss amounts presented below include the noncredit component of OTTI loss. Fixed maturity securities on which a noncredit OTTI loss has been recognized in accumulated other comprehensive income (loss) are categorized by length of time as being "less than 12 months" or "equal to or greater than 12 months" in a continuous unrealized loss position based on the point in time that the estimated fair value initially declined to below the amortized cost basis and not the period of time since the unrealized loss was deemed a noncredit OTTI loss.
DECEMBER 31, 2011 -------------------------------------------------------------- EQUAL TO OR GREATER LESS THAN 12 MONTHS THAN 12 MONTHS TOTAL -------------------- -------------------- -------------------- ESTIMATED GROSS ESTIMATED GROSS ESTIMATED GROSS FAIR UNREALIZED FAIR UNREALIZED FAIR UNREALIZED VALUE LOSSES VALUE LOSSES VALUE LOSSES --------- ---------- --------- ---------- --------- ---------- (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) FIXED MATURITY SECURITIES: U.S. corporate securities................... $ 5,669 $ 204 $3,170 $ 511 $ 8,839 $ 715 Foreign corporate securities................ 4,560 334 1,258 218 5,818 552 U.S. Treasury and agency securities......... 2,189 -- -- -- 2,189 -- RMBS........................................ 2,647 407 3,241 883 5,888 1,290 CMBS........................................ 709 66 365 52 1,074 118 ABS......................................... 2,557 45 608 114 3,165 159 State and political subdivision securities.. 31 -- 169 47 200 47 Foreign government securities............... 499 44 88 8 587 52 --------- ---------- --------- ---------- --------- ---------- Total fixed maturity securities............ $18,861 $1,100 $8,899 $1,833 $27,760 $2,933 ========= ========== ========= ========== ========= ========== EQUITY SECURITIES: Common stock................................ $ 4 $ 6 $ -- $ -- $ 4 $ 6 Non-redeemable preferred stock.............. 126 14 238 124 364 138 --------- ---------- --------- ---------- --------- ---------- Total equity securities.................... $ 130 $ 20 $ 238 $ 124 $ 368 $ 144 ========= ========== ========= ========== ========= ========== Total number of securities in an unrealized loss position............................. 1,412 819 ========= =========
F-47 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2010 -------------------------------------------------------------- EQUAL TO OR GREATER LESS THAN 12 MONTHS THAN 12 MONTHS TOTAL -------------------- -------------------- -------------------- ESTIMATED GROSS ESTIMATED GROSS ESTIMATED GROSS FAIR UNREALIZED FAIR UNREALIZED FAIR UNREALIZED VALUE LOSSES VALUE LOSSES VALUE LOSSES --------- ---------- --------- ---------- --------- ---------- (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) FIXED MATURITY SECURITIES: U.S. corporate securities................... $ 5,997 $197 $ 5,234 $ 762 $11,231 $ 959 Foreign corporate securities................ 3,692 125 2,662 367 6,354 492 U.S. Treasury and agency securities......... 8,553 367 -- -- 8,553 367 RMBS........................................ 3,983 122 5,128 996 9,111 1,118 CMBS........................................ 236 2 965 182 1,201 184 ABS......................................... 981 16 1,219 209 2,200 225 State and political subdivision securities.. 2,412 117 234 78 2,646 195 Foreign government securities............... 231 7 94 11 325 18 --------- ---------- --------- ---------- --------- ---------- Total fixed maturity securities............ $26,085 $953 $15,536 $2,605 $41,621 $3,558 --------- ---------- --------- ---------- --------- ---------- EQUITY SECURITIES: Common stock................................ $ 29 $ 7 $ -- $ -- $ 29 $ 7 Non-redeemable preferred stock.............. 52 3 558 161 610 164 --------- ---------- --------- ---------- --------- ---------- Total equity securities.................... $ 81 $ 10 $ 558 $ 161 $ 639 $ 171 ========= ========== ========= ========== ========= ========== Total number of securities in an unrealized loss position............................. 1,405 1,151 ========= =========
F-48 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) AGING OF GROSS UNREALIZED LOSSES AND OTTI LOSSES FOR FIXED MATURITY AND EQUITY SECURITIES AVAILABLE-FOR-SALE The following tables present the cost or amortized cost, gross unrealized losses, including the portion of OTTI loss on fixed maturity securities recognized in accumulated other comprehensive income (loss), gross unrealized losses as a percentage of cost or amortized cost and number of securities for fixed maturity and equity securities where the estimated fair value had declined and remained below cost or amortized cost by less than 20%, or 20% or more at:
DECEMBER 31, 2011 ------------------------------------------------------------------ COST OR AMORTIZED COST GROSS UNREALIZED LOSSES NUMBER OF SECURITIES ---------------------- --------------------- -------------------- LESS THAN 20% OR LESS THAN 20% OR LESS THAN 20% OR 20% MORE 20% MORE 20% MORE --------- ------ --------- ------ --------- ------ (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) FIXED MATURITY SECURITIES: Less than six months........................ $15,723 $3,112 $ 509 $ 881 945 180 Six months or greater but less than nine months.................................... 2,523 393 178 123 221 28 Nine months or greater but less than twelve months.................................... 445 196 21 60 52 8 Twelve months or greater.................... 6,859 1,442 597 564 498 128 --------- ------ --------- ------ Total...................................... $25,550 $5,143 $1,305 $1,628 ========= ====== ========= ====== Percentage of amortized cost................ 5% 32% ========= ====== EQUITY SECURITIES: Less than six months........................ $ 127 $ 133 $ 10 $ 41 13 18 Six months or greater but less than nine months.................................... -- -- -- -- 1 1 Nine months or greater but less than twelve months.................................... -- -- -- -- -- -- Twelve months or greater.................... 46 206 4 89 3 11 --------- ------ --------- ------ Total...................................... $ 173 $ 339 $ 14 $ 130 ========= ====== ========= ====== Percentage of cost.......................... 8% 38% ========= ======
F-49 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2010 ------------------------------------------------------------------ COST OR AMORTIZED COST GROSS UNREALIZED LOSSES NUMBER OF SECURITIES ---------------------- --------------------- -------------------- LESS THAN 20% OR LESS THAN 20% OR LESS THAN 20% OR 20% MORE 20% MORE 20% MORE --------- ------ --------- ------ --------- ------ (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) FIXED MATURITY SECURITIES: Less than six months............................ $25,867 $ 811 $ 843 $ 216 1,287 65 Six months or greater but less than nine months. 696 275 19 75 51 24 Nine months or greater but less than twelve months........................................ 271 35 22 8 29 6 Twelve months or greater........................ 13,525 3,699 1,158 1,217 823 226 --------- ------ --------- ------ Total.......................................... $40,359 $4,820 $2,042 $1,516 ========= ====== ========= ====== Percentage of amortized cost.................... 5% 31% ========= ====== EQUITY SECURITIES: Less than six months............................ $ 52 $ 59 $ 2 $ 13 23 11 Six months or greater but less than nine months. 29 28 5 6 3 2 Nine months or greater but less than twelve months........................................ -- 40 -- 14 2 2 Twelve months or greater........................ 309 293 32 99 22 13 --------- ------ --------- ------ Total.......................................... $ 390 $ 420 $ 39 $ 132 ========= ====== ========= ====== Percentage of cost.............................. 10% 31% ========= ======
Equity securities with gross unrealized losses of 20% or more for twelve months or greater decreased from $99 million at December 31, 2010 to $89 million at December 31, 2011. As shown in the section "-- Evaluating Temporarily Impaired Available-for-Sale Securities" below, all of the equity securities with gross unrealized losses of 20% or more for twelve months or greater at December 31, 2011 were financial services industry investment grade non-redeemable preferred stock, of which 74% were rated A or better. F-50 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONCENTRATION OF GROSS UNREALIZED LOSSES AND OTTI LOSSES FOR FIXED MATURITY AND EQUITY SECURITIES AVAILABLE-FOR-SALE The gross unrealized losses related to fixed maturity and equity securities, including the portion of OTTI losses on fixed maturity securities recognized in accumulated other comprehensive income (loss) were $3.1 billion and $3.7 billion at December 31, 2011 and 2010, respectively. The concentration, calculated as a percentage of gross unrealized losses (including OTTI losses), by sector and industry was as follows at:
DECEMBER 31, ---------- 2011 2010 ---- ---- SECTOR: RMBS....................................... 42% 30% U.S. corporate securities.................. 23 26 Foreign corporate securities............... 18 13 ABS........................................ 5 6 CMBS....................................... 4 5 Foreign government securities.............. 2 -- State and political subdivision securities. 1 5 U.S. Treasury and agency securities........ -- 10 Other...................................... 5 5 ---- ---- Total..................................... 100% 100% ==== ==== INDUSTRY: Mortgage-backed............................ 46% 35% Finance.................................... 23 21 Consumer................................... 7 4 Asset-backed............................... 5 6 Utility.................................... 5 6 Communications............................. 4 2 Industrial................................. 3 2 Foreign government securities.............. 2 -- State and political subdivision securities. 1 5 U.S. Treasury and agency securities........ -- 10 Other...................................... 4 9 ---- ---- Total..................................... 100% 100% ==== ====
F-51 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) EVALUATING TEMPORARILY IMPAIRED AVAILABLE-FOR-SALE SECURITIES The following table presents fixed maturity and equity securities, each with gross unrealized losses of greater than $10 million, the number of securities, total gross unrealized losses and percentage of total gross unrealized losses at:
DECEMBER 31, ------------------------------------------------------ 2011 2010 -------------------------- -------------------------- FIXED MATURITY EQUITY FIXED MATURITY EQUITY SECURITIES SECURITIES SECURITIES SECURITIES -------------- ---------- -------------- ---------- (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) Number of securities........................ 54 5 67 5 Total gross unrealized losses............... $938 $69 $1,179 $75 Percentage of total gross unrealized losses. 32% 48% 33% 44%
Fixed maturity and equity securities, each with gross unrealized losses greater than $10 million, decreased $247 million during the year ended December 31, 2011. The decline in, or improvement in, gross unrealized losses for the year ended December 31, 2011, was primarily attributable to a decrease in interest rates, partially offset by widening credit spreads. These securities were included in the Company's OTTI review process. As of December 31, 2011, $747 million of unrealized losses were from fixed maturity securities with an unrealized loss position of 20% or more of amortized cost for six months or greater. Of the $747 million, $314 million, or 42%, are related to unrealized losses on investment grade securities. Unrealized losses on investment grade securities are principally related to widening credit spreads or rising interest rates since purchase. Of the $747 million, $433 million, or 58%, are related to unrealized losses on below investment grade securities. Unrealized losses on below investment grade securities are principally related to non-agency RMBS (primarily alternative residential mortgage loans and sub-prime residential mortgage loans), U.S and foreign corporate securities (primarily utility, industrial and financial services industry securities) and ABS (primarily collateralized debt obligations) and were the result of significantly wider credit spreads resulting from higher risk premiums since purchase, largely due to economic and market uncertainties including concerns over the financial services industry sector, unemployment levels and valuations of residential real estate supporting non-agency RMBS. As explained further in Note 1, management evaluates these U.S. and foreign corporate securities based on factors such as expected cash flows and the financial condition and near-term and long-term prospects of the issuer; and evaluates non-agency RMBS and ABS based on actual and projected cash flows after considering the quality of underlying collateral, expected prepayment speeds, current and forecasted loss severity, consideration of the payment terms of the underlying assets backing a particular security, and the payment priority within the tranche structure of the security. See "-- Aging of Gross Unrealized Losses and OTTI Losses for Fixed Maturity and Equity Securities Available-for-Sale" for a discussion of equity securities with an unrealized loss position of 20% or more of cost for 12 months or greater. In the Company's impairment review process, the duration and severity of an unrealized loss position for equity securities are given greater weight and consideration than for fixed maturity securities. An extended and severe unrealized loss position on a fixed maturity security may not have any impact on the ability of the issuer to service all scheduled interest and principal payments and the Company's evaluation of recoverability of all contractual cash flows or the ability to recover an amount at least equal to its amortized cost based on the present value of the expected future cash flows to be collected. In contrast, for an equity security, greater weight and consideration are given by the Company to a decline in market value and the likelihood such market value decline will recover. F-52 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents certain information about the Company's equity securities available-for-sale with gross unrealized losses of 20% or more at December 31, 2011:
NON-REDEEMABLE PREFERRED STOCK ---------------------------------------------------------------------------------- ALL TYPES OF INVESTMENT GRADE ALL EQUITY NON-REDEEMABLE ----------------------------------------------------------- SECURITIES PREFERRED STOCK ALL INDUSTRIES FINANCIAL SERVICES INDUSTRY ---------- --------------------- -------------------------- ------------------------------- GROSS GROSS % OF ALL GROSS % OF ALL GROSS % A UNREALIZED UNREALIZED EQUITY UNREALIZED NON-REDEEMABLE UNREALIZED % OF ALL RATED OR LOSSES LOSSES SECURITIES LOSSES PREFERRED STOCK LOSSES INDUSTRIES BETTER ---------- ---------- ---------- ---------- --------------- ---------- ---------- -------- (IN MILLIONS) Less than six months............. $ 41 $ 35 85% $ 19 54% $ 19 100% 5% Six months or greater but less than twelve months.............. -- -- --% -- --% -- --% --% Twelve months or greater......... 89 89 100% 89 100% 89 100% 74% ---------- ---------- ---------- ---------- All equity securities with gross unrealized losses of 20% or more............................ $130 $124 95% $108 87% $108 100% 62% ========== ========== ========== ==========
In connection with the equity securities impairment review process, the Company evaluated its holdings in non-redeemable preferred stock, particularly those in the financial services industry. The Company considered several factors including whether there has been any deterioration in credit of the issuer and the likelihood of recovery in value of non-redeemable preferred stock with a severe or an extended unrealized loss. The Company also considered whether any issuers of non-redeemable preferred stock with an unrealized loss held by the Company, regardless of credit rating, have deferred any dividend payments. No such dividend payments had been deferred. With respect to common stock holdings, the Company considered the duration and severity of the unrealized losses for securities in an unrealized loss position of 20% or more; and the duration of unrealized losses for securities in an unrealized loss position of less than 20% in an extended unrealized loss position (i.e., 12 months or greater). Based on the Company's current evaluation of available-for-sale securities in an unrealized loss position in accordance with its impairment policy, and the Company's current intentions and assessments (as applicable to the type of security) about holding, selling and any requirements to sell these securities, the Company has concluded that these securities are not other-than-temporarily-impaired. Future OTTIs will depend primarily on economic fundamentals, issuer performance (including changes in the present value of future cash flows expected to be collected), changes in credit ratings, changes in collateral valuation, changes in interest rates and changes in credit spreads. If economic fundamentals or any of the above factors deteriorate, additional OTTIs may be incurred in upcoming quarters. F-53 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) TRADING AND OTHER SECURITIES The table below presents certain information about the Company's trading and other securities.
DECEMBER 31, ------------ 2011 2010 ------ ----- (IN MILLIONS) Actively Traded Securities..................................... $ 473 $ 463 FVO general account securities................................. 107 71 FVO securities held by CSEs.................................... 117 201 ------ ----- Total trading and other securities -- at estimated fair value. $ 697 $ 735 ====== ===== Actively Traded Securities -- at estimated fair value.......... $ 473 $ 463 Short sale agreement liabilities -- at estimated fair value.... (127) (46) ------ ----- Net long/short position -- at estimated fair value............ $ 346 $ 417 ====== ===== Investments pledged to secure short sale agreement liabilities. $ 558 $ 465 ====== =====
See "-- Variable Interest Entities" for discussion of CSEs included in the table above. See "-- Net Investment Income" and "-- Net Investment Gains (Losses)" for the net investment income recognized on trading and other securities and the related changes in estimated fair value subsequent to purchase included in net investment income and net investment gains (losses) for securities still held as of the end of the respective years, as applicable. F-54 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NET INVESTMENT GAINS (LOSSES) The components of net investment gains (losses) were as follows:
YEARS ENDED DECEMBER 31, ---------------------- 2011 2010 2009 ------ ------ -------- (IN MILLIONS) Total gains (losses) on fixed maturity securities: Total OTTI losses recognized.................................................. $(244) $(510) $(1,521) Less: Noncredit portion of OTTI losses transferred to and recognized in other comprehensive income (loss)................................................. 17 $ 150 $ 623 ------ ------ -------- Net OTTI losses on fixed maturity securities recognized in earnings........... (227) (360) (898) Fixed maturity securities -- net gains (losses) on sales and disposals........ 107 129 (7) ------ ------ -------- Total gains (losses) on fixed maturity securities............................ (120) (231) (905) ------ ------ -------- Other net investment gains (losses): Equity securities............................................................ 3 70 (255) Trading and other securities -- FVO general account securities -- changes in estimated fair value....................................................... (2) -- -- Mortgage loans............................................................... 133 59 (373) Real estate and real estate joint ventures................................... 133 (33) (100) Other limited partnership interests.......................................... 11 (5) (284) Other investment portfolio gains (losses).................................... (4) 36 (38) ------ ------ -------- Subtotal -- investment portfolio gains (losses)............................ 154 (104) (1,955) ------ ------ -------- FVO CSEs -- changes in estimated fair value: Securities................................................................... -- (78) -- Long-term debt -- related to securities...................................... (8) 48 -- Other gains (losses).......................................................... (14) (36) 288 ------ ------ -------- Subtotal FVO CSEs and other gains (losses)................................. (22) (66) 288 ------ ------ -------- Total net investment gains (losses).................................... $ 132 $(170) $(1,667) ====== ====== ========
See "-- Variable Interest Entities" for discussion of CSEs included in the table above. See "-- Related Party Investment Transactions" for discussion of affiliated net investment gains (losses) related to transfers of invested assets to affiliates. Gains (losses) from foreign currency transactions included within net investment gains (losses) were $21 million, $18 million and $317 million for the years ended December 31, 2011, 2010 and 2009, respectively. F-55 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Proceeds from sales or disposals of fixed maturity and equity securities and the components of fixed maturity and equity securities net investment gains (losses) were as shown in the table below. Investment gains and losses on sales of securities are determined on a specific identification basis.
YEARS ENDED DECEMBER 31, YEARS ENDED DECEMBER 31, YEARS ENDED DECEMBER 31, ----------------------- ------------------------ ------------------------ 2011 2010 2009 2011 2010 2009 2011 2010 2009 ------- ------- ------- ----- ----- ------ ------- ------- -------- FIXED MATURITY SECURITIES EQUITY SECURITIES TOTAL ----------------------- ------------------------ ------------------------ (IN MILLIONS) Proceeds............................. $34,015 $30,817 $24,900 $ 771 $ 429 $ 658 $34,786 $31,246 $ 25,558 ======= ======= ======= ===== ===== ====== ======= ======= ======== Gross investment gains............... $ 445 $ 544 $ 685 $ 86 $ 88 $ 118 $ 531 $ 632 $ 803 ------- ------- ------- ----- ----- ------ ------- ------- -------- Gross investment losses.............. (338) (415) (692) (42) (11) (90) (380) (426) (782) ------- ------- ------- ----- ----- ------ ------- ------- -------- Total OTTI losses recognized in earnings: Credit-related............ (183) (334) (632) -- -- -- (183) (334) (632) Other (1).......................... (44) (26) (266) (41) (7) (283) (85) (33) (549) ------- ------- ------- ----- ----- ------ ------- ------- -------- Total OTTI losses recognized in earnings......................... (227) (360) (898) (41) (7) (283) (268) (367) (1,181) ------- ------- ------- ----- ----- ------ ------- ------- -------- Net investment gains (losses).... $ (120) $ (231) $ (905) $ 3 $ 70 $(255) $ (117) $ (161) $(1,160) ======= ======= ======= ===== ===== ====== ======= ======= ========
---------- (1)Other OTTI losses recognized in earnings include impairments on equity securities, impairments on perpetual hybrid securities classified within fixed maturity securities where the primary reason for the impairment was the severity and/or the duration of an unrealized loss position and fixed maturity securities where there is an intent to sell or it is more likely than not that the Company will be required to sell the security before recovery of the decline in estimated fair value. Fixed maturity security OTTI losses recognized in earnings related to the following sectors and industries within the U.S. and foreign corporate securities sector:
YEARS ENDED DECEMBER 31, ------------------------ 2011 2010 2009 ---- ---- ---- (IN MILLIONS) Sector: U.S. and foreign corporate securities -- by industry: Consumer............................................. $ 40 $ 20 $127 Finance.............................................. 37 117 284 Communications....................................... 26 10 130 Industrial........................................... 8 -- 9 Utility.............................................. -- 1 81 Other industries..................................... -- -- 27 ---- ---- ---- Total U.S. and foreign corporate securities........ 111 148 658 RMBS................................................. 78 87 167 ABS.................................................. 28 66 55 CMBS................................................. 9 59 18 Foreign government securities........................ 1 -- -- ---- ---- ---- Total.............................................. $227 $360 $898 ==== ==== ====
F-56 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Equity security OTTI losses recognized in earnings related to the following sectors and industries:
YEARS ENDED DECEMBER 31, ------------------------ 2011 2010 2009 ---- ---- ---- (IN MILLIONS) Sector: Non-redeemable preferred stock........................ $33 $ 3 $228 Common stock.......................................... 8 4 55 ---- ---- ---- Total........................................... $41 $ 7 $283 ==== ==== ==== Industry: Financial services industry:.......................... Perpetual hybrid securities......................... $33 $ 3 $228 Common and remaining non-redeemable preferred stock. -- -- 25 ---- ---- ---- Total financial services industry................. 33 3 253 Other industries....................................... 8 4 30 ---- ---- ---- Total........................................... $41 $ 7 $283 ==== ==== ====
CREDIT LOSS ROLLFORWARD -- ROLLFORWARD OF THE CUMULATIVE CREDIT LOSS COMPONENT OF OTTI LOSS RECOGNIZED IN EARNINGS ON FIXED MATURITY SECURITIES STILL HELD FOR WHICH A PORTION OF THE OTTI LOSS WAS RECOGNIZED IN OTHER COMPREHENSIVE INCOME (LOSS) The table below presents a rollforward of the cumulative credit loss component of OTTI loss recognized in earnings on fixed maturity securities still held for which a portion of the OTTI loss was recognized in other comprehensive income (loss):
YEARS ENDED DECEMBER 31, ------------------------ 2011 2010 ----- ------ (IN MILLIONS) Balance, at January 1,................................................................... $ 330 $ 303 Additions: Initial impairments -- credit loss OTTI recognized on securities not previously impaired.............................................................................. 33 91 Additional impairments -- credit loss OTTI recognized on securities previously impaired.............................................................................. 68 91 Reductions: Sales (maturities, pay downs or prepayments) during the period of securities previously impaired as credit loss OTTI.......................................................... (82) (149) Securities impaired to net present value of expected future cash flows.................. (24) (1) Increases in cash flows -- accretion of previous credit loss OTTI....................... (9) (5) ----- ------ Balance, at December 31,................................................................. $ 316 $ 330 ===== ======
F-57 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NET INVESTMENT INCOME The components of net investment income were as follows:
YEARS ENDED DECEMBER 31, ----------------------- 2011 2010 2009 ------- ------- ------- (IN MILLIONS) Investment income: Fixed maturity securities.................................................. $ 8,225 $ 8,147 $ 7,799 Equity securities.......................................................... 73 89 126 Trading and other securities -- Actively Traded Securities and FVO general account securities (1)................................................... 29 72 116 Mortgage loans............................................................. 2,401 2,258 2,236 Policy loans............................................................... 479 515 504 Real estate and real estate joint ventures................................. 509 348 (185) Other limited partnership interests........................................ 435 684 147 Cash, cash equivalents and short-term investments.......................... 12 15 27 International joint ventures............................................... 5 14 7 Other...................................................................... 112 111 104 ------- ------- ------- Subtotal................................................................ 12,280 12,253 10,881 Less: Investment expenses................................................. 662 675 706 ------- ------- ------- Subtotal, net........................................................... 11,618 11,578 10,175 ------- ------- ------- FVO CSEs: Securities................................................................ 9 15 -- ------- ------- ------- Net investment income................................................. $11,627 $11,593 $10,175 ======= ======= =======
---------- (1)Changes in estimated fair value subsequent to purchase for securities still held as of the end of the respective years included in net investment income were $2 million, $30 million and $31 million for the years ended December 31, 2011, 2010, and 2009, respectively. See "-- Variable Interest Entities" for discussion of CSEs included in the table above. See "-- Related Party Investment Transactions" for discussion of affiliated net investment income and investment expenses included in the table above. F-58 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SECURITIES LENDING As described more fully in Note 1, the Company participates in a securities lending program whereby blocks of securities are loaned to third parties. These transactions are treated as financing arrangements and the associated cash collateral received is recorded as a liability. The Company is obligated to return the cash collateral received to its counterparties. Elements of the securities lending program are presented below at:
DECEMBER 31, --------------- 2011 2010 ------- ------- (IN MILLIONS) Securities on loan: (1) Amortized cost.................................... $13,595 $15,274 Estimated fair value.............................. $15,726 $15,682 Cash collateral on deposit from counterparties (2). $15,870 $15,981 Security collateral on deposit from counterparties. $ 188 $ -- Reinvestment portfolio -- estimated fair value..... $15,803 $15,789
---------- (1)Included within fixed maturity securities and short-term investments. (2)Included within payables for collateral under securities loaned and other transactions. Security collateral on deposit from counterparties in connection with the securities lending transactions may not be sold or repledged, unless the counterparty is in default, and is not reflected in the consolidated financial statements. INVESTED ASSETS ON DEPOSIT AND PLEDGED AS COLLATERAL Invested assets on deposit and pledged as collateral are presented in the table below at estimated fair value for cash and cash equivalents, short-term investments, fixed maturity securities, equity securities, and trading and other securities and at carrying value for mortgage loans.
DECEMBER 31, --------------- 2011 2010 ------- ------- (IN MILLIONS) Invested assets on deposit (1).............................. $ 976 $ 1,491 Invested assets pledged as collateral (2)................... 17,280 17,738 ------- ------- Total invested assets on deposit and pledged as collateral. $18,256 $19,229 ======= =======
---------- (1)The Company has invested assets on deposit with regulatory agencies consisting primarily of cash and cash equivalents, short-term investments, fixed maturity securities and equity securities. (2)The Company has pledged fixed maturity securities, mortgage loans and cash and cash equivalents in connection with various agreements and transactions, including funding agreements (see Note 8), derivative transactions (see Note 4), and short sale agreements (see "-- Trading and Other Securities"). F-59 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) MORTGAGE LOANS Mortgage loans are summarized as follows at:
DECEMBER 31, ------------------------------ 2011 2010 -------------- -------------- CARRYING % OF CARRYING % OF VALUE TOTAL VALUE TOTAL -------- ----- -------- ----- (IN MILLIONS) (IN MILLIONS) Mortgage loans: Commercial...................... $32,774 74.7% $31,080 74.6% Agricultural.................... 11,498 26.2 11,108 26.7 Residential..................... 1 -- 1 -- -------- ----- -------- ----- Subtotal...................... 44,273 100.9 42,189 101.3 Valuation allowances............ (393) (0.9) (522) (1.3) -------- ----- -------- ----- Total mortgage loans, net... $43,880 100.0% $41,667 100.0% ======== ===== ======== =====
Certain of the Company's real estate joint ventures have mortgage loans with the Company. The carrying values of such mortgage loans were $286 million and $283 million at December 31, 2011 and 2010, respectively. The following tables present the recorded investment in mortgage loans, by portfolio segment, by method of evaluation of credit loss, and the related valuation allowances, by type of credit loss, at:
COMMERCIAL AGRICULTURAL RESIDENTIAL TOTAL ---------- ------------ ----------- ------- (IN MILLIONS) DECEMBER 31, 2011: Mortgage loans: Evaluated individually for credit losses......... $ 73 $ 159 $-- $ 232 Evaluated collectively for credit losses......... 32,701 11,339 1 44,041 ---------- ------------ ----------- ------- Total mortgage loans........................... 32,774 11,498 1 44,273 ---------- ------------ ----------- ------- Valuation allowances: Specific credit losses........................... 44 45 -- 89 Non-specifically identified credit losses........ 274 30 -- 304 ---------- ------------ ----------- ------- Total valuation allowances..................... 318 75 -- 393 ---------- ------------ ----------- ------- Mortgage loans, net of valuation allowance... $32,456 $11,423 $ 1 $43,880 ---------- ------------ ----------- ------- DECEMBER 31, 2010: Mortgage loans: Evaluated individually for credit losses......... $ 96 $ 147 $-- $ 243 Evaluated collectively for credit losses......... 30,984 10,961 1 41,946 ---------- ------------ ----------- ------- Total mortgage loans........................... 31,080 11,108 1 42,189 ---------- ------------ ----------- ------- Valuation allowances: Specific credit losses........................... 13 52 -- 65 Non-specifically identified credit losses........ 428 29 -- 457 ---------- ------------ ----------- ------- Total valuation allowances..................... 441 81 -- 522 ---------- ------------ ----------- ------- Mortgage loans, net of valuation allowance... $30,639 $11,027 $ 1 $41,667 ========== ============ =========== =======
F-60 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following tables present the changes in the valuation allowance, by portfolio segment:
MORTGAGE LOAN VALUATION ALLOWANCES ------------------------------------------ COMMERCIAL AGRICULTURAL RESIDENTIAL TOTAL ---------- ------------ ----------- ------ (IN MILLIONS) Balance at January 1, 2009..... $ 184 $ 58 $ 2 $ 244 Provision (release)............ 325 69 -- 394 Charge-offs, net of recoveries. (17) (25) (2) (44) ---------- ------------ ----------- ------ Balance at December 31, 2009... 492 102 -- 594 Provision (release)............ (39) 12 -- (27) Charge-offs, net of recoveries. (12) (33) -- (45) ---------- ------------ ----------- ------ Balance at December 31, 2010... 441 81 -- 522 Provision (release)............ (111) (2) -- (113) Charge-offs, net of recoveries. (12) (4) -- (16) ---------- ------------ ----------- ------ Balance at December 31, 2011... $ 318 $ 75 $ -- $ 393 ========== ============ =========== ======
Commercial Mortgage Loans -- by Credit Quality Indicators with Estimated Fair Value. See Note 1 for a discussion of all credit quality indicators presented herein. Presented below for the commercial mortgage loans is the recorded investment, prior to valuation allowances, by the indicated loan-to-value ratio categories and debt service coverage ratio categories and estimated fair value of such mortgage loans by the indicated loan-to-value ratio categories at:
COMMERCIAL ---------------------------------------------------------------- RECORDED INVESTMENT ------------------------------------------- DEBT SERVICE COVERAGE RATIOS ----------------------------- % OF ESTIMATED % OF > 1.20X 1.00X - 1.20X < 1.00X TOTAL TOTAL FAIR VALUE TOTAL ------- ------------- ------- ------- ----- ------------- ----- (IN MILLIONS) (IN MILLIONS) DECEMBER 31, 2011: Loan-to-value ratios: Less than 65%......... $20,510 $ 389 $ 332 $21,231 64.8% $22,547 66.1% 65% to 75%............ 6,919 237 268 7,424 22.6 7,734 22.6 76% to 80%............ 950 98 200 1,248 3.8 1,251 3.7 Greater than 80%...... 1,880 674 317 2,871 8.8 2,588 7.6 ------- ------------- ------- ------- ----- ------------- ----- Total................ $30,259 $1,398 $1,117 $32,774 100.0% $34,120 100.0% ======= ============= ======= ======= ===== ============= ===== DECEMBER 31, 2010: Loan-to-value ratios: Less than 65%......... $13,864 $ 100 $ 425 $14,389 46.3% $15,203 47.5% 65% to 75%............ 7,658 611 343 8,612 27.7 8,955 28.0 76% to 80%............ 2,534 166 128 2,828 9.1 2,883 9.0 Greater than 80%...... 3,002 1,625 624 5,251 16.9 4,978 15.5 ------- ------------- ------- ------- ----- ------------- ----- Total................ $27,058 $2,502 $1,520 $31,080 100.0% $32,019 100.0% ======= ============= ======= ======= ===== ============= =====
F-61 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Agricultural Mortgage Loans -- by Credit Quality Indicator. The recorded investment in agricultural mortgage loans, prior to valuation allowances, by credit quality indicator, is as shown below. The estimated fair value of agricultural mortgage loans was $11.9 billion and $11.3 billion at December 31, 2011 and 2010, respectively.
AGRICULTURAL -------------------------------------------------------------- DECEMBER 31, -------------------------------------------------------------- 2011 2010 ------------------------------ ------------------------------ RECORDED INVESTMENT % OF TOTAL RECORDED INVESTMENT % OF TOTAL ------------------- ---------- ------------------- ---------- (IN MILLIONS) (IN MILLIONS) Loan-to-value ratios: Less than 65%......... $10,378 90.2% $ 9,896 89.1% 65% to 75%............ 732 6.4 829 7.5 76% to 80%............ 12 0.1 48 0.4 Greater than 80%...... 376 3.3 335 3.0 ------------------- ---------- ------------------- ---------- Total................ $11,498 100.0% $11,108 100.0% =================== ========== =================== ==========
Residential Mortgage Loans -- by Credit Quality Indicator. All residential mortgage loans were performing at both December 31, 2011 and 2010. The estimated fair value of residential mortgage loans was $1 million at both December 31, 2011 and 2010. Past Due and Interest Accrual Status of Mortgage Loans. The Company has a high quality, well performing, mortgage loan portfolio, with approximately 99% of all mortgage loans classified as performing at both December 31, 2011 and 2010. The Company defines delinquent mortgage loans consistent with industry practice, when interest and principal payments are past due as follows: commercial mortgage loans -- 60 days or more; and agricultural mortgage loans -- 90 days or more. The recorded investment in mortgage loans, prior to valuation allowances, past due according to these aging categories, greater than 90 days past due and still accruing interest and in nonaccrual status, by portfolio segment, were as follows at:
GREATER THAN 90 DAYS PAST DUE STILL PAST DUE ACCRUING INTEREST NONACCRUAL STATUS ----------------------------------- ----------------------------------- ----------------------------------- DECEMBER 31, 2011 DECEMBER 31, 2010 DECEMBER 31, 2011 DECEMBER 31, 2010 DECEMBER 31, 2011 DECEMBER 31, 2010 ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- (IN MILLIONS) Commercial... $ 63 $ 51 $-- $-- $ 63 $ 6 Agricultural. 139 145 27 9 150 166 ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- Total...... $202 $196 $27 $ 9 $213 $172 ================= ================= ================= ================= ================= =================
F-62 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Impaired Mortgage Loans. The unpaid principal balance, recorded investment, valuation allowances and carrying value, net of valuation allowances, for impaired mortgage loans, including those modified in a troubled debt restructuring, by portfolio segment, were as follows at:
IMPAIRED MORTGAGE LOANS -------------------------------------------------------------------------------- LOANS WITHOUT LOANS WITH A VALUATION ALLOWANCE A VALUATION ALLOWANCE ALL IMPAIRED LOANS ---------------------------------------- -------------------- ------------------ UNPAID UNPAID UNPAID PRINCIPAL RECORDED VALUATION CARRYING PRINCIPAL RECORDED PRINCIPAL CARRYING BALANCE INVESTMENT ALLOWANCES VALUE BALANCE INVESTMENT BALANCE VALUE --------- ---------- ---------- -------- --------- ---------- --------- -------- (IN MILLIONS) DECEMBER 31, 2011: Commercial......... $ 73 $ 73 $44 $ 29 $225 $209 $298 $238 Agricultural....... 160 159 45 114 62 60 222 174 --------- ---------- ---------- -------- --------- ---------- --------- -------- Total............ $233 $232 $89 $143 $287 $269 $520 $412 ========= ========== ========== ======== ========= ========== ========= ======== DECEMBER 31, 2010: Commercial......... $ 96 $ 96 $13 $ 83 $ 94 $ 82 $190 $165 Agricultural....... 146 146 52 94 107 104 253 198 --------- ---------- ---------- -------- --------- ---------- --------- -------- Total............ $242 $242 $65 $177 $201 $186 $443 $363 ========= ========== ========== ======== ========= ========== ========= ========
Unpaid principal balance is generally prior to any charge-offs. The average investment in impaired mortgage loans, including those modified in a troubled debt restructuring, and the related interest income, by portfolio segment, for the years ended December 31, 2011 and 2010, and for all mortgage loans for the year ended December 31, 2009, was:
IMPAIRED MORTGAGE LOANS --------------------------------------------- AVERAGE INVESTMENT INTEREST INCOME RECOGNIZED ------------------ -------------------------- CASH BASIS ACCRUAL BASIS ---------- ------------- (IN MILLIONS) FOR THE YEAR ENDED DECEMBER 31, 2011: Commercial............................ $257 $4 $ 1 Agricultural.......................... 239 3 -- ------------------ ---------- ------------- Total................................ $496 $7 $ 1 ================== ========== ============= FOR THE YEAR ENDED DECEMBER 31, 2010: Commercial............................ $126 $3 $ 1 Agricultural.......................... 259 6 2 ------------------ ---------- ------------- Total................................ $385 $9 $ 3 ================== ========== ============= FOR THE YEAR ENDED DECEMBER 31, 2009.. $288 $5 $ 1 ================== ========== =============
F-63 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Mortgage Loans Modified in a Troubled Debt Restructuring. See Note 1 for a discussion of loan modifications that are classified as troubled debt restructuring and the types of concessions typically granted. At December 31, 2011, the number of mortgage loans and carrying value after specific valuation allowance of mortgage loans modified during the period in a troubled debt restructuring were as follows:
MORTGAGE LOANS MODIFIED IN A TROUBLED DEBT RESTRUCTURING ------------------------------------------ DECEMBER 31, 2011 ------------------------------------------ NUMBER OF MORTGAGE CARRYING VALUE AFTER SPECIFIC LOANS VALUATION ALLOWANCE --------- ----------------------------- PRE- POST- MODIFICATION MODIFICATION ------------ ------------ (IN MILLIONS) Commercial... 4 $125 $ 87 Agricultural. 9 40 40 --------- ------------ ------------ Total....... 13 $165 $127 ========= ============ ============
During the previous 12 months, the Company had three agricultural mortgage loans, with a carrying value after specific valuation allowance of $11 million, modified in a troubled debt restructuring with a subsequent payment default at December 31, 2011. During the previous 12 months, there were no commercial mortgage loans modified in a troubled debt restructuring with a subsequent payment default at December 31, 2011. Payment default is determined in the same manner as delinquency status -- when interest and principal payments are past due as follows: commercial mortgage loans -- 60 days or more; and agricultural mortgage loans -- 90 days or more. REAL ESTATE AND REAL ESTATE JOINT VENTURES Real estate investments by type consisted of the following:
DECEMBER 31, ---------------------------------------- 2011 2010 ------------------- ------------------- CARRYING % OF CARRYING % OF VALUE TOTAL VALUE TOTAL ------------- ----- ------------- ----- (IN MILLIONS) (IN MILLIONS) Traditional......................................... $3,634 61.7% $3,211 55.8% Real estate joint ventures and funds................ 2,060 35.0 2,279 39.6 ------------- ----- ------------- ----- Real estate and real estate joint ventures....... 5,694 96.7 5,490 95.4 Foreclosed (commercial and agricultural)............ 196 3.3 85 1.5 ------------- ----- ------------- ----- Real estate held-for-investment.................. 5,890 100.0 5,575 96.9 Real estate held-for-sale........................... 1 -- 180 3.1 ------------- ----- ------------- ----- Total real estate and real estate joint ventures. $5,891 100.0% $5,755 100.0% ============= ===== ============= =====
The Company classifies within traditional real estate its investment in income-producing real estate, which is comprised primarily of wholly-owned real estate and, to a much lesser extent, joint ventures with interests in single property income-producing real estate. The Company classifies within real estate joint ventures and funds, its investments in joint ventures with interests in multi-property projects with varying strategies ranging from the development of properties to the operation of income-producing properties, as well as its investments in real estate private equity funds. From time to time, the Company transfers investments from these joint ventures to F-64 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) traditional real estate, if the Company retains an interest in the joint venture after a completed property commences operations and the Company intends to retain an interest in the property. Properties acquired through foreclosure were $156 million, $48 million and $121 million for the years ended December 31, 2011, 2010 and 2009, respectively, and include commercial and agricultural properties. After the Company acquires properties through foreclosure, it evaluates whether the properties are appropriate for retention in its traditional real estate portfolio. Foreclosed real estate held at December 31, 2011 and 2010 includes those properties the Company has not selected for retention in its traditional real estate portfolio and which do not meet the criteria to be classified as held-for-sale. The wholly-owned real estate within traditional real estate is net of accumulated depreciation of $1.1 billion and $1.3 billion at December 31, 2011 and 2010, respectively. Related depreciation expense on traditional wholly-owned real estate was $125 million, $134 million and $120 million for the years ended December 31, 2011, 2010 and 2009, respectively. These amounts include depreciation expense related to discontinued operations of $7 million, $16 million and $17 million for the years ended December 31, 2011, 2010 and 2009, respectively. There were no impairments recognized on real estate held-for-investment for the year ended December 31, 2011. Impairments recognized on real estate held-for-investment were $27 million and $96 million for the years ended December 31, 2010 and 2009, respectively. Impairments recognized on real estate held-for-sale were $1 million for the year ended December 31, 2010. There were no impairments recognized on real estate held-for-sale for the years ended December 31, 2011 and 2009. The Company's carrying value of real estate held-for-sale has been reduced by impairments recorded prior to 2009 of $1 million at both December 31, 2011 and 2010. The carrying value of non-income producing real estate was $110 million and $94 million at December 31, 2011 and 2010, respectively. OTHER LIMITED PARTNERSHIP INTERESTS The carrying value of other limited partnership interests (which primarily represent ownership interests in pooled investment funds that principally make private equity investments in companies in the United States and overseas) was $4.3 billion and $4.5 billion at December 31, 2011 and 2010, respectively. Included within other limited partnership interests were $667 million and $604 million at December 31, 2011 and 2010, respectively, of investments in hedge funds. Impairments of other limited partnership interests, principally other limited partnership interests accounted for under the cost method, were $3 million, $2 million and $288 million for the years ended December 31, 2011, 2010 and 2009, respectively. COLLECTIVELY SIGNIFICANT EQUITY METHOD INVESTMENTS The Company holds investments in real estate joint ventures, real estate funds and other limited partnership interests consisting of leveraged buy-out funds, hedge funds, private equity funds, joint ventures, tax credit partnerships and other funds. The portion of these investments accounted for under the equity method had a carrying value of $6.8 billion as of December 31, 2011. The Company's maximum exposure to loss related to these equity method investments is limited to the carrying value of these investments plus unfunded commitments of $2.2 billion as of December 31, 2011. Except for certain real estate joint ventures, the Company's investments in real estate funds and other limited partnership interests are generally of a passive nature in that the Company does not participate in the management of the entities. As further described in Note 1, the Company generally records its share of earnings in its equity method investments using a three-month lag methodology and within net investment income. As of December 31, 2011, aggregate net investment income from these equity method real estate joint ventures, real estate funds and other F-65 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) limited partnership interests exceeded 10% of the Company's consolidated pre-tax income (loss) from continuing operations. The Company is providing the following aggregated summarized financial data for such equity method investments. This aggregated summarized financial data does not represent the Company's proportionate share of the assets, liabilities, or earnings of such entities. As of, and for the year ended December 31, 2011, the aggregated summarized financial data presented below reflects the latest available financial information. Aggregate total assets of these entities totaled $229.7 billion and $185.6 billion as of December 31, 2011 and 2010, respectively. Aggregate total liabilities of these entities totaled $22.2 billion and $30.6 billion as of December 31, 2011 and 2010, respectively. Aggregate net income (loss) of these entities totaled $8.4 billion, $16.5 billion and $22.0 billion for the years ended December 31, 2011, 2010 and 2009, respectively. Aggregate net income (loss) from real estate joint ventures, real estate funds and other limited partnership interests is primarily comprised of investment income, including recurring investment income and realized and unrealized investment gains (losses). OTHER INVESTED ASSETS The following table presents the carrying value of the Company's other invested assets by type at:
DECEMBER 31, ---------------------------------------- 2011 2010 ------------------- ------------------- CARRYING % OF CARRYING % OF VALUE TOTAL VALUE TOTAL ------------- ----- ------------- ----- (IN MILLIONS) (IN MILLIONS) Freestanding derivatives with positive estimated fair values. $ 6,936 55.5% $3,311 42.3% Leveraged leases, net of non-recourse debt................... 1,832 14.7 1,799 23.0 Loans to affiliates.......................................... 1,600 12.8 1,415 18.1 Tax credit partnerships...................................... 1,409 11.3 835 10.7 Joint venture investments.................................... 59 0.5 51 0.7 Funds withheld............................................... 25 0.2 31 0.4 Other........................................................ 644 5.0 380 4.8 ------------- ----- ------------- ----- Total....................................................... $12,505 100.0% $7,822 100.0% ============= ===== ============= =====
See Note 4 for information regarding the freestanding derivatives with positive estimated fair values. See "-- Leveraged Leases" for the composition of leveraged leases. Loans to affiliates, some of which are regulated, are used by the affiliates to assist in meeting their capital requirements. See "-- Related Party Investment Transactions" for information regarding certain loans to affiliates. Tax credit partnerships are established for the purpose of investing in low-income housing and other social causes, where the primary return on investment is in the form of income tax credits, and are accounted for under the equity method or under the effective yield method. Joint venture investments are accounted for under the equity method and represent the Company's investment in an insurance underwriting joint venture in China. Funds withheld represent amounts contractually withheld by ceding companies in accordance with reinsurance agreements. F-66 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Leveraged Leases Investment in leveraged leases, included in other invested assets, consisted of the following:
DECEMBER 31, ----------------- 2011 2010 -------- -------- (IN MILLIONS) Rental receivables, net..................................... $ 1,761 $ 1,783 Estimated residual values................................... 1,110 1,136 -------- -------- Subtotal.................................................. 2,871 2,919 Unearned income............................................. (1,039) (1,120) -------- -------- Investment in leveraged leases........................... $ 1,832 $ 1,799 ======== ========
Rental receivables are generally due in periodic installments. The payment periods range from one to 15 years, but in certain circumstances are as long as 34 years. For rental receivables, the primary credit quality indicator is whether the rental receivable is performing or non-performing, which is assessed monthly. The Company generally defines non-performing rental receivables as those that are 90 days or more past due. As of December 31, 2011 and 2010, all rental receivables were performing. The deferred income tax liability related to leveraged leases was $1.3 billion and $1.2 billion at December 31, 2011 and 2010, respectively. The components of income from investment in leveraged leases, excluding realized gains (losses) were as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2011 2010 2009 ----- ----- ----- (IN MILLIONS) Net income from investment in leveraged leases............................. $ 101 $ 102 $ 92 Less: Income tax expense on leveraged leases............................... (35) (36) (32) ----- ----- ----- Net investment income after income tax from investment in leveraged leases. $ 66 $ 66 $ 60 ===== ===== =====
CASH EQUIVALENTS The carrying value of cash equivalents, which includes securities and other investments with an original or remaining maturity of three months or less at the time of purchase, was $1.2 billion and $3.1 billion at December 31, 2011 and 2010, respectively. PURCHASED CREDIT IMPAIRED INVESTMENTS Investments acquired with evidence of credit quality deterioration since origination and for which it is probable at the acquisition date that the Company will be unable to collect all contractually required payments are classified as purchased credit impaired investments. For each investment, the excess of the cash flows expected to be collected as of the acquisition date over its acquisition date fair value is referred to as the accretable yield and is recognized as net investment income on an effective yield basis. If subsequently, based on current information and events, it is probable that there is a significant increase in cash flows previously expected to be collected or if actual cash flows are significantly greater than cash flows previously expected to be collected, the accretable yield is adjusted prospectively. The excess of the contractually required payments F-67 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (including interest) as of the acquisition date over the cash flows expected to be collected as of the acquisition date is referred to as the nonaccretable difference, and this amount is not expected to be realized as net investment income. Decreases in cash flows expected to be collected can result in OTTI. The table below presents the purchased credit impaired fixed maturity securities held at:
DECEMBER 31, ------------- 2011 2010 ------ ------ (IN MILLIONS) Outstanding principal and interest balance (1). $3,708 $1,163 Carrying value (2)............................. $2,675 $ 913
---------- (1)Represents the contractually required payments which is the sum of contractual principal, whether or not currently due, and accrued interest. (2)Estimated fair value plus accrued interest. The following table presents information about purchased credit impaired fixed maturity securities acquired during the periods, as of their respective acquisition dates:
YEARS ENDED DECEMBER 31, ------------------------ 2011 2010 ------ ------ (IN MILLIONS) Contractually required payments (including interest). $4,260 $1,605 Cash flows expected to be collected (1).............. $3,603 $1,540 Fair value of investments acquired................... $2,140 $ 939
---------- (1)Represents undiscounted principal and interest cash flow expectations at the date of acquisition. The following table presents activity for the accretable yield on purchased credit impaired fixed maturity securities for:
DECEMBER 31, ------------- 2011 2010 ------ ------ (IN MILLIONS) Accretable yield, January 1,........................ $ 436 $ -- Investments purchased............................... 1,463 601 Accretion recognized in earnings.................... (97) (62) Reclassification (to) from nonaccretable difference. 176 (103) ------ ------ Accretable yield, December 31,...................... $1,978 $ 436 ====== ======
F-68 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) VARIABLE INTEREST ENTITIES The Company holds investments in certain entities that are VIEs. In certain instances, the Company holds both the power to direct the most significant activities of the entity, as well as an economic interest in the entity and, as such, is deemed to be the primary beneficiary or consolidator of the entity. The following table presents the total assets and total liabilities relating to VIEs for which the Company has concluded that it is the primary beneficiary and which are consolidated at December 31, 2011 and 2010. Creditors or beneficial interest holders of VIEs where the Company is the primary beneficiary have no recourse to the general credit of the Company, as the Company's obligation to the VIEs is limited to the amount of its committed investment.
DECEMBER 31, ------------------------------------- 2011 2010 ------------------ ------------------ TOTAL TOTAL TOTAL TOTAL ASSETS LIABILITIES ASSETS LIABILITIES ------ ----------- ------ ----------- (IN MILLIONS) Other limited partnership interests. $203 $ 1 $194 $ 53 CSEs (1)............................ 146 138 243 226 Other invested assets............... 102 1 108 1 Real estate joint ventures.......... 16 18 20 17 ------ ----------- ------ ----------- Total............................ $467 $158 $565 $297 ====== =========== ====== ===========
---------- (1)The Company consolidates former QSPEs that are structured as collateralized debt obligations. The assets of these entities can only be used to settle their respective liabilities, and under no circumstances is the Company liable for any principal or interest shortfalls should any arise. The Company's exposure was limited to that of its remaining investment in the former QSPEs of less than $1 million at estimated fair value at both December 31, 2011 and 2010, respectively. The long-term debt presented below bears interest primarily at variable rates, payable on a bi-annual basis and is expected to be repaid over the next three years. Interest expense related to these obligations, included in other expenses, was $9 million and $15 million for the years ended December 31, 2011 and 2010, respectively. The assets and liabilities of these CSEs, at estimated fair value, were as follows at:
DECEMBER 31, ------------ 2011 2010 ---- ---- (IN MILLIONS) ASSETS: Trading and other securities................ $117 $201 Cash and cash equivalents................... 21 39 Accrued investment income................... 1 3 Premiums, reinsurance and other receivables. 7 -- ---- ---- Total assets.............................. $146 $243 ==== ==== LIABILITIES: Long-term debt.............................. $116 $184 Other liabilities........................... 22 42 ---- ---- Total liabilities......................... $138 $226 ==== ====
F-69 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents the carrying amount and maximum exposure to loss relating to VIEs for which the Company holds significant variable interests but is not the primary beneficiary and which have not been consolidated at:
DECEMBER 31, ----------------------------------------- 2011 2010 -------------------- -------------------- MAXIMUM MAXIMUM CARRYING EXPOSURE CARRYING EXPOSURE AMOUNT TO LOSS (1) AMOUNT TO LOSS (1) -------- ----------- -------- ----------- (IN MILLIONS) Fixed maturity securities available-for-sale: RMBS (2)................................... $25,719 $25,719 $30,679 $30,679 CMBS (2)................................... 9,105 9,105 9,701 9,701 ABS (2).................................... 6,586 6,586 6,443 6,443 U.S. corporate securities.................. 1,593 1,593 1,283 1,283 Foreign corporate securities............... 786 786 1,058 1,058 Other limited partnership interests........... 2,537 3,259 2,583 3,281 Other invested assets......................... 745 1,140 514 694 Real estate joint ventures.................... 32 49 24 69 -------- ----------- -------- ----------- Total.................................... $47,103 $48,237 $52,285 $53,208 ======== =========== ======== ===========
---------- (1)The maximum exposure to loss relating to the fixed maturity securities is equal to the carrying amounts or carrying amounts of retained interests. The maximum exposure to loss relating to the other limited partnership interests and real estate joint ventures is equal to the carrying amounts plus any unfunded commitments of the Company. Such a maximum loss would be expected to occur only upon bankruptcy of the issuer or investee. For certain of its investments in other invested assets, the Company's return is in the form of income tax credits which are guaranteed by a creditworthy third party. For such investments, the maximum exposure to loss is equal to the carrying amounts plus any unfunded commitments, reduced by income tax credits guaranteed by third parties of $264 million and $225 million at December 31, 2011 and 2010, respectively. (2)For these variable interests, the Company's involvement is limited to that of a passive investor. As described in Note 13, the Company makes commitments to fund partnership investments in the normal course of business. Excluding these commitments, the Company did not provide financial or other support to investees designated as VIEs during the years ended December 31, 2011, 2010 and 2009. RELATED PARTY INVESTMENT TRANSACTIONS In the normal course of business, the Company transfers invested assets, primarily consisting of fixed maturity securities, to and from affiliates. Invested assets transferred to and from affiliates were as follows:
YEARS ENDED DECEMBER 31, ---------------------- 2011 2010 2009 ------ ------ -------- (IN MILLIONS) Estimated fair value of invested assets transferred to affiliates....................... $ 170 $ 444 $ -- Amortized cost of invested assets transferred to affiliates...................................... $ 164 $ 431 $ -- Net investment gains (losses) recognized on transfers....................................... $ 6 $ 13 $ -- Estimated fair value of invested assets transferred from affiliates..................... $ 132 $ 582 $ 1,019
F-70 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company has loans outstanding to Exeter Reassurance Company Ltd. ("Exeter"), an affiliate. During 2011, the Company issued loans to Exeter totaling $525 million bringing the total loans outstanding to $1.6 billion and $1.0 billion at December 31, 2011 and 2010, respectively, which are included in other invested assets. The loans issued in 2011 of $150 million and $375 million are due on July 15, 2021 and December 16, 2021, respectively, and bear interest, payable semi-annually, at 5.64% and 5.86%, respectively. The loans issued in 2009 are due as follows: $500 million due on June 30, 2014, $250 million due on September 30, 2012 and $250 million due on September 30, 2016, respectively, and these amounts bear interest, payable semi-annually, at 6.44%, 5.33% and 7.44%, respectively. Both the principal and interest payments have been guaranteed by MetLife, Inc. Net investment income from this investment was $74 million, $64 million and $28 million for the years ended December 31, 2011, 2010 and 2009, respectively. The Company provides investment administrative services to certain affiliates. Investment administrative service charges to these affiliates, which reduced investment expenses, were $164 million, $107 million and $87 million for the years ended December 31, 2011, 2010 and 2009, respectively. The Company also had additional affiliated net investment income of $3 million, $16 million and $16 million for the years ended December 31, 2011, 2010 and 2009, respectively. 4. DERIVATIVE FINANCIAL INSTRUMENTS ACCOUNTING FOR DERIVATIVE FINANCIAL INSTRUMENTS See Note 1 for a description of the Company's accounting policies for derivative financial instruments. See Note 5 for information about the fair value hierarchy for derivatives. F-71 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) PRIMARY RISKS MANAGED BY DERIVATIVE FINANCIAL INSTRUMENTS The Company is exposed to various risks relating to its ongoing business operations, including interest rate risk, foreign currency risk, credit risk and equity market risk. The Company uses a variety of strategies to manage these risks, including the use of derivative instruments. The following table presents the gross notional amount, estimated fair value and primary underlying risk exposure of the Company's derivative financial instruments, excluding embedded derivatives, held at:
DECEMBER 31, ------------------------------------------------------- 2011 2010 --------------------------- --------------------------- ESTIMATED FAIR ESTIMATED FAIR VALUE (1) VALUE (1) PRIMARY UNDERLYING NOTIONAL ------------------ NOTIONAL ------------------ RISK EXPOSURE INSTRUMENT TYPE AMOUNT ASSETS LIABILITIES AMOUNT ASSETS LIABILITIES ------------------ ------------------------- -------- ------ ----------- -------- ------ ----------- (IN MILLIONS) Interest rate Interest rate swaps...... $ 36,069 $4,609 $ 952 $ 25,614 $1,477 $ 870 Interest rate floors..... 13,290 789 14 13,290 460 4 Interest rate caps....... 38,532 83 -- 27,253 145 -- Interest rate futures.... 2,675 6 2 1,246 7 -- Interest rate options.... 4,624 326 -- 5,680 107 23 Interest rate forwards... 845 81 14 445 -- 36 Synthetic GICs........... 4,454 -- -- 4,397 -- -- Foreign currency Foreign currency swaps... 13,149 867 649 13,558 1,024 901 Foreign currency forwards 2,014 81 -- 2,050 17 16 Credit Credit default swaps..... 7,765 90 81 6,792 72 79 Credit forwards.......... 20 4 -- 90 2 3 Equity market Equity futures........... -- -- -- 7 -- -- Equity options........... 135 -- -- 176 -- -- -------- ------ ----------- -------- ------ ----------- Total.................. $123,572 $6,936 $1,712 $100,598 $3,311 $1,932 ======== ====== =========== ======== ====== ===========
---------- (1)The estimated fair value of all derivatives in an asset position is reported within other invested assets in the consolidated balance sheets and the estimated fair value of all derivatives in a liability position is reported within other liabilities in the consolidated balance sheets. F-72 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents the gross notional amount of derivative financial instruments by maturity at December 31, 2011:
REMAINING LIFE --------------------------------------------------------- AFTER FIVE AFTER ONE YEAR YEARS ONE YEAR OR THROUGH FIVE THROUGH TEN AFTER TEN LESS YEARS YEARS YEARS TOTAL ----------- -------------- ----------- --------- -------- (IN MILLIONS) Interest rate swaps....... $ 4,799 $18,744 $ 4,622 $ 7,904 $ 36,069 Interest rate floors...... -- 8,890 1,400 3,000 13,290 Interest rate caps........ 3,250 31,271 4,011 -- 38,532 Interest rate futures..... 2,675 -- -- -- 2,675 Interest rate options..... 65 4,159 400 -- 4,624 Interest rate forwards.... 580 265 -- -- 845 Synthetic GICs............ 4,454 -- -- -- 4,454 Foreign currency swaps.... 727 5,946 4,738 1,738 13,149 Foreign currency forwards. 1,919 16 20 59 2,014 Credit default swaps...... 161 6,970 634 -- 7,765 Credit forwards........... 20 -- -- -- 20 Equity futures............ -- -- -- -- -- Equity options............ 135 -- -- -- 135 ----------- -------------- ----------- --------- -------- Total.................. $18,785 $76,261 $15,825 $12,701 $123,572 =========== ============== =========== ========= ========
Interest rate swaps are used by the Company primarily to reduce market risks from changes in interest rates and to alter interest rate exposure arising from mismatches between assets and liabilities (duration mismatches). In an interest rate swap, the Company agrees with another party to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts as calculated by reference to an agreed notional principal amount. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by the counterparty at each due date. The Company utilizes interest rate swaps in fair value, cash flow and non-qualifying hedging relationships. The Company also enters into basis swaps to better match the cash flows from assets and related liabilities. In a basis swap, both legs of the swap are floating with each based on a different index. Generally, no cash is exchanged at the outset of the contract and no principal payments are made by either party. A single net payment is usually made by one counterparty at each due date. Basis swaps are included in interest rate swaps in the preceding table. The Company utilizes basis swaps in non-qualifying hedging relationships. Inflation swaps are used as an economic hedge to reduce inflation risk generated from inflation-indexed liabilities. Inflation swaps are included in interest rate swaps in the preceding table. The Company utilizes inflation swaps in non-qualifying hedging relationships. Implied volatility swaps are used by the Company primarily as economic hedges of interest rate risk associated with the Company's investments in mortgage-backed securities. In an implied volatility swap, the Company exchanges fixed payments for floating payments that are linked to certain market volatility measures. If implied volatility rises, the floating payments that the Company receives will increase, and if implied volatility falls, the floating payments that the Company receives will decrease. Implied volatility swaps are included in interest rate swaps in the preceding table. The Company utilizes implied volatility swaps in non-qualifying hedging relationships. F-73 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company uses structured interest rate swaps to synthetically create investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and a cash instrument such as a U.S. Treasury, agency, or other fixed maturity security. Structured interest rate swaps are included in interest rate swaps in the preceding table. Structured interest rate swaps are not designated as hedging instruments. The Company purchases interest rate caps and floors primarily to protect its floating rate liabilities against rises in interest rates above a specified level, and against interest rate exposure arising from mismatches between assets and liabilities (duration mismatches), as well as to protect its minimum rate guarantee liabilities against declines in interest rates below a specified level, respectively. In certain instances, the Company locks in the economic impact of existing purchased caps and floors by entering into offsetting written caps and floors. The Company utilizes interest rate caps and floors in non-qualifying hedging relationships. In exchange-traded interest rate (Treasury and swap) futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of interest rate securities, and to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded interest rate (Treasury and swap) futures are used primarily to hedge mismatches between the duration of assets in a portfolio and the duration of liabilities supported by those assets, to hedge against changes in value of securities the Company owns or anticipates acquiring and to hedge against changes in interest rates on anticipated liability issuances by replicating Treasury or swap curve performance. The Company utilizes exchange-traded interest rate futures in non-qualifying hedging relationships. Swaptions are used by the Company to hedge interest rate risk associated with the Company's long-term liabilities and invested assets. A swaption is an option to enter into a swap with a forward starting effective date. In certain instances, the Company locks in the economic impact of existing purchased swaptions by entering into offsetting written swaptions. The Company pays a premium for purchased swaptions and receives a premium for written swaptions. Swaptions are included in interest rate options in the preceding table. The Company utilizes swaptions in non-qualifying hedging relationships. The Company writes covered call options on its portfolio of U.S. Treasury securities as an income generation strategy. In a covered call transaction, the Company receives a premium at the inception of the contract in exchange for giving the derivative counterparty the right to purchase the referenced security from the Company at a predetermined price. The call option is "covered" because the Company owns the referenced security over the term of the option. Covered call options are included in interest rate options in the preceding table. The Company utilizes covered call options in non-qualifying hedging relationships. The Company enters into interest rate forwards to buy and sell securities. The price is agreed upon at the time of the contract and payment for such a contract is made at a specified future date. The Company utilizes interest rate forwards in cash flow and non-qualifying hedging relationships. A synthetic GIC is a contract that simulates the performance of a traditional guaranteed interest contract through the use of financial instruments. Under a synthetic GIC, the policyholder owns the underlying assets. The Company guarantees a rate return on those assets for a premium. Synthetic GICs are not designated as hedging instruments. Foreign currency derivatives, including foreign currency swaps and foreign currency forwards, are used by the Company to reduce the risk from fluctuations in foreign currency exchange rates associated with its assets and liabilities denominated in foreign currencies. The Company also uses foreign currency forwards and swaps to hedge the foreign currency risk associated with certain of its net investments in foreign operations. F-74 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In a foreign currency swap transaction, the Company agrees with another party to exchange, at specified intervals, the difference between one currency and another at a fixed exchange rate, generally set at inception, calculated by reference to an agreed upon principal amount. The principal amount of each currency is exchanged at the inception and termination of the currency swap by each party. The Company utilizes foreign currency swaps in fair value, cash flow, net investment in foreign operations and non-qualifying hedging relationships. In a foreign currency forward transaction, the Company agrees with another party to deliver a specified amount of an identified currency at a specified future date. The price is agreed upon at the time of the contract and payment for such a contract is made in a different currency at the specified future date. The Company utilizes foreign currency forwards in net investment in foreign operations and non-qualifying hedging relationships. Swap spreadlocks are used by the Company to hedge invested assets on an economic basis against the risk of changes in credit spreads. Swap spreadlocks are forward transactions between two parties whose underlying reference index is a forward starting interest rate swap where the Company agrees to pay a coupon based on a predetermined reference swap spread in exchange for receiving a coupon based on a floating rate. The Company has the option to cash settle with the counterparty in lieu of maintaining the swap after the effective date. The Company utilizes swap spreadlocks in non-qualifying hedging relationships. Certain credit default swaps are used by the Company to hedge against credit-related changes in the value of its investments. In a credit default swap transaction, the Company agrees with another party, at specified intervals, to pay a premium to hedge credit risk. If a credit event, as defined by the contract, occurs, the contract may be cash settled or it may be settled gross by the delivery of par quantities of the referenced investment equal to the specified swap notional in exchange for the payment of cash amounts by the counterparty equal to the par value of the investment surrendered. The Company utilizes credit default swaps in non-qualifying hedging relationships. Credit default swaps are also used to synthetically create investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and one or more cash instruments such as U.S. Treasury securities, agency securities or other fixed maturity securities. The Company also enters into certain credit default swaps held in relation to trading portfolios for the purpose of generating profits on short-term differences in price. These credit default swaps are not designated as hedging instruments. The Company enters into forwards to lock in the price to be paid for forward purchases of certain securities. The price is agreed upon at the time of the contract and payment for the contract is made at a specified future date. When the primary purpose of entering into these transactions is to hedge against the risk of changes in purchase price due to changes in credit spreads, the Company designates these as credit forwards. The Company utilizes credit forwards in cash flow hedging relationships. In exchange-traded equity futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of equity securities, and to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. The Company utilizes exchange-traded equity futures in non-qualifying hedging relationships. Equity index options are used by the Company to hedge certain invested assets against adverse changes in equity indices. In an equity index option transaction, the Company enters into contracts to sell the equity index within a limited time at a contracted price. The contracts will be net settled in cash based on differentials in the indices at the time of exercise and the strike price. In certain instances, the Company may enter into a combination of transactions to hedge adverse changes in equity indices within a pre-determined range through F-75 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) the purchase and sale of options. Equity index options are included in equity options in the preceding table. The Company utilizes equity index options in non-qualifying hedging relationships. Total rate of return swaps ("TRRs") are swaps whereby the Company agrees with another party to exchange, at specified intervals, the difference between the economic risk and reward of an asset or a market index and the London Inter-Bank Offered Rate ("LIBOR"), calculated by reference to an agreed notional principal amount. No cash is exchanged at the outset of the contract. Cash is paid and received over the life of the contract based on the terms of the swap. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by the counterparty at each due date. The Company uses TRRs to hedge its equity market guarantees in certain of its insurance products. TRRs can be used as hedges or to synthetically create investments. The Company utilizes TRRs in non-qualifying hedging relationships. HEDGING The following table presents the gross notional amount and estimated fair value of derivatives designated as hedging instruments by type of hedge designation at:
DECEMBER 31, ----------------------------------------------------------- 2011 2010 ----------------------------- ----------------------------- ESTIMATED FAIR VALUE ESTIMATED FAIR VALUE NOTIONAL -------------------- NOTIONAL -------------------- DERIVATIVES DESIGNATED AS HEDGING INSTRUMENTS AMOUNT ASSETS LIABILITIES AMOUNT ASSETS LIABILITIES --------------------------------------------- -------- ------ ----------- -------- ------ ----------- (IN MILLIONS) Fair value hedges: Foreign currency swaps................ $ 2,622 $ 312 $ 79 $ 3,737 $ 572 $126 Interest rate swaps................... 4,259 1,849 86 4,795 811 154 -------- ------ ----------- -------- ------ ----------- Subtotal.......................... 6,881 2,161 165 8,532 1,383 280 -------- ------ ----------- -------- ------ ----------- Cash flow hedges: Foreign currency swaps................ 5,135 314 160 4,487 193 212 Interest rate swaps................... 2,875 852 -- 2,602 95 71 Interest rate forwards................ 345 81 -- 445 -- 36 Credit forwards....................... 20 4 -- 90 2 3 -------- ------ ----------- -------- ------ ----------- Subtotal.......................... 8,375 1,251 160 7,624 290 322 -------- ------ ----------- -------- ------ ----------- Total qualifying hedges............ $15,256 $3,412 $325 $16,156 $1,673 $602 ======== ====== =========== ======== ====== ===========
F-76 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents the gross notional amount and estimated fair value of derivatives that were not designated or do not qualify as hedging instruments by derivative type at:
DECEMBER 31, ----------------------------------------------------------- 2011 2010 ----------------------------- ----------------------------- ESTIMATED FAIR VALUE ESTIMATED FAIR VALUE DERIVATIVES NOT DESIGNATED OR NOT NOTIONAL -------------------- NOTIONAL -------------------- QUALIFYING AS HEDGING INSTRUMENTS AMOUNT ASSETS LIABILITIES AMOUNT ASSETS LIABILITIES ------------------------------------------ -------- ------ ----------- -------- ------ ----------- (IN MILLIONS) Interest rate swaps........................ $ 28,935 $1,908 $ 866 $18,217 $ 571 $ 645 Interest rate floors....................... 13,290 789 14 13,290 460 4 Interest rate caps......................... 38,532 83 -- 27,253 145 -- Interest rate futures...................... 2,675 6 2 1,246 7 -- Interest rate options...................... 4,624 326 -- 5,680 107 23 Interest rate forwards..................... 500 -- 14 -- -- -- Synthetic GICs............................. 4,454 -- -- 4,397 -- -- Foreign currency swaps..................... 5,392 241 410 5,334 259 563 Foreign currency forwards.................. 2,014 81 -- 2,050 17 16 Credit default swaps....................... 7,765 90 81 6,792 72 79 Equity futures............................. -- -- -- 7 -- -- Equity options............................. 135 -- -- 176 -- -- -------- ------ ----------- -------- ------ ----------- Total non-designated or non-qualifying derivatives........................... $108,316 $3,524 $1,387 $84,442 $1,638 $1,330 ======== ====== =========== ======== ====== ===========
NET DERIVATIVE GAINS (LOSSES) The components of net derivative gains (losses) were as follows:
YEARS ENDED DECEMBER 31, ---------------------- 2011 2010 2009 ------ ------ -------- (IN MILLIONS) Derivatives and hedging gains (losses) (1). $2,040 $ 353 $(2,842) Embedded derivatives....................... (462) (619) (1,586) ------ ------ -------- Total net derivative gains (losses)..... $1,578 $(266) $(4,428) ====== ====== ========
---------- (1)Includes foreign currency transaction gains (losses) on hedged items in cash flow and non-qualifying hedging relationships, which are not presented elsewhere in this note. F-77 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents earned income on derivatives for the:
YEARS ENDED DECEMBER 31, ------------------------ 2011 2010 2009 ----- ----- ----- (IN MILLIONS) Qualifying hedges: Net investment income.............................. $ 96 $ 82 $ 51 Interest credited to policyholder account balances. 173 196 180 Non-qualifying hedges: Net investment income.............................. (8) (4) (3) Net derivative gains (losses)...................... 179 53 (51) ----- ----- ----- Total.......................................... $440 $327 $ 177 ===== ===== =====
FAIR VALUE HEDGES The Company designates and accounts for the following as fair value hedges when they have met the requirements of fair value hedging: (i) interest rate swaps to convert fixed rate investments to floating rate investments; (ii) interest rate swaps to convert fixed rate liabilities to floating rate liabilities; and (iii) foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated investments and liabilities. F-78 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company recognizes gains and losses on derivatives and the related hedged items in fair value hedges within net derivative gains (losses). The following table represents the amount of such net derivative gains (losses):
NET DERIVATIVE NET DERIVATIVE INEFFECTIVENESS GAINS (LOSSES) GAINS (LOSSES) RECOGNIZED IN DERIVATIVES IN FAIR VALUE HEDGED ITEMS IN FAIR VALUE RECOGNIZED RECOGNIZED FOR NET DERIVATIVE HEDGING RELATIONSHIPS HEDGING RELATIONSHIPS FOR DERIVATIVES HEDGED ITEMS GAINS (LOSSES) ------------------------- ----------------------------------- --------------- -------------- --------------- (IN MILLIONS) FOR THE YEAR ENDED DECEMBER 31, 2011: Interest rate swaps: Fixed maturity securities.......... $ (18) $ 18 $ -- PABs (1)........................... 1,019 (994) 25 Foreign currency swaps: Foreign-denominated fixed maturity securities....................... 1 3 4 Foreign-denominated PABs (2)....... 28 (55) (27) --------------- -------------- --------------- Total................................................... $1,030 $(1,028) $ 2 =============== ======== ===== FOR THE YEAR ENDED DECEMBER 31, 2010: Interest rate swaps: Fixed maturity securities.......... $ (13) $ 15 $ 2 PABs (1)........................... 153 (150) 3 Foreign currency swaps: Foreign-denominated fixed maturity securities....................... 13 (13) -- Foreign-denominated PABs (2)....... 47 (34) 13 --------------- -------------- --------------- Total................................................... $ 200 $ (182) $ 18 =============== ======== ===== FOR THE YEAR ENDED DECEMBER 31, 2009: Interest rate swaps: Fixed maturity securities.......... $ 42 $ (35) $ 7 PABs (1)........................... (956) 947 (9) Foreign currency swaps: Foreign-denominated fixed maturity securities....................... (13) 10 (3) Foreign-denominated PABs (2)....... 351 (332) 19 --------------- -------------- --------------- Total................................................... $(576) $ 590 $ 14 =============== ======== =====
---------- (1)Fixed rate liabilities. (2)Fixed rate or floating rate liabilities. All components of each derivative's gain or loss were included in the assessment of hedge effectiveness. CASH FLOW HEDGES The Company designates and accounts for the following as cash flow hedges when they have met the requirements of cash flow hedging: (i) interest rate swaps to convert floating rate investments to fixed rate investments; (ii) interest rate swaps to convert floating rate liabilities to fixed rate liabilities; (iii) foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated investments and liabilities; (iv) interest rate forwards and credit forwards to lock in the price to be paid for forward purchases of investments; and (v) interest rate swaps and interest rate forwards to hedge the forecasted purchases of fixed-rate investments. In certain instances, the Company discontinued cash flow hedge accounting because the forecasted transactions did not occur on the anticipated date, within two months of that date, or were no longer probable of occurring. The net amounts reclassified into net derivative gains (losses) for the years ended December 31, 2011, F-79 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2010 and 2009 related to such discontinued cash flow hedges were gains (losses) of $3 million, $9 million and ($7) million, respectively. At December 31, 2011 and 2010, the maximum length of time over which the Company was hedging its exposure to variability in future cash flows for forecasted transactions did not exceed nine years and seven years, respectively. The following table presents the components of accumulated other comprehensive income (loss), before income tax, related to cash flow hedges:
YEARS ENDED DECEMBER 31, ------------------------ 2011 2010 2009 ------ ----- ------ (IN MILLIONS) Accumulated other comprehensive income (loss), balance at January 1,.................. $ 90 $(92) $ 137 Gains (losses) deferred in other comprehensive income (loss) on the effective portion of cash flow hedges................................................................. 1,231 134 (327) Amounts reclassified to net derivative gains (losses)................................. (30) 46 93 Amounts reclassified to net investment income......................................... 2 3 7 Amounts reclassified to other expenses................................................ -- (1) -- Amortization of transition adjustment................................................. -- -- (2) ------ ----- ------ Accumulated other comprehensive income (loss), balance at December 31,................ $1,293 $ 90 $ (92) ====== ===== ======
At December 31, 2011, $26 million of deferred net gains (losses) on derivatives in accumulated other comprehensive income (loss) was expected to be reclassified to earnings within the next 12 months. F-80 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents the effects of derivatives in cash flow hedging relationships on the consolidated statements of operations and the consolidated statements of equity:
AMOUNT OF GAINS AMOUNT AND LOCATION (LOSSES) DEFERRED OF GAINS (LOSSES) AMOUNT AND LOCATION IN ACCUMULATED OTHER RECLASSIFIED FROM OF GAINS (LOSSES) DERIVATIVES IN CASH FLOW COMPREHENSIVE INCOME ACCUMULATED OTHER COMPREHENSIVE RECOGNIZED IN INCOME (LOSS) HEDGING RELATIONSHIPS (LOSS) ON DERIVATIVES INCOME (LOSS) INTO INCOME (LOSS) ON DERIVATIVES -------------------------------------- --------------------- -------------------------------------- --------------------------- (INEFFECTIVE PORTION AND AMOUNT EXCLUDED FROM (EFFECTIVE PORTION) (EFFECTIVE PORTION) EFFECTIVENESS TESTING) - --------------------- -------------------------------------- --------------------------- NET DERIVATIVE NET INVESTMENT OTHER NET DERIVATIVE GAINS (LOSSES) INCOME EXPENSES GAINS (LOSSES) -------------- -------------- -------- --------------------------- (IN MILLIONS) FOR THE YEAR ENDED DECEMBER 31, 2011: Interest rate swaps................... $ 919 $ -- $ 1 $-- $ 1 Foreign currency swaps................ 166 7 (5) -- 1 Interest rate forwards................ 128 22 2 -- 2 Credit forwards....................... 18 1 -- -- -- --------------------- -------------- -------------- -------- --------------------------- Total.............................. $1,231 $ 30 $(2) $-- $ 4 ===================== ============== ============== ======== =========================== FOR THE YEAR ENDED DECEMBER 31, 2010: Interest rate swaps................... $ 90 $ -- $ -- $ 1 $ 3 Foreign currency swaps................ 74 (56) (6) -- -- Interest rate forwards................ (35) 10 3 -- (1) Credit forwards....................... 5 -- -- -- -- --------------------- -------------- -------------- -------- --------------------------- Total.............................. $ 134 $ (46) $(3) $ 1 $ 2 ===================== ============== ============== ======== =========================== FOR THE YEAR ENDED DECEMBER 31, 2009: Interest rate swaps................... $ (47) $ -- $ -- $-- $(2) Foreign currency swaps................ (409) (159) (5) -- (1) Interest rate forwards................ 130 66 -- -- -- Credit forwards....................... (1) -- -- -- -- --------------------- -------------- -------------- -------- --------------------------- Total.............................. $(327) $ (93) $(5) $-- $(3) ===================== ============== ============== ======== ===========================
All components of each derivative's gain or loss were included in the assessment of hedge effectiveness. HEDGES OF NET INVESTMENTS IN FOREIGN OPERATIONS The Company uses foreign exchange contracts, which may include foreign currency swaps, forwards and options, to hedge portions of its net investments in foreign operations against adverse movements in exchange rates. The Company measures ineffectiveness on these contracts based upon the change in forward rates. In addition, the Company may also use non-derivative financial instruments to hedge portions of its net investments in foreign operations against adverse movements in exchange rates. The Company measures ineffectiveness on non-derivative financial instruments based upon the change in spot rates. When net investments in foreign operations are sold or substantially liquidated, the amounts in accumulated other comprehensive income (loss) are reclassified to the consolidated statements of operations, while a pro rata portion will be reclassified upon partial sale of the net investments in foreign operations. F-81 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents the effects of derivatives and non-derivative financial instruments in net investment hedging relationships in the consolidated statements of operations and the consolidated statements of equity:
AMOUNT AND LOCATION OF GAINS (LOSSES) RECLASSIFIED FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) INTO INCOME (LOSS) AMOUNT OF GAINS (LOSSES) (EFFECTIVE PORTION) DEFERRED IN ACCUMULATED ----------------------------- OTHER COMPREHENSIVE INCOME (LOSS) NET INVESTMENT (EFFECTIVE PORTION) GAINS (LOSSES) --------------------------------- ----------------------------- YEARS ENDED DECEMBER 31, YEARS ENDED DECEMBER 31, DERIVATIVES AND NON-DERIVATIVE HEDGING INSTRUMENTS IN NET --------------------------------- ----------------------------- INVESTMENT HEDGING RELATIONSHIPS (1), (2) 2011 2010 2009 2011 2010 2009 --------------------------------------------------------- ---- ---- ----- ---- ---- ------ (IN MILLIONS) Foreign currency forwards...................... $-- $-- $ -- $-- $-- $ (59) Foreign currency swaps......................... -- -- (18) -- -- (63) Non-derivative hedging instruments............. -- -- (37) -- -- (11) ---- ---- ----- ---- ---- ------ Total....................................... $-- $-- $(55) $-- $-- $(133) ==== ==== ===== ==== ==== ======
---------- (1)During the years ended December 31, 2011 and 2010, there were no sales or substantial liquidations of net investments in foreign operations that would have required the reclassification of gains or losses from accumulated other comprehensive income (loss) into earnings. During the year ended December 31, 2009, the Company substantially liquidated, through assumption reinsurance, the portion of its Canadian operations that was being hedged in a net investment hedging relationship. As a result, the Company reclassified losses of $133 million from accumulated other comprehensive income (loss) into earnings. See Note 2. (2)There was no ineffectiveness recognized for the Company's hedges of net investments in foreign operations. All components of each derivative and non-derivative hedging instrument's gain or loss were included in the assessment of hedge effectiveness. At December 31, 2011 and 2010, there was no cumulative foreign currency translation gain (loss) recorded in accumulated other comprehensive income (loss) related to hedges of net investments in foreign operations. NON-QUALIFYING DERIVATIVES AND DERIVATIVES FOR PURPOSES OTHER THAN HEDGING The Company enters into the following derivatives that do not qualify for hedge accounting or for purposes other than hedging: (i) interest rate swaps, implied volatility swaps, caps and floors and interest rate futures to economically hedge its exposure to interest rates; (ii) foreign currency forwards and swaps to economically hedge its exposure to adverse movements in exchange rates; (iii) credit default swaps to economically hedge exposure to adverse movements in credit; (iv) equity futures to economically hedge liabilities; (v) swap spreadlocks to economically hedge invested assets against the risk of changes in credit spreads; (vi) interest rate forwards to buy and sell securities to economically hedge its exposure to interest rates; (vii) credit default swaps, TRRs and structured interest rate swaps to synthetically create investments; (viii) basis swaps to better match the cash flows of assets and related liabilities; (ix) credit default swaps held in relation to trading portfolios; (x) swaptions to hedge interest rate risk; (xi) inflation swaps to reduce risk generated from inflation-indexed liabilities; (xii) covered call options for income generation; (xiii) synthetic GICs; and (xiv) equity options to economically hedge certain invested assets against adverse changes in equity indices. F-82 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents the amount and location of gains (losses) recognized in income for derivatives that were not designated or qualifying as hedging instruments:
NET NET DERIVATIVE INVESTMENT GAINS (LOSSES) INCOME (1) -------------- ---------- (IN MILLIONS) FOR THE YEAR ENDED DECEMBER 31, 2011: Interest rate swaps................... $ 1,073 $ -- Interest rate floors.................. 319 -- Interest rate caps.................... (185) -- Interest rate futures................. 240 -- Foreign currency swaps................ 72 -- Foreign currency forwards............. 31 -- Equity options........................ -- (14) Interest rate options................. 246 -- Interest rate forwards................ (14) -- Swap spreadlocks...................... -- -- Credit default swaps.................. 13 5 Total rate of return swaps............ -- -- -------------- ---------- Total................................ $ 1,795 $ (9) ============== ========== FOR THE YEAR ENDED DECEMBER 31, 2010: Interest rate swaps................... $ 74 $ -- Interest rate floors.................. 95 -- Interest rate caps.................... (165) -- Interest rate futures................. 108 -- Foreign currency swaps................ 118 -- Foreign currency forwards............. (12) -- Equity options........................ (2) (17) Interest rate options................. 30 -- Interest rate forwards................ 7 -- Swap spreadlocks...................... -- -- Credit default swaps.................. 28 (2) Total rate of return swaps............ 15 -- -------------- ---------- Total................................ $ 296 $(19) ============== ========== FOR THE YEAR ENDED DECEMBER 31, 2009: Interest rate swaps................... $ (880) $ -- Interest rate floors.................. (514) -- Interest rate caps.................... 27 -- Interest rate futures................. (155) -- Foreign currency swaps................ (584) -- Foreign currency forwards............. (151) -- Equity options........................ 2 (2) Interest rate options................. (379) -- Interest rate forwards................ (7) -- Swap spreadlocks...................... (38) -- Credit default swaps.................. (195) (11) Total rate of return swaps............ 63 -- -------------- ---------- Total................................ $(2,811) $(13) ============== ==========
---------- (1)Changes in estimated fair value related to economic hedges of equity method investments in joint ventures, and changes in estimated fair value related to derivatives held in relation to trading portfolios. F-83 \METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CREDIT DERIVATIVES In connection with synthetically created investment transactions and credit default swaps held in relation to the trading portfolio, the Company writes credit default swaps for which it receives a premium to insure credit risk. Such credit derivatives are included within the non-qualifying derivatives and derivatives for purposes other than hedging table. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the Company paying the counterparty the specified swap notional amount in exchange for the delivery of par quantities of the referenced credit obligation. The Company's maximum amount at risk, assuming the value of all referenced credit obligations is zero, was $5.4 billion and $4.2 billion at December 31, 2011 and 2010, respectively. The Company can terminate these contracts at any time through cash settlement with the counterparty at an amount equal to the then current fair value of the credit default swaps. At December 31, 2011, the Company would have paid $29 million to terminate all of these contracts, and at December 31, 2010, the Company would have received $49 million to terminate all of these contracts. The following table presents the estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps at:
DECEMBER 31, ----------------------------------------------------------------------------- 2011 2010 -------------------------------------- -------------------------------------- MAXIMUM MAXIMUM ESTIMATED AMOUNT ESTIMATED AMOUNT FAIR VALUE OF FUTURE WEIGHTED FAIR VALUE OF FUTURE WEIGHTED OF CREDIT PAYMENTS UNDER AVERAGE OF CREDIT PAYMENTS UNDER AVERAGE RATING AGENCY DESIGNATION OF REFERENCED DEFAULT CREDIT DEFAULT YEARS TO DEFAULT CREDIT DEFAULT YEARS TO CREDIT OBLIGATIONS (1) SWAPS SWAPS (2) MATURITY (3) SWAPS SWAPS (2) MATURITY (3) --------------------------------------------- ---------- -------------- ------------ ---------- -------------- ------------ (IN MILLIONS) (IN MILLIONS) Aaa/Aa/A Single name credit default swaps (corporate). $ 3 $ 488 3.1 $ 4 $ 423 3.9 Credit default swaps referencing indices..... (1) 2,150 3.0 34 2,247 3.7 ---------- -------------- ---------- -------------- Subtotal................................... 2 2,638 3.0 38 2,670 3.7 ---------- -------------- ---------- -------------- Baa Single name credit default swaps (corporate). (10) 750 3.6 5 730 4.4 Credit default swaps referencing indices..... (19) 1,959 4.9 6 728 5.0 ---------- -------------- ---------- -------------- Subtotal................................... (29) 2,709 4.5 11 1,458 4.7 ---------- -------------- ---------- -------------- Ba Single name credit default swaps (corporate). -- 25 3.5 -- 25 4.4 Credit default swaps referencing indices..... -- -- -- -- -- -- ---------- -------------- ---------- -------------- Subtotal................................... -- 25 3.5 -- 25 4.4 ---------- -------------- ---------- -------------- B Single name credit default swaps (corporate). -- -- -- -- -- -- Credit default swaps referencing indices..... (2) 25 4.8 -- -- -- ---------- -------------- ---------- -------------- Subtotal................................... (2) 25 4.8 -- -- -- ---------- -------------- ---------- -------------- Total..................................... $(29) $5,397 3.8 $49 $4,153 4.1 ========== ============== ========== ==============
---------- (1)The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody's Investors Service, S&P and Fitch Ratings. If no rating is available from a rating agency, then an internally developed rating is used. F-84 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (2)Assumes the value of the referenced credit obligations is zero. (3)The weighted average years to maturity of the credit default swaps is calculated based on weighted average notional amounts. The Company has also entered into credit default swaps to purchase credit protection on certain of the referenced credit obligations in the table above. As a result, the maximum amounts of potential future recoveries available to offset the $5.4 billion and $4.2 billion from the table above were $80 million and $120 million at December 31, 2011 and 2010, respectively. CREDIT RISK ON FREESTANDING DERIVATIVES The Company may be exposed to credit-related losses in the event of nonperformance by counterparties to derivative financial instruments. Generally, the current credit exposure of the Company's derivative contracts is limited to the net positive estimated fair value of derivative contracts at the reporting date after taking into consideration the existence of netting agreements and any collateral received pursuant to credit support annexes. The Company manages its credit risk related to OTC derivatives by entering into transactions with creditworthy counterparties, maintaining collateral arrangements and through the use of master agreements that provide for a single net payment to be made by one counterparty to another at each due date and upon termination. Because exchange-traded futures are effected through regulated exchanges, and positions are marked to market on a daily basis, the Company has minimal exposure to credit-related losses in the event of nonperformance by counterparties to such derivative instruments. See Note 5 for a description of the impact of credit risk on the valuation of derivative instruments. The Company enters into various collateral arrangements which require both the pledging and accepting of collateral in connection with its OTC derivative instruments. At December 31, 2011 and 2010, the Company was obligated to return cash collateral under its control of $4.4 billion and $1.0 billion, respectively. This cash collateral is included in cash and cash equivalents or in short-term investments and the obligation to return it is included in payables for collateral under securities loaned and other transactions in the consolidated balance sheets. At December 31, 2011 and 2010, the Company had received collateral consisting of various securities with a fair market value of $768 million and $501 million, respectively, which were held in separate custodial accounts. Subject to certain constraints, the Company is permitted by contract to sell or repledge this collateral, but at December 31, 2011, none of the collateral had been sold or repledged. The Company's collateral arrangements for its OTC derivatives generally require the counterparty in a net liability position, after considering the effect of netting agreements, to pledge collateral when the fair value of that counterparty's derivatives reaches a pre-determined threshold. Certain of these arrangements also include credit-contingent provisions that provide for a reduction of these thresholds (on a sliding scale that converges toward zero) in the event of downgrades in the credit ratings of the Company and/or the counterparty. In addition, certain of the Company's netting agreements for derivative instruments contain provisions that require the Company to maintain a specific investment grade credit rating from at least one of the major credit rating agencies. If the Company's credit ratings were to fall below that specific investment grade credit rating, it would be in violation of these provisions, and the counterparties to the derivative instruments could request immediate payment or demand immediate and ongoing full overnight collateralization on derivative instruments that are in a net liability position after considering the effect of netting agreements. The following table presents the estimated fair value of the Company's OTC derivatives that are in a net liability position after considering the effect of netting agreements, together with the estimated fair value and balance sheet location of the collateral pledged. The table also presents the incremental collateral that the Company would be required to provide if there was a one notch downgrade in the Company's credit rating at the F-85 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) reporting date or if the Company's credit rating sustained a downgrade to a level that triggered full overnight collateralization or termination of the derivative position at the reporting date. Derivatives that are not subject to collateral agreements are not included in the scope of this table.
ESTIMATED FAIR VALUE OF FAIR VALUE OF INCREMENTAL COLLATERAL COLLATERAL PROVIDED: PROVIDED UPON: - ----------------------- ------------------------------------ DOWNGRADE IN THE ONE NOTCH COMPANY'S CREDIT RATING DOWNGRADE TO A LEVEL THAT TRIGGERS ESTIMATED IN THE FULL OVERNIGHT FAIR VALUE (1) OF COMPANY'S COLLATERALIZATION OR DERIVATIVES IN NET FIXED MATURITY CREDIT TERMINATION LIABILITY POSITION SECURITIES (2) CASH (3) RATING OF THE DERIVATIVE POSITION - ------------------ -------------- -------- --------- -------------------------- (IN MILLIONS) DECEMBER 31, 2011: Derivatives subject to credit- contingent provisions........ $151 $ 94 $-- $25 $ 64 Derivatives not subject to credit-contingent provisions. -- -- -- -- -- ------------------ -------------- -------- --------- -------------------------- Total......................... $151 $ 94 $-- $25 $ 64 ================== ============== ======== ========= ========================== DECEMBER 31, 2010: Derivatives subject to credit- contingent provisions........ $243 $120 $-- $35 $110 Derivatives not subject to credit-contingent provisions. 1 -- 1 -- -- ------------------ -------------- -------- --------- -------------------------- Total......................... $244 $120 $ 1 $35 $110 ================== ============== ======== ========= ==========================
---------- (1)After taking into consideration the existence of netting agreements. (2)Included in fixed maturity securities in the consolidated balance sheets. Subject to certain constraints, the counterparties are permitted by contract to sell or repledge this collateral. (3)Included in premiums, reinsurance and other receivables in the consolidated balance sheets. Without considering the effect of netting agreements, the estimated fair value of the Company's OTC derivatives with credit-contingent provisions that were in a gross liability position at December 31, 2011 was $216 million. At December 31, 2011, the Company provided collateral of $94 million in connection with these derivatives. In the unlikely event that both: (i) the Company's credit rating was downgraded to a level that triggers full overnight collateralization or termination of all derivative positions; and (ii) the Company's netting agreements were deemed to be legally unenforceable, then the additional collateral that the Company would be required to provide to its counterparties in connection with its derivatives in a gross liability position at December 31, 2011 would be $122 million. This amount does not consider gross derivative assets of $65 million for which the Company has the contractual right of offset. The Company also has exchange-traded futures, which require the pledging of collateral. At both December 31, 2011 and 2010, the Company did not pledge any securities collateral for exchange-traded futures. At December 31, 2011 and 2010, the Company provided cash collateral for exchange-traded futures of $37 million and $21 million, respectively, which is included in premiums, reinsurance and other receivables. F-86 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) EMBEDDED DERIVATIVES The Company issues certain products or purchases certain investments that contain embedded derivatives that are required to be separated from their host contracts and accounted for as freestanding derivatives. These host contracts principally include: variable annuities with guaranteed minimum benefits, including GMWBs, GMABs and certain GMIBs; affiliated ceded reinsurance of guaranteed minimum benefits related to GMWBs, GMABs and certain GMIBs; funds withheld on ceded reinsurance and affiliated funds withheld on ceded reinsurance; funding agreements with equity or bond indexed crediting rates; and options embedded in debt or equity securities. The following table presents the estimated fair value of the Company's embedded derivatives at:
DECEMBER 31, ------------ 2011 2010 ------ ----- (IN MILLIONS) Net embedded derivatives within asset host contracts: Ceded guaranteed minimum benefits.......................... $1,163 $ 295 Options embedded in debt or equity securities.............. (15) (24) ------ ----- Net embedded derivatives within asset host contracts..... $1,148 $ 271 ====== ===== Net embedded derivatives within liability host contracts: Direct guaranteed minimum benefits......................... $ 307 $(77) Funds withheld on ceded reinsurance........................ 1,646 754 Other...................................................... 17 11 ------ ----- Net embedded derivatives within liability host contracts. $1,970 $ 688 ====== =====
The following table presents changes in estimated fair value related to embedded derivatives:
YEARS ENDED DECEMBER 31, ---------------------- 2011 2010 2009 ------ ------ -------- (IN MILLIONS) Net derivative gains (losses) (1), (2). $(462) $(619) $(1,586)
---------- (1)The valuation of direct guaranteed minimum benefits includes an adjustment for nonperformance risk. The amounts included in net derivative gains (losses), in connection with this adjustment, were $88 million, ($43) million and ($380) million for the years ended December 31, 2011, 2010 and 2009, respectively. In addition, the valuation of ceded guaranteed minimum benefits includes an adjustment for nonperformance risk. The amounts included in net derivative gains (losses), in connection with this adjustment, were ($219) million, $82 million and $624 million for the years ended December 31, 2011, 2010 and 2009, respectively. (2)See Note 9 for discussion of affiliated net derivative gains (losses) included in the table above. 5. FAIR VALUE Considerable judgment is often required in interpreting market data to develop estimates of fair value, and the use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. F-87 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ASSETS AND LIABILITIES MEASURED AT FAIR VALUE RECURRING FAIR VALUE MEASUREMENTS The assets and liabilities measured at estimated fair value on a recurring basis, including those items for which the Company has elected the FVO, were determined as described below. These estimated fair values and their corresponding placement in the fair value hierarchy are summarized as follows:
DECEMBER 31, 2011 ----------------------------------------------------------- FAIR VALUE MEASUREMENTS AT REPORTING DATE USING ------------------------------------------------- QUOTED PRICES IN ACTIVE MARKETS FOR SIGNIFICANT TOTAL IDENTICAL ASSETS SIGNIFICANT OTHER UNOBSERVABLE ESTIMATED AND LIABILITIES OBSERVABLE INPUTS INPUTS FAIR (LEVEL 1) (LEVEL 2) (LEVEL 3) VALUE ------------------ ----------------- ------------ --------- (IN MILLIONS) ASSETS: Fixed maturity securities: U.S. corporate securities.................................. $ -- $ 56,777 $ 4,919 $ 61,696 Foreign corporate securities............................... -- 26,888 2,258 29,146 U.S. Treasury and agency securities........................ 11,450 14,369 25 25,844 RMBS....................................................... -- 25,028 691 25,719 CMBS....................................................... -- 8,886 219 9,105 ABS........................................................ -- 5,440 1,146 6,586 State and political subdivision securities................. -- 6,182 -- 6,182 Foreign government securities.............................. -- 3,609 291 3,900 ------------------ ----------------- ------------ --------- Total fixed maturity securities........................... 11,450 147,179 9,549 168,178 ------------------ ----------------- ------------ --------- Equity securities: Common stock............................................... 79 673 104 856 Non-redeemable preferred stock............................. -- 129 293 422 ------------------ ----------------- ------------ --------- Total equity securities................................... 79 802 397 1,278 ------------------ ----------------- ------------ --------- Trading and other securities: Actively Traded Securities................................. -- 473 -- 473 FVO general account securities............................. -- 93 14 107 FVO securities held by CSEs................................ -- 117 -- 117 ------------------ ----------------- ------------ --------- Total trading and other securities........................ -- 683 14 697 ------------------ ----------------- ------------ --------- Short-term investments (1)................................... 1,641 4,364 134 6,139 Derivative assets: (2) Interest rate contracts.................................... 6 5,807 81 5,894 Foreign currency contracts................................. -- 892 56 948 Credit contracts........................................... -- 71 23 94 Equity market contracts.................................... -- -- -- -- ------------------ ----------------- ------------ --------- Total derivative assets................................... 6 6,770 160 6,936 ------------------ ----------------- ------------ --------- Net embedded derivatives within asset host contracts (3)..... -- -- 1,163 1,163 Separate account assets (4).................................. 22,445 83,151 1,082 106,678 ------------------ ----------------- ------------ --------- Total assets............................................. $35,621 $242,949 $12,499 $291,069 ================== ================= ============ ========= LIABILITIES: Derivative liabilities: (2) Interest rate contracts.................................... $ 2 $ 966 $ 14 $ 982 Foreign currency contracts................................. -- 649 -- 649 Credit contracts........................................... -- 59 22 81 Equity market contracts.................................... -- -- -- -- ------------------ ----------------- ------------ --------- Total derivative liabilities.............................. 2 1,674 36 1,712 ------------------ ----------------- ------------ --------- Net embedded derivatives within liability host contracts (3). -- 17 1,953 1,970 Long-term debt of CSEs....................................... -- -- 116 116 Trading liabilities (5)...................................... 124 3 -- 127 ------------------ ----------------- ------------ --------- Total liabilities........................................ $ 126 $ 1,694 $ 2,105 $ 3,925 ================== ================= ============ =========
F-88 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2010 ----------------------------------------------------------- FAIR VALUE MEASUREMENTS AT REPORTING DATE USING ------------------------------------------------- QUOTED PRICES IN ACTIVE MARKETS FOR SIGNIFICANT TOTAL IDENTICAL ASSETS SIGNIFICANT OTHER UNOBSERVABLE ESTIMATED AND LIABILITIES OBSERVABLE INPUTS INPUTS FAIR (LEVEL 1) (LEVEL 2) (LEVEL 3) VALUE ------------------ ----------------- ------------ --------- (IN MILLIONS) ASSETS: Fixed maturity securities: U.S. corporate securities.................................. $ -- $ 48,064 $ 5,063 $ 53,127 Foreign corporate securities............................... -- 27,771 2,796 30,567 U.S. Treasury and agency securities........................ 7,728 13,205 44 20,977 RMBS....................................................... 274 28,420 1,985 30,679 CMBS....................................................... -- 9,540 161 9,701 ABS........................................................ -- 4,929 1,514 6,443 State and political subdivision securities................. -- 4,583 1 4,584 Foreign government securities.............................. -- 3,286 171 3,457 ------------------ ----------------- ------------ --------- Total fixed maturity securities........................... 8,002 139,798 11,735 159,535 ------------------ ----------------- ------------ --------- Equity securities: Common stock............................................... 176 717 79 972 Non-redeemable preferred stock............................. -- 216 633 849 ------------------ ----------------- ------------ --------- Total equity securities................................... 176 933 712 1,821 ------------------ ----------------- ------------ --------- Trading and other securities: Actively Traded Securities................................. -- 453 10 463 FVO general account securities............................. -- 21 50 71 FVO securities held by CSEs................................ -- 201 -- 201 ------------------ ----------------- ------------ --------- Total trading and other securities........................ -- 675 60 735 ------------------ ----------------- ------------ --------- Short-term investments (1)................................... 1,001 845 379 2,225 Derivative assets: (2) Interest rate contracts.................................... 7 2,175 14 2,196 Foreign currency contracts................................. -- 995 46 1,041 Credit contracts........................................... -- 35 39 74 Equity market contracts.................................... -- -- -- -- ------------------ ----------------- ------------ --------- Total derivative assets................................... 7 3,205 99 3,311 ------------------ ----------------- ------------ --------- Net embedded derivatives within asset host contracts (3)..... -- -- 295 295 Separate account assets (4).................................. 19,550 76,770 1,509 97,829 ------------------ ----------------- ------------ --------- Total assets............................................. $28,736 $222,226 $14,789 $265,751 ================== ================= ============ ========= LIABILITIES: Derivative liabilities: (2) Interest rate contracts.................................... $ -- $ 896 $ 37 $ 933 Foreign currency contracts................................. -- 917 -- 917 Credit contracts........................................... -- 76 6 82 Equity market contracts.................................... -- -- -- -- ------------------ ----------------- ------------ --------- Total derivative liabilities.............................. -- 1,889 43 1,932 ------------------ ----------------- ------------ --------- Net embedded derivatives within liability host contracts (3). -- 11 677 688 Long-term debt of CSEs....................................... -- -- 184 184 Trading liabilities (5)...................................... 46 -- -- 46 ------------------ ----------------- ------------ --------- Total liabilities........................................ $ 46 $ 1,900 $ 904 $ 2,850 ================== ================= ============ =========
---------- (1)Short-term investments as presented in the tables above differ from the amounts presented in the consolidated balance sheets because certain short-term investments are not measured at estimated fair value (e.g., time deposits, etc.), and therefore are excluded from the tables presented above. (2)Derivative assets are presented within other invested assets in the consolidated balance sheets and derivative liabilities are presented within other liabilities in the consolidated balance sheets. The amounts are presented F-89 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) gross in the tables above to reflect the presentation in the consolidated balance sheets, but are presented net for purposes of the rollforward in the Fair Value Measurements Using Significant Unobservable Inputs (Level 3) tables which follow. (3)Net embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables in the consolidated balance sheets. Net embedded derivatives within liability host contracts are presented in the consolidated balance sheets within PABs and other liabilities. At December 31, 2011, fixed maturity securities and equity securities also included embedded derivatives of less than $1 million and ($15) million, respectively. At December 31, 2010, fixed maturity securities and equity securities included embedded derivatives of $1 million and ($25) million, respectively. (4)Separate account assets are measured at estimated fair value. Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose liability is reflected within separate account liabilities. Separate account liabilities are set equal to the estimated fair value of separate account assets. (5)Trading liabilities are presented within other liabilities in the consolidated balance sheets. See Note 3 for discussion of CSEs included in the tables above and for certain prior year amounts which have been reclassified to conform with the 2011 presentation. The methods and assumptions used to estimate the fair value of financial instruments are summarized as follows: Fixed Maturity Securities, Equity Securities, Trading and Other Securities and Short-term Investments When available, the estimated fair value of the Company's fixed maturity securities, equity securities, trading and other securities and short-term investments are based on quoted prices in active markets that are readily and regularly obtainable. Generally, these are the most liquid of the Company's securities holdings and valuation of these securities does not involve management's judgment. When quoted prices in active markets are not available, the determination of estimated fair value is based on market standard valuation methodologies, giving priority to observable inputs. The market standard valuation methodologies utilized include: discounted cash flow methodologies, matrix pricing or other similar techniques. The inputs in applying these market standard valuation methodologies include, but are not limited to: interest rates, credit standing of the issuer or counterparty, industry sector of the issuer, coupon rate, call provisions, sinking fund requirements, maturity and management's assumptions regarding estimated duration, liquidity and estimated future cash flows. Accordingly, the estimated fair values are based on available market information and management's judgments about financial instruments. The significant inputs to the market standard valuation methodologies for certain types of securities with reasonable levels of price transparency are inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Such observable inputs include benchmarking prices for similar assets in active markets, quoted prices in markets that are not active and observable yields and spreads in the market. When observable inputs are not available, the market standard valuation methodologies for determining the estimated fair value of certain types of securities that trade infrequently, and therefore have little or no price transparency, rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data. These unobservable inputs can be based in large part on management's judgment or estimation and cannot be supported by reference to market activity. Even though these inputs are unobservable, management believes they are consistent with what other F-90 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) market participants would use when pricing such securities and are considered appropriate given the circumstances. The estimated fair value of FVO securities held by CSEs is determined on a basis consistent with the methodologies described herein for fixed maturity securities and equity securities. The Company consolidates certain securitization entities that hold securities that have been accounted for under the FVO and classified within trading and other securities. The use of different methodologies, assumptions and inputs may have a material effect on the estimated fair values of the Company's securities holdings. Derivatives The estimated fair value of derivatives is determined through the use of quoted market prices for exchange-traded derivatives or through the use of pricing models for OTC derivatives. The determination of estimated fair value, when quoted market values are not available, is based on market standard valuation methodologies and inputs that management believes are consistent with what other market participants would use when pricing the instruments. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, default risk, nonperformance risk, volatility, liquidity and changes in estimates and assumptions used in the pricing models. The significant inputs to the pricing models for most OTC derivatives are inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Significant inputs that are observable generally include: interest rates, foreign currency exchange rates, interest rate curves, credit curves and volatility. However, certain OTC derivatives may rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data. Significant inputs that are unobservable generally include: independent broker quotes, references to emerging market currencies and inputs that are outside the observable portion of the interest rate curve, credit curve, volatility or other relevant market measure. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and management believes they are consistent with what other market participants would use when pricing such instruments. The credit risk of both the counterparty and the Company are considered in determining the estimated fair value for all OTC derivatives, and any potential credit adjustment is based on the net exposure by counterparty after taking into account the effects of netting agreements and collateral arrangements. The Company values its derivative positions using the standard swap curve which includes a spread to the risk free rate. This credit spread is appropriate for those parties that execute trades at pricing levels consistent with the standard swap curve. As the Company and its significant derivative counterparties consistently execute trades at such pricing levels, additional credit risk adjustments are not currently required in the valuation process. The Company's ability to consistently execute at such pricing levels is in part due to the netting agreements and collateral arrangements that are in place with all of its significant derivative counterparties. The evaluation of the requirement to make additional credit risk adjustments is performed by the Company each reporting period. Most inputs for OTC derivatives are mid market inputs but, in certain cases, bid level inputs are used when they are deemed more representative of exit value. Market liquidity, as well as the use of different methodologies, assumptions and inputs, may have a material effect on the estimated fair values of the Company's derivatives and could materially affect net income. F-91 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Embedded Derivatives Within Asset and Liability Host Contracts Embedded derivatives principally include certain direct variable annuity guarantees, certain affiliated ceded reinsurance agreements related to such variable annuity guarantees and certain funding agreements with equity or bond indexed crediting rates and those related to ceded funds withheld on reinsurance. Embedded derivatives are recorded at estimated fair value with changes in estimated fair value reported in net income. The Company issues certain variable annuity products with guaranteed minimum benefits. GMWBs, GMABs and certain GMIBs are embedded derivatives, which are measured at estimated fair value separately from the host variable annuity contract, with changes in estimated fair value reported in net derivative gains (losses). These embedded derivatives are classified within PABs in the consolidated balance sheets. The fair value of these guarantees is estimated using the present value of projected future benefits minus the present value of projected future fees using actuarial and capital market assumptions including expectations concerning policyholder behavior. A risk neutral valuation methodology is used under which the cash flows from the guarantees are projected under multiple capital market scenarios using observable risk free rates. The valuation of these guarantee liabilities includes adjustments for nonperformance risk and for a risk margin related to non-capital market inputs. The nonperformance adjustment is determined by taking into consideration publicly available information relating to spreads in the secondary market for MetLife, Inc.'s debt, including related credit default swaps. These observable spreads are then adjusted, as necessary, to reflect the priority of these liabilities and the claims paying ability of the issuing insurance subsidiaries compared to MetLife, Inc. Risk margins are established to capture the non-capital market risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties of such actuarial assumptions as annuitization, premium persistency, partial withdrawal and surrenders. The establishment of risk margins requires the use of significant management judgment, including assumptions of the amount and cost of capital needed to cover the guarantees. These guarantees may be more costly than expected in volatile or declining equity markets. Market conditions including, but not limited to, changes in interest rates, equity indices, market volatility and foreign currency exchange rates; changes in nonperformance risk; and variations in actuarial assumptions regarding policyholder behavior, mortality and risk margins related to non-capital market inputs may result in significant fluctuations in the estimated fair value of the guarantees that could materially affect net income. The Company ceded the risk associated with certain of the GMIBs, GMABs and GMWBs previously described. In addition to ceding risks associated with guarantees that are accounted for as embedded derivatives, the Company also ceded directly written GMIBs that are accounted for as insurance (i.e., not as embedded derivatives) but where the reinsurance agreement contains an embedded derivative. These embedded derivatives are included within premiums, reinsurance and other receivables in the consolidated balance sheets with changes in estimated fair value reported in net derivative gains (losses). The value of the embedded derivatives on these ceded risks is determined using a methodology consistent with that described previously for the guarantees directly written by the Company with the exception of the input for nonperformance risk that reflects the credit of the reinsurer. The estimated fair value of the embedded derivatives within funds withheld related to certain ceded reinsurance is determined based on the change in estimated fair value of the underlying assets held by the Company in a reference portfolio backing the funds withheld liability. The estimated fair value of the underlying assets is determined as previously described in "-- Fixed Maturity Securities, Equity Securities, Trading and Other Securities and Short-term Investments." The estimated fair value of these embedded derivatives is included, along with their funds withheld hosts, in other liabilities in the consolidated balance sheets with F-92 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) changes in estimated fair value recorded in net derivative gains (losses). Changes in the credit spreads on the underlying assets, interest rates and market volatility may result in significant fluctuations in the estimated fair value of these embedded derivatives that could materially affect net income. The estimated fair value of the embedded equity and bond indexed derivatives contained in certain funding agreements is determined using market standard swap valuation models and observable market inputs, including an adjustment for nonperformance risk. The estimated fair value of these embedded derivatives are included, along with their funding agreements host, within PABs with changes in estimated fair value recorded in net derivative gains (losses). Changes in equity and bond indices, interest rates and the Company's credit standing may result in significant fluctuations in the estimated fair value of these embedded derivatives that could materially affect net income. Separate Account Assets Separate account assets are carried at estimated fair value and reported as a summarized total on the consolidated balance sheets. The estimated fair value of separate account assets is based on the estimated fair value of the underlying assets. Assets within the Company's separate accounts include: mutual funds, fixed maturity securities, equity securities, mortgage loans, derivatives, hedge funds, other limited partnership interests, short-term investments and cash and cash equivalents. See "-- Valuation Techniques and Inputs by Level Within the Three-Level Fair Value Hierarchy by Major Classes of Assets and Liabilities" below for a discussion of the methods and assumptions used to estimate the fair value of these financial instruments. Long-term Debt of CSEs The Company has elected the FVO for the long-term debt of CSEs. See "-- Valuation Techniques and Inputs by Level Within the Three-Level Fair Value Hierarchy by Major Classes of Assets and Liabilities" below for a discussion of the methods and assumptions used to estimate the fair value of these financial instruments. Trading Liabilities Trading liabilities are recorded at estimated fair value with subsequent changes in estimated fair value recognized in net investment income. The estimated fair value of trading liabilities is determined on a basis consistent with the methodologies described in "-- Fixed Maturity Securities, Equity Securities, Trading and Other Securities and Short-term Investments." VALUATION TECHNIQUES AND INPUTS BY LEVEL WITHIN THE THREE-LEVEL FAIR VALUE HIERARCHY BY MAJOR CLASSES OF ASSETS AND LIABILITIES A description of the significant valuation techniques and inputs to the determination of estimated fair value for the more significant asset and liability classes measured at fair value on a recurring basis is as follows: The Company determines the estimated fair value of its investments using primarily the market approach and the income approach. The use of quoted prices for identical assets and matrix pricing or other similar techniques are examples of market approaches, while the use of discounted cash flow methodologies is an example of the income approach. The Company attempts to maximize the use of observable inputs and minimize the use of unobservable inputs in selecting whether the market or income approach is used. While certain investments have been classified as Level 1 from the use of unadjusted quoted prices for identical investments supported by high volumes of trading activity and narrow bid/ask spreads, most investments have been classified as Level 2 because the significant inputs used to measure the fair value on a F-93 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) recurring basis of the same or similar investment are market observable or can be corroborated using market observable information for the full term of the investment. Level 3 investments include those where estimated fair values are based on significant unobservable inputs that are supported by little or no market activity and may reflect management's own assumptions about what factors market participants would use in pricing these investments. LEVEL 1 MEASUREMENTS: Fixed Maturity Securities, Equity Securities and Short-term Investments These securities are comprised of U.S. Treasury and agency securities, RMBS principally to-be-announced securities, exchange traded common stock and short-term money market securities, including U.S. Treasury bills. Valuation of these securities is based on unadjusted quoted prices in active markets that are readily and regularly available. Derivative Assets and Derivative Liabilities These assets and liabilities are comprised of exchange-traded derivatives. Valuation of these assets and liabilities is based on unadjusted quoted prices in active markets that are readily and regularly available. Separate Account Assets These assets are comprised of (i) securities that are similar in nature to the fixed maturity securities, equity securities and short-term investments referred to above; and (ii) certain exchange-traded derivatives, including financial futures and owned options. Valuation of these assets is based on unadjusted quoted prices in active markets that are readily and regularly available. LEVEL 2 MEASUREMENTS: Fixed Maturity Securities, Equity Securities, Trading and Other Securities and Short-term Investments This level includes fixed maturity securities and equity securities priced principally by independent pricing services using observable inputs. Trading and other securities and short-term investments within this level are of a similar nature and class to the Level 2 securities described below. U.S. corporate and foreign corporate securities. These securities are principally valued using the market and income approaches. Valuation is based primarily on quoted prices in markets that are not active, or using matrix pricing or other similar techniques that use standard market observable inputs such as benchmark yields, spreads off benchmark yields, new issuances, issuer rating, duration, and trades of identical or comparable securities. Investment grade privately placed securities are valued using discounted cash flow methodologies using standard market observable inputs, and inputs derived from, or corroborated by, market observable data including market yield curve, duration, call provisions, observable prices and spreads for similar publicly traded or privately traded issues that incorporate the credit quality and industry sector of the issuer. This level also includes certain below investment grade privately placed fixed maturity securities priced by independent pricing services that use observable inputs. Structured securities comprised of RMBS, CMBS and ABS. These securities are principally valued using the market approach. Valuation is based primarily on matrix pricing or other similar techniques using standard market inputs including spreads for actively traded securities, spreads off benchmark yields, F-94 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) expected prepayment speeds and volumes, current and forecasted loss severity, rating, weighted average coupon, weighted average maturity, average delinquency rates, geographic region, debt-service coverage ratios and issuance-specific information including, but not limited to: collateral type, payment terms of the underlying assets, payment priority within the tranche, structure of the security, deal performance and vintage of loans. U.S. Treasury and agency securities. These securities are principally valued using the market approach. Valuation is based primarily on quoted prices in markets that are not active, or using matrix pricing or other similar techniques using standard market observable inputs such as benchmark U.S. Treasury yield curve, the spread off the U.S. Treasury curve for the identical security and comparable securities that are actively traded. Foreign government and state and political subdivision securities. These securities are principally valued using the market approach. Valuation is based primarily on matrix pricing or other similar techniques using standard market observable inputs including benchmark U.S. Treasury or other yields, issuer ratings, broker-dealer quotes, issuer spreads and reported trades of similar securities, including those within the same sub-sector or with a similar maturity or credit rating. Common and non-redeemable preferred stock. These securities are principally valued using the market approach where market quotes are available but are not considered actively traded. Valuation is based principally on observable inputs including quoted prices in markets that are not considered active. Derivative Assets and Derivative Liabilities This level includes all types of derivative instruments utilized by the Company with the exception of exchange-traded derivatives included within Level 1 and those derivative instruments with unobservable inputs as described in Level 3. These derivatives are principally valued using an income approach. Interest rate contracts. Non-option-based -- Valuations are based on present value techniques, which utilize significant inputs that may include the swap yield curve, LIBOR basis curves and repurchase rates. Option-based -- Valuations are based on option pricing models, which utilize significant inputs that may include the swap yield curve, LIBOR basis curves and interest rate volatility. Foreign currency contracts. Non-option-based -- Valuations are based on present value techniques, which utilize significant inputs that may include the swap yield curve, LIBOR basis curves, currency spot rates and cross currency basis curves. Credit contracts. Non-option-based -- Valuations are based on present value techniques, which utilize significant inputs that may include the swap yield curve, credit curves and recovery rates. Equity market contracts. Non-option-based -- Valuations are based on present value techniques, which utilize significant inputs that may include the swap yield curve, spot equity index levels and dividend yield curves. F-95 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Option-based -- Valuations are based on option pricing models, which utilize significant inputs that may include the swap yield curve, spot equity index levels, dividend yield curves and equity volatility. Embedded Derivatives Contained in Certain Funding Agreements These derivatives are principally valued using an income approach. Valuations are based on present value techniques, which utilize significant inputs that may include the swap yield curve and the spot equity and bond index level. Separate Account Assets These assets are comprised of investments that are similar in nature to the fixed maturity securities, equity securities, short-term investments and derivative assets referred to above. Also included are certain mutual funds and hedge funds without readily determinable fair values given prices are not published publicly. Valuation of the mutual funds and hedge funds is based upon quoted prices or reported NAV provided by the fund managers. LEVEL 3 MEASUREMENTS: In general, investments classified within Level 3 use many of the same valuation techniques and inputs as described in Level 2 Measurements. However, if key inputs are unobservable, or if the investments are less liquid and there is very limited trading activity, the investments are generally classified as Level 3. The use of independent non-binding broker quotations to value investments generally indicates there is a lack of liquidity or a lack of transparency in the process to develop the valuation estimates generally causing these investments to be classified in Level 3. Fixed Maturity Securities, Equity Securities, Trading and Other Securities and Short-term Investments This level includes fixed maturity securities and equity securities priced principally by independent broker quotations or market standard valuation methodologies using inputs that are not market observable or cannot be derived principally from or corroborated by observable market data. Trading and other securities and short-term investments within this level are of a similar nature and class to the Level 3 securities described below; accordingly, the valuation techniques and significant market standard observable inputs used in their valuation are also similar to those described below. U.S. corporate and foreign corporate securities. These securities, including financial services industry hybrid securities classified within fixed maturity securities, are principally valued using the market and income approaches. Valuations are based primarily on matrix pricing or other similar techniques that utilize unobservable inputs or cannot be derived principally from, or corroborated by, observable market data, including illiquidity premiums and spread adjustments to reflect industry trends or specific credit-related issues. Valuations may be based on independent non-binding broker quotations. Generally, below investment grade privately placed or distressed securities included in this level are valued using discounted cash flow methodologies which rely upon significant, unobservable inputs and inputs that cannot be derived principally from, or corroborated by, observable market data. Structured securities comprised of RMBS, CMBS and ABS. These securities are principally valued using the market approach. Valuation is based primarily on matrix pricing or other similar techniques that utilize inputs that are unobservable or cannot be derived principally from, or corroborated by, observable market data, or are based on independent non-binding broker quotations. Below investment grade securities and RMBS supported by sub-prime mortgage loans included in this level are valued based on inputs including F-96 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) quoted prices for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2, and certain of these securities are valued based on independent non-binding broker quotations. Foreign government and state and political subdivision securities. These securities are principally valued using the market approach. Valuation is based primarily on matrix pricing or other similar techniques, however these securities are less liquid and certain of the inputs are based on very limited trading activity. Common and non-redeemable preferred stock. These securities, including privately held securities and financial services industry hybrid securities classified within equity securities, are principally valued using the market and income approaches. Valuations are based primarily on matrix pricing or other similar techniques using inputs such as comparable credit rating and issuance structure. Equity securities valuations determined with discounted cash flow methodologies use inputs such as earnings multiples based on comparable public companies, and industry-specific non-earnings based multiples. Certain of these securities are valued based on independent non-binding broker quotations. Derivative Assets and Derivative Liabilities These derivatives are principally valued using an income approach. Valuations of non-option-based derivatives utilize present value techniques, whereas valuations of option-based derivatives utilize option pricing models. These valuation methodologies generally use the same inputs as described in the corresponding sections above for Level 2 measurements of derivatives. However, these derivatives result in Level 3 classification because one or more of the significant inputs are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. Interest rate contracts. Non-option-based -- Significant unobservable inputs may include the extrapolation beyond observable limits of the swap yield curve and LIBOR basis curves. Option-based -- Significant unobservable inputs may include the extrapolation beyond observable limits of the swap yield curve, LIBOR basis curves and interest rate volatility. Foreign currency contracts. Non-option-based -- Significant unobservable inputs may include the extrapolation beyond observable limits of the swap yield curve, LIBOR basis curves and cross currency basis curves. Certain of these derivatives are valued based on independent non-binding broker quotations. Credit contracts. Non-option-based -- Significant unobservable inputs may include credit spreads, repurchase rates, and the extrapolation beyond observable limits of the swap yield curve and credit curves. Certain of these derivatives are valued based on independent non-binding broker quotations. Equity market contracts. Non-option-based -- Significant unobservable inputs may include the extrapolation beyond observable limits of dividend yield curves. F-97 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Option-based -- Significant unobservable inputs may include the extrapolation beyond observable limits of dividend yield curves and equity volatility. Direct Guaranteed Minimum Benefits These embedded derivatives are principally valued using an income approach. Valuations are based on option pricing techniques, which utilize significant inputs that may include swap yield curve, currency exchange rates and implied volatilities. These embedded derivatives result in Level 3 classification because one or more of the significant inputs are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. Significant unobservable inputs generally include: the extrapolation beyond observable limits of the swap yield curve and implied volatilities, actuarial assumptions for policyholder behavior and mortality and the potential variability in policyholder behavior and mortality, nonperformance risk and cost of capital for purposes of calculating the risk margin. Reinsurance Ceded on Certain Guaranteed Minimum Benefits These embedded derivatives are principally valued using an income approach. The valuation techniques and significant market standard unobservable inputs used in their valuation are similar to those previously described under "Direct Guaranteed Minimum Benefits" and also include counterparty credit spreads. Embedded Derivatives Within Funds Withheld Related to Certain Ceded Reinsurance These embedded derivatives are principally valued using an income approach. Valuations are based on present value techniques, which utilize significant inputs that may include the swap yield curve and the fair value of assets within the reference portfolio. These embedded derivatives result in Level 3 classification because one or more of the significant inputs are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. Significant unobservable inputs generally include: the fair value of certain assets within the reference portfolio which are not observable in the market and cannot be derived principally from, or corroborated by, observable market data. Separate Account Assets These assets are comprised of investments that are similar in nature to the fixed maturity securities, equity securities and derivative assets referred to above. Separate account assets within this level also include mortgage loans and other limited partnership interests. The estimated fair value of mortgage loans is determined by discounting expected future cash flows, using current interest rates for similar loans with similar credit risk. Other limited partnership interests are valued giving consideration to the value of the underlying holdings of the partnerships and by applying a premium or discount, if appropriate, for factors such as liquidity, bid/ask spreads, the performance record of the fund manager or other relevant variables which may impact the exit value of the particular partnership interest. Long-term Debt of CSEs The estimated fair value of the long-term debt of the Company's CSEs are priced principally through independent broker quotations or market standard valuation methodologies using inputs that are not market observable or cannot be derived from or corroborated by observable market data. F-98 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) TRANSFERS BETWEEN LEVELS 1 AND 2: During the years ended December 31, 2011 and 2010, transfers between Levels 1 and 2 were not significant. TRANSFERS INTO OR OUT OF LEVEL 3: Overall, transfers into and/or out of Level 3 are attributable to a change in the observability of inputs. Assets and liabilities are transferred into Level 3 when a significant input cannot be corroborated with market observable data. This occurs when market activity decreases significantly and underlying inputs cannot be observed, current prices are not available, and/or when there are significant variances in quoted prices, thereby affecting transparency. Assets and liabilities are transferred out of Level 3 when circumstances change such that a significant input can be corroborated with market observable data. This may be due to a significant increase in market activity, a specific event, or one or more significant input(s) becoming observable. Transfers into and/or out of any level are assumed to occur at the beginning of the period. Significant transfers into and/or out of Level 3 assets and liabilities for the years ended December 31, 2011 and 2010 are summarized below. Transfers into Level 3 were due primarily to a lack of trading activity, decreased liquidity and credit ratings downgrades (e.g., from investment grade to below investment grade), which have resulted in decreased transparency of valuations and an increased use of broker quotations and unobservable inputs to determine estimated fair value. During the year ended December 31, 2011, transfers into Level 3 for fixed maturity securities of $299 million and for separate account assets of $18 million, were principally comprised of certain U.S. and foreign corporate securities. During the year ended December 31, 2010, transfers into Level 3 for fixed maturity securities of $1.3 billion and for separate account assets of $46 million, were principally comprised of certain U.S. and foreign corporate securities. Transfers out of Level 3 resulted primarily from increased transparency of both new issuances that subsequent to issuance and establishment of trading activity, became priced by independent pricing services and existing issuances that, over time, the Company was able to obtain pricing from, or corroborate pricing received from independent pricing services with observable inputs or increases in market activity and upgraded credit ratings. During the year ended December 31, 2011, transfers out of Level 3 for fixed maturity securities of $3.1 billion and for separate account assets of $252 million, were principally comprised of certain RMBS, U.S. and foreign corporate securities, and ABS. During the year ended December 31, 2010, transfers out of Level 3 for fixed maturity securities of $1.1 billion and for separate account assets of $231 million, were principally comprised of certain U.S. and foreign corporate securities, RMBS, ABS and foreign government securities. F-99 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following tables summarize the change of all assets and (liabilities) measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3), including realized and unrealized gains (losses) of all assets and (liabilities) and realized and unrealized gains (losses) of all assets and (liabilities) still held at the end of the respective time periods:
FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) ----------------------------------------------------------------------------- FIXED MATURITY SECURITIES: ----------------------------------------------------------------------------- U.S. STATE AND U.S. FOREIGN TREASURY POLITICAL FOREIGN CORPORATE CORPORATE AND AGENCY SUBDIVISION GOVERNMENT SECURITIES SECURITIES SECURITIES RMBS CMBS ABS SECURITIES SECURITIES ---------- ---------- ---------- -------- ----- ------ ----------- ---------- (IN MILLIONS) YEAR ENDED DECEMBER 31, 2011: Balance, January 1,........................... $5,063 $ 2,796 $ 44 $ 1,985 $ 161 $1,514 $ 1 $ 171 Total realized/unrealized gains (losses) included in: Earnings: (1), (2) Net investment income...................... 4 7 -- 10 -- 2 -- 6 Net investment gains (losses).............. (15) 16 -- (10) (1) (12) -- -- Net derivative gains (losses).............. -- -- -- -- -- -- -- -- Other comprehensive income (loss)............ 258 (24) 2 (52) 28 42 -- 17 Purchases (3)................................. 789 915 -- 78 106 670 -- 118 Sales (3)..................................... (653) (1,129) (1) (127) (86) (370) -- (21) Issuances (3)................................. -- -- -- -- -- -- -- -- Settlements (3)............................... -- -- -- -- -- -- -- -- Transfers into Level 3 (4).................... 122 155 -- -- 11 11 -- -- Transfers out of Level 3 (4).................. (649) (478) (20) (1,193) -- (711) (1) -- ---------- ---------- ---------- -------- ----- ------ ----------- ---------- Balance, December 31,......................... $4,919 $ 2,258 $ 25 $ 691 $ 219 $1,146 $ -- $ 291 ========== ========== ========== ======== ===== ====== =========== ========== Changes in unrealized gains (losses) relating to assets and liabilities still held at December 31, 2011 included in earnings: Net investment income...................... $ 4 $ 5 $ -- $ 11 $ -- $ 2 $ -- $ 5 Net investment gains (losses).............. $ (27) $ (22) $ -- $ (10) $ -- $ (9) $ -- $ -- Net derivative gains (losses).............. $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
F-100 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) ------------------------------------------------------------------------- EQUITY SECURITIES: TRADING AND OTHER SECURITIES: --------------------- -------------------------- NON- FVO REDEEMABLE ACTIVELY GENERAL SEPARATE COMMON PREFERRED TRADED ACCOUNT SHORT-TERM ACCOUNT STOCK STOCK SECURITIES SECURITIES INVESTMENTS ASSETS (5) ------ ---------- ---------- ---------- ----------- ---------- (IN MILLIONS) YEAR ENDED DECEMBER 31, 2011: Balance, January 1,.......................... $ 79 $ 633 $ 10 $ 50 $ 379 $1,509 Total realized/unrealized gains (losses) included in: Earnings: (1), (2) Net investment income...................... -- -- -- (6) 1 -- Net investment gains (losses).............. 11 (45) -- -- (1) 101 Net derivative gains (losses).............. -- -- -- -- -- -- Other comprehensive income (loss)........... 11 1 -- -- -- -- Purchases (3)................................ 22 2 -- -- 134 188 Sales (3).................................... (20) (298) (8) (30) (379) (482) Issuances (3)................................ -- -- -- -- -- -- Settlements (3).............................. -- -- -- -- -- -- Transfers into Level 3 (4)................... 1 -- -- -- -- 18 Transfers out of Level 3 (4)................. -- -- (2) -- -- (252) ------ ---------- ---------- ---------- ----------- ---------- Balance, December 31,........................ $ 104 $ 293 $ -- $ 14 $ 134 $1,082 ====== ========== ========== ========== =========== ========== Changes in unrealized gains (losses) relating to assets and liabilities still held at December 31, 2011 included in earnings: Net investment income...................... $ -- $ -- $ -- $ (6) $ 1 $ -- Net investment gains (losses).............. $ (6) $ (16) $ -- $ -- $ (1) $ -- Net derivative gains (losses).............. $ -- $ -- $ -- $ -- $ -- $ --
F-101 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) -------------------------------------------------------------------- NET DERIVATIVES: (6) --------------------------------------- INTEREST FOREIGN EQUITY NET RATE CURRENCY CREDIT MARKET EMBEDDED LONG-TERM CONTRACTS CONTRACTS CONTRACTS CONTRACTS DERIVATIVES (7) DEBT OF CSES --------- --------- --------- --------- --------------- ------------ (IN MILLIONS) YEAR ENDED DECEMBER 31, 2011: Balance, January 1,.......................... $(23) $46 $ 33 $-- $(382) $(184) Total realized/unrealized gains (losses) included in: Earnings: (1), (2) Net investment income...................... -- -- -- -- -- -- Net investment gains (losses).............. -- -- -- -- -- (8) Net derivative gains (losses).............. (7) 10 (33) -- (458) -- Other comprehensive income (loss)........... 130 -- 14 -- -- -- Purchases (3)................................ -- -- -- -- -- -- Sales (3).................................... -- -- -- -- -- -- Issuances (3)................................ -- -- (2) -- -- -- Settlements (3).............................. (33) -- (11) -- 50 76 Transfers into Level 3 (4)................... -- -- -- -- -- -- Transfers out of Level 3 (4)................. -- -- -- -- -- -- --------- --------- --------- --------- --------------- ------------ Balance, December 31,........................ $ 67 $56 $ 1 $-- $(790) $(116) ========= ========= ========= ========= =============== ============ Changes in unrealized gains (losses) relating to assets and liabilities still held at December 31, 2011 included in earnings: Net investment income...................... $ -- $-- $ -- $-- $ -- $ -- Net investment gains (losses).............. $ -- $-- $ -- $-- $ -- $ (8) Net derivative gains (losses).............. $(13) $10 $(32) $-- $(454) $ --
F-102 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) --------------------------------------------------------------------------- FIXED MATURITY SECURITIES: --------------------------------------------------------------------------- U.S. STATE AND U.S. FOREIGN TREASURY POLITICAL FOREIGN CORPORATE CORPORATE AND AGENCY SUBDIVISION GOVERNMENT SECURITIES SECURITIES SECURITIES RMBS CMBS ABS SECURITIES SECURITIES ---------- ---------- ---------- ------ ----- ------ ----------- ---------- (IN MILLIONS) YEAR ENDED DECEMBER 31, 2010: Balance, January 1,.......................... $4,674 $3,456 $-- $2,290 $ 87 $ 958 $ 20 $ 249 Total realized/unrealized gains (losses) included in: Earnings: (1), (2) Net investment income...................... 17 (1) -- 63 2 5 -- 5 Net investment gains (losses).............. (10) (32) -- (47) (2) (33) -- (1) Net derivative gains (losses).............. -- -- -- -- -- -- -- -- Other comprehensive income (loss)........... 184 179 -- 234 50 113 -- 16 Purchases, sales, issuances and settlements (3)......................................... (400) (709) 22 (420) (21) 581 2 15 Transfers into Level 3 (4)................... 751 351 22 57 45 29 -- -- Transfers out of Level 3 (4)................. (153) (448) -- (192) -- (139) (21) (113) ---------- ---------- ---------- ------ ----- ------ ----------- ---------- Balance, December 31,........................ $5,063 $2,796 $44 $1,985 $ 161 $1,514 $ 1 $ 171 ========== ========== ========== ====== ===== ====== =========== ========== Changes in unrealized gains (losses) relating to assets and liabilities still held at December 31, 2010 included in earnings: Net investment income...................... $ 8 $ (2) $-- $ 62 $ 1 $ 5 $ -- $ 5 Net investment gains (losses).............. $ (32) $ (43) $-- $ (26) $ (2) $ (23) $ -- $ -- Net derivative gains (losses).............. $ -- $ -- $-- $ -- $ -- $ -- $ -- $ --
F-103 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) ------------------------------------------------------------------------- EQUITY SECURITIES: TRADING AND OTHER SECURITIES: --------------------- -------------------------- NON- FVO REDEEMABLE ACTIVELY GENERAL SEPARATE COMMON PREFERRED TRADED ACCOUNT SHORT-TERM ACCOUNT STOCK STOCK SECURITIES SECURITIES INVESTMENTS ASSETS (5) ------ ---------- ---------- ---------- ----------- ---------- (IN MILLIONS) YEAR ENDED DECEMBER 31, 2010: Balance, January 1,.......................... $ 64 $ 793 $ 32 $ 51 $ 8 $1,583 Total realized/unrealized gains (losses) included in: Earnings: (1), (2) Net investment income...................... -- -- -- 10 1 -- Net investment gains (losses).............. (1) 30 -- -- -- 142 Net derivative gains (losses).............. -- -- -- -- -- -- Other comprehensive income (loss)........... -- 2 -- -- -- -- Purchases, sales, issuances and settlements (3)......................................... 16 (192) (22) (30) 370 (31) Transfers into Level 3 (4)................... 1 -- -- 37 -- 46 Transfers out of Level 3 (4)................. (1) -- -- (18) -- (231) ------ ---------- ---------- ---------- ----------- ---------- Balance, December 31,........................ $ 79 $ 633 $ 10 $ 50 $379 $1,509 ====== ========== ========== ========== =========== ========== Changes in unrealized gains (losses) relating to assets and liabilities still held at December 31, 2010 included in earnings: Net investment income...................... $ -- $ -- $ -- $ 13 $ 1 $ -- Net investment gains (losses).............. $(2) $ (3) $ -- $ -- $ -- $ -- Net derivative gains (losses).............. $ -- $ -- $ -- $ -- $ -- $ --
F-104 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) ------------------------------------------------------------------------ NET DERIVATIVES: (6) --------------------------------------- INTEREST FOREIGN EQUITY NET RATE CURRENCY CREDIT MARKET EMBEDDED LONG-TERM CONTRACTS CONTRACTS CONTRACTS CONTRACTS DERIVATIVES (7) DEBT OF CSES (8) --------- --------- --------- --------- --------------- ---------------- (IN MILLIONS) YEAR ENDED DECEMBER 31, 2010: Balance, January 1,.......................... $ -- $ 53 $ 37 $ 2 $ 166 $ -- Total realized/unrealized gains (losses) included in: Earnings: (1), (2) Net investment income...................... -- -- -- -- -- -- Net investment gains (losses).............. -- -- -- -- -- 48 Net derivative gains (losses).............. 23 28 2 (2) (588) -- Other comprehensive income (loss)........... (36) -- 1 -- -- -- Purchases, sales, issuances and settlements (3)......................................... (10) (35) (7) -- 40 (232) Transfers into Level 3 (4)................... -- -- -- -- -- -- Transfers out of Level 3 (4)................. -- -- -- -- -- -- --------- --------- --------- --------- --------------- ---------------- Balance, December 31,........................ $(23) $ 46 $ 33 $ -- $(382) $(184) ========= ========= ========= ========= =============== ================ Changes in unrealized gains (losses) relating to assets and liabilities still held at December 31, 2010 included in earnings: Net investment income...................... $ -- $ -- $ -- $ -- $ -- $ -- Net investment gains (losses).............. $ -- $ -- $ -- $ -- $ -- $ 48 Net derivative gains (losses).............. $ 23 $ 21 $ 3 $(2) $(584) $ --
F-105 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) -------------------------------------------------------------------------- FIXED MATURITY SECURITIES: -------------------------------------------------------------------------- U.S. STATE AND U.S. FOREIGN TREASURY POLITICAL FOREIGN CORPORATE CORPORATE AND AGENCY SUBDIVISION GOVERNMENT SECURITIES SECURITIES SECURITIES RMBS CMBS ABS SECURITIES SECURITIES ---------- ---------- ---------- ------ ----- ----- ----------- ---------- (IN MILLIONS) YEAR ENDED DECEMBER 31, 2009: Balance, January 1,.......................... $ 5,089 $3,367 $ 48 $1,077 $ 138 $ 783 $ 76 $ 202 Total realized/unrealized gains (losses) included in: Earnings: (1), (2) Net investment income...................... 12 (8) -- 36 -- 2 -- 3 Net investment gains (losses).............. (288) (202) -- (22) 6 (44) -- (1) Net derivative gains (losses).............. -- -- -- -- -- -- -- -- Other comprehensive income (loss)........... 572 1,156 -- 148 4 213 1 18 Purchases, sales, issuances and settlements (3)......................................... (1,002) (614) (27) 1,104 (38) (31) (15) 66 Transfers into and/or out of Level 3 (4)..... 291 (243) (21) (53) (23) 35 (42) (39) ---------- ---------- ---------- ------ ----- ----- ----------- ---------- Balance, December 31,........................ $ 4,674 $3,456 $ -- $2,290 $ 87 $ 958 $ 20 $ 249 ========== ========== ========== ====== ===== ===== =========== ========== Changes in unrealized gains (losses) relating to assets and liabilities still held at December 31, 2009 included in earnings: Net investment income...................... $ 11 $ (7) $ -- $ 36 $ -- $ 2 $ -- $ 3 Net investment gains (losses).............. $ (281) $(106) $ -- $ (41) $ (5) $(50) $ -- $ -- Net derivative gains (losses).............. $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
F-106 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) ----------------------------------------------------------------------------------- EQUITY SECURITIES: ----------------- NON- TRADING REDEEMABLE AND NET SEPARATE COMMON PREFERRED SHORT-TERM OTHER NET EMBEDDED ACCOUNT STOCK STOCK INVESTMENTS SECURITIES DERIVATIVES (6) DERIVATIVES (7) ASSETS (5) ------ ---------- ----------- ---------- --------------- --------------- ---------- (IN MILLIONS) YEAR ENDED DECEMBER 31, 2009: Balance, January 1,..................... $ 59 $ 918 $ 75 $ 116 $(19) $ 1,702 $1,486 Total realized/unrealized gains (losses) included in: Earnings: (1), (2) Net investment income................. -- -- -- 16 -- -- -- Net investment gains (losses)......... (2) (251) (9) -- -- -- (221) Net derivative gains (losses)......... -- -- -- -- 35 (1,570) -- Other comprehensive income (loss)...... (2) 355 -- -- (1) -- -- Purchases, sales, issuances, and settlements (3)........................ 9 (190) (53) (49) 79 34 452 Transfers into and/or out of Level 3 (4) -- (39) (5) -- (2) -- (134) ------ ---------- ----------- ---------- --------------- --------------- ---------- Balance, December 31,................... $ 64 $ 793 $ 8 $ 83 $ 92 $ 166 $1,583 ====== ========== =========== ========== =============== =============== ========== Changes in unrealized gains (losses) relating to assets and liabilities still held at December 31, 2009 included in earnings: Net investment income................. $ -- $ -- $ -- $ 15 $ -- $ -- $ -- Net investment gains (losses)......... $(1) $(128) $ -- $ -- $ -- $ -- $ -- Net derivative gains (losses)......... $ -- $ -- $ -- $ -- $ 96 $(1,568) $ --
---------- (1)Amortization of premium/discount is included within net investment income. Impairments charged to earnings on securities are included within net investment gains (losses). Lapses associated with embedded derivatives are included within net derivative gains (losses). (2)Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward. (3)The amount reported within purchases, sales, issuances and settlements is the purchase or issuance price and the sales or settlement proceeds based upon the actual date purchased or issued and sold or settled, respectively. Items purchased/issued and sold/settled in the same period are excluded from the rollforward. For the year ended December 31, 2011, fees attributed to net embedded derivatives are included within settlements. For the years ended December 31, 2010 and 2009, fees attributed to net embedded derivatives are included within purchases, sales, issuances and settlements. (4)Total gains and losses (in earnings and other comprehensive income (loss)) are calculated assuming transfers into and/or out of Level 3 occurred at the beginning of the period. Items transferred into and/or out of Level 3 in the same period are excluded from the rollforward. (5)Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders within separate account liabilities. Therefore, such changes in estimated fair value are not recorded in net income. For the purpose of this disclosure, these changes are presented within net investment gains (losses). (6)Freestanding derivative assets and liabilities are presented net for purposes of the rollforward. (7)Embedded derivative assets and liabilities are presented net for purposes of the rollforward. (8)The long-term debt of the CSEs at January 1, 2010 is reported within the purchases, sales, issuances and settlements caption of the rollforward. F-107 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Assets and Liabilities Held by CSEs The Company has elected the FVO for the following assets and liabilities held by CSEs: securities and long-term debt. Information on the estimated fair value of the securities classified as trading and other securities is presented in Note 3. The following table presents the long-term debt carried under the FVO related to securities classified as trading and other securities at:
DECEMBER 31, ------------- 2011 2010 ----- ----- (IN MILLIONS) Contractual principal balance..................................... $ 138 $ 214 Excess of contractual principal balance over estimated fair value. (22) (30) ----- ----- Carrying value at estimated fair value........................... $ 116 $ 184 ===== =====
Interest income on securities classified as trading and other securities held by CSEs is recorded in net investment income. Interest expense on long-term debt of CSEs is recorded in other expenses. Gains and losses from initial measurement, subsequent changes in estimated fair value and gains or losses on sales of long-term debt are recognized in net investment gains (losses). See Note 3. NON-RECURRING FAIR VALUE MEASUREMENTS Certain assets are measured at estimated fair value on a non-recurring basis and are not included in the tables presented above. The amounts below relate to certain investments measured at estimated fair value during the period and still held at the reporting dates.
YEARS ENDED DECEMBER 31, --------------------------------------------------------------------------------------------- 2011 2010 2009 ---------------------------------- ---------------------------------- ----------------------- CARRYING ESTIMATED NET CARRYING ESTIMATED NET CARRYING ESTIMATED VALUE FAIR INVESTMENT VALUE FAIR INVESTMENT VALUE FAIR PRIOR TO VALUE AFTER GAINS PRIOR TO VALUE AFTER GAINS PRIOR TO VALUE AFTER MEASUREMENT MEASUREMENT (LOSSES) MEASUREMENT MEASUREMENT (LOSSES) MEASUREMENT MEASUREMENT ----------- ----------- ---------- ----------- ----------- ---------- ----------- ----------- (IN MILLIONS) Mortgage loans, net (1)........ $168 $143 $(25) $176 $160 $(16) $248 $168 Other limited partnership interests (2)................. $ 11 $ 8 $ (3) $ 3 $ 1 $ (2) $805 $517 Real estate joint ventures (3). $ -- $ -- $ -- $ 8 $ 3 $ (5) $ 80 $ 43
----------- ----------- NET INVESTMENT GAINS (LOSSES) ---------- Mortgage loans, net (1)........ $ (80) Other limited partnership interests (2)................. $(288) Real estate joint ventures (3). $ (37)
---------- (1)Mortgage loans -- The impaired mortgage loans presented above were written down to their estimated fair values at the date the impairments were recognized and are reported as losses above. Subsequent improvements in estimated fair value on previously impaired loans recorded through a reduction in the previously established valuation allowance are reported as gains above. Estimated fair values for impaired mortgage loans are based on observable market prices or, if the loans are in foreclosure or are otherwise determined to be collateral dependent, on the estimated fair value of the underlying collateral, or the present value of the expected future cash flows. Impairments to estimated fair value and decreases in previous impairments from subsequent improvements in estimated fair value represent non-recurring fair value measurements that have been categorized as Level 3 due to the lack of price transparency inherent in the limited markets for such mortgage loans. (2)Other limited partnership interests -- The impaired investments presented above were accounted for using the cost method. Impairments on these cost method investments were recognized at estimated fair value determined from information provided in the financial statements of the underlying entities in the period in which the impairment was incurred. These impairments to estimated fair value represent non-recurring fair F-108 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) value measurements that have been classified as Level 3 due to the limited activity and price transparency inherent in the market for such investments. This category includes several private equity and debt funds that typically invest primarily in a diversified pool of investments using certain investment strategies including domestic and international leveraged buyout funds; power, energy, timber and infrastructure development funds; venture capital funds; and below investment grade debt and mezzanine debt funds. The estimated fair values of these investments have been determined using the NAV of the Company's ownership interest in the partners' capital. Distributions from these investments will be generated from investment gains, from operating income from the underlying investments of the funds and from liquidation of the underlying assets of the funds. It is estimated that the underlying assets of the funds will be liquidated over the next two to 10 years. Unfunded commitments for these investments were $1 million and $11 million at December 31, 2011 and 2010, respectively. (3)Real estate joint ventures -- The impaired investments presented above were accounted for using the cost method. Impairments on these cost method investments were recognized at estimated fair value determined from information provided in the financial statements of the underlying entities in the period in which the impairment was incurred. These impairments to estimated fair value represent non-recurring fair value measurements that have been classified as Level 3 due to the limited activity and price transparency inherent in the market for such investments. This category includes several real estate funds that typically invest primarily in commercial real estate. The estimated fair values of these investments have been determined using the NAV of the Company's ownership interest in the partners' capital. Distributions from these investments will be generated from investment gains, from operating income from the underlying investments of the funds and from liquidation of the underlying assets of the funds. It is estimated that the underlying assets of the funds will be liquidated over the next two to 10 years. There were no unfunded commitments for these investments at December 31, 2011. Unfunded commitments for these investments were $3 million at December 31, 2010. F-109 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FAIR VALUE OF FINANCIAL INSTRUMENTS Amounts related to the Company's financial instruments that were not measured at fair value on a recurring basis, were as follows:
DECEMBER 31, ------------------------------------------------------- 2011 2010 --------------------------- --------------------------- ESTIMATED ESTIMATED NOTIONAL CARRYING FAIR NOTIONAL CARRYING FAIR AMOUNT VALUE VALUE AMOUNT VALUE VALUE -------- -------- --------- -------- -------- --------- (IN MILLIONS) ASSETS: Mortgage loans, net................................. $43,880 $46,013 $41,667 $43,278 Policy loans........................................ $ 8,314 $10,279 $ 8,270 $ 9,509 Real estate joint ventures (1)...................... $ 59 $ 73 $ 50 $ 58 Other limited partnership interests (1)............. $ 1,207 $ 1,517 $ 1,423 $ 1,491 Short-term investments (2).......................... $ 1 $ 1 $ 144 $ 144 Other invested assets (1)........................... $ 1,996 $ 2,032 $ 1,494 $ 1,506 Cash and cash equivalents........................... $ 2,089 $ 2,089 $ 3,485 $ 3,485 Accrued investment income........................... $ 2,219 $ 2,219 $ 2,183 $ 2,183 Premiums, reinsurance and other receivables (1)..... $18,127 $19,276 $18,268 $18,999 LIABILITIES: PABs (1)............................................ $65,606 $68,360 $66,249 $68,861 Payables for collateral under securities loaned and other transactions................................ $20,280 $20,280 $17,014 $17,014 Short-term debt..................................... $ 101 $ 101 $ 102 $ 102 Long-term debt (1), (3)............................. $ 2,106 $ 2,408 $ 3,399 $ 3,473 Other liabilities (1)............................... $23,963 $24,637 $24,553 $25,034 Separate account liabilities (1).................... $45,467 $45,467 $37,791 $37,791 COMMITMENTS: (4) Mortgage loan commitments........................... $2,332 $ -- $ 3 $2,516 $ -- $ (13) Commitments to fund bank credit facilities, bridge loans and private corporate bond investments...... $ 986 $ -- $ 38 $1,997 $ -- $ 16
---------- (1)Carrying values presented herein differ from those presented in the consolidated balance sheets because certain items within the respective financial statement caption are not considered financial instruments. Financial statement captions excluded from the table above are not considered financial instruments. (2)Short-term investments as presented in the table above differ from the amounts presented in the consolidated balance sheets because this table does not include short-term investments that meet the definition of a security, which are measured at estimated fair value on a recurring basis. (3)Long-term debt as presented in the table above does not include long-term debt of CSEs, which is accounted for under the FVO. (4)Commitments are off-balance sheet obligations. Negative estimated fair values represent off-balance sheet liabilities. F-110 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The methods and assumptions used to estimate the fair value of financial instruments are summarized as follows: The assets and liabilities measured at estimated fair value on a recurring basis include: fixed maturity securities, equity securities, trading and other securities, certain short-term investments, derivative assets and liabilities, net embedded derivatives within asset and liability host contracts, separate account assets, long-term debt of CSEs and trading liabilities. These assets and liabilities are described in the section "-- Recurring Fair Value Measurements" and, therefore, are excluded from the table above. The estimated fair value for these financial instruments approximates carrying value. Mortgage Loans The Company originates mortgage loans principally for investment purposes. These loans are principally carried at amortized cost. The estimated fair value of mortgage loans is primarily determined by estimating expected future cash flows and discounting them using current interest rates for similar mortgage loans with similar credit risk. Policy Loans For policy loans with fixed interest rates, estimated fair values are determined using a discounted cash flow model applied to groups of similar policy loans determined by the nature of the underlying insurance liabilities. Cash flow estimates are developed by applying a weighted-average interest rate to the outstanding principal balance of the respective group of policy loans and an estimated average maturity determined through experience studies of the past performance of policyholder repayment behavior for similar loans. These cash flows are discounted using current risk-free interest rates with no adjustment for borrower credit risk as these loans are fully collateralized by the cash surrender value of the underlying insurance policy. The estimated fair value for policy loans with variable interest rates approximates carrying value due to the absence of borrower credit risk and the short time period between interest rate resets, which presents minimal risk of a material change in estimated fair value due to changes in market interest rates. Real Estate Joint Ventures and Other Limited Partnership Interests Real estate joint ventures and other limited partnership interests included in the preceding table consist of those investments accounted for using the cost method. The remaining carrying value recognized in the consolidated balance sheets represents investments in real estate carried at cost less accumulated depreciation, or real estate joint ventures and other limited partnership interests accounted for using the equity method, which do not meet the definition of financial instruments for which fair value is required to be disclosed. The estimated fair values for real estate joint ventures and other limited partnership interests accounted for under the cost method are generally based on the Company's share of the NAV as provided in the financial statements of the investees. In certain circumstances, management may adjust the NAV by a premium or discount when it has sufficient evidence to support applying such adjustments. Short-term Investments Certain short-term investments do not qualify as securities and are recognized at amortized cost in the consolidated balance sheets. For these instruments, the Company believes that there is minimal risk of material changes in interest rates or credit of the issuer such that estimated fair value approximates carrying value. In light F-111 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) of recent market conditions, short-term investments have been monitored to ensure there is sufficient demand and maintenance of issuer credit quality and the Company has determined additional adjustment is not required. Other Invested Assets Other invested assets within the preceding table are principally comprised of loans to affiliates and funds withheld. The estimated fair value of loans to affiliates is determined by discounting the expected future cash flows using market interest rates currently available for instruments with similar terms and remaining maturities. For funds withheld, the Company evaluates the specific facts and circumstances of each instrument to determine the appropriate estimated fair values. The estimated fair value for funds withheld was not materially different from the recognized carrying value. Cash and Cash Equivalents Due to the short-term maturities of cash and cash equivalents, the Company believes there is minimal risk of material changes in interest rates or credit of the issuer such that estimated fair value generally approximates carrying value. In light of recent market conditions, cash and cash equivalent instruments have been monitored to ensure there is sufficient demand and maintenance of issuer credit quality, or sufficient solvency in the case of depository institutions, and the Company has determined additional adjustment is not required. Accrued Investment Income Due to the short term until settlement of accrued investment income, the Company believes there is minimal risk of material changes in interest rates or credit of the issuer such that estimated fair value approximates carrying value. In light of recent market conditions, the Company has monitored the credit quality of the issuers and has determined additional adjustment is not required. Premiums, Reinsurance and Other Receivables Premiums, reinsurance and other receivables in the preceding table are principally comprised of certain amounts recoverable under reinsurance agreements, amounts on deposit with financial institutions to facilitate daily settlements related to certain derivative positions and amounts receivable for securities sold but not yet settled. Premiums receivable and those amounts recoverable under reinsurance agreements determined to transfer significant risk are not financial instruments subject to disclosure and thus have been excluded from the amounts presented in the preceding table. Amounts recoverable under ceded reinsurance agreements, which the Company has determined do not transfer significant risk such that they are accounted for using the deposit method of accounting, have been included in the preceding table. The estimated fair value is determined as the present value of expected future cash flows, which were discounted using an interest rate determined to reflect the appropriate credit standing of the assuming counterparty. The amounts on deposit for derivative settlements essentially represent the equivalent of demand deposit balances and amounts due for securities sold are generally received over short periods such that the estimated fair value approximates carrying value. In light of recent market conditions, the Company has monitored the solvency position of the financial institutions and has determined additional adjustments are not required. F-112 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) PABs PABs in the table above include investment contracts. Embedded derivatives on investment contracts and certain variable annuity guarantees accounted for as embedded derivatives are included in this caption in the consolidated financial statements but excluded from this caption in the table above as they are separately presented in "-- Recurring Fair Value Measurements." The remaining difference between the amounts reflected as PABs in the preceding table and those recognized in the consolidated balance sheets represents those amounts due under contracts that satisfy the definition of insurance contracts and are not considered financial instruments. The investment contracts primarily include certain funding agreements, fixed deferred annuities, modified guaranteed annuities, fixed term payout annuities and total control accounts. The fair values for these investment contracts are estimated by discounting best estimate future cash flows using current market risk-free interest rates and adding a spread to reflect the nonperformance risk in the liability. Payables for Collateral Under Securities Loaned and Other Transactions The estimated fair value for payables for collateral under securities loaned and other transactions approximates carrying value. The related agreements to loan securities are short-term in nature such that the Company believes there is limited risk of a material change in market interest rates. Additionally, because borrowers are cross-collateralized by the borrowed securities, the Company believes no additional consideration for changes in nonperformance risk are necessary. Short-term and Long-term Debt The estimated fair value for short-term debt approximates carrying value due to the short-term nature of these obligations. The estimated fair value of long-term debt is generally determined by discounting expected future cash flows using market rates currently available for debt with similar remaining maturities and reflecting the credit risk of the Company, including inputs when available, from actively traded debt of the Company or other companies with similar types of borrowing arrangements. Risk-adjusted discount rates applied to the expected future cash flows can vary significantly based upon the specific terms of each individual arrangement, including, but not limited to: subordinated rights, contractual interest rates in relation to current market rates, the structuring of the arrangement, and the nature and observability of the applicable valuation inputs. Use of different risk-adjusted discount rates could result in different estimated fair values. The carrying value of long-term debt presented in the table above differs from the amounts presented in the consolidated balance sheets as it does not include capital leases which are not required to be disclosed at estimated fair value. Other Liabilities Other liabilities included in the table above reflect those other liabilities that satisfy the definition of financial instruments subject to disclosure. These items consist primarily of interest and dividends payable, amounts due for securities purchased but not yet settled, funds withheld amounts payable which are contractually withheld by the Company in accordance with the terms of the reinsurance agreements and amounts payable under certain ceded and assumed reinsurance agreements are recorded using the deposit method of accounting. The Company evaluates the specific terms, facts and circumstances of each instrument to determine the appropriate estimated fair values, which are not materially different from the carrying values, with the exception of certain deposit type reinsurance payables. For these reinsurance payables, the estimated fair value is F-113 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) determined as the present value of expected future cash flows, which are discounted using an interest rate determined to reflect the appropriate credit standing of the assuming counterparty. Separate Account Liabilities Separate account liabilities included in the preceding table represent those balances due to policyholders under contracts that are classified as investment contracts. The remaining amounts presented in the consolidated balance sheets represent those contracts classified as insurance contracts, which do not satisfy the definition of financial instruments. Separate account liabilities classified as investment contracts primarily represent variable annuities with no significant mortality risk to the Company such that the death benefit is equal to the account balance, funding agreements related to group life contracts and certain contracts that provide for benefit funding. Separate account liabilities are recognized in the consolidated balance sheets at an equivalent value of the related separate account assets. Separate account assets, which equal net deposits, net investment income and realized and unrealized investment gains and losses, are fully offset by corresponding amounts credited to the contractholders' liability which is reflected in separate account liabilities. Since separate account liabilities are fully funded by cash flows from the separate account assets which are recognized at estimated fair value as described in the section "-- Recurring Fair Value Measurements," the Company believes the value of those assets approximates the estimated fair value of the related separate account liabilities. Mortgage Loan Commitments and Commitments to Fund Bank Credit Facilities, Bridge Loans and Private Corporate Bond Investments The estimated fair values for mortgage loan commitments that will be held for investment and commitments to fund bank credit facilities, bridge loans and private corporate bonds that will be held for investment reflected in the above table represents the difference between the discounted expected future cash flows using interest rates that incorporate current credit risk for similar instruments on the reporting date and the principal amounts of the commitments. F-114 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 6. DEFERRED POLICY ACQUISITION COSTS AND VALUE OF BUSINESS ACQUIRED Information regarding DAC and VOBA was as follows:
DAC VOBA TOTAL -------- ----- -------- (IN MILLIONS) Balance at January 1, 2009............ $ 10,662 $ 209 $ 10,871 Capitalizations...................... 857 -- 857 -------- ----- -------- Subtotal........................... 11,519 209 11,728 -------- ----- -------- Amortization related to: Net investment gains (losses)...... 254 1 255 Other expenses..................... (648) (22) (670) -------- ----- -------- Total amortization............... (394) (21) (415) -------- ----- -------- Unrealized investment gains (losses). (1,897) (52) (1,949) -------- ----- -------- Balance at December 31, 2009.......... 9,228 136 9,364 Capitalizations...................... 804 -- 804 -------- ----- -------- Subtotal........................... 10,032 136 10,168 -------- ----- -------- Amortization related to: Net investment gains (losses)...... (127) -- (127) Other expenses..................... (809) (14) (823) -------- ----- -------- Total amortization............... (936) (14) (950) -------- ----- -------- Unrealized investment gains (losses). (1,020) (7) (1,027) -------- ----- -------- Balance at December 31, 2010.......... 8,076 115 8,191 Capitalizations...................... 893 -- 893 -------- ----- -------- Subtotal........................... 8,969 115 9,084 -------- ----- -------- Amortization related to: Net investment gains (losses)...... (82) -- (82) Other expenses..................... (895) (10) (905) -------- ----- -------- Total amortization............... (977) (10) (987) -------- ----- -------- Unrealized investment gains (losses). (310) (8) (318) -------- ----- -------- Balance at December 31, 2011.......... $ 7,682 $ 97 $ 7,779 ======== ===== ========
The estimated future amortization expense allocated to other expenses for the next five years for VOBA is $11 million in 2012, $11 million in 2013, $9 million in 2014, $8 million in 2015 and $4 million in 2016. Amortization of DAC and VOBA is attributed to both investment gains and losses and to other expenses for the amount of gross margins or profits originating from transactions other than investment gains and losses. Unrealized investment gains and losses represent the amount of DAC and VOBA that would have been amortized if such gains and losses had been recognized. F-115 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information regarding DAC and VOBA by segment was as follows:
DAC VOBA TOTAL ------------- --------- ------------- DECEMBER 31, ------------------------------------- 2011 2010 2011 2010 2011 2010 ------ ------ ---- ---- ------ ------ (IN MILLIONS) Insurance Products........ $5,993 $6,143 $80 $ 97 $6,073 $6,240 Retirement Products....... 1,599 1,866 14 17 1,613 1,883 Corporate Benefit Funding. 89 66 2 -- 91 66 Corporate & Other......... 1 1 1 1 2 2 ------ ------ ---- ---- ------ ------ Total.................... $7,682 $8,076 $97 $115 $7,779 $8,191 ====== ====== ==== ==== ====== ======
7. GOODWILL Goodwill, which is included in other assets, is the excess of cost over the estimated fair value of net assets acquired. Information regarding allocated goodwill by segment and reporting unit was as follows:
DECEMBER 31, ------------ 2011 2010 ---- ---- (IN MILLIONS) Insurance Products: Group life................. $ 3 $ 3 Individual life............ 27 27 Non-medical health......... 65 65 ---- ---- Total Insurance Products. 95 95 Retirement Products......... 10 10 Corporate Benefit Funding... 2 2 Corporate & Other........... 4 4 ---- ---- Total.................. $111 $111 ==== ====
The Company performed its annual goodwill impairment tests during the third quarter of 2011 based upon data at June 30, 2011 and concluded that the fair values of all reporting units were in excess of their carrying values and, therefore, goodwill was not impaired. Such tests are described in more detail in Note 1. Management continues to evaluate current market conditions that may affect the estimated fair value of these reporting units to assess whether any goodwill impairment exists. Deteriorating or adverse market conditions for certain reporting units may have a significant impact on the estimated fair value of these reporting units and could result in future impairments of goodwill. F-116 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 8. INSURANCE INSURANCE LIABILITIES Insurance liabilities, including affiliated insurance liabilities on reinsurance assumed and ceded, were as follows:
FUTURE POLICY POLICYHOLDER ACCOUNT OTHER POLICY-RELATED BENEFITS BALANCES BALANCES ----------------- -------------------- -------------------- DECEMBER 31, ----------------------------------------------------------- 2011 2010 2011 2010 2011 2010 -------- -------- ------- ------- ------ ------ (IN MILLIONS) Insurance Products........ $ 70,734 $ 69,529 $19,452 $19,317 $5,565 $5,322 Retirement Products....... 7,606 6,681 21,691 21,280 48 44 Corporate Benefit Funding. 30,632 26,391 47,689 48,296 167 179 Corporate & Other......... 361 349 24 29 96 104 -------- -------- ------- ------- ------ ------ Total.................... $109,333 $102,950 $88,856 $88,922 $5,876 $5,649 ======== ======== ======= ======= ====== ======
See Note 9 for discussion of affiliated reinsurance liabilities included in the table above. VALUE OF DISTRIBUTION AGREEMENTS AND CUSTOMER RELATIONSHIPS ACQUIRED Information regarding VODA and VOCRA, which are reported in other assets, was as follows:
AMOUNT ------------- (IN MILLIONS) Balance at January 1, 2009... $ 427 Acquisitions................. -- Amortization................. (15) ------------- Balance at December 31, 2009. $ 412 Acquisitions................. 7 Amortization................. (19) ------------- Balance at December 31, 2010. $ 400 Acquisitions................. -- Amortization................. (22) ------------- Balance at December 31, 2011. $ 378 =============
The estimated future amortization expense allocated to other expenses for the next five years for VODA and VOCRA is $25 million in 2012, $27 million in 2013, $30 million in 2014, $30 million in 2015 and $30 million in 2016. F-117 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SALES INDUCEMENTS Information regarding deferred sales inducements, which are reported in other assets, was as follows:
AMOUNT ------------- (IN MILLIONS) Balance at January 1, 2009... $ 144 Capitalization............... 51 Amortization................. (22) ------------- Balance at December 31, 2009. 173 Capitalization............... 42 Amortization................. (25) ------------- Balance at December 31, 2010. 190 Capitalization............... 29 Amortization................. (35) ------------- Balance at December 31, 2011. $ 184 =============
SEPARATE ACCOUNTS Separate account assets and liabilities include two categories of account types: pass-through separate accounts totaling $62.7 billion and $63.8 billion at December 31, 2011 and 2010, respectively, for which the policyholder assumes all investment risk, and separate accounts for which the Company contractually guarantees either a minimum return or account value to the policyholder which totaled $44.0 billion and $34.0 billion at December 31, 2011 and 2010, respectively. The latter category consisted primarily of funding agreements and participating close-out contracts. The average interest rate credited on these contracts was 3.12% and 3.30% at December 31, 2011 and 2010, respectively. For the years ended December 31, 2011, 2010 and 2009, there were no investment gains (losses) on transfers of assets from the general account to the separate accounts. OBLIGATIONS UNDER FUNDING AGREEMENTS The Company issues fixed and floating rate funding agreements, which are denominated in either U.S. dollars or foreign currencies, to certain special purpose entities ("SPEs") that have issued either debt securities or commercial paper for which payment of interest and principal is secured by such funding agreements. During the years ended December 31, 2011, 2010 and 2009, the Company issued $27.4 billion, $15.0 billion and $14.1 billion, respectively, and repaid $28.2 billion, $12.3 billion and $16.8 billion, respectively, of such funding agreements. At December 31, 2011 and 2010, funding agreements outstanding, which are included in PABs, were $20.1 billion and $20.6 billion, respectively. Metropolitan Life Insurance Company and General American Life Insurance Company ("GALIC"), a subsidiary, are members of the Federal Home Loan Bank ("FHLB"). Holdings of FHLB common stock by branch, included in equity securities, were as follows at:
DECEMBER 31, ------------ 2011 2010 - ---- ---- (IN MILLIONS) FHLB of New York ("FHLB of NY"). $658 $890 FHLB of Des Moines.............. $ 31 $ 10
F-118 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company has also entered into funding agreements. The liability for funding agreements is included in PABs. Information related to the funding agreements was as follows:
LIABILITY COLLATERAL --------------- ----------------------- DECEMBER 31, --------------------------------------- 2011 2010 2011 2010 ------- ------- ----------- ----------- (IN MILLIONS) FHLB of NY (1)......... $11,655 $12,555 $13,002 (2) $14,204 (2) Farmer Mac (3)......... $ 2,550 $ 2,550 $ 2,927 (4) $ 2,928 (4) FHLB of Des Moines (1). $ 475 $ -- $ 662 (2) $ -- (2)
---------- (1)Represents funding agreements issued to the FHLB in exchange for cash and for which the FHLB has been granted a lien on certain assets, including RMBS, to collateralize obligations under the funding agreements. The Company maintains control over these pledged assets, and may use, commingle, encumber or dispose of any portion of the collateral as long as there is no event of default and the remaining qualified collateral is sufficient to satisfy the collateral maintenance level. Upon any event of default by the Company, the FHLB's recovery on the collateral is limited to the amount of the Company's liability to the FHLB. (2)Advances are collateralized by mortgage-backed securities. The amount of collateral presented is at estimated fair value. (3)Represents funding agreements issued to certain SPEs that have issued debt securities for which payment of interest and principal is secured by such funding agreements, and such debt securities are also guaranteed as to payment of interest and principal by the Federal Agricultural Mortgage Corporation, a federally chartered instrumentality of the United States ("Farmer Mac"). (4)Secured by a pledge of certain eligible agricultural real estate mortgage loans. The amount of collateral presented is at carrying value. F-119 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) LIABILITIES FOR UNPAID CLAIMS AND CLAIM EXPENSES Information regarding the liabilities for unpaid claims and claim expenses relating to group accident and non-medical health policies and contracts, which are reported in future policy benefits and other policy-related balances, was as follows:
YEARS ENDED DECEMBER 31, -------------------------- 2011 2010 2009 -------- -------- -------- (IN MILLIONS) Balance at January 1,........... $ 6,539 $ 6,302 $ 5,669 Less: Reinsurance recoverables. 448 354 266 -------- -------- -------- Net balance at January 1,....... 6,091 5,948 5,403 -------- -------- -------- Incurred related to: Current year................... 3,856 3,733 4,480 Prior years.................... (79) 13 (14) -------- -------- -------- Total incurred............... 3,777 3,746 4,466 -------- -------- -------- Paid related to: Current year................... (2,282) (2,244) (2,664) Prior years.................... (1,288) (1,359) (1,257) -------- -------- -------- Total paid................... (3,570) (3,603) (3,921) -------- -------- -------- Net balance at December 31,..... 6,298 6,091 5,948 Add: Reinsurance recoverables... 324 448 354 -------- -------- -------- Balance at December 31,......... $ 6,622 $ 6,539 $ 6,302 ======== ======== ========
During 2011 and 2009, claims and claim adjustment expenses associated with prior years decreased by $79 million and $14 million, respectively, due to improved loss ratios for non-medical health claim liabilities. During 2010, claims and claim adjustment expenses associated with prior years increased by $13 million due to differences between the actual benefits paid and expected benefits owed during those periods. GUARANTEES The Company issues annuity contracts which may include contractual guarantees to the contractholder for: (i) return of no less than total deposits made to the contract less any partial withdrawals ("return of net deposits"); and (ii) the highest contract value on a specified anniversary date minus any withdrawals following the contract anniversary, or total deposits made to the contract less any partial withdrawals plus a minimum return ("anniversary contract value" or "minimum return"). The Company also issues annuity contracts that apply a lower rate of funds deposited if the contractholder elects to surrender the contract for cash and a higher rate if the contractholder elects to annuitize ("two tier annuities"). These guarantees include benefits that are payable in the event of death or at annuitization. The Company also issues universal and variable life contracts where the Company contractually guarantees to the contractholder a secondary guarantee or a guaranteed paid-up benefit. F-120 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information regarding the types of guarantees relating to annuity contracts and universal and variable life contracts was as follows:
DECEMBER 31, --------------------------------------------------------- 2011 2010 ---------------------------- ---------------------------- IN THE AT IN THE AT EVENT OF DEATH ANNUITIZATION EVENT OF DEATH ANNUITIZATION -------------- ------------- -------------- ------------- (IN MILLIONS) ANNUITY CONTRACTS (1) RETURN OF NET DEPOSITS Separate account value.................. $ 4,311 $ N/A $ 4,610 $ N/A Net amount at risk (2).................. $ 126 (3) $ N/A $ 78 (3) $ N/A Average attained age of contractholders. 62 years N/A 61 years N/A ANNIVERSARY CONTRACT VALUE OR MINIMUM RETURN Separate account value.................. $ 44,360 $ 18,378 $ 40,114 $ 13,797 Net amount at risk (2).................. $1,768 (3) $2,563 (4) $1,241 (3) $1,271 (4) Average attained age of contractholders. 63 years 60 years 63 years 59 years TWO TIER ANNUITIES General account value................... N/A $ 276 N/A $ 280 Net amount at risk (2).................. N/A $ 49 (5) N/A $ 49 (5) Average attained age of contractholders. N/A 63 years N/A 62 years
DECEMBER 31, ---------------------------------------------- 2011 2010 ---------------------- ----------------------- SECONDARY PAID-UP SECONDARY PAID-UP GUARANTEES GUARANTEES GUARANTEES GUARANTEES ----------- ---------- ----------- ----------- (IN MILLIONS) UNIVERSAL AND VARIABLE LIFE CONTRACTS (1) Account value (general and separate account)................................ $ 6,535 $ 1,206 $ 6,194 $ 1,250 Net amount at risk (2).................... $88,999 (3) $9,977 (3) $88,425 (3) $10,713 (3) Average attained age of policyholders..... 51 years 58 years 50 years 57 years
---------- (1)The Company's annuity and life contracts with guarantees may offer more than one type of guarantee in each contract. Therefore, the amounts listed above may not be mutually exclusive. (2)The net amount at risk is based on the direct amount at risk (excluding ceded reinsurance). (3)The net amount at risk for guarantees of amounts in the event of death is defined as the current GMDB in excess of the current account balance at the balance sheet date. (4)The net amount at risk for guarantees of amounts at annuitization is defined as the present value of the minimum guaranteed annuity payments available to the contractholder determined in accordance with the terms of the contract in excess of the current account balance. (5)The net amount at risk for two tier annuities is based on the excess of the upper tier, adjusted for a profit margin, less the lower tier. F-121 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information regarding the liabilities for guarantees (excluding base policy liabilities) relating to annuity and universal and variable life contracts was as follows:
UNIVERSAL AND VARIABLE ANNUITY CONTRACTS LIFE CONTRACTS ------------------------ --------------------- GUARANTEED GUARANTEED DEATH ANNUITIZATION SECONDARY PAID-UP BENEFITS BENEFITS GUARANTEES GUARANTEES TOTAL ---------- ------------- ---------- ---------- ----- (IN MILLIONS) DIRECT Balance at January 1, 2009... $ 69 $ 89 $ 27 $13 $ 198 Incurred guaranteed benefits. 21 -- 40 8 69 Paid guaranteed benefits..... (33) -- -- -- (33) ---------- ------------- ---------- ---------- ----- Balance at December 31, 2009. 57 89 67 21 234 Incurred guaranteed benefits. 10 24 179 28 241 Paid guaranteed benefits..... (6) -- -- -- (6) ---------- ------------- ---------- ---------- ----- Balance at December 31, 2010. 61 113 246 49 469 Incurred guaranteed benefits. 30 45 15 9 99 Paid guaranteed benefits..... (7) -- -- -- (7) ---------- ------------- ---------- ---------- ----- Balance at December 31, 2011. $ 84 $158 $261 $58 $ 561 ========== ============= ========== ========== ===== CEDED Balance at January 1, 2009... $ 40 $ 26 $ -- $-- $ 66 Incurred guaranteed benefits. 30 2 44 8 84 Paid guaranteed benefits..... (33) -- -- -- (33) ---------- ------------- ---------- ---------- ----- Balance at December 31, 2009. 37 28 44 8 117 Incurred guaranteed benefits. 13 8 165 26 212 Paid guaranteed benefits..... (6) -- -- -- (6) ---------- ------------- ---------- ---------- ----- Balance at December 31, 2010. 44 36 209 34 323 Incurred guaranteed benefits. 25 16 3 7 51 Paid guaranteed benefits..... (7) -- -- -- (7) ---------- ------------- ---------- ---------- ----- Balance at December 31, 2011. $ 62 $ 52 $212 $41 $ 367 ========== ============= ========== ========== ===== NET Balance at January 1, 2009... $ 29 $ 63 $ 27 $13 $ 132 Incurred guaranteed benefits. (9) (2) (4) -- (15) Paid guaranteed benefits..... -- -- -- -- -- ---------- ------------- ---------- ---------- ----- Balance at December 31, 2009. 20 61 23 13 117 Incurred guaranteed benefits. (3) 16 14 2 29 Paid guaranteed benefits..... -- -- -- -- -- ---------- ------------- ---------- ---------- ----- Balance at December 31, 2010. 17 77 37 15 146 Incurred guaranteed benefits. 5 29 12 2 48 Paid guaranteed benefits..... -- -- -- -- -- ---------- ------------- ---------- ---------- ----- Balance at December 31, 2011. $ 22 $106 $ 49 $17 $ 194 ========== ============= ========== ========== =====
F-122 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Account balances of contracts with insurance guarantees were invested in separate account asset classes as follows at:
DECEMBER 31, --------------- 2011 2010 ------- ------- (IN MILLIONS) Fund Groupings: Equity.......... $18,240 $19,167 Balanced........ 14,368 11,640 Bond............ 4,221 3,875 Specialty....... 787 886 Money Market.... 211 218 ------- ------- Total.......... $37,827 $35,786 ======= =======
9. REINSURANCE The Company's Insurance Products segment participates in reinsurance activities in order to limit losses, minimize exposure to significant risks and provide additional capacity for future growth. For its individual life insurance products, the Company has historically reinsured the mortality risk primarily on an excess of retention basis or a quota share basis. The Company currently reinsures 90% of the mortality risk in excess of $1 million for most products and reinsures up to 90% of the mortality risk for certain other products. In addition to reinsuring mortality risk as described above, the Company reinsures other risks, as well as specific coverages. Placement of reinsurance is done primarily on an automatic basis and also on a facultative basis for risks with specified characteristics. On a case by case basis, the Company may retain up to $20 million per life and reinsure 100% of amounts in excess of the amount the Company retains. The Company evaluates its reinsurance programs routinely and may increase or decrease its retention at any time. For other policies within the Insurance Products segment, the Company generally retains most of the risk and only cedes particular risks on certain client arrangements. The Company's Retirement Products segment reinsures 90% of the new production of fixed annuities from several affiliates. The Company's Retirement Products segment also reinsures 100% of the living and death benefit guarantees associated with its variable annuities issued since 2004 to an affiliated reinsurer and certain portions of the living and death benefit guarantees associated with its variable annuities issued prior to 2004 to affiliated and non-affiliated reinsurers. Under these reinsurance agreements, the Company pays a reinsurance premium generally based on fees associated with the guarantees collected from policyholders, and receives reimbursement for benefits paid or accrued in excess of account values, subject to certain limitations. The Company's Corporate Benefit Funding segment periodically engages in reinsurance activities, as considered appropriate. The impact of these activities on the financial results of this segment has not been significant. The Company has exposure to catastrophes, which could contribute to significant fluctuations in the Company's results of operations. The Company uses excess of retention and quota share reinsurance agreements to provide greater diversification of risk and minimize exposure to larger risks. The Company reinsures its business through a diversified group of well-capitalized, highly rated reinsurers. The Company analyzes recent trends in arbitration and litigation outcomes in disputes, if any, with its reinsurers. The Company monitors ratings and evaluates the financial strength of its reinsurers by analyzing their financial F-123 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) statements. In addition, the reinsurance recoverable balance due from each reinsurer is evaluated as part of the overall monitoring process. Recoverability of reinsurance recoverable balances is evaluated based on these analyses. The Company generally secures large reinsurance recoverable balances with various forms of collateral, including secured trusts, funds withheld accounts and irrevocable letters of credit. These reinsurance recoverable balances are stated net of allowances for uncollectible reinsurance, which at December 31, 2011 and 2010, were immaterial. The Company has secured certain reinsurance recoverable balances with various forms of collateral, including secured trusts, funds withheld accounts and irrevocable letters of credit. The Company had $2.3 billion of unsecured unaffiliated reinsurance recoverable balances at both December 31, 2011 and 2010. At December 31, 2011, the Company had $5.4 billion of net unaffiliated ceded reinsurance recoverables. Of this total, $4.2 billion, or 78%, were with the Company's five largest unaffiliated ceded reinsurers, including $1.6 billion of which were unsecured. At December 31, 2010, the Company had $5.6 billion of net unaffiliated ceded reinsurance recoverables. Of this total, $4.6 billion, or 82%, were with the Company's five largest unaffiliated ceded reinsurers, including $1.6 billion of which were unsecured. The Company has reinsured with an unaffiliated third-party reinsurer, 49.25% of the closed block through a modified coinsurance agreement. The Company accounts for this agreement under the deposit method of accounting. The Company, having the right of offset, has offset the modified coinsurance deposit with the deposit recoverable. F-124 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The amounts in the consolidated statements of operations include the impact of reinsurance. Information regarding the effect of reinsurance was as follows:
YEARS ENDED DECEMBER 31, -------------------------- 2011 2010 2009 -------- -------- -------- (IN MILLIONS) PREMIUMS: Direct premiums............................................... $ 18,435 $ 18,793 $ 19,285 Reinsurance assumed........................................... 1,240 1,155 1,197 Reinsurance ceded............................................. (1,387) (1,429) (1,853) -------- -------- -------- Net premiums............................................... $ 18,288 $ 18,519 $ 18,629 ======== ======== ======== UNIVERSAL LIFE AND INVESTMENT-TYPE PRODUCT POLICY FEES: Direct universal life and investment-type product policy fees. $ 2,686 $ 2,627 $ 2,565 Reinsurance assumed........................................... 38 13 9 Reinsurance ceded............................................. (522) (565) (507) -------- -------- -------- Net universal life and investment-type product policy fees. $ 2,202 $ 2,075 $ 2,067 ======== ======== ======== OTHER REVENUES: Direct other revenues......................................... $ 836 $ 750 $ 779 Reinsurance assumed........................................... (6) (5) (5) Reinsurance ceded............................................. 978 980 965 -------- -------- -------- Net other revenues......................................... $ 1,808 $ 1,725 $ 1,739 ======== ======== ======== POLICYHOLDER BENEFITS AND CLAIMS: Direct policyholder benefits and claims....................... $ 21,100 $ 21,246 $ 21,570 Reinsurance assumed........................................... 1,069 1,235 1,045 Reinsurance ceded............................................. (1,488) (1,774) (1,953) -------- -------- -------- Net policyholder benefits and claims....................... $ 20,681 $ 20,707 $ 20,662 ======== ======== ======== INTEREST CREDITED TO POLICYHOLDER ACCOUNT BALANCES: Direct interest credited to policyholder account balances..... $ 2,434 $ 2,581 $ 2,734 Reinsurance assumed........................................... 32 28 13 Reinsurance ceded............................................. (94) (86) (78) -------- -------- -------- Net interest credited to policyholder account balances..... $ 2,372 $ 2,523 $ 2,669 ======== ======== ======== POLICYHOLDER DIVIDENDS: Direct policyholder dividends................................. $ 1,386 $ 1,475 $ 1,643 Reinsurance ceded............................................. (31) (32) (31) -------- -------- -------- Net policyholder dividends................................. $ 1,355 $ 1,443 $ 1,612 ======== ======== ======== OTHER EXPENSES: Direct other expenses......................................... $ 5,223 $ 5,140 $ 4,945 Reinsurance assumed........................................... 458 462 427 Reinsurance ceded............................................. 733 657 637 -------- -------- -------- Net other expenses......................................... $ 6,414 $ 6,259 $ 6,009 ======== ======== ========
F-125 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The amounts in the consolidated balance sheets include the impact of reinsurance. Information regarding the effect of reinsurance was as follows at:
DECEMBER 31, 2011 --------------------------------- TOTAL BALANCE DIRECT ASSUMED CEDED SHEET -------- ------- ------- -------- (IN MILLIONS) ASSETS: Premiums, reinsurance and other receivables...................... $ 1,383 $ 485 $26,113 $ 27,981 Deferred policy acquisition costs and value of business acquired. 7,793 386 (400) 7,779 -------- ------- ------- -------- Total assets.................................................... $ 9,176 $ 871 $25,713 $ 35,760 ======== ======= ======= ======== LIABILITIES: Future policy benefits........................................... $107,713 $1,620 $ -- $109,333 Policyholder account balances.................................... 88,557 299 -- 88,856 Other policy-related balances.................................... 5,631 294 (49) 5,876 Other liabilities................................................ 8,068 7,574 20,972 36,614 -------- ------- ------- -------- Total liabilities............................................... $209,969 $9,787 $20,923 $240,679 ======== ======= ======= ========
DECEMBER 31, 2010 --------------------------------- TOTAL BALANCE DIRECT ASSUMED CEDED SHEET -------- ------- ------- -------- (IN MILLIONS) ASSETS: Premiums, reinsurance and other receivables...................... $ 1,010 $ 476 $25,316 $ 26,802 Deferred policy acquisition costs and value of business acquired. 8,322 342 (473) 8,191 -------- ------- ------- -------- Total assets.................................................... $ 9,332 $ 818 $24,843 $ 34,993 ======== ======= ======= ======== LIABILITIES: Future policy benefits........................................... $101,227 $1,723 $ -- $102,950 Policyholder account balances.................................... 88,602 320 -- 88,922 Other policy-related balances.................................... 5,448 279 (78) 5,649 Other liabilities................................................ 7,515 7,543 20,055 35,113 -------- ------- ------- -------- Total liabilities............................................... $202,792 $9,865 $19,977 $232,634 ======== ======= ======= ========
Reinsurance agreements that do not expose the Company to a reasonable possibility of a significant loss from insurance risk are recorded using the deposit method of accounting. The deposit assets on reinsurance were $17.9 billion and $18.2 billion at December 31, 2011 and 2010, respectively. The deposit liabilities on reinsurance were $7.0 billion and $7.1 billion at December 31, 2011 and 2010, respectively. RELATED PARTY REINSURANCE TRANSACTIONS The Company has reinsurance agreements with certain of MetLife, Inc.'s subsidiaries, including Exeter, First MetLife Investors Insurance Company, MetLife Insurance Company of Connecticut ("MICC"), MetLife Investors USA Insurance Company, MetLife Investors Insurance Company, MetLife Reinsurance Company of Charleston ("MRC"), MetLife Reinsurance Company of Vermont and Metropolitan Tower Life Insurance Company, all of which are related parties. F-126 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information regarding the effect of affiliated reinsurance included in the consolidated statements of operations was as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2011 2010 2009 ------ ------ ------ (IN MILLIONS) PREMIUMS: Reinsurance assumed........................................... $ 169 $ 88 $ 66 Reinsurance ceded............................................. (51) (63) (43) ------ ------ ------ Net premiums............................................... $ 118 $ 25 $ 23 ====== ====== ====== UNIVERSAL LIFE AND INVESTMENT-TYPE PRODUCT POLICY FEES: Reinsurance assumed........................................... $ 38 $ 13 $ 9 Reinsurance ceded............................................. (170) (230) (177) ------ ------ ------ Net universal life and investment-type product policy fees. $(132) $(217) $(168) ====== ====== ====== OTHER REVENUES: Reinsurance assumed........................................... $ (7) $ (5) $ (4) Reinsurance ceded (1)......................................... 916 908 901 ------ ------ ------ Net other revenues......................................... $ 909 $ 903 $ 897 ====== ====== ====== POLICYHOLDER BENEFITS AND CLAIMS: Reinsurance assumed........................................... $ 175 $ 112 $ 75 Reinsurance ceded............................................. (121) (129) (91) ------ ------ ------ Net policyholder benefits and claims....................... $ 54 $ (17) $ (16) ====== ====== ====== INTEREST CREDITED TO POLICYHOLDER ACCOUNT BALANCES: Reinsurance assumed........................................... $ 28 $ 26 $ 10 Reinsurance ceded............................................. (94) (86) (78) ------ ------ ------ Net interest credited to policyholder account balances..... $ (66) $ (60) $ (68) ====== ====== ====== POLICYHOLDER DIVIDENDS: Reinsurance assumed........................................... $ -- $ -- $ -- Reinsurance ceded............................................. (14) (16) (18) ------ ------ ------ Net policyholder dividends................................. $ (14) $ (16) $ (18) ====== ====== ====== OTHER EXPENSES: Reinsurance assumed........................................... $ 352 $ 362 $ 331 Reinsurance ceded (1)......................................... 914 826 791 ------ ------ ------ Net other expenses......................................... $1,266 $1,188 $1,122 ====== ====== ======
---------- (1)In connection with the cession of a portion of its closed block liabilities on a coinsurance with funds withheld basis to MRC, the Company recognized interest earned of $916 million and $908 million for the years ended December 31, 2011 and 2010, respectively, on the deposit, which is recorded in premiums, reinsurance and other receivables. The Company also recognized in other expenses $906 million, $898 million and $888 million of interest expense associated with the funds withheld for the years ended December 31, 2011, 2010 and 2009, respectively. F-127 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information regarding the effect of affiliated reinsurance included in the consolidated balance sheets was as follows at:
DECEMBER 31, ------------------------------- 2011 2010 --------------- --------------- ASSUMED CEDED ASSUMED CEDED ------- ------- ------- ------- (IN MILLIONS) ASSETS: Premiums, reinsurance and other receivables...................... $ 44 $20,469 $ 14 $19,423 Deferred policy acquisition costs and value of business acquired. 359 (292) 310 (323) ------- ------- ------- ------- Total assets.................................................... $ 403 $20,177 $ 324 $19,100 ======= ======= ======= ======= LIABILITIES: Future policy benefits........................................... $ 442 $ -- $ 401 $ -- Policyholder account balances.................................... 266 -- 281 -- Other policy-related balances.................................... 59 (49) 49 (78) Other liabilities................................................ 7,114 18,707 7,059 17,844 ------- ------- ------- ------- Total liabilities............................................... $7,881 $18,658 $7,790 $17,766 ======= ======= ======= =======
MLIC cedes two blocks of business to an affiliate on a 75% coinsurance with funds withheld basis. Certain contractual features of this agreement qualify as an embedded derivative, which is separately accounted for at estimated fair value on the Company's consolidated balance sheets. The embedded derivative related to the funds withheld associated with this reinsurance agreement is included within other liabilities and increased the funds withheld balance by $20 million at December 31, 2011, and decreased the funds withheld balance by $9 million at December 31, 2010. Net derivative gains (losses) associated with the embedded derivative were ($29) million and $9 million for the years ended December 31, 2011 and 2010, respectively. The reinsurance agreement also includes an experience refund provision, whereby some or all of the profits on the underlying reinsurance agreement are returned to MLIC from the affiliated reinsurer during the first several years of the reinsurance agreement. The experience refund reduced the funds withheld by MLIC from the affiliated reinsurer by $12 million and $27 million at December 31, 2011 and 2010, respectively, and is considered unearned revenue, amortized over the life of the contract using the same assumptions as used for the DAC associated with the underlying policies. Amortization and interest of the unearned revenue associated with the experience refund was $5 million for both the years ended December 31, 2011 and 2010, and is included in premiums and universal life and investment-type product policy fees in the consolidated statements of operations. At December 31, 2011 and 2010, unearned revenue related to the experience refund was $30 million and $22 million, respectively, and is included in other policy-related balances in the consolidated balance sheets. The Company cedes risks to an affiliate related to guaranteed minimum benefit guarantees written directly by the Company. These ceded reinsurance agreements contain embedded derivatives and changes in their fair value are included within net derivative gains (losses). The embedded derivatives associated with the cessions are included within premiums, reinsurance and other receivables and were assets of $1.2 billion and $295 million at December 31, 2011 and 2010, respectively. Net derivative gains (losses) associated with the embedded derivatives were $727 million, ($66) million and ($596) million, for the years ended December 31, 2011, 2010 and 2009, respectively. Certain contractual features of the closed block agreement with MRC create an embedded derivative, which is separately accounted for at estimated fair value on the Company's consolidated balance sheets. The embedded derivative related to the funds withheld associated with this reinsurance agreement was included within other liabilities and increased the funds withheld balance by $1.5 billion and $697 million at December 31, 2011 and F-128 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2010, respectively. Net derivative gains (losses) associated with the embedded derivative were ($811) million, ($596) million and ($1.3) billion, for the years ended December 31, 2011, 2010 and 2009, respectively. The Company has secured certain reinsurance recoverable balances with various forms of collateral, including secured trusts, funds withheld accounts and irrevocable letters of credit. The Company had $1.5 billion and $1.4 billion of unsecured affiliated reinsurance recoverable balances at December 31, 2011 and 2010, respectively. Affiliated reinsurance agreements that do not expose the Company to a reasonable possibility of a significant loss from insurance risk are recorded using the deposit method of accounting. The deposit assets on affiliated reinsurance were $15.7 billion and $15.8 billion at December 31, 2011 and 2010, respectively. The deposit liabilities on affiliated reinsurance were $6.9 billion and $7.0 billion at December 31, 2011 and 2010, respectively. 10.CLOSED BLOCK On April 7, 2000 (the "Demutualization Date"), Metropolitan Life Insurance Company converted from a mutual life insurance company to a stock life insurance company and became a wholly-owned subsidiary of MetLife, Inc. The conversion was pursuant to an order by the New York Superintendent of Insurance (the "Superintendent") approving Metropolitan Life Insurance Company's plan of reorganization, as amended (the "Plan"). On the Demutualization Date, Metropolitan Life Insurance Company established a closed block for the benefit of holders of certain individual life insurance policies of Metropolitan Life Insurance Company. Assets have been allocated to the closed block in an amount that has been determined to produce cash flows which, together with anticipated revenues from the policies included in the closed block, are reasonably expected to be sufficient to support obligations and liabilities relating to these policies, including, but not limited to, provisions for the payment of claims and certain expenses and taxes, and to provide for the continuation of policyholder dividend scales in effect for 1999, if the experience underlying such dividend scales continues, and for appropriate adjustments in such scales if the experience changes. At least annually, the Company compares actual and projected experience against the experience assumed in the then-current dividend scales. Dividend scales are adjusted periodically to give effect to changes in experience. The closed block assets, the cash flows generated by the closed block assets and the anticipated revenues from the policies in the closed block will benefit only the holders of the policies in the closed block. To the extent that, over time, cash flows from the assets allocated to the closed block and claims and other experience related to the closed block are, in the aggregate, more or less favorable than what was assumed when the closed block was established, total dividends paid to closed block policyholders in the future may be greater than or less than the total dividends that would have been paid to these policyholders if the policyholder dividend scales in effect for 1999 had been continued. Any cash flows in excess of amounts assumed will be available for distribution over time to closed block policyholders and will not be available to stockholders. If the closed block has insufficient funds to make guaranteed policy benefit payments, such payments will be made from assets outside of the closed block. The closed block will continue in effect as long as any policy in the closed block remains in-force. The expected life of the closed block is over 100 years. The Company uses the same accounting principles to account for the participating policies included in the closed block as it used prior to the Demutualization Date. However, the Company establishes a policyholder dividend obligation for earnings that will be paid to policyholders as additional dividends as described below. The excess of closed block liabilities over closed block assets at the Demutualization Date (adjusted to eliminate the impact of related amounts in accumulated other comprehensive income) represents the estimated maximum future earnings from the closed block expected to result from operations attributed to the closed block after income taxes. Earnings of the closed block are recognized in income over the period the policies and contracts in F-129 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) the closed block remain in-force. Management believes that over time the actual cumulative earnings of the closed block will approximately equal the expected cumulative earnings due to the effect of dividend changes. If, over the period the closed block remains in existence, the actual cumulative earnings of the closed block are greater than the expected cumulative earnings of the closed block, the Company will pay the excess of the actual cumulative earnings of the closed block over the expected cumulative earnings to closed block policyholders as additional policyholder dividends unless offset by future unfavorable experience of the closed block and, accordingly, will recognize only the expected cumulative earnings in income with the excess recorded as a policyholder dividend obligation. If over such period, the actual cumulative earnings of the closed block are less than the expected cumulative earnings of the closed block, the Company will recognize only the actual earnings in income. However, the Company may change policyholder dividend scales in the future, which would be intended to increase future actual earnings until the actual cumulative earnings equal the expected cumulative earnings. Experience within the closed block, in particular mortality and investment yields, as well as realized and unrealized gains and losses, directly impact the policyholder dividend obligation. Amortization of the closed block DAC, which resides outside of the closed block, is based upon cumulative actual and expected earnings within the closed block. Accordingly, the Company's net income continues to be sensitive to the actual performance of the closed block. F-130 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information regarding the closed block liabilities and assets designated to the closed block was as follows:
DECEMBER 31, ---------------- 2011 2010 -------- ------- (IN MILLIONS) CLOSED BLOCK LIABILITIES Future policy benefits............................................................... $ 43,169 $43,456 Other policy-related balances........................................................ 358 316 Policyholder dividends payable....................................................... 514 579 Policyholder dividend obligation..................................................... 2,919 876 Current income tax payable........................................................... -- 178 Other liabilities.................................................................... 613 627 -------- ------- Total closed block liabilities.................................................... 47,573 46,032 -------- ------- ASSETS DESIGNATED TO THE CLOSED BLOCK Investments: Fixed maturity securities available-for-sale, at estimated fair value............... 30,407 28,768 Equity securities available-for-sale, at estimated fair value....................... 35 102 Mortgage loans...................................................................... 6,206 6,253 Policy loans........................................................................ 4,657 4,629 Real estate and real estate joint ventures held-for-investment...................... 364 328 Short-term investments.............................................................. -- 1 Other invested assets............................................................... 857 729 -------- ------- Total investments................................................................. 42,526 40,810 Cash and cash equivalents............................................................ 249 236 Accrued investment income............................................................ 509 518 Premiums, reinsurance and other receivables.......................................... 109 95 Current income tax recoverable....................................................... 53 -- Deferred income tax assets........................................................... 362 474 -------- ------- Total assets designated to the closed block....................................... 43,808 42,133 -------- ------- Excess of closed block liabilities over assets designated to the closed block........ 3,765 3,899 -------- ------- Amounts included in accumulated other comprehensive income (loss): Unrealized investment gains (losses), net of income tax............................. 2,394 1,101 Unrealized gains (losses) on derivative instruments, net of income tax.............. 11 10 Allocated to policyholder dividend obligation, net of income tax.................... (1,897) (569) -------- ------- Total amounts included in accumulated other comprehensive income (loss).............. 508 542 -------- ------- Maximum future earnings to be recognized from closed block assets and liabilities. $ 4,273 $ 4,441 ======== =======
F-131 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information regarding the closed block policyholder dividend obligation was as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2011 2010 2009 ------ ---- ---- (IN MILLIONS) Balance at January 1,......................................... $ 876 $ -- $-- Change in unrealized investment and derivative gains (losses). 2,043 876 -- ------ ---- ---- Balance at December 31,....................................... $2,919 $876 $-- ====== ==== ====
Information regarding the closed block revenues and expenses was as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2011 2010 2009 ------ ------ ------ (IN MILLIONS) REVENUES Premiums...................................................................... $2,306 $2,461 $2,708 Net investment income......................................................... 2,233 2,294 2,197 Net investment gains (losses): Other-than-temporary impairments on fixed maturity securities................ (14) (32) (107) Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive income (loss).......................................... 3 -- 40 Other net investment gains (losses).......................................... 43 71 327 ------ ------ ------ Total net investment gains (losses)........................................ 32 39 260 Net derivative gains (losses)................................................ 8 (27) (128) ------ ------ ------ Total revenues............................................................. 4,579 4,767 5,037 ------ ------ ------ EXPENSES Policyholder benefits and claims.............................................. 2,991 3,115 3,329 Policyholder dividends........................................................ 1,137 1,235 1,394 Other expenses................................................................ 193 199 203 ------ ------ ------ Total expenses............................................................. 4,321 4,549 4,926 ------ ------ ------ Revenues, net of expenses before provision for income tax expense (benefit)... 258 218 111 Provision for income tax expense (benefit).................................... 90 72 36 ------ ------ ------ Revenues, net of expenses and provision for income tax expense (benefit)...... $ 168 $ 146 $ 75 ====== ====== ======
The change in the maximum future earnings of the closed block was as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2011 2010 2009 ------ ------ ------ (IN MILLIONS) Balance at December 31,........... $4,273 $4,441 $4,587 Less: Closed block adjustment (1). -- -- 144 Balance at January 1,............. 4,441 4,587 4,518 ------ ------ ------ Change during year................ $(168) $(146) $ (75) ====== ====== ======
---------- (1)The closed block adjustment represents an intra-company reallocation of assets which affected the closed block. The adjustment had no impact on the Company's consolidated financial statements. F-132 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Metropolitan Life Insurance Company charges the closed block with federal income taxes, state and local premium taxes and other additive state or local taxes, as well as investment management expenses relating to the closed block as provided in the Plan. Metropolitan Life Insurance Company also charges the closed block for expenses of maintaining the policies included in the closed block. 11.LONG-TERM AND SHORT-TERM DEBT Long-term and short-term debt outstanding was as follows:
INTEREST RATES -------------------- DECEMBER 31, WEIGHTED ------------- RANGE AVERAGE MATURITY 2011 2010 ----------- -------- --------- ------ ------ (IN MILLIONS) Surplus notes -- affiliated............. 3.00%-7.38% 5.97% 2014-2037 $1,099 $1,874 Surplus notes........................... 7.63%-7.88% 7.85% 2015-2025 700 699 Capital notes -- affiliated............. 7.13% 7.13% 2032-2033 -- 500 Mortgage loans -- affiliated............ 2.24%-7.26% 7.18% 2015-2020 307 199 Other notes with varying interest rates. 3.76%-8.56% 4.45% 2016-2017 -- 102 Secured demand note -- affiliated....... 0.50% 0.50% 2011 -- 25 Capital lease obligations............... 26 27 ------ ------ Total long-term debt (1)................ 2,132 3,426 Total short-term debt................... 101 102 ------ ------ Total.................................. $2,233 $3,528 ====== ======
---------- (1)Excludes $116 million and $184 million at December 31, 2011 and 2010, respectively, of long-term debt relating to CSEs. See Note 3. The aggregate maturities of long-term debt at December 31, 2011 for the next five years and thereafter are $1 million in 2012, $2 million in 2013, $219 million in 2014, $500 million in 2015, $2 million in 2016 and $1.4 billion thereafter. Capital lease obligations, mortgage loans and the secured demand note are collateralized and rank highest in priority, followed by unsecured senior debt which consists of other notes with varying interest rates. Payments of interest and principal on the Company's surplus notes and capital notes are subordinate to all other obligations. Payments of interest and principal on surplus notes may be made only with the prior approval of the insurance department of the state of domicile, whereas such payments on capital notes may or may not require this prior approval. Certain of the Company's debt instruments, credit facilities and committed facilities contain various administrative, reporting, legal and financial covenants. The Company believes it was in compliance with all such covenants at December 31, 2011. SURPLUS NOTES -- AFFILIATED On April 25, 2011, Metropolitan Life Insurance Company repaid in cash a $775 million surplus note issued to MetLife, Inc. in December 2009, with an original maturity of December 31, 2011 and an interest rate of six-month LIBOR plus 1.80%. The early redemption was approved by the Superintendent. F-133 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In December 2010, Metropolitan Life Insurance Company repaid a $300 million surplus note to MetLife, Inc. in cash. The note was issued in December 2009, with an original maturity of 2011 and an interest rate of six-month LIBOR plus 1.80%. The issuance was settled by the transfer of securities from MetLife, Inc. to the Company. In November 2010, Metropolitan Life Insurance Company issued a $188 million surplus note to MetLife Mexico, S.A. ("MetLife Mexico"), an affiliate, maturing in 2015 with an interest rate of 3.0%. In September 2009, Metropolitan Life Insurance Company issued a $217 million surplus note to MetLife Mexico, maturing in 2014 with an interest rate of 6.46%. CAPITAL NOTES -- AFFILIATED On December 15, 2011, Metropolitan Life Insurance Company repaid in cash the $400 million and $100 million capital notes issued to MetLife, Inc. in December 2002, each with an interest rate of 7.129% and with original maturities of December 15, 2032 and January 15, 2033, respectively. Although prior approval was not required, the Superintendent was notified of these early repayments. MORTGAGE LOANS -- AFFILIATED On December 28, 2011, a wholly-owned real estate subsidiary of the Company issued a note for $110 million to MICC. This affiliated mortgage loan is secured by real estate held by the Company for investment. This note bears interest at a rate of one-month LIBOR plus 1.95%, which is payable quarterly through maturity in 2015. In December 2009, two wholly-owned real estate subsidiaries of the Company issued notes aggregating $200 million to MICC and its wholly-owned subsidiary, MetLife Investors USA Insurance Company. These affiliated mortgage loans are secured by real estate held by the Company for investment. Of these loans, $60 million bears interest at a rate of 7.01%, which is payable quarterly through maturity in 2020. Additionally, $140 million bears interest at a rate of 7.26%, with principal and interest payable quarterly through maturity in 2020. SECURED DEMAND NOTE -- AFFILIATED Effective September 2008, the Company entered into a secured demand note collateral agreement with an affiliate pursuant to which the affiliate pledged securities to the Company to collateralize its obligation to lend $25 million to the Company. The secured demand note matured in February 2011. SHORT-TERM DEBT Short-term debt with original maturities of one year or less consisted entirely of commercial paper. During the years ended December 31, 2011, 2010 and 2009, the weighted average interest rate on short-term debt was 0.16%, 0.21% and 0.35%, respectively. During the years ended December 31, 2011, 2010 and 2009, the average daily balance of short-term debt was $102 million, $311 million and $365 million, respectively, and the average days outstanding was 44 days, 29 days and 23 days, respectively. F-134 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) INTEREST EXPENSE Interest expense related to the Company's indebtedness included in other expenses was $185 million, $202 million and $166 million for the years ended December 31, 2011, 2010 and 2009, respectively. These amounts include $125 million, $143 million and $105 million of interest expense related to affiliated debt for the years ended December 31, 2011, 2010 and 2009, respectively. CREDIT AND COMMITTED FACILITIES The Company maintains unsecured credit facilities and a committed facility, which aggregated $4.0 billion and $500 million, respectively, at December 31, 2011. When drawn upon, these facilities bear interest at varying rates in accordance with the respective agreements. Credit Facilities. The unsecured credit facilities are used for general corporate purposes, to support the borrowers' commercial paper program and for the issuance of letters of credit. Total fees expensed by the Company associated with these credit facilities were $6 million, $8 million and $6 million for the years ended December 31, 2011, 2010 and 2009, respectively. Information on these credit facilities at December 31, 2011 is as follows:
LETTER OF CREDIT UNUSED BORROWER(S) EXPIRATION CAPACITY ISSUANCES DRAWDOWNS COMMITMENTS -------------------------------------------- --------------------- -------- --------- --------- ----------- (IN MILLIONS) MetLife, Inc. and MetLife Funding, Inc....... October 2013 (1), (2) $1,000 $ 104 $-- $896 MetLife, Inc. and MetLife Funding, Inc....... August 2016 (1) 3,000 2,980 -- 20 -------- --------- --------- ----------- Total...................................... $4,000 $3,084 $-- $916 ======== ========= ========= ===========
---------- (1)In August 2011, the 364-day, $1.0 billion senior unsecured credit agreement entered into in October 2010 by MetLife, Inc. and MetLife Funding, Inc., a subsidiary of Metropolitan Life Insurance Company, was amended and restated to provide a five-year, $3.0 billion senior unsecured credit facility. Concurrently, MetLife, Inc. and MetLife Funding, Inc. elected to reduce the outstanding commitments under the three-year, $3.0 billion senior unsecured credit facility entered into in October 2010 to $1.0 billion with no change to the original maturity of October 2013. The Company incurred costs of $5 million related to the five-year credit facility, which have been capitalized and included in other assets. These costs will be amortized over the amended terms of the facilities. Due to the reduction in total capacity of the three-year facility, the Company subsequently expensed $2 million of the remaining deferred financing costs associated with the October 2010 credit agreement, which are included in other expenses. (2)All borrowings under the credit agreement must be repaid by October 2013, except that letters of credit outstanding upon termination may remain outstanding until October 2014. F-135 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Committed Facility. The committed facility is used for collateral for certain of the Company's affiliated reinsurance liabilities. Total fees expensed by the Company associated with this committed facility were $3 million, $4 million and $3 million for the years ended December 31, 2011, 2010 and 2009, respectively. Information on the committed facility at December 31, 2011 is as follows:
LETTER OF CREDIT UNUSED MATURITY ACCOUNT PARTY/BORROWER(S) EXPIRATION CAPACITY ISSUANCES DRAWDOWNS COMMITMENTS (YEARS) --------------------------------------- ---------- -------- --------- --------- ----------- -------- (IN MILLIONS) Exeter Reassurance Company Ltd., MetLife, Inc. & Missouri Reinsurance (Barbados), Inc...................... June 2016 $500 $490 (1) $-- $10 4
---------- (1)Missouri Reinsurance (Barbados), Inc., a subsidiary of Metropolitan Life Insurance Company, had outstanding $390 million in letters of credit at December 31, 2011. 12.INCOME TAX The provision for income tax from continuing operations was as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2011 2010 2009 ------ ---- -------- (IN MILLIONS) Current: Federal.......................................... $ 552 $305 $ 206 State and local.................................. 2 4 3 Foreign.......................................... 116 46 174 ------ ---- -------- Subtotal....................................... 670 355 383 ------ ---- -------- Deferred: Federal.......................................... 789 354 (2,226) Foreign.......................................... 22 69 (53) ------ ---- -------- Subtotal....................................... 811 423 (2,279) ------ ---- -------- Provision for income tax expense (benefit)... $1,481 $778 $(1,896) ====== ==== ========
The reconciliation of the income tax provision at the U.S. statutory rate to the provision for income tax as reported for continuing operations was as follows:
YEARS ENDED DECEMBER 31, ---------------------- 2011 2010 2009 ------ ------ -------- (IN MILLIONS) Tax provision at U.S. statutory rate.......... $1,685 $ 891 $(1,554) Tax effect of: Tax-exempt investment income................. (102) (100) (149) State and local income tax................... 3 1 -- Prior year tax............................... 10 48 (11) Tax credits.................................. (119) (72) (85) Foreign tax rate differential................ (2) (6) (89) Change in valuation allowance................ -- 13 12 Other, net................................... 6 3 (20) ------ ------ -------- Provision for income tax expense (benefit). $1,481 $ 778 $(1,896) ====== ====== ========
F-136 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Deferred income tax represents the tax effect of the differences between the book and tax basis of assets and liabilities. Net deferred income tax assets and liabilities consisted of the following at:
DECEMBER 31, --------------- 2011 2010 -------- ------ (IN MILLIONS) Deferred income tax assets: Policyholder liabilities and receivables.... $ 2,558 $2,787 Net operating loss carryforwards............ 26 24 Employee benefits........................... 840 632 Capital loss carryforwards.................. 11 12 Tax credit carryforwards.................... 249 287 Litigation-related and government mandated.. 200 220 Other....................................... 94 17 -------- ------ 3,978 3,979 Less: Valuation allowance................... 38 38 -------- ------ 3,940 3,941 -------- ------ Deferred income tax liabilities: Investments, including derivatives.......... 1,754 1,219 DAC......................................... 2,250 2,235 Net unrealized investment gains............. 2,540 1,239 Intangibles................................. 207 189 Other....................................... 16 9 -------- ------ 6,767 4,891 -------- ------ Net deferred income tax asset (liability). $(2,827) $(950) ======== ======
The following table sets forth the domestic, state, and foreign net operating and capital loss carryforwards for tax purposes at December 31, 2011:
NET OPERATING LOSS CAPITAL LOSS CARRYFORWARDS CARRYFORWARDS -------------------------------------- ------------------------------- AMOUNT EXPIRATION AMOUNT EXPIRATION ------------- ------------------------ ------------- ----------------- (IN MILLIONS) (IN MILLIONS) Domestic..... $23 Beginning in 2018 $-- N/A State........ $ 4 Beginning in 2012 $-- N/A Foreign...... $50 Five years to indefinite $31 Beginning in 2014
Tax credit carryforwards of $249 million at December 31, 2011 will expire beginning in 2021. The Company has recorded a valuation allowance increase related to tax benefits of $2 million related to certain state and foreign net operating loss carryforwards and a decrease of $2 million related to certain foreign capital loss carryforwards. The valuation allowance reflects management's assessment, based on available information, that it is more likely than not that the deferred income tax asset for certain foreign net operating and capital loss carryforwards and certain state net operating loss carryforwards will not be realized. The tax benefit will be recognized when management believes that it is more likely than not that these deferred income tax assets are realizable. F-137 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company files income tax returns with the U.S. federal government and various state and local jurisdictions, as well as foreign jurisdictions. The Company is under continuous examination by the Internal Revenue Service ("IRS") and other tax authorities in jurisdictions in which the Company has significant business operations. The income tax years under examination vary by jurisdiction. With a few exceptions, the Company is no longer subject to U.S. federal, state and local, or foreign income tax examinations by tax authorities for years prior to 2000. In early 2009, the Company and the IRS completed and substantially settled the audit years of 2000 to 2002. A few issues not settled have been escalated to the next level, IRS Appeals. The IRS exam of the current audit cycle, years 2003 to 2006, began in April 2010. The Company's liability for unrecognized tax benefits may decrease in the next 12 months pending the outcome of remaining issues, tax-exempt income and tax credits associated with the 2000 to 2002 IRS audit. A reasonable estimate of the decrease cannot be made at this time. However, the Company continues to believe that the ultimate resolution of the issues will not result in a material change to its consolidated financial statements, although the resolution of income tax matters could impact the Company's effective tax rate for a particular future period. A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows:
YEARS ENDED DECEMBER 31, ---------------- 2011 2010 2009 ---- ----- ----- (IN MILLIONS) Balance at January 1,......................................................... $499 $ 592 $ 593 Additions for tax positions of prior years.................................... 26 2 42 Reductions for tax positions of prior years................................... -- (54) (30) Additions for tax positions of current year................................... 1 2 34 Reductions for tax positions of current year.................................. (1) (1) (2) Settlements with tax authorities.............................................. -- (31) (45) Lapses of statutes of limitations............................................. -- (11) -- ---- ----- ----- Balance at December 31,....................................................... $525 $ 499 $ 592 ==== ===== ===== Unrecognized tax benefits that, if recognized would impact the effective rate. $459 $ 432 $ 490 ==== ===== =====
The Company classifies interest accrued related to unrecognized tax benefits in interest expense, included within other expenses, while penalties are included in income tax expense. Interest and penalties were as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2011 2010 2009 - ---- ---- ---- (IN MILLIONS) Interest and penalties recognized in the consolidated statements of operations. $27 $27 $38
DECEMBER 31, ------------ 2011 2010 ---- ---- (IN MILLIONS) Interest and penalties included in other liabilities in the consolidated balance sheets. $203 $176
The U.S. Treasury Department and the IRS have indicated that they intend to address through regulations the methodology to be followed in determining the dividends received deduction ("DRD"), related to variable F-138 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) life insurance and annuity contracts. The DRD reduces the amount of dividend income subject to tax and is a significant component of the difference between the actual tax expense and expected amount determined using the federal statutory tax rate of 35%. Any regulations that the IRS ultimately proposes for issuance in this area will be subject to public notice and comment, at which time insurance companies and other interested parties will have the opportunity to raise legal and practical questions about the content, scope and application of such regulations. As a result, the ultimate timing and substance of any such regulations are unknown at this time. For the years ended December 31, 2011 and 2010, the Company recognized an income tax benefit of $69 million and $38 million, respectively, related to the separate account DRD. The 2011 benefit included a benefit of $4 million related to a true-up of the 2010 tax return. The 2010 benefit included an expense of $23 million related to a true-up of the 2009 tax return. 13. CONTINGENCIES, COMMITMENTS AND GUARANTEES CONTINGENCIES LITIGATION The Company is a defendant in a large number of litigation matters. In some of the matters, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Modern pleading practice in the U.S. permits considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the trial court. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters. This variability in pleadings, together with the actual experience of the Company in litigating or resolving through settlement numerous claims over an extended period of time, demonstrates to management that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value. Due to the vagaries of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time may normally be difficult to ascertain. Uncertainties can include how fact finders will evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how trial and appellate courts will apply the law in the context of the pleadings or evidence presented, whether by motion practice, or at trial or on appeal. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law. The Company establishes liabilities for litigation and regulatory loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Liabilities have been established for a number of the matters noted below. It is possible that some of the matters could require the Company to pay damages or make other expenditures or establish accruals in amounts that could not be estimated at December 31, 2011. While the potential future charges could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known to management, management does not believe any such charges are likely to have a material effect on the Company's financial position. Matters as to Which an Estimate Can Be Made For some of the matters disclosed below, the Company is able to estimate a reasonably possible range of loss. For such matters where a loss is believed to be reasonably possible, but not probable, no accrual has been made. As of December 31, 2011, the Company estimates the aggregate range of reasonably possible losses in excess of amounts accrued for these matters to be approximately $0 to $175 million. F-139 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Matters as to Which an Estimate Cannot Be Made For other matters disclosed below, the Company is not currently able to estimate the reasonably possible loss or range of loss. The Company is often unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of the range of possible loss, such as quantification of a damage demand from plaintiffs, discovery from other parties and investigation of factual allegations, rulings by the court on motions or appeals, analysis by experts, and the progress of settlement negotiations. On a quarterly and annual basis, the Company reviews relevant information with respect to litigation contingencies and updates its accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews. Asbestos-Related Claims Metropolitan Life Insurance Company is and has been a defendant in a large number of asbestos-related suits filed primarily in state courts. These suits principally allege that the plaintiff or plaintiffs suffered personal injury resulting from exposure to asbestos and seek both actual and punitive damages. Metropolitan Life Insurance Company has never engaged in the business of manufacturing, producing, distributing or selling asbestos or asbestos-containing products nor has Metropolitan Life Insurance Company issued liability or workers' compensation insurance to companies in the business of manufacturing, producing, distributing or selling asbestos or asbestos-containing products. The lawsuits principally have focused on allegations with respect to certain research, publication and other activities of one or more of Metropolitan Life Insurance Company's employees during the period from the 1920's through approximately the 1950's and allege that Metropolitan Life Insurance Company learned or should have learned of certain health risks posed by asbestos and, among other things, improperly publicized or failed to disclose those health risks. Metropolitan Life Insurance Company believes that it should not have legal liability in these cases. The outcome of most asbestos litigation matters, however, is uncertain and can be impacted by numerous variables, including differences in legal rulings in various jurisdictions, the nature of the alleged injury and factors unrelated to the ultimate legal merit of the claims asserted against Metropolitan Life Insurance Company. Metropolitan Life Insurance Company employs a number of resolution strategies to manage its asbestos loss exposure, including seeking resolution of pending litigation by judicial rulings and settling individual or groups of claims or lawsuits under appropriate circumstances. Claims asserted against Metropolitan Life Insurance Company have included negligence, intentional tort and conspiracy concerning the health risks associated with asbestos. Metropolitan Life Insurance Company's defenses (beyond denial of certain factual allegations) include that: (i) Metropolitan Life Insurance Company owed no duty to the plaintiffs -- it had no special relationship with the plaintiffs and did not manufacture, produce, distribute or sell the asbestos products that allegedly injured plaintiffs; (ii) plaintiffs did not rely on any actions of Metropolitan Life Insurance Company; (iii) Metropolitan Life Insurance Company's conduct was not the cause of the plaintiffs' injuries; (iv) plaintiffs' exposure occurred after the dangers of asbestos were known; and (v) the applicable time with respect to filing suit has expired. During the course of the litigation, certain trial courts have granted motions dismissing claims against Metropolitan Life Insurance Company, while other trial courts have denied Metropolitan Life Insurance Company's motions to dismiss. There can be no assurance that Metropolitan Life Insurance Company will receive favorable decisions on motions in the future. While most cases brought to date have settled, Metropolitan Life Insurance Company intends to continue to defend aggressively against claims based on asbestos exposure, including defending claims at trials. F-140 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The approximate total number of asbestos personal injury claims pending against Metropolitan Life Insurance Company as of the dates indicated, the approximate number of new claims during the years ended on those dates and the approximate total settlement payments made to resolve asbestos personal injury claims at or during those years are set forth in the following table:
DECEMBER 31, ------------------------------ 2011 2010 2009 ------- ------- ------- (IN MILLIONS, EXCEPT NUMBER OF CLAIMS) Asbestos personal injury claims at year end. 66,747 68,513 68,804 Number of new claims during the year........ 4,972 5,670 3,910 Settlement payments during the year (1)..... $ 34.2 $ 34.9 $ 37.6
---------- (1)Settlement payments represent payments made by Metropolitan Life Insurance Company during the year in connection with settlements made in that year and in prior years. Amounts do not include Metropolitan Life Insurance Company's attorneys' fees and expenses and do not reflect amounts received from insurance carriers. In 2008, Metropolitan Life Insurance Company received approximately 5,063 new claims, ending the year with a total of approximately 74,027 claims, and paid approximately $99 million for settlements reached in 2008 and prior years. In 2007, Metropolitan Life Insurance Company received approximately 7,161 new claims, ending the year with a total of approximately 79,717 claims, and paid approximately $28.2 million for settlements reached in 2007 and prior years. In 2006, Metropolitan Life Insurance Company received approximately 7,870 new claims, ending the year with a total of approximately 87,070 claims, and paid approximately $35.5 million for settlements reached in 2006 and prior years. In 2005, Metropolitan Life Insurance Company received approximately 18,500 new claims, ending the year with a total of approximately 100,250 claims, and paid approximately $74.3 million for settlements reached in 2005 and prior years. In 2004, Metropolitan Life Insurance Company received approximately 23,900 new claims, ending the year with a total of approximately 108,000 claims, and paid approximately $85.5 million for settlements reached in 2004 and prior years. In 2003, Metropolitan Life Insurance Company received approximately 58,750 new claims, ending the year with a total of approximately 111,700 claims, and paid approximately $84.2 million for settlements reached in 2003 and prior years. The number of asbestos cases that may be brought, the aggregate amount of any liability that Metropolitan Life Insurance Company may incur, and the total amount paid in settlements in any given year are uncertain and may vary significantly from year to year. The ability of Metropolitan Life Insurance Company to estimate its ultimate asbestos exposure is subject to considerable uncertainty, and the conditions impacting its liability can be dynamic and subject to change. The availability of reliable data is limited and it is difficult to predict the numerous variables that can affect liability estimates, including the number of future claims, the cost to resolve claims, the disease mix and severity of disease in pending and future claims, the impact of the number of new claims filed in a particular jurisdiction and variations in the law in the jurisdictions in which claims are filed, the possible impact of tort reform efforts, the willingness of courts to allow plaintiffs to pursue claims against Metropolitan Life Insurance Company when exposure to asbestos took place after the dangers of asbestos exposure were well known, and the impact of any possible future adverse verdicts and their amounts. The ability to make estimates regarding ultimate asbestos exposure declines significantly as the estimates relate to years further in the future. In the Company's judgment, there is a future point after which losses cease to be probable and reasonably estimable. It is reasonably possible that the Company's total exposure to asbestos claims may be materially greater than the asbestos liability currently accrued and that future charges to income may be necessary. To the extent the Company can estimate reasonably possible losses in excess of amounts F-141 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) accrued, it has been included in the aggregate estimate of reasonably possible loss provided above. While the potential future charges could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known by management, management does not believe any such charges are likely to have a material effect on the Company's financial position. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for asbestos-related claims. Metropolitan Life Insurance Company's recorded asbestos liability is based on its estimation of the following elements, as informed by the facts presently known to it, its understanding of current law and its past experiences: (i) the probable and reasonably estimable liability for asbestos claims already asserted against Metropolitan Life Insurance Company, including claims settled but not yet paid; (ii) the probable and reasonably estimable liability for asbestos claims not yet asserted against Metropolitan Life Insurance Company, but which Metropolitan Life Insurance Company believes are reasonably probable of assertion; and (iii) the legal defense costs associated with the foregoing claims. Significant assumptions underlying Metropolitan Life Insurance Company's analysis of the adequacy of its recorded liability with respect to asbestos litigation include: (i) the number of future claims; (ii) the cost to resolve claims; and (iii) the cost to defend claims. Metropolitan Life Insurance Company reevaluates on a quarterly and annual basis its exposure from asbestos litigation, including studying its claims experience, reviewing external literature regarding asbestos claims experience in the United States, assessing relevant trends impacting asbestos liability and considering numerous variables that can affect its asbestos liability exposure on an overall or per claim basis. These variables include bankruptcies of other companies involved in asbestos litigation, legislative and judicial developments, the number of pending claims involving serious disease, the number of new claims filed against it and other defendants and the jurisdictions in which claims are pending. As previously disclosed, in 2002 Metropolitan Life Insurance Company increased its recorded liability for asbestos-related claims by $402 million from approximately $820 million to $1.2 billion. Based upon its regular reevaluation of its exposure from asbestos litigation, Metropolitan Life Insurance Company has updated its liability analysis for asbestos-related claims through December 31, 2011. Regulatory Matters The Company receives and responds to subpoenas or other inquiries from state regulators, including state insurance commissioners; state attorneys general or other state governmental authorities; federal regulators, including the U.S. Securities and Exchange Commission ("SEC"); federal governmental authorities, including congressional committees; and the Financial Industry Regulatory Authority ("FINRA") seeking a broad range of information. The issues involved in information requests and regulatory matters vary widely. The Company cooperates in these inquiries. United States of America v. EME Homer City Generation, L.P., et al. (W.D. Pa., filed January 4, 2011). On January 4, 2011, the U.S. commenced a civil action in United States District Court for the Western District of Pennsylvania against EME Homer City Generation L.P. ("EME Homer City"), Homer City OL6 LLC, and other defendants regarding the operations of the Homer City Generating Station, an electricity generating facility. Homer City OL6 LLC, an entity owned by Metropolitan Life Insurance Company, is a passive investor with a noncontrolling interest in the electricity generating facility, which is solely operated by the lessee, EME Homer City. The complaint sought injunctive relief and assessment of civil penalties for alleged violations of the federal Clean Air Act and Pennsylvania's State Implementation Plan. The alleged violations were the subject of Notices of Violations ("NOVs") that the Environmental Protection Agency ("EPA") issued to EME Homer City, Homer City OL6 LLC, and others in June 2008 and May 2010. On January 7, 2011, the United States District Court for the Western District of Pennsylvania granted the motion by the Pennsylvania Department of F-142 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Environmental Protection and the State of New York to intervene in the lawsuit as additional plaintiffs. On February 16, 2011, the State of New Jersey filed an Intervenor's Complaint in the lawsuit. On January 7, 2011, two plaintiffs filed a putative class action titled Scott Jackson and Maria Jackson v. EME Homer City Generation L.P., et al. in the United States District Court for the Western District of Pennsylvania on behalf of a putative class of persons who have allegedly incurred damage to their persons and/or property because of the violations alleged in the action brought by the U.S. Homer City OL6 LLC is a defendant in this action. On October 12, 2011, the court issued an order dismissing the U.S.'s lawsuit with prejudice. The Government entities have appealed from the order granting defendants' motion to dismiss. On October 13, 2011, the court also issued an order dismissing the federal claims in the putative class actions with prejudice and dismissing the state law claims in the putative class actions without prejudice to re-file in state court. EME Homer City has acknowledged its obligation to indemnify Homer City OL6 LLC for any claims relating to the NOVs. Due to the acknowledged indemnification obligation, this matter is not included in the aggregate estimate of range of reasonably possible loss. In a February 13, 2012, letter to EME Homer City, Homer City OL6 LLC and others, the Sierra Club indicated its intent to sue for alleged violations of the Clean Air Act and to seek to enjoin the alleged violations, seek unspecified penalties and attorneys' fees, and other relief. Homer City OL6 LLC has served a claim for indemnification on EME Homer City. In the Matter of Chemform, Inc. Site, Pompano Beach, Broward County, Florida. In July 2010, the EPA advised Metropolitan Life Insurance Company that it believed payments were due under two settlement agreements, known as "Administrative Orders on Consent," that New England Mutual Life Insurance Company ("New England Mutual") signed in 1989 and 1992 with respect to the cleanup of a Superfund site in Florida (the "Chemform Site"). The EPA originally contacted Metropolitan Life Insurance Company (as successor to New England Mutual) and a third party in 2001, and advised that they owed additional clean-up costs for the Chemform Site. The matter was not resolved at that time. The EPA is requesting payment of an amount under $1 million from Metropolitan Life Insurance Company and such third party for past costs and an additional amount for future environmental testing costs at the Chemform Site. The Company estimates that the aggregate cost to resolve this matter will not exceed $1 million. Sales Practices Regulatory Matters. Regulatory authorities in a small number of states and FINRA, and occasionally the SEC, have had investigations or inquiries relating to sales of individual life insurance policies or annuities or other products by Metropolitan Life Insurance Company, New England Life Insurance Company ("NELICO"), GALIC, and New England Securities Corporation. These investigations often focus on the conduct of particular financial services representatives and the sale of unregistered or unsuitable products or the misuse of client assets. Over the past several years, these and a number of investigations by other regulatory authorities were resolved for monetary payments and certain other relief, including restitution payments. The Company may continue to resolve investigations in a similar manner. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for these sales practices related investigations or inquiries. Unclaimed Property Inquiries and Related Litigation More than 30 U.S. jurisdictions are auditing MetLife, Inc. and certain of its affiliates, including Metropolitan Life Insurance Company, for compliance with unclaimed property laws. Additionally, Metropolitan Life Insurance Company and certain of its affiliates have received subpoenas and other regulatory inquiries from certain regulators and other officials relating to claims-payment practices and compliance with unclaimed property laws. An examination of these practices by the Illinois Department of Insurance has been converted into a multistate targeted market conduct exam. On July 5, 2011, the New York Insurance Department issued a letter requiring life insurers doing business in New York to use data available on the U.S. Social Security Administration's Death Master File or a similar database to identify instances where death benefits under life F-143 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) insurance policies, annuities, and retained asset accounts are payable, to locate and pay beneficiaries under such contracts, and to report the results of the use of the data. It is possible that other jurisdictions may pursue similar investigations or inquiries, may join the multistate market conduct exam, or issue directives similar to the New York Insurance Department's letter. In the third quarter of 2011, Metropolitan Life Insurance Company incurred a $110 million after tax charge to increase reserves in connection with the Company's use of the U.S. Social Security Administration's Death Master File and similar databases to identify potential life insurance claims that have not yet been presented to the Company. It is possible that the audits, market conduct exam, and related activity may result in additional payments to beneficiaries, additional escheatment of funds deemed abandoned under state laws, administrative penalties, interest, and changes to the Company's procedures for the identification and escheatment of abandoned property. The Company believes that payments for life insurance claims not yet presented and interest thereon will not be materially different from the reserve charge noted above. To the extent the Company can estimate the reasonably possible amount of potential additional payments, it has been included in the aggregate estimate of reasonably possible loss provided above. It is possible that there will be additional payments or other expenses incurred with respect to changes in procedures, and the Company is not currently able to estimate these additional possible amounts but such costs may be substantial. Total Asset Recovery Services, LLC on behalf of the State of Illinois v. MetLife, Inc., et. al. (Cir. Ct. Cook County, IL, filed January 24, 2011). Alleging that MetLife, Inc. and another company have violated the Illinois Uniform Disposition of Unclaimed Property Act by failing to escheat to Illinois benefits of 4,766 life insurance contracts, Total Asset Recovery Services, LLC ("the Relator") has brought an action under the Illinois False Claims Whistleblower Reward and Protection Act seeking to recover damages on behalf of Illinois. Based on the allegations in the complaint, it appears that plaintiff may have improperly named MetLife, Inc. as a defendant instead of Metropolitan Life Insurance Company. The action was sealed by court order until January 18, 2012. The Relator alleges that the aggregate damages, including statutory damages and treble damages, is $1,572,780,000. The Relator does not allocate this claimed damage amount between MetLife, Inc. and the other defendant. The Relator also bases its damage calculation in part on its assumption that the average face amount of the subject policies is $110,000. MetLife, Inc. strongly disputes this assumption, the Relator's alleged damages amounts, and other allegations in the complaint, and intends to defend this action vigorously. Total Asset Recovery Services, LLC on behalf of the State of Minnesota v. MetLife, Inc., et. al. (District Court, County of Hennepin, MN, filed January 31, 2011). Alleging that MetLife, Inc. and another company have violated the Minnesota Uniform Disposition of Unclaimed Property Act by failing to escheat to Minnesota benefits of 584 life insurance contracts, Total Asset Recovery Services, LLC ("the Relator") has brought an action under the Minnesota False Claims Act seeking to recover damages on behalf of Minnesota. Based on the allegations in the complaint, it appears that plaintiff may have improperly named MetLife, Inc. as a defendant instead of Metropolitan Life Insurance Company. The action was sealed by court order until March 22, 2012. The Relator alleges that the aggregate damages, including statutory damages and treble damages, is $227,750,000. The Relator does not allocate this claimed damage amount between MetLife, Inc. and the other defendant. The Relator also bases its damage calculation in part on its assumption that the average face amount of the subject policies is $130,000. MetLife, Inc. strongly disputes this assumption, the Relator's alleged damages amounts, and other allegations in the complaint, and intends to defend this action vigorously. Total Control Accounts Litigation Metropolitan Life Insurance Company is a defendant in lawsuits related to its use of retained asset accounts, known as Total Control Accounts ("TCA"), as a settlement option for death benefits. The lawsuits include claims of breach of contract, breach of a common law fiduciary duty or a quasi-fiduciary duty such as a confidential or special relationship, or breach of a fiduciary duty under the Employee Retirement Income Security Act of 1974 ("ERISA"). F-144 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Clark, et al. v. Metropolitan Life Insurance Company (D. Nev., filed March 28, 2008). This putative class action lawsuit alleges breach of contract and breach of a common law fiduciary and/or quasi-fiduciary duty arising from use of the TCA to pay life insurance policy death benefits. As damages, plaintiffs seek disgorgement of the difference between the interest paid to the account holders and the investment earnings on the assets backing the accounts. In March 2009, the court granted in part and denied in part Metropolitan Life Insurance Company's motion to dismiss, dismissing the fiduciary duty and unjust enrichment claims but allowing a breach of contract claim and a special or confidential relationship claim to go forward. On September 9, 2010, the court granted Metropolitan Life Insurance Company's motion for summary judgment. Plaintiffs appealed this order and on December 7, 2011, the United States Court of Appeals for the Ninth Circuit affirmed the district court's grant of summary judgment to Metropolitan Life Insurance Company, finding no breach of contract because plaintiffs suffered no damages and finding that no special or confidential relationship existed between the parties under Nevada law. Faber, et al. v. Metropolitan Life Insurance Company (S.D.N. Y., filed December 4, 2008). This putative class action lawsuit alleges that Metropolitan Life Insurance Company's use of the TCA as the settlement option under group life insurance policies violates Metropolitan Life Insurance Company's fiduciary duties under ERISA. As damages, plaintiffs seek disgorgement of the difference between the interest paid to the account holders and the investment earnings on the assets backing the accounts. On October 23, 2009, the court granted Metropolitan Life Insurance Company's motion to dismiss with prejudice. On August 5, 2011, the United States Court of Appeals for the Second Circuit affirmed the dismissal of the complaint. Plaintiffs' petition for a rehearing or rehearing en banc with the Second Circuit was denied by the Second Circuit on November 1, 2011. Keife, et al. v. Metropolitan Life Insurance Company (D. Nev., filed in state court on July 30, 2010 and removed to federal court on September 7, 2010). This putative class action lawsuit raises a breach of contract claim arising from Metropolitan Life Insurance Company's use of the TCA to pay life insurance benefits under the Federal Employees' Group Life Insurance program ("FEGLI"). As damages, plaintiffs seek disgorgement of the difference between the interest paid to the account holders and the investment earnings on the assets backing the accounts. In September 2010, plaintiffs filed a motion for class certification of the breach of contract claim, which the court has denied. On April 28, 2011, the court denied Metropolitan Life Insurance Company's motion to dismiss. Simon v. Metropolitan Life Insurance Company (D. Nev., filed November 3, 2011). Similar to Keife v. Metropolitan Life Insurance Company (pending in the same court), in this putative class action the plaintiff alleges that Metropolitan Life Insurance Company improperly paid interest to FEGLI beneficiaries. Specifically, plaintiff alleges that under the terms of the FEGLI policy, Metropolitan Life Insurance Company is required to make "immediate" payment of death benefits in "one sum." Metropolitan Life Insurance Company, plaintiff alleges, breached this duty by instead retaining the death benefits in its general investment account and sending beneficiaries a "book of drafts" known as the "TCA Money Market Option" as the only means by which funds can be accessed. Plaintiff further alleges that Metropolitan Life Insurance Company manipulates interest rates paid to policy beneficiaries. This matter has been consolidated with Keife. The Company is unable to estimate the reasonably possible loss or range of loss arising from the TCA matters. Other Litigation Sun Life Assurance Company of Canada v. Metropolitan Life Ins. Co. (Super. Ct., Ontario, October 2006). In 2006, Sun Life Assurance Company of Canada ("Sun Life"), as successor to the purchaser of Metropolitan Life Insurance Company's Canadian operations, filed this lawsuit in Toronto, seeking a declaration that Metropolitan Life Insurance Company remains liable for "market conduct claims" related to certain F-145 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) individual life insurance policies sold by Metropolitan Life Insurance Company and that have been transferred to Sun Life. Sun Life had asked that the court require Metropolitan Life Insurance Company to indemnify Sun Life for these claims pursuant to indemnity provisions in the sale agreement for the sale of Metropolitan Life Insurance Company's Canadian operations entered into in June of 1998. In January 2010, the court found that Sun Life had given timely notice of its claim for indemnification but, because it found that Sun Life had not yet incurred an indemnifiable loss, granted Metropolitan Life Insurance Company's motion for summary judgment. Both parties appealed. In September 2010, Sun Life notified Metropolitan Life Insurance Company that a purported class action lawsuit was filed against Sun Life in Toronto, Kang v. Sun Life Assurance Co. (Super. Ct., Ontario, September 2010), alleging sales practices claims regarding the same individual policies sold by Metropolitan Life Insurance Company and transferred to Sun Life. An amended class action complaint in that case was served on Sun Life, again without naming Metropolitan Life Insurance Company as a party. On August 30, 2011, Sun Life notified Metropolitan Life Insurance Company that a purported class action lawsuit was filed against Sun Life in Vancouver, Alamwala v. Sun Life Assurance Co. (Sup. Ct., British Columbia, August 2011), alleging sales practices claims regarding certain of the same policies sold by Metropolitan Life Insurance Company and transferred to Sun Life. Sun Life contends that Metropolitan Life Insurance Company is obligated to indemnify Sun Life for some or all of the claims in these lawsuits. The Company is unable to estimate the reasonably possible loss or range of loss arising from this litigation. Merrill Haviland, et al. v. Metropolitan Life Insurance Company (E.D. Mich., removed to federal court on July 22, 2011). This lawsuit was filed by 45 retired General Motors ("GM") employees against Metropolitan Life Insurance Company and includes claims for conversion, unjust enrichment, breach of contract, fraud, intentional infliction of emotional distress, fraudulent insurance acts, and unfair trade practices, based upon GM's 2009 reduction of the employees' life insurance coverage under GM's ERISA-governed plan. The complaint includes a count seeking class action status. Metropolitan Life Insurance Company is the insurer of GM's group life insurance plan and administers claims under the plan. According to the complaint, Metropolitan Life Insurance Company had previously provided plaintiffs with a "written guarantee" that their life insurance benefits under the GM plan would not be reduced for the rest of their lives. Metropolitan Life Insurance Company has removed the case to federal court based upon complete ERISA preemption of the state law claims. Plaintiffs filed an amended complaint recasting the state law claims and asserting ERISA claims. Metropolitan Life Insurance Company has filed a motion to dismiss. Sales Practices Claims. Over the past several years, the Company has faced numerous claims, including class action lawsuits, alleging improper marketing or sales of individual life insurance policies, annuities, mutual funds or other products. Some of the current cases seek substantial damages, including punitive and treble damages and attorneys' fees. The Company continues to vigorously defend against the claims in these matters. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for sales practices matters. Summary Putative or certified class action litigation and other litigation and claims and assessments against the Company, in addition to those discussed previously and those otherwise provided for in the Company's consolidated financial statements, have arisen in the course of the Company's business, including, but not limited to, in connection with its activities as an insurer, employer, investor, investment advisor and taxpayer. Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning the Company's compliance with applicable insurance and other laws and regulations. It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings. In some of the matters referred to previously, very large and/or indeterminate amounts, including punitive and F-146 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) treble damages, are sought. Although in light of these considerations it is possible that an adverse outcome in certain cases could have a material effect upon the Company's financial position, based on information currently known by the Company's management, in its opinion, the outcomes of such pending investigations and legal proceedings are not likely to have such an effect. However, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material effect on the Company's consolidated net income or cash flows in particular quarterly or annual periods. INSOLVENCY ASSESSMENTS Most of the jurisdictions in which the Company is admitted to transact business require insurers doing business within the jurisdiction to participate in guaranty associations, which are organized to pay contractual benefits owed pursuant to insurance policies issued by impaired, insolvent or failed insurers. These associations levy assessments, up to prescribed limits, on all member insurers in a particular state on the basis of the proportionate share of the premiums written by member insurers in the lines of business in which the impaired, insolvent or failed insurer engaged. Some states permit member insurers to recover assessments paid through full or partial premium tax offsets. Assets and liabilities held for insolvency assessments were as follows:
DECEMBER 31, ------------ 2011 2010 ---- ---- (IN MILLIONS) Other Assets: Premium tax offset for future undiscounted assessments....... $ 63 $42 Premium tax offsets currently available for paid assessments. 13 7 ---- ---- $ 76 $49 ==== ==== Other Liabilities: Insolvency assessments....................................... $113 $63 ==== ====
On September 1, 2011, the New York State Department of Financial Services filed a liquidation plan for Executive Life Insurance Company of New York ("ELNY"), which had been under rehabilitation by the Liquidation Bureau since 1991. The plan will involve the satisfaction of insurers' financial obligations under a number of state life and health insurance guaranty associations and also contemplates that additional industry support for certain ELNY policyholders will be provided. The Company recorded a net charge of $21 million, after tax, related to ELNY. COMMITMENTS LEASES In accordance with industry practice, certain of the Company's income from lease agreements with retail tenants are contingent upon the level of the tenants' revenues. Additionally, the Company, as lessee, has entered into various lease and sublease agreements for office space, information technology and other equipment. Future F-147 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) minimum rental and sublease income, and minimum gross rental payments relating to these lease agreements are as follows:
GROSS RENTAL SUBLEASE RENTAL INCOME INCOME PAYMENTS ------ -------- -------- (IN MILLIONS) 2012....... $305 $14 $181 2013....... $296 $16 $172 2014....... $270 $12 $132 2015....... $224 $12 $124 2016....... $169 $12 $110 Thereafter. $681 $74 $840
MetLife, Inc. previously moved certain of its operations in New York from Long Island City, Queens to Manhattan. Market conditions, which precluded MetLife, Inc.'s immediate and complete sublet of all unused space following this movement of operations, resulted in a lease impairment charge of $52 million during 2009, which is included in other expenses within Corporate & Other. The impairment charge was determined based upon the present value of the gross rental payments less sublease income discounted at a risk-adjusted rate over the remaining lease terms which range from 15-20 years. The Company has made assumptions with respect to the timing and amount of future sublease income in the determination of this impairment charge. See Note 16 for discussion of $28 million of such charges related to restructuring. Additional impairment charges could be incurred should market conditions change. COMMITMENTS TO FUND PARTNERSHIP INVESTMENTS The Company makes commitments to fund partnership investments in the normal course of business. The amounts of these unfunded commitments were $2.5 billion and $2.4 billion at December 31, 2011 and 2010, respectively. The Company anticipates that these amounts will be invested in partnerships over the next five years. MORTGAGE LOAN COMMITMENTS The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $2.3 billion and $2.5 billion at December 31, 2011 and 2010, respectively. COMMITMENTS TO FUND BANK CREDIT FACILITIES, BRIDGE LOANS AND PRIVATE CORPORATE BOND INVESTMENTS The Company commits to lend funds under bank credit facilities, bridge loans and private corporate bond investments. The amounts of these unfunded commitments were $986 million and $2.0 billion at December 31, 2011 and 2010, respectively. GUARANTEES In the normal course of its business, the Company has provided certain indemnities, guarantees and commitments to third parties pursuant to which it may be required to make payments now or in the future. In the context of acquisition, disposition, investment and other transactions, the Company has provided indemnities and guarantees, including those related to tax, environmental and other specific liabilities and other indemnities and guarantees that are triggered by, among other things, breaches of representations, warranties or covenants F-148 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) provided by the Company. In addition, in the normal course of business, the Company provides indemnifications to counterparties in contracts with triggers similar to the foregoing, as well as for certain other liabilities, such as third-party lawsuits. These obligations are often subject to time limitations that vary in duration, including contractual limitations and those that arise by operation of law, such as applicable statutes of limitation. In some cases, the maximum potential obligation under the indemnities and guarantees is subject to a contractual limitation ranging from less than $1 million to $800 million, with a cumulative maximum of $1.1 billion, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future. Management believes that it is unlikely the Company will have to make any material payments under these indemnities, guarantees, or commitments. In addition, the Company indemnifies its directors and officers as provided in its charters and by-laws. Also, the Company indemnifies its agents for liabilities incurred as a result of their representation of the Company's interests. Since these indemnities are generally not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these indemnities in the future. During the year ended December 31, 2011, the Company recorded $1 million of additional liabilities for indemnities, guarantees and commitments. The Company's recorded liabilities were $4 million and $3 million at December 31, 2011 and 2010, respectively, for indemnities, guarantees and commitments. 14. EMPLOYEE BENEFIT PLANS PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS The Company sponsors and administers various U.S. qualified and non-qualified defined benefit pension plans and other postretirement employee benefit plans covering employees and sales representatives who meet specified eligibility requirements. Pension benefits are provided utilizing either a traditional formula or cash balance formula. The traditional formula provides benefits based upon years of credited service and final average earnings. The cash balance formula utilizes hypothetical or notional accounts which credit participants with benefits equal to a percentage of eligible pay, as well as earnings credits, determined annually based upon the average annual rate of interest on 30-year U.S. Treasury securities, for each account balance. At December 31, 2011, the majority of active participants were accruing benefits under the cash balance formula; however, approximately 90% of the Company's obligations result from benefits calculated with the traditional formula. The non-qualified pension plans provide supplemental benefits in excess of limits applicable to a qualified plan. Participating affiliates are allocated a proportionate share of net expense related to the plans as well as contributions made to the plans. The Company's proportionate share of net pension expense related to its sponsored pension plans was $316 million, $309 million and $355 million for the years ended December 31, 2011, 2010 and 2009, respectively. The Company also provides certain postemployment benefits and certain postretirement medical and life insurance benefits for retired employees. Employees of the Company who were hired prior to 2003 (or, in certain cases, rehired during or after 2003) and meet age and service criteria while working for the Company may become eligible for these other postretirement benefits, at various levels, in accordance with the applicable plans. Virtually all retirees, or their beneficiaries, contribute a portion of the total costs of postretirement medical benefits. Employees hired after 2003 are not eligible for any employer subsidy for postretirement medical benefits. Participating affiliates are allocated a proportionate share of net expense and contributions related to the postemployment and other postretirement plans. The Company's proportionate share of net other postretirement expense related to its sponsored other postretirement plans was ($22) million, less than $1 million and $70 million for the years ended December 31, 2011, 2010 and 2009, respectively. A December 31 measurement date is used for all of the Company's defined benefit pension and other postretirement benefit plans. F-149 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) OBLIGATIONS, FUNDED STATUS AND NET PERIODIC BENEFIT COSTS
OTHER PENSION POSTRETIREMENT BENEFITS (1) BENEFITS --------------- ------------- DECEMBER 31, ----------------------------- 2011 2010 2011 2010 -------- ------ ------ ------ (IN MILLIONS) Change in benefit obligations: Benefit obligations at January 1,................................. $ 6,690 $6,287 $1,819 $1,829 Service costs.................................................... 165 150 16 17 Interest costs................................................... 384 375 107 111 Plan participants' contributions................................. -- -- 28 33 Net actuarial (gains) losses..................................... 897 277 269 68 Curtailments..................................................... -- 6 -- -- Plan amendments, change in benefits, and other (2)............... 128 -- -- (81) Net transfer in (out) of controlled group........................ (12) -- -- (17) Prescription drug subsidy........................................ -- -- -- 12 Benefits paid.................................................... (385) (405) (133) (153) -------- ------ ------ ------ Benefit obligations at December 31,............................... 7,867 6,690 2,106 1,819 -------- ------ ------ ------ Change in plan assets: Fair value of plan assets at January 1,........................... 5,976 5,419 1,184 1,118 Actual return on plan assets..................................... 787 673 81 98 Plan amendments, change in benefits, and other (2)............... 110 -- -- -- Plan participants' contributions................................. -- -- 28 33 Employer contributions........................................... 223 289 80 87 Net transfer in (out) of controlled group........................ (12) -- -- (12) Benefits paid.................................................... (385) (405) (133) (140) -------- ------ ------ ------ Fair value of plan assets at December 31,......................... 6,699 5,976 1,240 1,184 -------- ------ ------ ------ Over (under) funded status at December 31,....................... $(1,168) $(714) $(866) $(635) ======== ====== ====== ====== Amounts recognized in the consolidated balance sheets consist of: Other assets..................................................... $ -- $ 107 $ -- $ -- Other liabilities................................................ (1,168) (821) (866) (635) -------- ------ ------ ------ Net amount recognized.......................................... $(1,168) $(714) $(866) $(635) ======== ====== ====== ====== Accumulated other comprehensive (income) loss: Net actuarial losses............................................. $ 2,403 $2,058 $ 621 $ 399 Prior service costs (credit)..................................... 29 16 (179) (287) -------- ------ ------ ------ Accumulated other comprehensive (income) loss, before income tax.......................................................... $ 2,432 $2,074 $ 442 $ 112 ======== ====== ====== ======
---------- (1)Includes non-qualified unfunded plans, for which the aggregate projected benefit obligation was $997 million and $821 million at December 31, 2011 and 2010, respectively. (2)During 2011, the Company became the sole sponsor of a certain qualified defined pension plan. Accordingly, the Company transitioned its accounting for that plan from a multiemployer to a single employer plan as of December 31, 2011. F-150 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The accumulated benefit obligations for all defined benefit pension plans were $7.4 billion and $6.4 billion at December 31, 2011 and 2010, respectively. The aggregate pension accumulated benefit obligation and aggregate fair value of plan assets for pension benefit plans with accumulated benefit obligations in excess of plan assets was as follows:
DECEMBER 31, ------------- 2011 2010 ------ ---- (IN MILLIONS) Projected benefit obligations... $1,129 $821 Accumulated benefit obligations. $1,011 $748 Fair value of plan assets....... $ 110 $ --
Information for pension and other postretirement benefit plans with a projected benefit obligation in excess of plan assets were as follows:
OTHER PENSION POSTRETIREMENT BENEFITS BENEFITS ----------- ------------- DECEMBER 31, ------------------------- 2011 2010 2011 2010 ------ ---- ------ ------ (IN MILLIONS) Projected benefit obligations. $7,867 $821 $2,106 $1,819 Fair value of plan assets..... $6,699 $ -- $1,240 $1,184
Net periodic pension costs and net periodic other postretirement benefit plan costs are comprised of the following: i) Service Costs -- Service costs are the increase in the projected (expected) pension benefit obligation resulting from benefits payable to employees of the Company on service rendered during the current year. ii)Interest Costs -- Interest costs are the time value adjustment on the projected (expected) pension benefit obligation at the end of each year. iii)Settlement and Curtailment Costs -- The aggregate amount of net gains (losses) recognized in net periodic benefit costs due to settlements and curtailments. Settlements result from actions that relieve/eliminate the plan's responsibility for benefit obligations or risks associated with the obligations or assets used for the settlement. Curtailments result from an event that significantly reduces/eliminates plan participants' expected years of future services or benefit accruals. iv)Expected Return on Plan Assets -- Expected return on plan assets is the assumed return earned by the accumulated pension and other postretirement fund assets in a particular year. v) Amortization of Net Actuarial (Gains) Losses -- Actuarial gains and losses result from differences between the actual experience and the expected experience on pension and other postretirement plan assets or projected (expected) pension benefit obligation during a particular period. These gains and losses are accumulated and, to the extent they exceed 10% of the greater of the PBO or the fair value of plan assets, the excess is amortized into pension and other postretirement benefit costs over the expected service years of the employees. vi)Amortization of Prior Service Costs (Credit) -- These costs relate to the recognition of increases or decreases in pension and other postretirement benefit obligation due to amendments in plans or F-151 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) initiation of new plans. These increases or decreases in obligation are recognized in accumulated other comprehensive income (loss) at the time of the amendment. These costs are then amortized to pension and other postretirement benefit costs over the expected service years of the employees affected by the change. The components of net periodic benefit costs and other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) were as follows:
OTHER PENSION POSTRETIREMENT BENEFITS BENEFITS -------------------- ------------------- YEARS ENDED DECEMBER 31, ---------------------------------------- 2011 2010 2009 2011 2010 2009 ------ ------ ------ ------ ----- ------ (IN MILLIONS) Net Periodic Benefit Costs: Service costs............................................. $ 165 $ 150 $ 147 $ 16 $ 17 $ 22 Interest costs............................................ 384 375 374 107 111 123 Settlement and curtailment costs.......................... -- 8 18 -- -- -- Expected return on plan assets............................ (423) (422) (414) (76) (79) (74) Amortization of net actuarial (gains) losses.............. 189 192 223 42 38 43 Amortization of prior service costs (credit).............. 3 6 8 (108) (83) (36) ------ ------ ------ ------ ----- ------ Total net periodic benefit costs (credit)............. 318 309 356 (19) 4 78 ------ ------ ------ ------ ----- ------ Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (Loss): Net actuarial (gains) losses.............................. 532 24 251 264 49 284 Prior service costs (credit).............................. 18 -- (12) -- (81) (167) Amortization of net actuarial gains (losses).............. (189) (192) (223) (42) (38) (43) Amortization of prior service (costs) credit.............. (3) (6) (8) 108 83 36 ------ ------ ------ ------ ----- ------ Total recognized in other comprehensive income (loss)................................................ 358 (174) 8 330 13 110 ------ ------ ------ ------ ----- ------ Total recognized in net periodic benefit costs and other comprehensive income (loss)................... $ 676 $ 135 $ 364 $ 311 $ 17 $ 188 ====== ====== ====== ====== ===== ======
For the year ended December 31, 2011, included within other comprehensive income (loss) were other changes in plan assets and benefit obligations associated with pension benefits of $358 million and other postretirement benefits of $330 million for an aggregate reduction in other comprehensive income (loss) of $688 million before income tax and $439 million, net of income tax. The estimated net actuarial (gains) losses and prior service costs (credit) for the pension plans that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit costs over the next year are $172 million and $6 million, respectively. The estimated net actuarial (gains) losses and prior service costs (credit) for the defined benefit other postretirement benefit plans that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit costs over the next year are $54 million and ($104) million, respectively. The Medicare Modernization Act of 2003 created various subsidies for sponsors of retiree drug programs. Two common ways of providing subsidies were the Retiree Drug Subsidy ("RDS") and Medicare Part D Prescription Drug Plans ("PDP"). From 2006 through 2010, the Company applied for and received the RDS each year. The RDS program provides the subsidy through cash payments made by Medicare to the Company, F-152 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) resulting in smaller net claims paid by the Company. A summary of the reduction to the APBO and the related reduction to the components of net periodic other postretirement benefits plan costs resulting from receipt of the RDS is presented below. As of January 1, 2011, as a result of changes made under the Patient Protection and Affordable Care Act of 2010, the Company, no longer applies for the RDS. Instead it has joined PDP and will indirectly receive Medicare subsidies in the form of smaller gross benefit payments for prescription drug coverage.
DECEMBER 31, ------------ 2010 2009 ------ ----- (IN MILLIONS) Cumulative reduction in other postretirement benefits obligations: Balance at January 1,............................................. $ 247 $ 317 Service costs..................................................... 3 2 Interest costs.................................................... 16 16 Net actuarial (gains) losses...................................... (255) (76) Expected prescription drug subsidy................................ (11) (12) ------ ----- Balance at December 31,........................................... $ -- $ 247 ====== =====
YEARS ENDED DECEMBER 31, ------------------------ 2010 2009 ---- ---- (IN MILLIONS) Reduction in net periodic other postretirement benefit costs: Service costs................................................ $ 3 $ 2 Interest costs............................................... 16 16 Amortization of net actuarial (gains) losses................. 10 11 ---- ---- Total reduction in net periodic benefit costs.............. $29 $29 ==== ====
The Company received subsidies of $3 million, $8 million and $12 million for the years ended December 31, 2011, 2010 and 2009, respectively. ASSUMPTIONS Assumptions used in determining benefit obligations were as follows:
OTHER PENSION POSTRETIREMENT BENEFITS BENEFITS ------------------- -------------- DECEMBER 31, ---------------------------------- 2011 2010 2011 2010 --------- --------- ----- ----- Weighted average discount rate. 4.95% 5.80% 4.95% 5.80% Rate of compensation increase.. 3.5%-7.5% 3.5%-7.5% N/A N/A
F-153 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Assumptions used in determining net periodic benefit costs were as follows:
OTHER PENSION POSTRETIREMENT BENEFITS BENEFITS ----------------------------- ----------------- DECEMBER 31, ----------------------------------------------- 2011 2010 2009 2011 2010 2009 --------- --------- --------- ----- ----- ----- Weighted average discount rate.............. 5.80% 6.25% 6.60% 5.80% 6.25% 6.60% Weighted average expected rate of return on plan assets............................... 7.25% 8.00% 8.25% 7.25% 7.20% 7.36% Rate of compensation increase............... 3.5%-7.5% 3.5%-7.5% 3.5%-7.5% N/A N/A N/A
The weighted average discount rate is determined annually based on the yield, measured on a yield to worst basis, of a hypothetical portfolio constructed of high quality debt instruments available on the valuation date, which would provide the necessary future cash flows to pay the aggregate projected benefit obligation when due. The weighted average expected rate of return on plan assets is based on anticipated performance of the various asset sectors in which the plan invests, weighted by target allocation percentages. Anticipated future performance is based on long-term historical returns of the plan assets by sector, adjusted for the Company's long-term expectations on the performance of the markets. While the precise expected rate of return derived using this approach will fluctuate from year to year, the Company's policy is to hold this long-term assumption constant as long as it remains within reasonable tolerance from the derived rate. The weighted average expected rate of return on plan assets for use in that plan's valuation in 2012 is currently anticipated to be 7.00% for pension benefits and 6.22% for other postretirement benefits. The assumed healthcare costs trend rates used in measuring the APBO and net periodic benefit costs were as follows:
DECEMBER 31, ------------------------------------------------------------------------- 2011 2010 ------------------------------------ ------------------------------------ Pre-and 7.3% in 2012, gradually decreasing 7.8% in 2011, gradually decreasing Post-Medicare each year until 2083 each year until 2083 eligible claims... reaching the ultimate rate of 4.3%. reaching the ultimate rate of 4.4%.
Assumed healthcare costs trend rates may have a significant effect on the amounts reported for healthcare plans. A 1% change in assumed healthcare costs trend rates would have the following effects:
ONE PERCENT ONE PERCENT INCREASE DECREASE ----------- ----------- (IN MILLIONS) Effect on total of service and interest costs components. $ 8 $ (9) Effect of accumulated postretirement benefit obligations. $196 $(161)
F-154 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) PLAN ASSETS The pension and other postretirement benefit plan assets are categorized into the three-level fair value hierarchy, as defined in Note 1, based upon the priority of the inputs to the respective valuation technique. The following summarizes the types of assets included within the three-level fair value hierarchy presented below. Level 1 This category includes investments in fixed maturity securities, equity securities, derivative securities, and short-term investments which have unadjusted quoted market prices in active markets for identical assets and liabilities. Level 2 This category includes certain separate accounts that are primarily invested in liquid and readily marketable securities. The estimated fair value of such separate account is based upon reported NAV provided by fund managers and this value represents the amount at which transfers into and out of the respective separate account are effected. These separate accounts provide reasonable levels of price transparency and can be corroborated through observable market data. Certain separate accounts are invested in investment partnerships designated as hedge funds. The values for these separate accounts is determined monthly based on the NAV of the underlying hedge fund investment. Additionally, such hedge funds generally contain lock out or other waiting period provisions for redemption requests to be filled. While the reporting and redemption restrictions may limit the frequency of trading activity in separate accounts invested in hedge funds, the reported NAV, and thus the referenced value of the separate account, provides a reasonable level of price transparency that can be corroborated through observable market data. Directly held investments are primarily invested in U.S. and foreign government and corporate securities. Level 3 This category includes separate accounts that are invested in fixed maturity securities, equity securities, pass-through securities, derivative securities and other invested assets that provide little or no price transparency due to the infrequency with which the underlying assets trade and generally require additional time to liquidate in an orderly manner. Accordingly, the values for separate accounts invested in these alternative asset classes are based on inputs that cannot be readily derived from or corroborated by observable market data. The Company has issued group annuity and life insurance contracts supporting the pension and other postretirement benefit plan assets, which are invested primarily in separate accounts. The underlying assets of the separate accounts are principally comprised of cash and cash equivalents, short term investments, fixed maturity and equity securities, mutual funds, real estate, private equity investments and hedge funds investments. F-155 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The pension and postretirement plan assets and liabilities measured at estimated fair value on a recurring basis were determined as described below. These estimated fair values and their corresponding placement in the fair value hierarchy are summarized as follows:
DECEMBER 31, 2011 ----------------------------------------------------------------------------------- OTHER PENSION POSTRETIREMENT BENEFITS BENEFITS ---------------------------------------------- ------------------------------------ FAIR VALUE MEASUREMENTS AT FAIR VALUE MEASUREMENTS AT REPORTING DATE USING REPORTING DATE USING ------------------------------------ ------------------------------------ QUOTED QUOTED PRICES PRICES IN ACTIVE IN ACTIVE MARKETS MARKETS FOR SIGNIFICANT FOR SIGNIFICANT IDENTICAL OTHER SIGNIFICANT TOTAL IDENTICAL OTHER SIGNIFICANT ASSETS AND OBSERVABLE UNOBSERVABLE ESTIMATED ASSETS AND OBSERVABLE UNOBSERVABLE LIABILITIES INPUTS INPUTS FAIR LIABILITIES INPUTS INPUTS (LEVEL 1) (LEVEL 2) (LEVEL 3) VALUE (LEVEL 1) (LEVEL 2) (LEVEL 3) ----------- ----------- ------------ --------- ----------- ----------- ------------ (IN MILLIONS) ASSETS: Fixed maturity securities: Corporate.......................... $ -- $1,820 $ 30 $1,850 $ -- $139 $ 4 Federal agencies................... 1 270 -- 271 -- 29 -- Foreign bonds...................... -- 200 5 205 -- 13 -- Municipals......................... -- 174 -- 174 -- 59 1 Preferred stocks................... -- 1 -- 1 -- -- -- U.S. government bonds.............. 949 176 -- 1,125 160 1 -- ----------- ----------- ------------ --------- ----------- ----------- ------------ Total fixed maturity securities.. 950 2,641 35 3,626 160 241 5 ----------- ----------- ------------ --------- ----------- ----------- ------------ Equity securities: Common stock -- domestic........... 1,082 36 194 1,312 240 2 -- Common stock -- foreign............ 271 -- -- 271 55 -- -- ----------- ----------- ------------ --------- ----------- ----------- ------------ Total equity securities.......... 1,353 36 194 1,583 295 2 -- ----------- ----------- ------------ --------- ----------- ----------- ------------ Money market securities............. 2 -- -- 2 -- 1 -- Pass-through securities............. -- 444 2 446 -- 84 5 Derivative securities............... 28 9 4 41 -- -- 1 Short-term investments.............. 4 378 -- 382 6 435 -- Other invested assets............... -- 65 501 566 -- -- -- Other receivables................... -- 45 -- 45 -- 4 -- Securities receivable............... -- 8 -- 8 -- 1 -- ----------- ----------- ------------ --------- ----------- ----------- ------------ Total assets.................... $2,337 $3,626 $736 $6,699 $461 $768 $11 =========== =========== ============ ========= =========== =========== ============
---------- ---------- TOTAL ESTIMATED FAIR VALUE --------- ASSETS: Fixed maturity securities: Corporate.......................... $ 143 Federal agencies................... 29 Foreign bonds...................... 13 Municipals......................... 60 Preferred stocks................... -- U.S. government bonds.............. 161 --------- Total fixed maturity securities.. 406 --------- Equity securities: Common stock -- domestic........... 242 Common stock -- foreign............ 55 --------- Total equity securities.......... 297 --------- Money market securities............. 1 Pass-through securities............. 89 Derivative securities............... 1 Short-term investments.............. 441 Other invested assets............... -- Other receivables................... 4 Securities receivable............... 1 --------- Total assets.................... $1,240 =========
F-156 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2010 ----------------------------------------------------------------------------------- OTHER PENSION POSTRETIREMENT BENEFITS BENEFITS ---------------------------------------------- ------------------------------------ FAIR VALUE MEASUREMENTS AT FAIR VALUE MEASUREMENTS AT REPORTING DATE USING REPORTING DATE USING ------------------------------------ ------------------------------------ QUOTED QUOTED PRICES PRICES IN ACTIVE IN ACTIVE MARKETS MARKETS FOR SIGNIFICANT FOR SIGNIFICANT IDENTICAL OTHER SIGNIFICANT TOTAL IDENTICAL OTHER SIGNIFICANT ASSETS AND OBSERVABLE UNOBSERVABLE ESTIMATED ASSETS AND OBSERVABLE UNOBSERVABLE LIABILITIES INPUTS INPUTS FAIR LIABILITIES INPUTS INPUTS (LEVEL 1) (LEVEL 2) (LEVEL 3) VALUE (LEVEL 1) (LEVEL 2) (LEVEL 3) ----------- ----------- ------------ --------- ----------- ----------- ------------ (IN MILLIONS) ASSETS: Fixed maturity securities: Corporate........................... $ -- $1,444 $ 45 $1,489 $ -- $ 67 $ 4 Federal agencies.................... -- 165 -- 165 -- 15 -- Foreign bonds....................... -- 138 4 142 -- 3 -- Municipals.......................... -- 129 -- 129 -- 37 1 Preferred stocks.................... -- 4 -- 4 -- -- -- U.S. government bonds............... 614 129 -- 743 82 -- -- ----------- ----------- ------------ --------- ----------- ----------- ------------ Total fixed maturity securities... 614 2,009 49 2,672 82 122 5 ----------- ----------- ------------ --------- ----------- ----------- ------------ Equity securities: Common stock -- domestic............ 1,329 88 228 1,645 359 3 -- Common stock -- foreign............. 436 -- -- 436 77 -- -- ----------- ----------- ------------ --------- ----------- ----------- ------------ Total equity securities........... 1,765 88 228 2,081 436 3 -- ----------- ----------- ------------ --------- ----------- ----------- ------------ Money market securities.............. 189 95 -- 284 1 1 -- Pass-through securities.............. -- 303 2 305 -- 73 6 Derivative securities................ 2 (4) (1) (3) -- -- -- Short-term investments............... (10) 96 -- 86 8 443 -- Other invested assets................ -- 59 446 505 -- -- -- Other receivables.................... -- 37 -- 37 -- 3 -- Securities receivable................ -- 66 -- 66 -- 2 -- ----------- ----------- ------------ --------- ----------- ----------- ------------ Total assets..................... $2,560 $2,749 $724 $6,033 $527 $647 $11 =========== =========== ============ ========= =========== =========== ============ LIABILITIES: Securities payable................... $ -- $ 57 $ -- $ 57 $ -- $ 1 $-- ----------- ----------- ------------ --------- ----------- ----------- ------------ Total liabilities................ $ -- $ 57 $ -- $ 57 $ -- $ 1 $-- =========== =========== ============ ========= =========== =========== ============ Total assets and liabilities.... $2,560 $2,692 $724 $5,976 $527 $646 $11 =========== =========== ============ ========= =========== =========== ============
---------- ---------- TOTAL ESTIMATED FAIR VALUE --------- ASSETS: Fixed maturity securities: Corporate........................... $ 71 Federal agencies.................... 15 Foreign bonds....................... 3 Municipals.......................... 38 Preferred stocks.................... -- U.S. government bonds............... 82 --------- Total fixed maturity securities... 209 --------- Equity securities: Common stock -- domestic............ 362 Common stock -- foreign............. 77 --------- Total equity securities........... 439 --------- Money market securities.............. 2 Pass-through securities.............. 79 Derivative securities................ -- Short-term investments............... 451 Other invested assets................ -- Other receivables.................... 3 Securities receivable................ 2 --------- Total assets..................... $1,185 ========= LIABILITIES: Securities payable................... $ 1 --------- Total liabilities................ $ 1 ========= Total assets and liabilities.... $1,184 =========
F-157 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) A rollforward of all pension and other postretirement benefit plan assets measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs was as follows:
FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) -------------------------------------------------------------------------------------------- PENSION BENEFITS OTHER POSTRETIREMENT BENEFITS ------------------------------------------------------------ ------------------------------- FIXED MATURITY EQUITY FIXED MATURITY SECURITIES: SECURITIES: SECURITIES: ----------------- ----------- -------------------- COMMON PASS- OTHER PASS- FOREIGN STOCK- THROUGH DERIVATIVE INVESTED THROUGH CORPORATE BONDS DOMESTIC SECURITIES SECURITIES ASSETS CORPORATE MUNICIPALS SECURITIES --------- ------- ----------- ---------- ---------- -------- --------- ---------- ---------- (IN MILLIONS) YEAR ENDED DECEMBER 31, 2011: Balance, January 1,............. $ 45 $ 4 $ 228 $ 2 $(1) $ 446 $ 4 $ 1 $ 6 Total realized/unrealized gains (losses) included in: Earnings: Net investment income........ -- -- -- -- -- -- -- -- -- Net investment gains (losses).................... -- -- (57) (1) 1 80 -- -- (1) Net derivative gains (losses).................... -- -- -- -- -- -- -- -- -- Other comprehensive income (loss)....................... (3) (2) 110 1 6 42 -- -- 1 Purchases..................... -- 3 7 1 -- 91 -- -- -- Sales......................... (13) -- (94) (2) (2) (158) -- -- (1) Issuances..................... -- -- -- -- -- -- -- -- -- Settlements................... -- -- -- -- -- -- -- -- -- Transfers into Level 3.......... 1 -- -- 1 -- -- -- -- 1 Transfers out of Level 3........ -- -- -- -- -- -- -- -- (1) --------- ------- ----------- ---------- ---------- -------- --------- ---------- ---------- Balance, December 31,........... $ 30 $ 5 $ 194 $ 2 $ 4 $ 501 $ 4 $ 1 $ 5 ========= ======= =========== ========== ========== ======== ========= ========== ==========
DERIVATIVE SECURITIES ---------- YEAR ENDED DECEMBER 31, 2011: Balance, January 1,............. $-- Total realized/unrealized gains (losses) included in: Earnings: Net investment income........ -- Net investment gains (losses).................... -- Net derivative gains (losses).................... -- Other comprehensive income (loss)....................... 1 Purchases..................... -- Sales......................... -- Issuances..................... -- Settlements................... -- Transfers into Level 3.......... -- Transfers out of Level 3........ -- ---------- Balance, December 31,........... $ 1 ==========
FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) -------------------------------------------------------------------------------------------- PENSION BENEFITS OTHER POSTRETIREMENT BENEFITS ------------------------------------------------------------ ------------------------------- FIXED MATURITY EQUITY FIXED MATURITY SECURITIES: SECURITIES: SECURITIES: ----------------- ----------- -------------------- COMMON PASS- OTHER PASS- FOREIGN STOCK- THROUGH DERIVATIVE INVESTED THROUGH CORPORATE BONDS DOMESTIC SECURITIES SECURITIES ASSETS CORPORATE MUNICIPALS SECURITIES --------- ------- ----------- ---------- ---------- -------- --------- ---------- ---------- (IN MILLIONS) YEAR ENDED DECEMBER 31, 2010: Balance, January 1,............. $ 64 $ 5 $229 $ 66 $ -- $354 $-- $-- $ 9 Total realized/unrealized gains (losses) included in: Earnings: Net investment income........ -- -- -- (11) 2 74 -- -- (4) Net investment gains (losses).................... -- -- -- -- -- -- -- -- -- Net derivative gains (losses).................... -- -- -- -- -- -- -- -- -- Other comprehensive income (loss)................ 7 1 (2) 13 (2) (4) 1 -- 1 Purchases, sales, issuances and settlements.................... (17) (2) 1 (67) (1) 22 -- -- (1) Transfers into Level 3.......... 4 -- -- 2 -- -- 3 1 1 Transfers out of Level 3........ (13) -- -- (1) -- -- -- -- -- --------- ------- ----------- ---------- ---------- -------- --------- ---------- ---------- Balance, December 31,........... $ 45 $ 4 $228 $ 2 $(1) $446 $ 4 $ 1 $ 6 ========= ======= =========== ========== ========== ======== ========= ========== ==========
F-158 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) ------------------------------------------------------------------------------------------ PENSION BENEFITS OTHER POSTRETIREMENT BENEFITS ------------------------------------------------------------ ----------------------------- FIXED MATURITY EQUITY SECURITIES: SECURITIES: ----------------- ----------- COMMON PASS- OTHER PASS- FOREIGN STOCK- THROUGH DERIVATIVE INVESTED THROUGH CORPORATE BONDS DOMESTIC SECURITIES SECURITIES ASSETS SECURITIES --------- ------- ----------- ---------- ---------- -------- ----------------------------- (IN MILLIONS) YEAR ENDED DECEMBER 31, 2009: Balance, January 1,.................. $ 54 $ 4 $ 437 $ 76 $ 38 $ 372 $ 13 Total realized/unrealized gains (losses) included in: Earnings:.......................... Net investment income............. (5) (1) -- (2) 34 4 (17) Net investment gains (losses)..... -- -- -- -- -- -- -- Net derivative gains (losses)..... -- -- -- -- -- -- -- Other comprehensive income (loss)............................ 20 5 (220) 8 (37) (56) 17 Purchases, sales, issuances and settlements......................... (3) (3) 12 (23) (35) 34 (4) Transfers into and/or out of Level 3. (2) -- -- 7 -- -- -- --------- ------- ----------- ---------- ---------- -------- ----------------------------- Balance, December 31,................ $ 64 $ 5 $ 229 $ 66 $ -- $ 354 $ 9 ========= ======= =========== ========== ========== ======== =============================
See Note 5 for further information about the valuation techniques and inputs by level of major assets of invested assets that affect the amounts reported above. The Company provides employees with benefits under various ERISA benefit plans. These include qualified pension plans, postretirement medical plans and certain retiree life insurance coverage. The assets of the Company's qualified pension plans are held in insurance group annuity contracts, and the vast majority of the assets of the postretirement medical plan and backing the retiree life coverage are held in insurance contracts. All of these contracts are issued by the Company and the assets under the contracts are held in insurance separate accounts that have been established by the Company. The insurance contract provider engages investment management firms ("Managers") to serve as sub-advisors for the separate accounts based on the specific investment needs and requests identified by the plan fiduciary. These Managers have portfolio management discretion over the purchasing and selling of securities and other investment assets pursuant to the respective investment management agreements and guidelines established for each insurance separate account. The assets of the qualified pension plans and postretirement medical plans (the "Invested Plans") are well diversified across multiple asset categories and across a number of different Managers, with the intent of minimizing risk concentrations within any given asset category or with any given Manager. The Invested Plans, other than those held in participant directed investment accounts, are managed in accordance with investment policies consistent with the longer-term nature of related benefit obligations and within prudent risk parameters. Specifically, investment policies are oriented toward (i) maximizing the Invested Plan's funded status; (ii) minimizing the volatility of the Invested Plan's funded status; (iii) generating asset returns that exceed liability increases; and (iv) targeting rates of return in excess of a custom benchmark and industry standards over appropriate reference time periods. These goals are expected to be met through identifying appropriate and diversified asset classes and allocations, ensuring adequate liquidity to pay benefits and expenses when due and controlling the costs of administering and managing the Invested Plan's investments. Independent investment consultants are periodically used to evaluate the investment risk of Invested Plan's assets relative to liabilities, analyze the economic and portfolio impact of various asset allocations and management strategies and to recommend asset allocations. F-159 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Derivative contracts may be used to reduce investment risk, to manage duration and to replicate the risk/return profile of an asset or asset class. Derivatives may not be used to leverage a portfolio in any manner, such as to magnify exposure to an asset, asset class, interest rates or any other financial variable. Derivatives are also prohibited for use in creating exposures to securities, currencies, indices or any other financial variable that are otherwise restricted. The table below summarizes the actual weighted average allocation of the fair value of total plan assets by asset class at December 31 for the years indicated and the approved target range allocation by major asset class as of December 31, 2011 for the Invested Plans:
DEFINED BENEFIT PLAN POSTRETIREMENT MEDICAL POSTRETIREMENT LIFE ------------------------ ------------------------- --------------------- ACTUAL ALLOCATION ACTUAL ALLOCATION ACTUAL ALLOCATION TARGET -------------- TARGET -------------- TARGET -------------- RANGE 2011 2010 RANGE 2011 2010 RANGE 2011 2010 --------- ---- ---- ---------- ---- ---- ------ ---- ---- ASSET CLASS: Fixed maturity securities: Corporate...................... 28% 24% 17% 10% --% --% Federal agency................. 4 3 4 2 -- -- Foreign bonds.................. 3 3 2 -- -- -- Municipals..................... 3 2 8 5 -- -- U.S. government bonds.......... 17 12 20 11 -- -- ---- ---- ---- ---- ---- ---- Total fixed maturity securities................... 50% - 80% 55% 44% 50% - 100% 51% 28% 0% --% --% ---- ---- ---- ---- ---- ---- Equity securities: Common stock -- domestic....... 20% 27% 30% 49% --% --% Common stock -- foreign........ 4 8 7 10 -- -- ---- ---- ---- ---- ---- ---- Total equity securities....... 0% - 40% 24% 35% 0% - 50% 37% 59% 0% --% --% ---- ---- ---- ---- ---- ---- Alternative securities: Money market securities........ --% 5% 1% --% --% --% Pass-through securities........ 6 5 11 11 -- -- Derivatives.................... 1 -- -- -- -- -- Short-term investments......... 5 1 -- 1 100 100 Other invested assets.......... 8 8 -- -- -- -- Other receivables.............. 1 1 -- 1 -- -- Securities receivable.......... -- 1 -- -- -- -- ---- ---- ---- ---- ---- ---- Total alternative securities.. 10% - 20% 21% 21% 0% - 10% 12% 13% 100% 100% 100% ---- ---- ---- ---- ---- ---- Total assets................. 100% 100% 100% 100% 100% 100% ==== ==== ==== ==== ==== ====
EXPECTED FUTURE CONTRIBUTIONS AND BENEFIT PAYMENTS It is the Company's practice to make contributions to the qualified pension plan to comply with minimum funding requirements of ERISA. In accordance with such practice, no contributions were required for 2012. The Company expects to make discretionary contributions to the qualified pension plan of $176 million in 2012. For information on employer contributions, see "-- Obligations, Funded Status and Net Periodic Benefit Costs." F-160 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Benefit payments due under the non-qualified pension plans are primarily funded from the Company's general assets as they become due under the provision of the plans, therefore benefit payments equal employer contributions. The Company expects to make contributions of $88 million to fund the benefit payments in 2012. Postretirement benefits are either: (i) not vested under law; (ii) a non-funded obligation of the Company; or (iii) both. Current regulations do not require funding for these benefits. The Company uses its general assets, net of participant's contributions, to pay postretirement medical claims as they come due in lieu of utilizing any plan assets. The Company expects to make contributions of $75 million towards benefit obligations in 2012 to pay postretirement medical claims. As noted previously, the Company no longer expects to receive the RDS under the Medicare Modernization Act of 2003 to partially offset payment of such benefits. Instead, the gross benefit payments that will be made under the PDP will already reflect subsidies. Gross benefit payments for the next 10 years, which reflect expected future service where appropriate, are expected to be as follows:
OTHER PENSION POSTRETIREMENT BENEFITS BENEFITS -------- -------------- (IN MILLIONS) 2012...... $ 435 $110 2013...... $ 410 $112 2014...... $ 440 $115 2015...... $ 439 $117 2016...... $ 454 $119 2017-2021. $2,543 $609
ADDITIONAL INFORMATION As previously discussed, most of the assets of the pension and other postretirement benefit plans are held in group annuity and life insurance contracts issued by the Company. Total revenues from these contracts recognized in the consolidated statements of operations were $47 million, $46 million and $42 million for the years ended December 31, 2011, 2010 and 2009, respectively, and included policy charges and net investment income from investments backing the contracts and administrative fees. Total investment income (loss), including realized and unrealized gains (losses), credited to the account balances was $885 million, $767 million and $689 million for the years ended December 31, 2011, 2010 and 2009, respectively. The terms of these contracts are consistent in all material respects with those the Company offers to unaffiliated parties that are similarly situated. SAVINGS AND INVESTMENT PLANS The Company sponsors savings and investment plans for substantially all Company employees under which a portion of employee contributions are matched. The Company contributed $73 million, $72 million and $79 million for the years ended December 31, 2011, 2010 and 2009, respectively. F-161 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 15. EQUITY CAPITAL CONTRIBUTIONS During the year ended December 31, 2011, United MetLife Insurance Company Limited ("United"), an insurance underwriting joint venture of the Company accounted for under the equity method, merged with Sino-US MetLife Insurance Company Limited ("Sino"), another insurance underwriting joint venture of an affiliate of the Company. The Company's ownership interest in the merged entity, Sino-US United MetLife Insurance Company Limited ("Sino-United") was determined based on its contributed capital and share of undistributed earnings of United compared to the contributed capital and undistributed earnings of all other owners of United and Sino. Since both of the joint ventures were under common ownership both prior to and subsequent to the merger, the Company's investment in Sino-United is based on the carrying value of its investment in United. Pursuant to the merger, the Company entered into an agreement whereby the affiliate will pay an amount to the Company based on the relative fair values of their respective investments in Sino-United. Accordingly, upon completion of the estimation of fair value, $47 million, representing a capital contribution, was received during the year ended December 31, 2011. The Company's investment in Sino-United is accounted for under the equity method and is included in other invested assets. During each of the years ended December 31, 2011, 2010 and 2009, MetLife, Inc. contributed $3 million in the form of payment of line of credit fees on the Company's behalf. STOCK-BASED COMPENSATION PLANS Overview The stock-based compensation expense recognized by the Company is related to awards payable in shares of MetLife, Inc. common stock, or options to purchase MetLife, Inc. common stock. The Company does not issue any awards payable in its common stock or options to purchase its common stock. Description of Plans for Employees and Agents -- General Terms The MetLife, Inc. 2000 Stock Incentive Plan, as amended (the "2000 Stock Plan") authorized the granting of awards to employees and agents in the form of options to buy shares of MetLife, Inc. common stock ("Stock Options") that either qualify as incentive Stock Options under Section 422A of the Code or are non-qualified. By December 31, 2009 all awards under the 2000 Stock Plan had either vested or been forfeited. No awards have been made under the 2000 Stock Plan since 2005. Under the MetLife, Inc. 2005 Stock and Incentive Compensation Plan (the "2005 Stock Plan"), awards granted to employees and agents may be in the form of Stock Options, Stock Appreciation Rights, Restricted Stock or Restricted Stock Units, Performance Shares or Performance Share Units, Cash-Based Awards and Stock-Based Awards (each as defined in the 2005 Stock Plan with reference to MetLife, Inc. common stock). The aggregate number of shares authorized for issuance under the 2005 Stock Plan is 68,000,000, plus those shares available but not utilized under the 2000 Stock Plan and those shares utilized under the 2000 Stock Plan that are recovered due to forfeiture of Stock Options. Each share issued under the 2005 Stock Plan in connection with a Stock Option or Stock Appreciation Right reduces the number of shares remaining for issuance under that plan by one, and each share issued under the 2005 Stock Plan in connection with awards other than Stock Options or Stock Appreciation Rights reduces the number of shares remaining for issuance under that plan by 1.179 shares. At December 31, 2011, the aggregate number of shares of MetLife, Inc. common stock remaining available for issuance pursuant to the 2005 Stock Plan was 31,803,801. Stock Option exercises and other awards F-162 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) settled in shares are satisfied through the issuance of shares held in treasury by MetLife, Inc. or by the issuance of new shares. Of the stock-based compensation for the years ended December 31, 2011, 2010 and 2009, 70%, 79% and 88%, respectively, was allocated to the Company. No expense amounts related to stock-based awards to MetLife, Inc. non-management directors were allocated to the Company. This allocation represents substantially all stock-based compensation recognized in the Company's consolidated results of operations. Accordingly, this discussion addresses MetLife, Inc.'s practices for recognizing expense for awards under the Incentive Plans. References to compensation expense in this note refer to the Company's allocated portion of that expense. All other references relevant to awards under the Incentive Plans pertain to all awards under those plans. Compensation expense related to awards under the 2005 Stock Plan is recognized based on the number of awards expected to vest, which represents the awards granted less expected forfeitures over the life of the award, as estimated at the date of grant. Unless a material deviation from the assumed forfeiture rate is observed during the term in which the awards are expensed, any adjustment necessary to reflect differences in actual experience is recognized in the period the award becomes payable or exercisable. Compensation expense related to awards under the 2005 Stock Plan is principally related to the issuance of Stock Options, Performance Shares and Restricted Stock Units. The majority of the awards granted by MetLife, Inc. each year under the 2005 Stock Plan are made in the first quarter of each year. Compensation Expense Related to Stock-Based Compensation The components of compensation expense related to stock-based compensation was as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2011 2010 2009 ---- ---- ---- (IN MILLIONS) Stock Options............... $ 48 $39 $48 Performance Shares (1)...... 37 19 10 Restricted Stock Units...... 15 9 3 ---- ---- ---- Total compensation expenses. $100 $67 $61 ==== ==== ==== Income tax benefits......... $ 35 $23 $21 ==== ==== ====
---------- (1)Performance Shares expected to vest and the related compensation expenses may be further adjusted by the performance factor most likely to be achieved, as estimated by management, at the end of the performance period. At December 31, 2011, the Company's allocated portion of expense for Stock Options, Performance Shares and Restricted Stock Units was 85%, 54% and 84%, respectively. F-163 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents the total unrecognized compensation expense related to stock-based compensation and the expected weighted average period over which these expenses will be recognized at:
DECEMBER 31, 2011 ------------------------------ WEIGHTED AVERAGE EXPENSE PERIOD ------------- ---------------- (IN MILLIONS) (YEARS) Stock Options.......... $52 1.82 Performance Shares..... $44 1.76 Restricted Stock Units. $23 1.82
Stock Options Stock Options are the contingent right of award holders to purchase shares of MetLife, Inc. common stock at a stated price for a limited time. All Stock Options have an exercise price equal to the closing price of MetLife, Inc. common stock reported on the New York Stock Exchange on the date of grant, and have a maximum term of 10 years. The vast majority of Stock Options granted have become or will become exercisable at a rate of one-third of each award on each of the first three anniversaries of the grant date. Other Stock Options have become or will become exercisable on the third anniversary of the grant date. Vesting is subject to continued service, except for employees who are retirement eligible and in certain other limited circumstances. A summary of the activity related to Stock Options for the year ended December 31, 2011 was as follows:
WEIGHTED AVERAGE REMAINING AGGREGATE SHARES UNDER WEIGHTED AVERAGE CONTRACTUAL INTRINSIC OPTION EXERCISE PRICE TERM VALUE (1) ------------ ---------------- ----------- ------------- (YEARS) (IN MILLIONS) Outstanding at January 1, 2011........................ 32,702,331 $38.47 5.30 $195 Granted (2)........................................... 5,471,447 $45.16 Exercised............................................. (2,944,529) $29.83 Expired............................................... (317,342) $42.32 Forfeited............................................. (198,381) $38.34 ----------- Outstanding at December 31, 2011...................... 34,713,526 $40.22 5.35 $ -- ============ ================ =========== ============= Aggregate number of stock options expected to vest at a future date as of December 31, 2011............... 33,596,536 $40.31 5.25 $ -- ============ ================ =========== ============= Exercisable at December 31, 2011...................... 24,345,356 $41.06 4.02 $ -- ============ ================ =========== =============
---------- (1)The aggregate intrinsic value was computed using the closing share price on December 30, 2011 of $31.18 and December 31, 2010 of $44.44, as applicable. (2)The total fair value of the shares MetLife, Inc. granted on the date of the grant was $78 million. The fair value of Stock Options is estimated on the date of grant using a binomial lattice model. Significant assumptions used in MetLife, Inc.'s binomial lattice model, which are further described below, include: expected volatility of the price of MetLife, Inc. common stock; risk-free rate of return; expected dividend yield on MetLife, Inc. common stock; exercise multiple; and the post-vesting termination rate. F-164 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Expected volatility is based upon an analysis of historical prices of MetLife, Inc. common stock and call options on that common stock traded on the open market. MetLife, Inc. uses a weighted-average of the implied volatility for publicly traded call options with the longest remaining maturity nearest to the money as of each valuation date and the historical volatility, calculated using monthly closing prices of MetLife, Inc.'s common stock. MetLife, Inc. chose a monthly measurement interval for historical volatility as it believes this better depicts the nature of employee option exercise decisions being based on longer-term trends in the price of the underlying shares rather than on daily price movements. The binomial lattice model used by MetLife, Inc. incorporates different risk-free rates based on the imputed forward rates for U.S. Treasury Strips for each year over the contractual term of the option. The table below presents the full range of rates that were used for options granted during the respective periods. Dividend yield is determined based on historical dividend distributions compared to the price of the underlying common stock as of the valuation date and held constant over the life of the Stock Option. The binomial lattice model used by MetLife, Inc. incorporates the contractual term of the Stock Options and then factors in expected exercise behavior and a post-vesting termination rate, or the rate at which vested options are exercised or expire prematurely due to termination of employment, to derive an expected life. Exercise behavior in the binomial lattice model used by MetLife, Inc. is expressed using an exercise multiple, which reflects the ratio of exercise price to the strike price of Stock Options granted at which holders of the Stock Options are expected to exercise. The exercise multiple is derived from actual historical exercise activity. The post-vesting termination rate is determined from actual historical exercise experience and expiration activity under the Incentive Plans. The following table presents the weighted average assumptions, with the exception of risk-free rate, which is expressed as a range, used to determine the fair value of Stock Options issued:
YEARS ENDED DECEMBER 31, ----------------------------------- 2011 2010 2009 ----------- ----------- ----------- Dividend yield........................................... 1.65% 2.11% 3.15% Risk-free rate of return................................. 0.29%-5.51% 0.35%-5.88% 0.73%-6.67% Expected volatility...................................... 32.64% 34.41% 44.39% Exercise multiple........................................ 1.69 1.75 1.76 Post-vesting termination rate............................ 3.36% 3.64% 3.70% Contractual term (years)................................. 10 10 10 Expected life (years).................................... 7 7 6 Weighted average exercise price of stock options granted. $ 45.16 $35.06 $23.61 Weighted average fair value of stock options granted..... $ 14.27 $11.29 $8.37
MetLife, Inc. deducts 35% of the compensation amount of a Stock Option from its income on its tax return. The compensation amount is the price of shares on the date the Stock Option is exercised less the exercise price of the Stock Option. This tax benefit is allocated to the subsidiary of MetLife, Inc. that is the current or former employer of the associate, or is or was the principal for the non-employee insurance agent, who exercised the Stock Option. F-165 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents a summary of Stock Option exercise activity:
YEARS ENDED DECEMBER 31, ------------------------ 2011 2010 2009 ---- ---- ---- (IN MILLIONS) Total intrinsic value of stock options exercised.. $41 $22 $ 1 Cash received from exercise of stock options...... $88 $52 $ 8 Tax benefit realized from stock options exercised. $13 $ 8 $--
Performance Shares Performance Shares are units that, if they vest, are multiplied by a performance factor to produce a number of final Performance Shares which are payable in shares of MetLife, Inc. common stock. Performance Shares are accounted for as equity awards, but are not credited with dividend-equivalents for actual dividends paid on MetLife, Inc. common stock during the performance period. Accordingly, the estimated fair value of Performance Shares is based upon the closing price of MetLife, Inc. common stock on the date of grant, reduced by the present value of estimated dividends to be paid on that stock during the performance period. Performance Share awards normally vest in their entirety at the end of the three-year performance period. Vesting is subject to continued service, except for employees who are retirement eligible and in certain other limited circumstances. Vested Performance Shares are multiplied by a performance factor of 0.0 to 2.0 based largely on MetLife, Inc.'s performance in change in annual net operating earnings and total shareholder return over the applicable three-year performance period compared to the performance of its competitors. The performance factor was 0.90 for the January 1, 2008 -- December 31, 2010 performance period. The following table presents a summary of Performance Share activity for the year ended December 31, 2011:
WEIGHTED AVERAGE PERFORMANCE GRANT DATE SHARES FAIR VALUE ----------- ---------------- Outstanding at January 1, 2011............................................... 4,155,574 $31.91 Granted (1).................................................................. 1,783,070 $42.84 Forfeited.................................................................... (89,725) $32.79 Payable (2).................................................................. (824,825) $57.95 --------- Outstanding at December 31, 2011............................................. 5,024,094 $31.50 =========== ================ Performance Shares expected to vest at a future date as of December 31, 2011. 4,729,890 $32.35 =========== ================
---------- (1)The total fair value of the shares MetLife, Inc. granted on the date of the grant was $76 million. (2)Includes both shares paid and shares deferred for later payment. Performance Share amounts above represent aggregate initial target awards and do not reflect potential increases or decreases resulting from the performance factor determined after the end of the respective performance periods. At December 31, 2011, the three year performance period for the 2009 Performance Share grants was completed, but the performance factor had not yet been calculated. Included in the immediately preceding table are 1,791,609 outstanding Performance Shares to which the 2009-2011 performance factor will be applied. F-166 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Restricted Stock Units Restricted Stock Units are units that, if they vest, are payable in shares of MetLife, Inc. common stock. Restricted Stock Units are accounted for as equity awards, but are not credited with dividend-equivalents for actual dividends paid on MetLife, Inc. common stock during the performance period. Accordingly, the estimated fair value of Restricted Stock Units is based upon the closing price of MetLife, Inc. common stock on the date of grant, reduced by the present value of estimated dividends to be paid on that stock during the performance period. The vast majority of Restricted Stock Units normally vest in their entirety on the third anniversary of their grant date. Other Restricted Stock Units normally vest in their entirety on the fifth anniversary of their grant date. Vesting is subject to continued service, except for employees who are retirement eligible and in certain other limited circumstances. The following table presents a summary of Restricted Stock Unit activity for the year ended December 31, 2011:
WEIGHTED AVERAGE RESTRICTED STOCK GRANT DATE UNITS FAIR VALUE ---------------- ---------------- Outstanding at January 1, 2011.............................................. 937,172 $29.63 Granted (1)................................................................. 734,159 $41.94 Forfeited................................................................... (61,160) $35.36 Payable (2)................................................................. (47,322) $44.35 ---------------- ---------------- Outstanding at December 31, 2011............................................ 1,562,849 $34.74 ================ ================ Restricted Stock Units expected to vest at a future date as of December 31, 2011...................................................................... 1,562,849 $34.74 ================ ================
---------- (1)The total fair value of the shares MetLife, Inc. granted on the date of the grant was $31 million. (2)Includes both shares paid and shares deferred for later payment. STATUTORY EQUITY AND INCOME Each insurance company's state of domicile imposes minimum risk-based capital ("RBC") requirements that were developed by the National Association of Insurance Commissioners ("NAIC"). The formulas for determining the amount of RBC specify various weighting factors that are applied to financial balances or various levels of activity based on the perceived degree of risk. Regulatory compliance is determined by a ratio of total adjusted capital, as defined by the NAIC, to authorized control level RBC, as defined by the NAIC. Companies below specific trigger points or ratios are classified within certain levels, each of which requires specified corrective action. Metropolitan Life Insurance Company and each of its U.S. insurance subsidiaries exceeded the minimum RBC requirements for all periods presented herein. The NAIC has adopted the Codification of Statutory Accounting Principles ("Statutory Codification"). Statutory Codification is intended to standardize regulatory accounting and reporting to state insurance departments. However, statutory accounting principles continue to be established by individual state laws and permitted practices. Modifications by the various state insurance departments may impact the effect of Statutory Codification on the statutory capital and surplus of Metropolitan Life Insurance Company and its insurance subsidiaries. 167 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Statutory accounting principles differ from GAAP primarily by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions, reporting surplus notes as surplus instead of debt, reporting of reinsurance agreements and valuing securities on a different basis. In addition, certain assets are not admitted under statutory accounting principles and are charged directly to surplus. The most significant assets not admitted by the Company are net deferred income tax assets resulting from temporary differences between statutory accounting principles basis and tax basis not expected to reverse and become recoverable within three years. Further, statutory accounting principles do not give recognition to purchase accounting adjustments. Statutory net income (unaudited) of Metropolitan Life Insurance Company, a New York domiciled insurer, was $2.0 billion, $2.1 billion and $1.2 billion for the years ended December 31, 2011, 2010 and 2009, respectively. Statutory capital and surplus (unaudited), as filed with the New York State Department of Insurance, was $13.5 billion and $13.2 billion at December 31, 2011 and 2010, respectively. DIVIDEND RESTRICTIONS Under New York State Insurance Law, Metropolitan Life Insurance Company is permitted, without prior insurance regulatory clearance, to pay stockholder dividends to MetLife, Inc. as long as the aggregate amount of all such dividends in any calendar year does not exceed the lesser of: (i) 10% of its surplus to policyholders as of the end of the immediately preceding calendar year; or (ii) its statutory net gain from operations for the immediately preceding calendar year (excluding realized capital gains). Metropolitan Life Insurance Company will be permitted to pay a dividend to MetLife, Inc. in excess of the lesser of such two amounts only if it files notice of its intention to declare such a dividend and the amount thereof with the Superintendent and the Superintendent does not disapprove the dividend within 30 days of its filing. Under New York State Insurance Law, the Superintendent has broad discretion in determining whether the financial condition of a stock life insurance company would support the payment of such dividends to its shareholders. During the year ended December 31, 2011, Metropolitan Life Insurance Company paid a dividend of $1.3 billion, of which $170 million was a transfer of securities. During the year ended December 31, 2010, Metropolitan Life Insurance Company paid a dividend of $631 million, of which $399 million was a transfer of securities. During the year ended December 31, 2009, Metropolitan Life Insurance Company did not pay a dividend. The maximum amount of dividends which Metropolitan Life Insurance Company may pay in 2012 without prior regulatory approval is $1.3 billion. Under Massachusetts State Insurance Law, NELICO is permitted, without prior insurance regulatory clearance, to pay stockholder dividends to Metropolitan Life Insurance Company as long as the amount of such dividends, when aggregated with all other dividends in the preceding 12 months, does not exceed the greater of: (i) 10% of its surplus to policyholders as of the end of the immediately preceding calendar year; or (ii) its statutory net gain from operations for the immediately preceding calendar year. NELICO will be permitted to pay a dividend to Metropolitan Life Insurance Company in excess of the greater of such two amounts only if it files notice of its intention to declare such a dividend and the amount thereof with the Massachusetts Commissioner of Insurance (the "Commissioner") and the Commissioner does not disapprove the payment within 30 days of its filing. Under Massachusetts State Insurance Law, the Commissioner has broad discretion in determining whether the financial condition of a stock life insurance company would support the payment of such dividends to its shareholders. In addition, any dividend that exceeds statutory unassigned funds surplus as of the last filed annual statutory statement requires insurance regulatory approval. During the years ended December 31, 2011, 2010 and 2009, NELICO paid a dividend of $107 million, $84 million and $19 million, respectively. The maximum amount of dividends which NELICO may pay to Metropolitan Life Insurance Company in 2012 without prior regulatory approval is $46 million. F-168 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Under Missouri State Insurance Law, GALIC is permitted, without prior insurance regulatory clearance, to pay stockholder dividends to Metropolitan Life Insurance Company as long as the amount of the dividend when aggregated with all other dividends in the preceding 12 months does not exceed the greater of: (i) 10% of its surplus to policyholders as of the end of the immediately preceding calendar year; or (ii) its statutory net gain from operations for the immediately preceding calendar year (excluding net realized capital gains). GALIC will be permitted to pay a cash dividend to Metropolitan Life Insurance Company in excess of the greater of such two amounts only if it files notice of the declaration of such a dividend and the amount thereof with the Missouri Director of Insurance (the "Missouri Director") and the Missouri Director does not disapprove the distribution within 30 days of its filing. In addition, any dividend that exceeds earned surplus (defined by the Company as unassigned funds) as of the last filed annual statutory statement requires insurance regulatory approval. Under Missouri State Insurance Law, the Missouri Director has broad discretion in determining whether the financial condition of a stock life insurance company would support the payment of such dividends to its shareholders. During the year ended December 31, 2011, GALIC paid an extraordinary cash dividend to GenAmerica Financial, LLC ("GenAmerica"), its former parent, of $183 million and GenAmerica subsequently paid an ordinary dividend to its parent, Metropolitan Life Insurance Company of $183 million. During the years ended December 31, 2010 and 2009, GALIC paid a dividend to GenAmerica, which was subsequently paid by GenAmerica to Metropolitan Life Insurance Company, of $149 million and $107 million, respectively. The maximum amount of dividends which GALIC may pay to Metropolitan Life Insurance Company in 2012 without prior regulatory approval is $70 million. For the years ended December 31, 2011, 2010 and 2009, Metropolitan Life Insurance Company received dividends from non-insurance subsidiaries of $518 million, $248 million and $41 million, respectively. F-169 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) OTHER COMPREHENSIVE INCOME (LOSS) The following table sets forth the balance and changes in accumulated other comprehensive income (loss) including reclassification adjustments required for the years ended December 31, 2011, 2010 and 2009 in other comprehensive income (loss) that are included as part of net income for the current year that have been reported as a part of other comprehensive income (loss) in the current or prior year:
YEARS ENDED DECEMBER 31, -------------------------- 2011 2010 2009 -------- -------- -------- (IN MILLIONS) Holding gains (losses) on investments arising during the year................... $ 9,190 $ 7,350 $ 12,267 Income tax effect of holding gains (losses)..................................... (3,219) (2,568) (4,233) Reclassification adjustments for recognized holding (gains) losses included in current year income........................................................... (45) (545) 562 Income tax effect of reclassification adjustments............................... 16 190 (194) Allocation of holding (gains) losses on investments relating to other policyholder amounts.......................................................... (5,430) (2,329) (1,948) Income tax effect of allocation of holding (gains) losses to other policyholder amounts....................................................................... 1,902 814 672 -------- -------- -------- Net unrealized investment gains (losses), net of income tax..................... 2,414 2,912 7,126 Foreign currency translation adjustments, net of income tax..................... 4 (16) (92) Defined benefit plans adjustment, net of income tax............................. (422) 98 (90) -------- -------- -------- Other comprehensive income (loss)............................................... 1,996 2,994 6,944 Other comprehensive income (loss) attributable to noncontrolling interests...... -- (6) 5 -------- -------- -------- Other comprehensive income (loss) attributable to Metropolitan Life Insurance Company, excluding cumulative effect of change in accounting principle........ 1,996 2,988 6,949 Cumulative effect of change in accounting principle, net of income tax expense (benefit) of $0, $6 million and ($19) million (see Note 1).................... -- 10 (36) -------- -------- -------- Other comprehensive income (loss) attributable to Metropolitan Life Insurance Company............................................................ $ 1,996 $ 2,998 $ 6,913 ======== ======== ========
F-170 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 16. OTHER EXPENSES Information on other expenses was as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2011 2010 2009 ------ ------ ------ (IN MILLIONS) Compensation............................................... $2,260 $2,230 $2,433 Pension, postretirement & post employment benefit costs.... 330 331 411 Commissions................................................ 724 651 758 Volume-related costs....................................... 196 173 36 Affiliated interest costs on ceded and assumed reinsurance. 1,393 1,386 1,236 Capitalization of DAC...................................... (893) (804) (857) Amortization of DAC and VOBA............................... 987 950 415 Interest expense on debt and debt issuance costs........... 194 217 166 Premium taxes, licenses & fees............................. 302 288 317 Professional services...................................... 832 743 701 Rent, net of sublease income............................... 129 147 262 Other...................................................... (40) (53) 131 ------ ------ ------ Total other expenses...................................... $6,414 $6,259 $6,009 ====== ====== ======
CAPITALIZATION OF DAC AND AMORTIZATION OF DAC AND VOBA See Note 6 for DAC and VOBA by segment and a rollforward of each including impacts of capitalization and amortization. See also Note 10 for a description of the DAC amortization impact associated with the closed block. INTEREST EXPENSE ON DEBT AND DEBT ISSUANCE COSTS See Note 11 for attribution of interest expense by debt issuance. Interest expense on debt and debt issuance costs includes interest expense related to CSEs. See Note 3. AFFILIATED EXPENSES Commissions, capitalization of DAC and amortization of DAC and VOBA include the impact of affiliated reinsurance transactions. See Notes 9, 11 and 19 for a discussion of affiliated expenses included in the table above. LEASE IMPAIRMENTS See Note 13 for description of lease impairments included within other expenses. RESTRUCTURING CHARGES In September 2008, MetLife, Inc. began an enterprise-wide cost reduction and revenue enhancement initiative which was fully implemented by December 31, 2011. This initiative was focused on reducing complexity, leveraging scale, increasing productivity and improving the effectiveness of MetLife, Inc.'s and its subsidiaries' operations, as well as providing a foundation for future growth. F-171 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) These restructuring charges are included in other expenses. As the expenses relate to an enterprise-wide initiative, they are reported within Corporate & Other. Restructuring charges associated with this enterprise-wide initiative were as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2011 2010 2009 ---- ----- ------ (IN MILLIONS) Balance at January 1,.............................................. $ 3 $ 19 $ 61 Severance charges.................................................. 2 14 70 Change in severance charge estimates............................... 1 (2) (8) Cash payments...................................................... (6) (28) (104) ---- ----- ------ Balance at December 31,............................................ $ -- $ 3 $ 19 ==== ===== ====== Restructuring charges incurred in current period................... $ 3 $ 12 $ 62 ==== ===== ====== Total restructuring charges incurred since inception of initiative. $138 $ 135 $ 123 ==== ===== ======
Changes in severance charge estimates were due to changes in estimates for variable incentive compensation, COBRA benefits, employee outplacement services and for employees whose severance status changed. In addition to the above charges, the Company has recognized lease charges of $28 million associated with the consolidation of office space since the inception of the initiative. 17. BUSINESS SEGMENT INFORMATION The Company is organized into three segments: Insurance Products, Retirement Products and Corporate Benefit Funding. In addition, the Company reports certain of its results of operations in Corporate & Other. On November 21, 2011, MetLife, Inc. announced that it will be reorganizing its business into three broad geographic regions and creating a global employee benefits business. While MetLife, Inc. has initiated certain changes in response to this announcement, the Company continued to evaluate the performance of its operating segments under the existing segment structure as of December 31, 2011. Insurance Products offers a broad range of protection products and services to individuals and corporations, as well as other institutions and their respective employees, and is organized into three distinct businesses: Group Life, Individual Life and Non-Medical Health. Group Life insurance products and services include variable life, universal life and term life products. Individual Life insurance products and services include variable life, universal life, term life and whole life products. Non-Medical Health products and services include dental insurance, group short- and long-term disability, individual disability income, LTC, critical illness and accidental death & dismemberment coverages. Retirement Products offers a variety of variable and fixed annuities. Corporate Benefit Funding offers pension risk solutions, structured settlements, stable value and investment products and other benefit funding products. Corporate & Other contains the excess capital not allocated to the segments, various start-up and run-off entities, as well as interest expense related to the majority of the Company's outstanding debt and expenses associated with certain legal proceedings and income tax audit issues. Corporate & Other also includes the elimination of intersegment amounts, which generally relate to intersegment loans, which bear interest rates commensurate with related borrowings. F-172 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Operating earnings is the measure of segment profit or loss the Company uses to evaluate segment performance and allocate resources. Consistent with GAAP accounting guidance for segment reporting, operating earnings is the Company's measure of segment performance and is reported below. Operating earnings should not be viewed as a substitute for GAAP income (loss) from continuing operations, net of income tax. The Company believes the presentation of operating earnings as the Company measures it for management purposes enhances the understanding of its performance by highlighting the results of operations and the underlying profitability drivers of the business. Operating earnings is defined as operating revenues less operating expenses, both net of income tax. Operating revenues excludes net investment gains (losses) and net derivative gains (losses). The following additional adjustments are made to GAAP revenues, in the line items indicated, in calculating operating revenues: . Universal life and investment-type product policy fees excludes the amortization of unearned revenue related to net investment gains (losses) and net derivative gains (losses) and certain variable annuity GMIB fees ("GMIB Fees"); and . Net investment income: (i) includes amounts for scheduled periodic settlement payments and amortization of premium on derivatives that are hedges of investments but do not qualify for hedge accounting treatment, (ii) includes income from discontinued real estate operations, and (iii) excludes certain amounts related to securitization entities that are VIEs consolidated under GAAP. The following adjustments are made to GAAP expenses, in the line items indicated, in calculating operating expenses: . Policyholder benefits and claims and policyholder dividends excludes: (i) changes in the policyholder dividend obligation related to net investment gains (losses) and net derivative gains (losses), (ii) amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets, (iii) benefits and hedging costs related to GMIBs ("GMIB Costs"), and (iv) market value adjustments associated with surrenders or terminations of contracts ("Market Value Adjustments"); . Interest credited to policyholder account balances includes adjustments for scheduled periodic settlement payments and amortization of premium on derivatives that are hedges of PABs but do not qualify for hedge accounting treatment; . Amortization of DAC and VOBA excludes amounts related to: (i) net investment gains (losses) and net derivative gains (losses), (ii) GMIB Fees and GMIB Costs, and (iii) Market Value Adjustments; . Interest expense on debt excludes certain amounts related to securitization entities that are VIEs consolidated under GAAP; and . Other expenses excludes costs related to noncontrolling interests. In 2011, management modified its definition of operating earnings to exclude impacts related to certain variable annuity guarantees and Market Value Adjustments to better conform to the way it manages and assesses its business. Accordingly, such results are no longer reported in operating earnings. Consequently, prior years' results for Retirement Products and total consolidated operating earnings have been decreased by $15 million, net of $8 million of income tax, and $18 million, net of $10 million of income tax, for the years ended December 31, 2010 and 2009, respectively. Set forth in the tables below is certain financial information with respect to the Company's segments, as well as Corporate & Other for the years ended December 31, 2011, 2010 and 2009 and at December 31, 2011 and F-173 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2010. The accounting policies of the segments are the same as those of the Company, except for operating earnings adjustments as defined above, the method of capital allocation and the accounting for gains (losses) from intercompany sales, which are eliminated in consolidation. Economic capital is an internally developed risk capital model, the purpose of which is to measure the risk in the business and to provide a basis upon which capital is deployed. The economic capital model accounts for the unique and specific nature of the risks inherent in MetLife, Inc.'s business. Effective January 1, 2011, MetLife, Inc. updated its economic capital model to align segment allocated equity with emerging standards and consistent risk principles. Such changes to MetLife, Inc.'s economic capital model are applied prospectively. Segment net investment income is also credited or charged based on the level of allocated equity; however, changes in allocated equity do not impact the Company's consolidated net investment income, operating earnings or income (loss) from continuing operations, net of income tax.
OPERATING EARNINGS ------------------------------------------------ CORPORATE INSURANCE RETIREMENT BENEFIT CORPORATE TOTAL YEAR ENDED DECEMBER 31, 2011 PRODUCTS PRODUCTS FUNDING & OTHER TOTAL ADJUSTMENTS CONSOLIDATED ------------------------------------- --------- ---------- --------- --------- ------- ----------- ------------ (IN MILLIONS) REVENUES Premiums.............................. $16,346 $ 594 $1,347 $ 1 $18,288 $ -- $18,288 Universal life and investment-type product policy fees.................. 1,406 559 196 -- 2,161 41 2,202 Net investment income................. 5,216 2,154 3,987 391 11,748 (121) 11,627 Other revenues........................ 491 109 242 966 1,808 -- 1,808 Net investment gains (losses)......... -- -- -- -- -- 132 132 Net derivative gains (losses)......... -- -- -- -- -- 1,578 1,578 --------- ---------- --------- --------- ------- ----------- ------------ Total revenues...................... 23,459 3,416 5,772 1,358 34,005 1,630 35,635 --------- ---------- --------- --------- ------- ----------- ------------ EXPENSES Policyholder benefits and claims and policyholder dividends............... 17,994 1,005 2,989 4 21,992 44 22,036 Interest credited to policyholder account balances..................... 502 678 1,138 -- 2,318 54 2,372 Capitalization of DAC................. (398) (475) (20) -- (893) -- (893) Amortization of DAC and VOBA.......... 529 366 14 1 910 77 987 Interest expense on debt.............. 3 3 7 172 185 9 194 Other expenses........................ 3,031 1,396 446 1,247 6,120 6 6,126 --------- ---------- --------- --------- ------- ----------- ------------ Total expenses...................... 21,661 2,973 4,574 1,424 30,632 190 30,822 --------- ---------- --------- --------- ------- ----------- ------------ Provision for income tax expense (benefit)............................ 631 156 421 (229) 979 502 1,481 --------- ---------- --------- --------- ------- ------------ OPERATING EARNINGS.................... $ 1,167 $ 287 $ 777 $ 163 2,394 ========= ========== ========= ========= ======= Adjustments to: Total revenues...................... 1,630 Total expenses...................... (190) Provision for income tax (expense) benefit............................ (502) ------- INCOME (LOSS) FROM CONTINUING OPERATIONS, NET OF INCOME TAX........ $ 3,332 $ 3,332 ======= ============
F-174 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CORPORATE INSURANCE RETIREMENT BENEFIT CORPORATE AT DECEMBER 31, 2011 PRODUCTS PRODUCTS FUNDING & OTHER TOTAL ----------------------------------- --------- ---------- --------- ----------- ------------ (IN MILLIONS) TOTAL ASSETS....................... $127,169 $80,219 $157,553 $37,255 $402,196 SEPARATE ACCOUNT ASSETS............ $ 7,173 $36,557 $ 62,948 $ -- $106,678 SEPARATE ACCOUNT LIABILITIES....... $ 7,173 $36,557 $ 62,948 $ -- $106,678 OPERATING EARNINGS --------------------------------------------------- CORPORATE INSURANCE RETIREMENT BENEFIT CORPORATE TOTAL YEAR ENDED DECEMBER 31, 2010 PRODUCTS PRODUCTS FUNDING & OTHER TOTAL ADJUSTMENTS CONSOLIDATED ----------------------------------- --------- ---------- --------- ---------- --------- ----------- ------------ (IN MILLIONS) REVENUES Premiums........................... $16,615 $ 608 $ 1,295 $ 1 $ 18,519 $ -- $ 18,519 Universal life and investment-type product policy fees............... 1,363 481 196 -- 2,040 35 2,075 Net investment income.............. 5,344 2,274 3,830 146 11,594 (1) 11,593 Other revenues..................... 444 78 239 964 1,725 -- 1,725 Net investment gains (losses)...... -- -- -- -- -- (170) (170) Net derivative gains (losses)...... -- -- -- -- -- (266) (266) --------- ---------- --------- ---------- --------- ----------- ------------ Total revenues................... 23,766 3,441 5,560 1,111 33,878 (402) 33,476 --------- ---------- --------- ---------- --------- ----------- ------------ EXPENSES Policyholder benefits and claims and policyholder dividends........ 18,299 963 2,875 (18) 22,119 31 22,150 Interest credited to policyholder account balances.................. 507 712 1,251 -- 2,470 53 2,523 Capitalization of DAC.............. (398) (392) (14) -- (804) -- (804) Amortization of DAC and VOBA....... 546 266 15 1 828 122 950 Interest expense on debt........... 4 4 5 189 202 15 217 Other expenses..................... 2,968 1,320 425 1,181 5,894 2 5,896 --------- ---------- --------- ---------- --------- ----------- ------------ Total expenses................... 21,926 2,873 4,557 1,353 30,709 223 30,932 --------- ---------- --------- ---------- --------- ----------- ------------ Provision for income tax expense (benefit)......................... 645 200 350 (208) 987 (209) 778 --------- ---------- --------- ---------- --------- ------------ OPERATING EARNINGS................. $ 1,195 $ 368 $ 653 $ (34) 2,182 ========= ========== ========= ========== ========= Adjustments to: Total revenues................... (402) Total expenses................... (223) Provision for income tax (expense) benefit............... 209 --------- INCOME (LOSS) FROM CONTINUING OPERATIONS, NET OF INCOME TAX............................... $ 1,766 $ 1,766 ========= ============ CORPORATE INSURANCE RETIREMENT BENEFIT CORPORATE AT DECEMBER 31, 2010 PRODUCTS PRODUCTS FUNDING & OTHER TOTAL ----------------------------------- --------- ---------- --------- ----------- ------------ (IN MILLIONS) TOTAL ASSETS....................... $123,915 $77,622 $143,541 $30,329 $375,407 SEPARATE ACCOUNT ASSETS............ $ 8,343 $34,540 $ 54,946 $ -- $ 97,829 SEPARATE ACCOUNT LIABILITIES....... $ 8,343 $34,540 $ 54,946 $ -- $ 97,829
F-175 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OPERATING EARNINGS - ------------------------------------------------- CORPORATE INSURANCE RETIREMENT BENEFIT CORPORATE TOTAL YEAR ENDED DECEMBER 31, 2009 PRODUCTS PRODUCTS FUNDING & OTHER TOTAL ADJUSTMENTS CONSOLIDATED ------------------------------------- --------- ---------- --------- --------- -------- ----------- ------------ (IN MILLIONS) REVENUES Premiums.............................. $16,651 $ 553 $1,414 $ 11 $ 18,629 $ -- $ 18,629 Universal life and investment-type product policy fees.................. 1,486 416 145 -- 2,047 20 2,067 Net investment income................. 4,968 2,006 3,466 (328) 10,112 63 10,175 Other revenues........................ 511 73 230 925 1,739 -- 1,739 Net investment gains (losses)......... -- -- -- -- -- (1,667) (1,667) Net derivative gains (losses)......... -- -- -- -- -- (4,428) (4,428) --------- ---------- --------- --------- -------- ----------- ------------ Total revenues...................... 23,616 3,048 5,255 608 32,527 (6,012) 26,515 --------- ---------- --------- --------- -------- ----------- ------------ EXPENSES Policyholder benefits and claims and policyholder dividends............... 18,447 923 2,879 7 22,256 18 22,274 Interest credited to policyholder account balances..................... 513 754 1,366 -- 2,633 36 2,669 Capitalization of DAC................. (396) (449) (12) -- (857) -- (857) Amortization of DAC and VOBA.......... 410 248 12 2 672 (257) 415 Interest expense on debt.............. 2 -- 1 163 166 -- 166 Other expenses........................ 3,145 1,391 422 1,320 6,278 7 6,285 --------- ---------- --------- --------- -------- ----------- ------------ Total expenses...................... 22,121 2,867 4,668 1,492 31,148 (196) 30,952 --------- ---------- --------- --------- -------- ----------- ------------ Provision for income tax expense (benefit)............................ 498 51 187 (489) 247 (2,143) (1,896) --------- ---------- --------- --------- -------- ------------ OPERATING EARNINGS.................... $ 997 $ 130 $ 400 $(395) 1,132 ========= ========== ========= ========= ======== Adjustments to: Total revenues...................... (6,012) Total expenses...................... 196 Provision for income tax (expense) benefit............................ 2,143 -------- INCOME (LOSS) FROM CONTINUING OPERATIONS, NET OF INCOME TAX........ $(2,541) $(2,541) ======== ============
Net investment income is based upon the actual results of each segment's specifically identifiable asset portfolio adjusted for allocated equity. Other costs are allocated to each of the segments based upon: (i) a review of the nature of such costs; (ii) time studies analyzing the amount of employee compensation costs incurred by each segment; and (iii) cost estimates included in the Company's product pricing. Operating revenues derived from any customer did not exceed 10% of consolidated operating revenues for the years ended December 31, 2011, 2010 and 2009. Substantially all of the Company's revenues originated in the U.S. 18. DISCONTINUED OPERATIONS REAL ESTATE The Company actively manages its real estate portfolio with the objective of maximizing earnings through selective acquisitions and dispositions. Income related to real estate classified as held-for-sale or sold is presented in discontinued operations. These assets are carried at the lower of depreciated cost or estimated fair F-176 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) value less expected disposition costs. Income from discontinued real estate operations, net of income tax, was $65 million, $20 million and $19 million for the years ended December 31, 2011, 2010 and 2009, respectively. The carrying value of real estate related to discontinued operations was $1 million and $180 million at December 31, 2011 and 2010, respectively. 19. RELATED PARTY TRANSACTIONS SERVICE AGREEMENTS The Company has entered into various agreements with affiliates for services necessary to conduct its activities. Typical services provided under these agreements include personnel, policy administrative functions and distribution services. For certain agreements, charges are based on various performance measures or activity-based costing. The bases for such charges are modified and adjusted by management when necessary or appropriate to reflect fairly and equitably the actual incidence of cost incurred by the Company and/or affiliate. Expenses and fees incurred with affiliates related to these agreements, recorded in other expenses, were $2.8 billion, $2.7 billion and $3.0 billion for the years ended December 31, 2011, 2010 and 2009, respectively. The Company also entered into agreements with affiliates to provide additional services necessary to conduct the affiliates' activities. Typical services provided under these agreements include management, policy administrative functions, investment advice and distribution services. Expenses incurred by the Company related to these agreements, included in other expenses, were $1.6 billion, $1.2 billion and $1.1 billion for the years ended December 31, 2011, 2010 and 2009, respectively, and were reimbursed to the Company by these affiliates. The aforementioned expenses and fees incurred with affiliates were comprised of the following:
YEARS ENDED DECEMBER 31, ------------------------ 2011 2010 2009 - ------ ------ ------ (IN MILLIONS) Compensation........................................... $1,823 $1,770 $2,255 Pension, postretirement & postemployment benefit costs. (10) -- -- Commissions............................................ 905 801 638 Volume-related costs................................... (328) (269) (284) Professional services.................................. (122) (18) -- Rent................................................... (36) (28) -- Other.................................................. (993) (745) (718) ------ ------ ------ Total other expenses.................................. $1,239 $1,511 $1,891 ====== ====== ======
Revenues received from affiliates related to these agreements were recorded as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2011 2010 2009 - ---- ---- ---- (IN MILLIONS) Universal life and investment-type product policy fees. $94 $84 $55 Other revenues......................................... $46 $34 $22
The Company had net payables to affiliates of $238 million and $243 million at December 31, 2011 and 2010, respectively, related to the items discussed above. These payables exclude affiliated reinsurance balances discussed in Note 9. See Notes 3, 8 and 11 for additional related party transactions. F-177 PART C OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (a) The financial statements and financial highlights comprising each of the individual Investment Divisions of the Separate Account and the report of Independent Registered Public Accounting Firm thereto are contained in the Separate Account's Annual Report and are included in the Statement of Additional Information. The financial statements of the Separate Account include: (1) Statements of Assets and Liabilities as of December 31, 2011 (2) Statements of Operations for the year ended December 31, 2011 (3) Statements of Changes in Net Assets for the years ended December 31, 2011 and 2010 (4) Notes to the Financial Statements (b) The consolidated financial statements of Metropolitan Life Insurance Company and subsidiaries and Independent Auditors' Report, are included in the Statement of Additional Information. The consolidated financial statements of Metropolitan Life Insurance Company and subsidiaries include: (1) Consolidated Balance Sheets as of December 31, 2011 and 2010 (2) Consolidated Statements of Operations for the years ended December 31, 2011, 2010 and 2009 (3) Consolidated Statements of Equity for the years ended December 31, 2011, 2010 and 2009 (4) Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010 and 2009 (5) Notes to the Consolidated Financial Statements (B) Exhibits (1) --Resolution of the Board of Directors of Metropolitan Life establishing Separate Account E.(1) (2) --Not applicable. (3)(a) --Principal Underwriting Agreement with MetLife Investors Distribution Company (14) (b) --Specimen Metropolitan Life Insurance Company Sales Agreement. (8) (b)(i) --Specimen Retail Sales Agreement (MLIDC Retail Sales Agreement 7-1-05)(LTC)(10) (b)(ii) Form of Enterprise Selling Agreement 02-10 (MetLife Investors Distribution Company Sales Agreement). (17) (c) --Participation Agreement--New England Zenith Fund (3) (d) --Participation Agreement--American Funds Insurance Series (2) (d)(i) --Participation Agreement--American Funds Insurance Series - Summary (16) (e) --Participation Agreement--Met Investors Series Trust (4) (3)(e)(i) Amendment to each of the Participation Agreements currently in effect between Met Investors Series Trust, MetLife Advisers, LLC, MetLife Investors Distribution Company and Metropolitan Life Insurance Company, MetLife Insurance Company of Connecticut, MetLife Investors USA Insurance Company, MetLife Investors Insurance Company, First MetLife Investors Insurance Company, New England Life Insurance Company and General American Life Insurance Company effective April 30, 2010. (16) (3)(e)(ii) First Amendment to the Participation Agreement. (18) (3)(e)(iii) Second Amendment to the Participation Agreement. (18) (f) --Participation Agreement--Calvert Variable Series, Inc. (5) (3)(f)(i) Amendment to the Shared Funding Agreement dated June 5, 1990 between Calvert Investment Distributors, Inc., and Metropolitan Life Insurance, effective as of April 30, 2011. (16) (g) --Participation Agreement--Metropolitan Series Fund. (13) (3)(g)(i) Amendment to each of the Participation Agreements currently in effect between Metropolitan Series Fund, MetLife Advisers, LLC, MetLife Investors Distribution Company and Metropolitan Life Insurance Company, Metropolitan Tower Life Insurance Company, MetLife Insurance Company of Connecticut, MetLife Investors USA Insurance Company, MetLife Investors Insurance Company, First MetLife Investors Insurance Company, New England Life Insurance Company and General American Life Insurance Company effective April 30, 2010. (16) (4)(a) --Form of Variable Annuity Contract.(6) (4)(a)(i) --Backcover to Form of Variable Annuity Contract.(7) (4)(a)(ii) --Annual Step-Up Death Benefit Rider to Form of Variable Annuity Contract.(7) (4)(b) --Tax Sheltered Annuity Endorsement--Form G.ML-398 (08/02) (6) (4)(c) --SEP and SIMPLE IRA Endorsement Form ML-408.2 (09/02) (7) (4)(d) --457 Contract with TSA ERISA Endorsements (9) (4)(e) --Roth 403(b) Endorsement--Form ML-G-Roth-398 (11/05)(10) (4)(e)(i) 403(b) Nationwide Tax Sheltered Annuity Endorsement--Form ML- 398-3 (17) (4)(f) --Roth 401 Endorsement--Form HL-G-Roth-401 (11/05)(10) (4)(g) --Qualified G-Roth 403(b) Tax Sheltered Annuity Contribution Program Endorsement - Form G-Roth403(b) (3/06)(10) (4)(h) --Lifetime Guaranteed Withdrawal Benefit (LGWB) Rider Certificate Schedule (14) (4)(i) --SEP and Simple IRA LGWB Rider (14) (4)(j) --Tax Sheltered Annuity LGWB Rider (14) (4)(k) --Certificate Schedule B Class, G.FFS (08-02) for LGWB. (15) (4)(l) --Certificate Schedule L Class G.FFS (08-02) for LGWB. (15) (4)(m) --Certificate Schedule eBonus Class G.FFS (08-02) for LGWB. (15) 4(n) Metropolitan Life Insurance Company 401(a)/403(a) Plan Endorsement ML - 401 -3 (5/11). (16) 4(o) Metropolitan Life Insurance Company 457 (b) Plan Endorsement (Governmental and Tax-Exempt) ML-457-2 (5/11). (16) II-1 (5)(a) --Application Form for the Deferred Annuity, Version 1.(6) (5)(b) --Application Form for the Deferred Annuity, Version 2.(6) (5)(c) --Variable Annuity Application SEP, SIMPLE IRA Version 1 MFFSVER1APP-SS(0304)(9) (5)(d) --Variable Annuity Application SEP, SIMPLE IRA Version 2 MFFSVER2APP-SS(0304)(9) (5)(e) --Annuity SMART APP Receipt (SEP/SIMPLE IRA) MFFS-ASAR-SS (03/04)(9) (5)(f) --Variable Annuity Application MetLife Financial Freedom Select(R) Non - ERISA Tax Sheltered Annuity (TSA) Version 2. Form FFS403V2-R- LGWB(02/07) and ADMIN FFS VER2 (02/07) ef.(12) (5)(g) -- Variable Annuity Application MetLife Financial Freedom Select(R) SEP, SIMPLE IRA Version. 2. Form MFFS-V2-SS-LGWB (02/07) (12) (5)(h) -- Variable Annuity Application MetLife Financial Freedom Select(R) Non - ERISA Tax Sheltered Annuity (TSA) Version 1. Form FFS_VER1 LGWB-R (02/07) and ADMIN VER1 (02/07) ef.(12) (5)(i) -- Variable Annuity Application MetLife Financial Freedom Select(R) SEP, SIMPLE IRA Version 1. Form MFFSVER1-SS-LGWB (02/07) and ADMIN FFS VER1 (04/07) ef.(12) (5)(j) -- MFFS New York TSA Application V1 FFS 403B APP VER1 NY (07/08). (15) (5)(k) -- New York TSA Application V2 FFS 403B APP VER2 NY (07/08). (15) (5)(l) -- MFFS New York SEP/SIMPLE Application VER 1 MFFSVER1 SS NY (10/08). (15) (5)(m) -- New York SEP/SIMPLE Application VER 2 MFFSVER2 SS NY (10/08). (15) (6)(a) --Amended and Restated Charter of Metropolitan Life. (4) (6)(b) --Amended and Restated By-Laws of Metropolitan Life.(11) (7) --Not applicable. (8) --Not applicable. (9) --Opinion and consent of counsel as to the legality of the securities being registered.(6,9) (10) --Consent of Independent Registered Public Accounting Firm.(16) (11) --Not applicable. (12) --Not applicable. (13) --Powers of Attorney.(16) ---------- (1) Filed with Post-Effective Amendment No. 19 to Registration Statement No. 2-90380/811-4001 for Metropolitan Life Separate Account E on Form N-4 on February 27, 1996. As incorporated herein by reference. (2) Filed with Pre-Effective Amendment No. 1 to Registration Statement No. 333-52366/811-4001 for Metropolitan Life Separate Account E on Form N-4 on August 3, 2001. As incorporated herein by reference. (3) Filed with Post-Effective Amendment No. 10 to Registration Statement No. 33-57320/811-4001 for Metropolitan Life Separate Account UL on Form S-6 on September 18, 2000. As incorporated herein by reference. (4) Filed with this Registration Statement on March 5, 2002. (5) Filed with Post-Effective Amendment No. 22 to Registration Statement No. 2-90380/811-4001 for Metropolitan Life Separate Account E on Form N-4 on April 30, 1997 as incorporated herein by reference. (6) Filed with Pre-Effective Amendment No. 1 to this Registration Statement on July 12, 2002. (7) Filed with Post-Effective Amendment No. 1 to this Registration Statement on April 10, 2003. (8) Filed with Post-Effective Amendment No. 30 to Registration Statement Nos. 2-90380/811-4001 for Metropolitan Life Separate Account E on Form N-4 on October 22, 2003. (9) Filed with Post Effective Amendment No. 2 to this Registration Statement on April 21, 2004. (10) Filed with Post-Effective Amendment No. 5 to this Registration Statement on April 26, 2006 (11) Filed with Post-Effective Amendment No. 16 to Registration Statement No. 333-52366/811-4001 for Metropolitan Life Separate Account E on Form N-4 on January 16, 2008. As incorporated herein by reference. (12) Filed with Post-Effective Amendment No. 11 to this Registration Statement on January 26, 2009. (13) Filed with Post-Effective Amendment No. 8 to this Registration Statement on August 23, 2007. (14) Filed with Post-Effective Amendment No. 3 to Registration Statement No. 333-133675/811-07534 for Paragon Separate Account B on Form N-6 on February 6, 2008. As incorporated herein by reference. (15) Filed with Post-Effective Amendment No. 12 to this Registration Statement on March 13, 2009. (16) Filed herewith. Powers of Attorney for Eric T. Steigerwalt, Lulu C. Wang, Catherine R. Kinney, Alfred F. Kelly, Jr., Peter M. Carlson, Sylvia Matthews Burwell, Cheryl M. Grise, R. Glenn Hubbard, Steven A. Kandarian, John M. Keane, James M. Kilts, Hugh B. Price, Kenton J. Sicchitano and Eduardo Castro-Wright. (17) Filed with Post-Effective Amendment No. 14 to this Registration Statement on March 13, 2010. (18) Filed with Post-Effective Amendment No. 2 to Registration Statement File No. 333-153109/811-04001 for Metropolitan Life Separate Account E on Form N-4 on June 26, 2009. II-2 ITEM 25. DIRECTORS AND OFFICERS OF DEPOSITOR
NAME, PRINCIPAL OCCUPATION AND BUSINESS ADDRESS POSITION AND OFFICES WITH DEPOSITOR ---------------------------------------------------- ------------------------------------------------------------ Steven A. Kandarian Director, Chairman, President and Metlife, Inc and Metropolitan Life Insurance Company Chief Executive Officer 1095 Avenue of the Americas New York, NY 10036 United States Sylvia Mathews Burwell Director President, Wal-Mart Foundation Corporate Affairs 702 Southwest 8th Street Pole D-48 Bentonville, AR 72716 Eduardo Castro-Wright Director President and Chief Executive Officer Wal-Mart Stores, USA 702 Southwest 8th Street Bentonville, AR 72716 Cheryl W. Grise Director Retired Executive Vice President Northeast Utilities 24 Stratford Road West Hartford, CT 06117 R. Glenn Hubbard Director Dean and Russell L. Carson Professor of Finance and Economics Graduate School of Business Columbia University Uris Hall 3022 Broadway New York, NY 10027-6902 John M. Keane Director Co-Founder and Senior Managing Director Keane Advisors, LLC 2020 K St., N.W. Washington, DC 20006 Alfred F. Kelly, Jr. Director President American Express Company 200 Vesey Street New York, NY 10285 James M. Kilts Director Partner Centerview Partners Management, LLC 16 School Street Rye, NY 10580 Catherine R. Kinney Director Retired President and Co-Chief Operating Officer NYSE 1158 5th Avenue New York, NY 10029 Hugh B. Price Director Senior Fellow Brookings Institution 1775 Massachusetts Avenue, N.W. Washington, DC 20036 David Satcher Director Director of Satcher Health Leadership Institute and Center of Excellence on Health Disparities Morehouse School of Medicine 720 Westview Drive, S.W. Atlanta, GA 30310-1495 Kenton J. Sicchitano Director Retired Global Managing Partner PricewaterhouseCoopers, LLC 25 Phillips Pond Road Natick, MA 01760 Lulu C. Wang Director Chief Executive Officer Tupelo Capital Management LLC 767 Third Avenue New York, NY 10017
II-3 Set forth below is a list of certain principal officers of MetLife. The principal business address of each officer of MetLife is 200 Park Avenue, New York, New York 10166
NAME POSITION WITH METLIFE ------------------------ ------------------------------------------------------------ Steven A. Kandarian Director, Chairman, President and Chief Executive Officer Michel A. Khalaf President, Europe/Middle East/Africa Division Eric T. Steigerwalt Executive Vice President and Chief Financial Officer William J. Wheeler President, The Americas Peter M. Carlson Executive Vice President and Chief Accounting Officer Steven J. Goulart Executive Vice President and Chief Investment Officer Nicholas D. Latrenta Executive Vice President and General Counsel Frans Hijkoop Executive Vice President and Chief Human Resources Officer Beth M. Hirschhorn Executive Vice President of Global Brand, Marketing and Communications Maria R. Morris Executive Vice President, Global Employee Benefits Martin J. Lippert Executive Vice President, Global Technology and Operations
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR REGISTRANT. The registrant is a separate account of Metropolitan Life Insurance Company under the New York Insurance law. Under said law the assets allocated to the separate account are the property of Metropolitan Life Insurance Company, which is a wholly-owned subsidiary of MetLife Inc. The following outline indicates those persons who are controlled by or under common control with Metropolitan Life Insurance Company: II-4 ORGANIZATIONAL STRUCTURE OF METLIFE, INC. AND SUBSIDIARIES AS OF DECEMBER 31, 2011 The following is a list of subsidiaries of MetLife, Inc. updated as of December 31, 2011. Those entities which are listed at the left margin (labeled with capital letters) are direct subsidiaries of MetLife, Inc. Unless otherwise indicated, each entity which is indented under another entity is a subsidiary of that other entity and, therefore, an indirect subsidiary of MetLife, Inc. Certain inactive subsidiaries have been omitted from the MetLife, Inc. organizational listing. The voting securities (excluding directors' qualifying shares, if any) of the subsidiaries listed are 100% owned by their respective parent corporations, unless otherwise indicated. The jurisdiction of domicile of each subsidiary listed is set forth in the parenthetical following such subsidiary. A. MetLife Group, Inc. (NY) B. MetLife Bank, National Association (USA) 1. Federal Flood Certification Corp. (TX) 2. MetLife Home Loans LLC (DE) C. Exeter Reassurance Company, Ltd. (Cayman Islands) D. Metropolitan Tower Life Insurance Company (DE) 1. EntreCap Real Estate II LLC (DE) a) PREFCO Dix-Huit LLC (CT) b) PREFCO X Holdings LLC (CT) c) PREFCO Ten Limited Partnership (CT) - a 99.9% limited partnership interest of PREFCO Ten Limited Partnership is held by EntreCap Real Estate II LLC and 0.1% general partnership is held by PREFCO X Holdings LLC. d) PREFCO Vingt LLC (CT) e) PREFCO Twenty Limited Partnership (CT) - a 99% limited partnership interest of PREFCO Twenty Limited Partnership is held by EntreCap Real Estate II LLC and 1% general partnership is held by PREFCO Vingt LLC. 2. Plaza Drive Properties, LLC (DE) 3. MTL Leasing, LLC (DE) a) PREFCO IX Realty LLC (CT) b) PREFCO XIV Holdings LLC (CT) c) PREFCO Fourteen Limited Partnership (CT) - a 99.9% limited partnership interest of PREFCO Fourteen Limited Partnership is held by MTL Leasing, LLC and 0.1% general partnership is held by PREFCO XIV Holdings LLC. d) 1320 Venture LLC (DE) i) 1320 Owner LP (DE) - a 99.9% limited partnership of 1320 Owner LP is held by 1320 Venture LLC and .01% general partnership is held by 1320 GP LLC e) 1320 GP LLC (DE) E. MetLife Chile Inversiones Limitada (Chile)- 91.15% is owned by MetLife, Inc., 8.84% is owned by Inversiones MetLife Holdco Dos Limitada and 0.01% is owned by Natiloportem Holdings, Inc. 1. MetLife Chile Seguros de Vida S.A. (Chile)- 68.6071% is held by MetLife Chile Inversiones Limitada, 31.3898% is held by Inversiones Interamericana S.A. and .0031% by International Technical & Advisory Services. a) MetLife Chile Administradora de Mutuos Hipotecarios S.A. (Chile)- 99.99% is owned by MetLife Chile Seguros de Vida S.A. and 0.01% is owned by MetLife Chile Inversiones Limitada. F. Metropolitan Life Seguros de Vida S.A. (Uruguay) - 99.9994% is owned by MetLife, Inc. and 0.0006% is owned by Oscar Schmidt. G. MetLife Securities, Inc. (DE) H. Enterprise General Insurance Agency, Inc. (DE) 1 I. Metropolitan Property and Casualty Insurance Company (RI) 1. Metropolitan General Insurance Company (RI) 2. Metropolitan Casualty Insurance Company (RI) 3. Metropolitan Direct Property and Casualty Insurance Company (RI) 4. Met P&C Managing General Agency, Inc. (TX) 5. MetLife Auto & Home Insurance Agency, Inc. (RI) 6. Metropolitan Group Property and Casualty Insurance Company (RI) a) Metropolitan Reinsurance Company (U.K.) Limited (United Kingdom) 7. Metropolitan Lloyds, Inc. (TX) a) Metropolitan Lloyds Insurance Company of Texas (TX)- Metropolitan Lloyds Insurance Company of Texas, an affiliated association, provides automobile, homeowner and related insurance for the Texas market. It is an association of individuals designated as underwriters. Metropolitan Lloyds, Inc., a subsidiary of Metropolitan Property and Casualty Insurance Company, serves as the attorney-in-fact and manages the association. 8. Economy Fire & Casualty Company (IL) a) Economy Preferred Insurance Company (IL) b) Economy Premier Assurance Company (IL) J. MetLife Investors Insurance Company (MO) K. First MetLife Investors Insurance Company (NY) L. Walnut Street Securities, Inc. (MO) M. Newbury Insurance Company, Limited (Bermuda) N. MetLife Investors Group, Inc. (DE) 1. MetLife Investors Distribution Company (MO) 2. MetLife Advisers, LLC (MA) 2 O. MetLife International Holdings, Inc. (DE) 1. MetLife Mexico Cares, S.A. de C.V. (Mexico) a) Fundacion MetLife Mexico, A.C. (Mexico) 2. Natiloportem Holdings, Inc. (DE) a) Servicios Administrativos Gen, S.A. de C.V. (Mexico) i) MLA Comercial, S.A. de C.V. (Mexico) 99% is owned by Servicios Administrativos Gen, S.A. de C.V. and 1% is owned by MetLife Mexico Cares, S.A. de C.V. ii) MLA Servicios, S.A. de C.V. (Mexico) 99% is owned by Servicios Administrativos Gen, S.A. de C.V. and 1% is owned by MetLife Mexico Cares, S.A. de C.V. 3. MetLife India Insurance Company Limited (India)- 26% is owned by MetLife International Holdings, Inc. and 74% is owned by third parties. 4. Metropolitan Life Insurance Company of Hong Kong Limited (Hong Kong)- 99.99935% is owned by MetLife International Holdings, Inc. and 0.00065% is owned by Natiloporterm Holdings, Inc. 5. MetLife Seguros de Vida S.A. (Argentina)- 96.7372% is owned by MetLife International Holdings, Inc. and 3.2628% is owned by Natiloportem Holdings, Inc. 6. Metropolitan Life Seguros e Previdencia Privada S.A. (Brazil)- 66.6617540% is owned by MetLife International Holdings, Inc., 33.3382457% is owned by MetLife Worldwide Holdings, Inc. and 0.0000003% is owned by Natiloportem Holdings, Inc. 7. MetLife Global, Inc. (DE) 8. MetLife Administradora de Fundos Multipatrocinados Ltda. (Brazil) - 99.999998% of MetLife Administradora de Fundos Multipatrocinados Ltda. is owned by MetLife International Holdings, Inc. and .000002% by Natiloportem Holdings, Inc. 9. MetLife Insurance Limited (United Kingdom) 10. MetLife Limited (United Kingdom) 11. MetLife Insurance S.A./NV (Belgium) - 99.99999% of MetLife Insurance S.A./NV is owned by MetLife International Holdings, Inc. and 0.00001% by Natiloportem Holdings, Inc. 12. MetLife Services Limited (United Kingdom) 13. MetLife Europe R Limited (Ireland) 14. MetLife Seguros de Retiro S.A. (Argentina) - 96.8488% is owned by MetLife International Holdings, Inc. and 3.1512% is owned by Natiloportem Holdings, Inc. 15. Best Market S.A. (Argentina) - 5% of the shares are held by Natiloportem Holdings, Inc. and 95% is owned by MetLife International Holdings Inc. 16. Compania Previsional MetLife S.A. (Brazil) - 95.46% is owned by MetLife International Holdings, Inc. and 4.54% is owned by Natiloportem Holdings, Inc. a) Met AFJP S.A. (Argentina) - 75.41% of the shares of Met AFJP S.A. are held by Compania Previsional MetLife S.A., 19.59% is owned by MetLife Seguros de Vida S.A., 3.97% is held by Natiloportem Holdings, Inc. and 1.03% is held by MetLife Seguros de Retiro S.A. 17. MetLife Worldwide Holdings, Inc. (DE) a) MetLife Direct Co., LTD. (Japan) b) MetLife Limited (Hong Kong) 18. MetLife NC Limited (Ireland) 19. MetLife Europe Services Limited (Ireland) 20. MetLife International Limited, LLC (DE) 21. MetLife Planos Odontologicos Ltda. (Brazil) - 99.999% is owned by MetLife International Holdings, Inc. and .001% is owned by Natiloportem Holdings, Inc. 22. MetLife Ireland Holdings One Limited (Ireland) a) MetLife Global Holdings Corporation S.A. de C.V. (Mexico) - 98.9% is owned by MetLife Ireland Holdings One Limited and 1.1% is owned by MetLife International Limited, LLC. i) MetLife Ireland Treasury Limited (Ireland) a) MetLife General Insurance Limited (Australia) b) MetLife Insurance Limited (Australia) 1) MetLife Services (Singapore) PTE Limited (Singapore) 2) The Direct Call Centre PTY Limited (Australia) 3) MetLife Investments PTY Limited (Australia) aa) MetLife Insurance and Investment Trust (Australia) - MetLife Insurance and Investment Trust is a trust vehicle, the trustee of which is MetLife Investments PTY Limited ("MIPL"). MIPL is a wholly owned subsidiary of MetLife Insurance Limited. ii) Metropolitan Global Management, LLC (DE) - 99.7% is owned by MetLife Global Holdings Corporation, S.A. de C.V. and 0.3% is owned by MetLife International Holdings, Inc. a) MetLife Pensiones Mexico S.A. (Mexico)- 97.4738% is owned by Metropolitan Global Management, LLC and 2.5262% is owned by MetLife International Holdings, Inc. b) MetLife Mexico Servicios, S.A. de C.V. (Mexico) - 98% is owned by Metropolitan Global Management, LLC and 2% is owned by MetLife International Holdings, Inc. c) MetLife Mexico S.A. (Mexico)- 98.70541% is owned by Metropolitan Global Management, LLC and 1.29459% is owned by MetLife International Holdings, Inc. 1) MetLife Afore, S.A. de C.V. (Mexico)- 99.99% is owned by MetLife Mexico S.A. and 0.01% is owned by MetLife Pensiones Mexico S.A. aa) Met1 SIEFORE, S.A. de C.V. (Mexico)- 99.99% is owned by MetLife Afore, S.A. de C.V. and 0.01% is owned by MetLife Mexico S.A. bb) Met2 SIEFORE, S.A. de C.V. (Mexico)- 99.99% is owned by MetLife Afore, S.A. de C.V. and 0.01% is owned by MetLife Mexico S.A. cc) MetA SIEFORE Adicional, S.A. de C.V. (Mexico)- 99.99% is owned by MetLife Afore, S.A. de C.V. and 0.01% is owned by MetLife Mexico S.A. dd) Met3 SIEFORE Basica, S.A. de C.V. (Mexico) - 99.99% is owned by MetLife Afore, S.A. de C.V. and 0.01% is owned by MetLife Mexico S.A. ee) Met4 SIEFORE, S.A. de C.V. (Mexico) - 99.99% is owned by MetLife Afore, S.A. de C.V. and 0.01% is owned by MetLife Mexico S.A. ff) Met5 SIEFORE, S.A. de C.V. (Mexico) - 99.99% is owned by MetLife Afore, S.A. de C.V. and 0.01% is owned by MetLife Mexico S.A. 2) ML Capacitacion Comercial S.A. de C.V. (Mexico) - 99% is owned by MetLife Mexico S.A. and 1% is owned by MetLife Mexico Cares, S.A. de C.V. d) MetLife Saengmyoung Insurance Co. Ltd. (also known as MetLife Insurance Company of Korea Limited (South Korea)- 14.64% is owned by MetLife Mexico, S.A. and 85.36% is owned by Metropolitan Global Management, LLC. 23. Inversiones Metlife Holdco Dos Limitada (Chile)- 99% is owned by Metlife International Holdings, Inc. and 1% is owned by Natiloportem Holdings, Inc. 24. MetLife Asia Pacific Limited (Hong Kong) P. Metropolitan Life Insurance Company (NY) 1. 334 Madison Euro Investments, Inc. (DE) 2. St. James Fleet Investments Two Limited (Cayman Islands) a) Park Twenty Three Investments Company (United Kingdom) i) Convent Station Euro Investments Four Company (United Kingdom) a) One Madison Investments (Cayco) Limited (Cayman Islands)- 99.99999% voting control of One Madison Investments (Cayco) Limited is held by Convent Station Euro Investments Four Company and 0.00001% by St. James Fleet Investments Two Limited. 3. CRB Co., Inc. (MA)- AEW Real Estate Advisors, Inc. holds 49,000 preferred non-voting shares and AEW Advisors, Inc. holds 1,000 preferred non-voting shares of CRB, Co., Inc. 4. MLIC Asset Holdings II LLC (DE) 3 5. Thorngate, LLC (DE) 6. Alternative Fuel I, LLC (DE) 7. Transmountain Land & Livestock Company (MT) 8. MetPark Funding, Inc. (DE) 9. HPZ Assets LLC (DE) 10. Missouri Reinsurance (Barbados), Inc. (Barbados) 11. Metropolitan Tower Realty Company, Inc. (DE) a) Midtown Heights, LLC (DE) 12. MetLife Real Estate Cayman Company (Cayman Islands) 13. MetCanada Investments Ltd. (Canada) 14. MetLife Private Equity Holdings, LLC (DE) 15. 23rd Street Investments, Inc. (DE) a) MetLife Capital Credit L.P. (DE)- 1% General Partnership interest is held by 23rd Street Investments, Inc. and 99% Limited Partnership interest is held by Metropolitan Life Insurance Company. b) MetLife Capital Limited Partnership (DE)- 1% General Partnership interest is held by 23rd Street Investments, Inc. and 99% Limited Partnership interest is held by Metropolitan Life Insurance Company. 16. Hyatt Legal Plans, Inc. (DE) a) Hyatt Legal Plans of Florida, Inc. (FL) 17. MetLife Holdings, Inc. (DE) a) MetLife Credit Corp. (DE) b) MetLife Funding, Inc. (DE) 4 18. MetLife Investments Asia Limited (Hong Kong) 19. MetLife Investments Limited (United Kingdom)- 23rd Street Investments, Inc. holds one share of MetLife Investments Limited. 20. MetLife Latin America Asesorias e Inversiones Limitada (Chile)- 23rd Street Investments, Inc. holds 0.01% of MetLife Latin America Asesorias e Inversiones Limitada. 21. New England Life Insurance Company (MA) a) New England Securities Corporation (MA) 22. General American Life Insurance Company (MO) a) GALIC Holdings LLC (DE) 5 23. Corporate Real Estate Holdings, LLC (DE) 24. Ten Park SPC (Cayman Islands) - 1% voting control of Ten Park SPC is held by 23rd Street Investments, Inc. 25. MetLife Tower Resources Group, Inc. (DE) 26. Headland - Pacific Palisades, LLC (CA) 27. Headland Properties Associates (CA) - 1% is owned by Headland - Pacific Palisades, LLC and 99% is owned by Metropolitan Life Insurance Company. 28. WFP 1000 Holding Company GP, LLC (DE) 29. White Oak Royalty Company (OK) 30. 500 Grant Street GP LLC (DE) 31. 500 Grant Street Associates Limited Partnership (CT) - 99% of 500 Grant Street Associates Limited Partnership is held by Metropolitan Life Insurance Company and 1% by 500 Grant Street GP LLC. 32. MetLife Canada/MetVie Canada (Canada) 33. MetLife Retirement Services LLC (NJ) a) MetLife Investment Funds Services LLC (NJ) i) MetLife Associates LLC (DE) 34. Euro CL Investments LLC (DE) 35. MEX DF Properties, LLC (DE) 36. MSV Irvine Property, LLC (DE) - 4% of MSV Irvine Property, LLC is owned by Metropolitan Tower Realty Company, Inc. and 96% is owned by Metropolitan Life Insurance Company 37. MetLife Properties Ventures, LLC (DE) a) Citypoint Holdings II Limited (United Kingdom) 38. Housing Fund Manager, LLC (DE) a) MTC Fund I, LLC (DE) 0.01% of MTC Fund I, LLC is held by Housing Fund Manager, LLC. - Housing Fund Manager, LLC is the managing member LLC and the remaining interests are held by a third party member. b) MTC Fund II, LLC (DE) - 0.01% of MTC Fund II, LLC is held by Housing Fund Manager, LLC. - Housing Fund Manager, LLC is the managing member LLC and the remaining interests are held by a third party member. c) MTC Fund III, LLC (DE) - 0.01% of MTC Fund III, LLC is held by Housing Fund Manager, LLC. - Housing Fund Manager, LLC is the managing member LLC and the remaining interests are held by a third party member. 39. MLIC Asset Holdings, LLC (DE) 40. 85 Broad Street Mezzanine LLC (DE) a) 85 Broad Street LLC (DE) 41. The Building at 575 Fifth Avenue Mezzanine LLC (DE) a) The Building at 575 Fifth LLC (DE) 42. CML Columbia Park Fund I, LLC (DE)- 10% of membership interest is held by MetLife Insurance Company of Connecticut and 90% membership interest is held by Metropolitan Life Insurance Company. 43. Para-Met Plaza Associates (FL)- 75% of the General Partnership is held by Metropolitan Life Insurance Company and 25% of the General Partnership is held by Metropolitan Tower Realty Company, Inc. 44. MLIC CB Holdings LLC (DE) 45. Met II Office Mezzanine, LLC (FL) - 10.4167% of the membership interest is owned by Metropolitan Tower Life Insurance Company and 89.5833% is owned by Metropolitan Life Insurance Company. a) Met II Office, LLC Q. MetLife Capital Trust IV (DE) R. MetLife Insurance Company of Connecticut (CT) - 86.72% is owned by MetLife, Inc. and 13.28% by MetLife Investors Group, Inc. 1. MetLife Property Ventures Canada ULC (Canada) 2. Pilgrim Alternative Investments Opportunity Fund I, LLC (DE) - 67% is owned by MetLife Insurance Company of Connecticut and 33% is owned by third party. 3. Pilgrim Alternative Investments Opportunity Fund III Associates, LLC (CT) - 67% is owned by MetLife Insurance Company of Connecticut and 33% is owned by third party. 4. Metropolitan Connecticut Properties Ventures, LLC (DE) a) ML/VCC UT West Jordan, LLC (DE) 5. MetLife Canadian Property Ventures LLC (NY) 6. Euro TI Investments LLC (DE) 7. Greenwich Street Investments, L.L.C. (DE) a) Greenwich Street Capital Offshore Fund, Ltd. (Virgin Islands) b) Greenwich Street Investments, L.P. (DE) 8. One Financial Place Corporation (DE) - 100% is owned in the aggregate by MetLife Insurance Company of Connecticut. 9. Plaza LLC (CT) a) Tower Square Securities, Inc. (CT) 10. TIC European Real Estate LP, LLC (DE) 11. MetLife European Holdings, LLC (DE) a) MetLife Europe Limited (Ireland) i) MetLife Pension Trustees Limited (United Kingdom) b) MetLife Assurance Limited (United Kingdom) 12. Travelers International Investments Ltd. (Cayman Islands) 13. Euro TL Investments LLC (DE) 14. Corrigan TLP LLC (DE) 15. TLA Holdings LLC (DE) a) The Prospect Company (DE) i) Panther Valley, Inc. (NJ) 16. TRAL & Co. (CT) - TRAL & Co. is a general partnership. Its partners are MetLife Insurance Company of Connecticut and Metropolitan Life Insurance Company. 17. MetLife Investors USA Insurance Company (DE) a) MetLife Renewables Holding, LLC (DE) i) Greater Sandhill I, LLC (DE) 18. TLA Holdings II LLC (DE) 19. TLA Holdings III LLC (DE) 20. MetLife Greenstone Southeast Ventures, LLC (DE) - 95% of MetLife Greenstone Southeast Ventures, LLC is owned by MetLife Insurance Company of Connecticut and 5% is owned by Metropolitan Connecticut Properties Ventures, LLC. a) MLGP Lakeside, LLC (DE) S. MetLife Reinsurance Company of South Carolina (SC) T. MetLife Investment Advisors Company, LLC (DE) U. MetLife Standby I, LLC (DE) 1. MetLife Exchange Trust I (DE) V. MetLife Services and Solutions, LLC (DE) 1. MetLife Solutions Pte. Ltd. (Singapore) a) MetLife Services East Private Limited (India) b) MetLife Global Operations Support Center Private Limited (India) - 99.99999% is owned by MetLife Solutions Pte. Ltd. and 0.00001% is owned by Natiloportem Holdings, Inc. W. SafeGuard Health Enterprises, Inc. (DE) 1. MetLife Health Plans, Inc. (DE) 2. SafeGuard Health Plans, Inc. (CA) 3. SafeHealth Life Insurance Company (CA) 4. SafeGuard Health Plans, Inc. (FL) 5. SafeGuard Health Plans, Inc. (NV) 6. SafeGuard Health Plans, Inc. (TX) X. MetLife Capital Trust X (DE) Y. Cova Life Management Company (DE) Z. MetLife Reinsurance Company of Charleston (SC) AA. MetLife Reinsurance Company of Vermont (VT) AB. Delaware American Life Insurance Company (DE) 1. GBN, LLC (DE) AC. American Life Insurance Company (ALICO) (US) 1. ALICO Nagasaki Operation Yugen Kaisha (Japan) 2. Communication One Kabushiki Kaisha (Japan) 3. Financial Learning Kabushiki Kaisha (Japan) 4. Pharaonic American Life Insurance Company (Egypt) - 84.125% of Pharaonic American Life Insurance Company is owned by ALICO and the remaining interests are owned by third parties. 5. A.I.G. Limited (Nigeria) 6. ALICO Limited (Nigeria) 7. American Life Limited (Nigeria) 8. American Life Insurance Company (Pakistan) Ltd. (Pakistan) - 66.47% of American Life Insurance Company (Pakistan) Ltd. is owned by ALICO and the remaining interests are owned by third parties. 9. American Life Hayat Sigorta A.S. (Turkey) a) Deniz Emeklilik ve Hayat A.S. (Turkey) - 99.86% of Deniz Emeklilik ve Hayat A.S. is owned by American Life Hayat Sigorta A.S., .0000000004% by ALICO and the remaining interests are owned by third parties 10. ALICO (Bulgaria) Zhivotozastrahovatelno Druzestvo EAD (Bulgaria) 11. Amcico pojist'ovna a.s. (Czech Republic) 12. MetLife S.A. (France) a) Hestis S.A.S. (France) - 66.06% of Hestis S.A.S. is owned by ALICO and the remaining interests are owned by third parties. b) MetLife Solutions S.A.S. (France) 13. ALICO Mutual Fund Management Company (Greece) - 90% of ALICO Mutual Fund Management Company is owned by ALICO and the remaining interests are owned by third parties. 14. AHICO First American Hungarian Insurance Company (Elso Amerikai-Magyar Biztosito) Zrt (Hungary) a) First Hungarian-American Insurance Agency Limited (Hungary) 15. ALICO Life International Limited (Ireland) 16. ALICO Italia S.p.A. (Italy) a) Agenvita S.r.L. (Italy) - 95% of Agenvita S.r.L. is owned by ALICO Italia S.p.A., the remaining 5% is owned by ALICO. 17. AMPLICO Life-First American Polish Life Insurance & Reinsurance Company, S.A. (Poland) - 95.74% of AMPLICO Life-First American Polish Life Insurance & Reinsurance Company, S.A. is owned by ALICO and 4.26% by MetLife Worldwide Holdings, Inc. a) Amplico Services Sp z.o.o. (Poland) b) AMPLICO Towartzystwo Funduszky Inwestycyjnych, S.A. (Poland) c) AMPLICO Powszechne Towartzystwo Emerytalne S.A. (Poland) - 50% of AMPLICO Powszechne Towarzystwo Emerytalne S.A. is owned by AMPLICO Life-First American Polish Life Insurance & Reinsurance Company, S.A. and the remaining 50% is owned by ALICO. 18. ALICO Asigurari Romania S.A. (Romania) - 99.99999726375% of ALICO Asigurari Romania S.A. is owned by American Life Insurance Company and the remaining .000001273625% is owned by International Technical and Advisory Services Limited. a) ALICO Societate de Administrare a unui Fond de Pensii Administrat Privat S.A. (Romania) - 99.9748% of ALICO Societate de Administrare a unui Fond de Pensii Administrat Privat S.A. is owned by ALICO Asigurari Romania S.A. and .0252% is owned by AMPLICO Services Sp z.o.o. b) ALICO Training and Consulting S.R.L. (Romania) 19. International Investment Holding Company Limited (Russia) 20. ALICO European Holdings Limited (Ireland) a) ZAO Master D (Russia) i) ZAO ALICO Insurance Company (Russia) - 51% of ZAO ALICO Insurance Company is owned by ZAO Master D and 49% is owned by ALICO. 21. MetLife Akcionarska Drustvoza za Zivotno Osiguranje (Serbia) - 99.96% of MetLife Akcionarska Drustvoza za Zivotno Osiguranje is owned by American Life Insurance Company and the remaining .04% is owned by International Technical and Advisory Services Limited. 22. AMSLICO poist'ovna ALICO a.s. (Slovakia) a) ALICO Services Central Europe s.r.o. (Slovakia) b) ALICO Funds Central Europe sprav.spol., a.s. (Slovakia) 23. ALICO Gestora de Fondos y Planos de Pensiones S.A. (Spain) 24. ALICO Management Services Limited (United Kingdom) 25. ZEUS Administration Services Limited (United Kingdom) 26. ALICO Trustees (UK) Ltd. (United Kingdom) - 50% of ALICO Trustees (UK) Ltd. is owned by ALICO and the remaining interests are owned by International Technical and Advisory Services Limited. 27. PJSC ALICO Ukraine (Ukraine) - 99.9990% of PJSC ALICO Ukraine is owned by American Life Insurance Company, .0005% is owned by International Technical and Advisory Services Limited and the remaining .0005% is owned by Borderland Investment Limited. 28. Borderland Investments Limited (USA-Delaware) a) ALICO Hellas Single Member Limited Liability Company (Greece) 29. International Technical and Advisory Services Limited (USA-Delaware) 30. International Services Incorporated (USA-Delaware) 31. ALICO Operations Inc. (USA-Delaware) a) ALICO Asset Management Corp. (Japan) 32. ALICO Compania de Seguros de Retiro, S.A. (Argentina) - 90% of ALICO Compania de Seguros de Retiro, S.A. is owned by ALICO and 10% by International Technical & Advisory Services. 33. ALICO Compania de Seguros, S.A. (Argentina) - 90% of ALICO Compania de Seguros, S.A. is owned by ALICO and 10% by International Technical & Advisory Services. 34. MetLife Colombia Seguros de Vida S.A. (Colombia) - 94.989811% of MetLife Colombia Seguros de Vida S.A. is owned by ALICO, 5.0100030% is owned by International Technical and Advisory Services Limited and the remaining interests are owned by third parties. 35. Inversiones Interamericana S.A. (Chile) 99.9850% of Inversiones Interamericana S.A. is owned by ALICO and .0150% by International Technical & Advisory Services. a) ALICO Costa Rica S.A. (Costa Rica) - 99% of ALICO Costa Rica S.A. is owned by Inversiones Interamericana S.A. and 1% by La Interamericana Compania de Seguros de Vida S.A. b) Legal Chile S.A. (Chile) - 51% of Legal Chile S.A. is owned by Inversiones Interamericana S.A. and the remaining interests by a third party. i) Legagroup S.A. (Chile) - 99% is owned by Legal Chile and 1% is owned by a third party. 36. ALICO Mexico Compania de Seguros, S.A. de C.V. (Mexico) - 99.999998% of ALICO Mexico Compania de Seguros de Vida, SA de CV is owned by American Life Insurance Company and .000002% is owned by International Technical and Advisory Services Limited. 37. ALICO Services, Inc. (Panama) 38. American Life and General Insurance Company (Trinidad & Tobago) Ltd. (Trinidad and Tobago) - 80.92373% of American Life and General Insurance Company (Trinidad & Tobago) Ltd. is owned by ALICO and the remaining interests are owned by a third party. a) ALGICO Properties, Ltd. (Trinidad & Tobago) - 99.99994% of ALGICO Properties, Ltd. is owned by American Life and General Insurance Company (Trinidad & Tobago), .00003% is owned by American Life Insurance Company and the remaining .00003% is owned by third parties. b) Eleven Dee, LTD. (Trinidad & Tobago) 39. MetLife Seguros de Vida, S.A. (Uruguay) 40. ALICO Properties, Inc. (USA-Delaware) - 51% of ALICO Properties, Inc. is owned by ALICO and the remaining interests are owned by third parties. 41. Global Properties, Inc. (USA-Delaware) 42. Alpha Properties, Inc. (USA-Delaware) 43. Beta Properties, Inc. (USA-Delaware) 44. Delta Properties Japan, Inc. (USA-Delaware) 45. Epsilon Properties Japan, Inc. (USA) 46. Iris Properties, Inc. (USA-Delaware) 47. Kappa Properties Japan, Inc. (USA-Delaware) 48. MetLife Global Holding Company I GmbH (Swiss I) (Switzerland) a) MetLife Global Holding Company II GmbH (Swiss II) (Switzerland) i) MetLife EU Holding Company Limited (Ireland) 49. MetLife ALICO Preparatory Company KK (Japan) 1) The voting securities (excluding directors' qualifying shares, if any) of each subsidiary shown on the organizational chart are 100% owned by their respective parent corporation, unless otherwise indicated. 2) The Metropolitan Money Market Pool and MetLife Intermediate Income Pool are pass-through investment pools, of which Metropolitan Life Insurance Company and/or its subsidiaries and/or affiliates are general partners. 3) The MetLife, Inc. organizational chart does not include real estate joint ventures and partnerships of which MetLife, Inc. and/or its subsidiaries is an investment partner. In addition, certain inactive subsidiaries have also been omitted. 4) MetLife Services EEIG is a cost-sharing mechanism used in the EU for EU affiliated members. 6 ITEM 27. NUMBER OF CONTRACTOWNERS. As of January 31, 2012, there were 756,865 owners of qualified contracts and 186,536 owners of non-qualified contracts offered by the Registrant (Metropolitan Life Insurance Company Separate Account E). ITEM 28. INDEMNIFICATION. UNDERTAKING PURSUANT TO RULE 494 (a) (1) UNDER THE SECURITIES ACT OF 1933 MetLife, Inc. has secured a Financial Institutions Bond in the amount of $50,000,000, subject to a $5,000,000 deductible. MetLife, Inc. also maintains a Directors' and Officers' liability policy with a limit of $400 million. The directors and officers of Metropolitan Life Insurance Company ("Metropolitan"), a subsidiary of MetLife, Inc., are also covered under the Financial Institutions Bond as well as under the directors' and Officers' Liability policy. A provision in Metropolitan's by-laws provides for the indemnification (under certain circumstances) of individuals serving as directors or officers of Metropolitan. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of Metropolitan pursuant to the foregoing provisions, or otherwise, Metropolitan has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Metropolitan of expenses incurred or paid by a director, officer or controlling person of Metropolitan in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, Metropolitan will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. ITEM 29. PRINCIPAL UNDERWRITER MetLife Investors Distribution Company also serves as principal underwriter and distributor of the Contracts. MetLife Investors Distribution Company is the principal underwriter for the following investment companies: Met Investors Series Trust Metropolitan Series Fund, Inc. Metropolitan Life Separate Account E Metropolitan Life Separate Account UL Metropolitan Tower Separate Account One Metropolitan Tower Separate Account Two MetLife Investors USA Separate Account A MetLife Investors USA Variable Life Account A MetLife Investors Variable Annuity Account One MetLife Investors Variable Annuity Account Five MetLife Investors Variable Life Account One MetLife Investors Variable Life Account Five First MetLife Investors Variable Annuity Account One General American Separate Account Eleven General American Separate Account Twenty-Eight General American Separate Account Twenty-Nine General American Separate Account Two Security Equity Separate Account 26 Security Equity Separate Account 27 MetLife of CT Separate Account Eleven for Variable Annuities MetLife of CT Separate Account QPN for Variable Annuities MetLife of CT Fund UL for Variable Life Insurance MetLife of CT Fund UL III for Variable Life Insurance Metropolitan Life Variable Annuity Separate Account I Metropolitan Life Variable Annuity Separate Account II Paragon Separate Account A Paragon Separate Account B Paragon Separate Account C and Paragon Separate Account D. II-5 (b) MetLife Investors Distribution Company is the principal underwriter for the Contracts. The following persons are officers and directors of MetLife Investors Distribution Company. The principal business address for MetLife Investors Distribution Company is 5 Park Plaza, Suite 1900, Irvine, CA 92614. NAME AND PRINCIPAL POSITIONS AND OFFICES BUSINESS ADDRESS WITH UNDERWRITER ---------------- ------------------------------------- Michael K. Farrell Director 10 Park Avenue Morristown, NJ 07962 Craig W. Markham Director and Vice President 13045 Tesson Ferry Road St. Louis, MO 63128 William J. Toppeta Director 1095 Avenue of the Americas New York, NY 10036 Paul A. Sylvester President, National Sales Manager- 10 Park Avenue Annuities & LTC Morristown, NJ 07962 Elizabeth M. Forget Executive Vice President 1095 Avenues of the Americas New York, NY 10036 Paul A. LaPiana Executive Vice President, National 5 Park Plaza Sales Manager-Life Suite 1900 Irvine, CA 92614 Andrew G. Aiello Senior Vice President, Channel 5 Park Plaza Head-National Accounts Suite 1900 Irvine, CA 92614 Jeffrey A. Barker Senior Vice President, Channel 18210 Crane Nest Head-Independent Accounts Tampa, FL 33647 Isaac Torres Secretary 1095 Avenue of the Americas New York, NY 10036 Curtis Wohlers Senior Vice President, National Sales 1300 Hall Boulevard Manager, Independent Planners and Bloomfield, CT 06002 Insurance Advisors Jay S. Kaduson Senior Vice President 10 Park Avenue Morristown, NJ 07962 Marlene B. Debel Treasurer 1095 Avenue of the Americas New York, NY 10036 John G. Martinez Vice President, Chief Financial 18210 Crane Nest Dr Officer Tampa, FL 33647 Debora L. Buffington Vice President, Director of Compliance 5 Park Plaza Suite 1900 Irvine, CA 92614 David DeCarlo Vice President 5 Park Plaza Suite 1900 Irvine, CA 92614 Rashid Ismail Vice President 5 Park Plaza Suite 1900 Irvine, CA 92614 Paul M. Kos Vice President 5 Park Plaza Suite 1900 Irvine, CA 92614 Cathy A. Sturdivant Vice President 5 Park Plaza Suite 1900 Irvine, CA 92614 Paulina Vakouros Vice President 200 Park Avenue 40/th/ Floor New York, NY 10166 Cathy Sturdivant Vice President 5 Park Plaza Suite 1900 Irvine, CA 92614 Paulina Vakouros Vice President 5 Park Plaza Suite 1900 Irvine, CA 92614 James Allen Assistant Vice President 5 Park Plaza Suite 1900 Irvine, CA 92614 Timothy McLinden Assistant Vice President 1095 Avenue of the Americas New York, NY 10036 Joseph A. Zdeb Assistant Vice President 1095 Avenue of the Americas New York, NY 10036 James W. Koeger Assistant Treasurer 13045 Tesson Ferry Road St. Louis, MO 63128 Jonnie L. Crawford Assistant Secretary 5 Park Plaza Suite 1900 Irvine, CA 92614 (c) Compensation from the Registrant. The following commissions and other compensation were received by the Distributor, directly or indirectly, from the Registrant during the Registrant's last fiscal year:
(2) (1) NET UNDERWRITING (3) (4) (5) NAME OF PRINCIPAL DISCOUNTS AND COMPENSATION ON BROKERAGE OTHER UNDERWRITER COMMISSIONS REDEMPTION COMMISSIONS COMPENSATION ----------------------------------------- ---------------- --------------- ----------- ------------ MetLife Investors Distribution Company $222,177,300 $0 $0 $0
ITEM 30. LOCATION OF ACCOUNT AND RECORDS. Metropolitan Life Insurance Company 200 Park Avenue New York, N.Y. 10166 ITEM 31. MANAGEMENT SERVICES. Not Applicable ITEM 32. UNDERTAKINGS. (a) The undersigned registrant hereby undertakes to file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the financial statements in this registration statement are not more than 16 months old for as long as payments under these variable annuity contracts may be accepted. (b) The undersigned registrant hereby undertakes to include a post card or similar written communication affixed to or included in the prospectus that the applicant can remove to send for a Statement of Additional Information. (c) The undersigned registrant hereby undertakes to deliver any Statement of Additional Information and any financial statements required to be made available under this form promptly upon written or oral request. (d) The undersigned registrant represents that it is relying on the exemptions form certain provisions of Sections 22(e) and 27 of the Investment Company Act of 1940 provided by Rule 6c-7 under the Act. The registrant further represents that the provisions of paragraph (a) - (d) of Rule 6c-7 have been complied with. (e) Metropolitan Life Insurance Company represents that the fees and charges deducted under the Deferred Annuity described in this Registration Statement, in the aggregate, are reasonable in relation to the services rendered, the expenses to be incurred, and the risks assumed by Metropolitan Life Insurance Company under the Deferred Annuity. (f) The undersigned registrant represents that for its TSA Deferred Annuities it is relying on the "no-action" position of the Commission staff as contained in its November 7, 1988 letter to the American Council of Life Insurance and has complied with the provisions of numbered paragraphs (1) - (4) of such letter. II-6 SIGNATURES As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets the requirements of Securities Act Rule 485(b) for effectiveness of this registration statement and has caused this Registration Statement to be signed on its behalf, in the City of New York, and State of New York on this 12th, day of April 2012. METROPOLITAN LIFE SEPARATE ACCOUNT E (Registrant) By: METROPOLITAN LIFE INSURANCE COMPANY (Depositor) By: /s/ PAUL G. CELLUPICA ----------------------------------- Paul G. Cellupica Chief Counsel, Securities Products and Regulation METROPOLITAN LIFE INSURANCE COMPANY (Depositor) By: /s/ PAUL G. CELLUPICA ----------------------------------- Paul G. Cellupica Chief Counsel, The Americas II-7 As required by the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- Director, Chairman, President and ----------------------------- Chief Executive Officer Steven A. Kandarian * Executive Vice President and ----------------------------- Chief Accounting Officer Peter M. Carlson * Executive Vice President and ----------------------------- Chief Financial Officer Eric T. Steigerwalt Director ----------------------------- Sylvia Mathews Burwell * Director ----------------------------- Eduardo Castro-Wright * Director ----------------------------- Cheryl W. Grise * Director ----------------------------- R. Glenn Hubbard * Director ----------------------------- John M. Keane * Director ----------------------------- Alfred F. Kelly, Jr. * Director ----------------------------- James M. Kilts * Director ----------------------------- Catherine R. Kinney * Director ----------------------------- Hugh P. Price Director ----------------------------- David Satcher * Director ----------------------------- Kenton J. Sicchitano * Director ----------------------------- Lulu C. Wang By: /s/ Myra L. Saul April 12, 2012 -------------------------- *By Myra L. Saul Attorney-in-Fact II-8